H. Suresh, J. (On January 7, 1987):— Pepsico Inc., the Plaintiffs herein, claiming to have worldwide reputation with regard to manufacture and sale of their non-alcoholic drinks, beverages, syrups etc. have filed this suit against the defendants, who have been carrying on business in the name and style of Pepsi Sodawater Company, on the basis that there is an infringement of their Trade Marks. The Plaintiffs are the Registered Proprietors in India of the Trade Marks PEPSI, PEPSI-COLA and PEPSICO and copies of the said Trade Mark Registrations are at Exhibits A-1 to A-3 to the Plaint. Admittedly, they have not been carrying on the business of manufacturing and sale of those products in India since 1961. Since recently they have been trying to restart the manufacturing in India but they have not been successful so far.
2. The Defendants have been manufacturing their products since about the middle of 1985. The Plaintiffs were not aware of this till they received a Notice from the Calcutta High Court of an application made by Defendant No. 1 for rectification under Section 46 of the Trade and Merchandise Marks Act, 1958. That was in September 1985. The Calcutta High Court has granted an injunction which restrains the Plaintiffs from in any way or manner using, utilising and advertising the said Trade Marks and other marks associated therewith in relation to mineral and aerated waters, non-alcoholic drinks, beverages, and other preparations till the disposal of that application. It appears that the Plaintiffs moved the Calcutta High Court to have the injunction vacated. But they were not successful. In the present proceedings, the main contention is that irrespective of the said proceedings. In the Calcutta High Court, the fact remains that the Trade Marks of the Plaintiffs are still registered and, therefore, if it could be said that the defendants have infringed the Plaintiffs' rights with regard to those Trade Marks, an injunction must follow. The Defendants contend that the Plaintiffs on their own showing have not been manufacturing and selling these items since 1961 and if that is so there is hardly any goodwill in India, as far as the Plaintiffs are concerned. As far as interim injunctions are concerned assuming that the Plaintiffs have made out a prima facie case. Still the Courts have to consider the question of ‘balance of convenience’ and also as to whether it could be said that the Plaintiffs would suffer irreparable damages in the event interim injunction is not granted. In the present cases, according to me, the question mainly revolves on considerations relating to balance of convenience. The Plaintiffs say that they have been selling these items in India prior to 1961. But we have no evidence of the extent of any goodwill established in this country with regard to these products of the plaintiffs prior to 1961. In any event, since 1961 a quarter century has passed and obviously there cannot be an assumption of the plaintiffs having any goodwill with regard to these products in India. It is well settled that if a business is carried on in several countries, a separate goodwill attaches to it in each country. So, when the business is not carried on in any one country in which it has acquired any goodwill, that goodwill may not continue although the business may continue to be carried on in other countries. Therefore, it is necessary for the plaintiffs to show that even today they have a certain amount of goodwill in this country. Admittedly, they have not been manufacturing these products since 1961. But Mr. Chinoy says that they have been supplying some of their products to certain Embassies and some have been kept in certain warehouses. That is no evidence of the products being sold through local agents or in the market. Therefore, in my view it cannot be said that there is any goodwill as such in this country in respect of these products for the last over several years. If that is so, there is hardly any question of the plaintiffs suffering any damage even if injunction is not granted in their favour. As against this, if an injunction is granted, it will certainly cause considerable damage to the Defendants inasmuch as they have been manufacturing their brand since about a year or so. In fact, but for the recent liberalization of the policy of the Government with regard to import restrictions, the plaintiffs would not have ventured to seek these reliefs. They have some hope of their getting licence to manufacture. But that is not enough. As against this, the Defendants have already been manufacturing their products which have nothing to do with that of the plaintiffs.
3. Mr. Chinoy mainly relied on two cases - one of a Division Bench of this Court in the case of Centron Industrial Alliance Ltd. v. Evergreen Blade Co. Ltd. Appeal No. 368 of 1986 in Notice of Motion No. 640 of 1986 in Suit No. 564 of 1986 and another of a Single Judge of the Delhi High Court in the case of Philip Morris Belgium S.A… v. Golden Tobacco Co. Ltd.…., AIR 1986 Delhi 146. The case of our High Court decided on 24th July 1986 relates to blades having the Trade Mark “7 O'Clock” manufactured by Gillette U.K Ltd., who were the plaintiffs in that due to import restrictions it has not been possible for the plaintiffs to manufacture these blades in the country. However, there was evidence in the said matter that since about 1968 due to change of certain policies, collaborations between Indian parties and foreign parties in respect of manufacture came to be allowed and that is how the plaintiffs could came to be allowed and that is how the plaintiffs could manufacture and sell “7 O'Clock” blades, as permitted by the Government since then. The evidence also indicated that by the time the matter had come to the Court the plaintiffs had sold 16 lakhs blades and, therefore, on a clear infringement of the Trade Mark rights, the Court granted an injunction in the said case. That case must certainly be distinguished from the present case inasmuch as there is no such evidence of any sales of the plaintiffs' products in India for the last 25 years.
4. The other case of the Delhi High Court relates to a brand of cigarettes under the Trade Mark ‘VISA’. The Court granted an injunction mainly ort the basis that the Defendants in that case had adopted in to the registered trade mark of the plaintiffs', which makes it a case of a clear infringement, without any consideration of balance of convenience. In the present case, if one has regard for the Trade Marks as registered and as disclosed in Exhibits A-1 to A-3 to the plaint, it is not clear as to whether the registration relates to the Trade name, or a particular style or a distinct mark as disclosed in the said Exhibits.
5. Mr. J.I Mehta for the defendants pointed out that the Trade Marks used by the Defendants are totally different and it cannot be said that this is a case of clear infringement of the Trade Marks of the plaintiffs.
6. In the result, in my view, this is not a case where I would grant an injunction in favour of the plaintiffs. Suffice it to say that the interests of the plaintiffs, if any, can be safeguarded if I direct the Defendants to maintain accounts.
7. Mr. Mehta drew my attention to Section 111 of the Trade and Merchandise Marks Act, 1958 and submitted that in view of the proceedings which are pending in the Calcutta High Court, in any event this suit will have to be stayed, though, of course, that fact may not preclude the Court from granting interlocutory orders. Hence I pass the following order:
8. Notice of Motion is dismissed. However, I direct the Defendants that they should keep the accounts in respect of manufacture and sale of their products bearing the Trade Mark “PEPSI” attached to those products.
9. In the meanwhile, the suit stands stayed as provided under Section 111 of the Trade and Merchandise Marks Act, 1958 and the stay will continue to be operative till the disposal of the proceedings in the Calcutta High Court.
10. The plaintiffs appealed.
On June 22/23, 1987
11. S.K Desai, A.C.J:— This is an Appeal preferred from the decision given by the Single Judge dismissing the plaintiffs Notice of Motion but at the same time directing the Defendants to keep accounts in respect of manufacture and sale of the products bearing the trade mark ‘PEPSI’. At the same time, further, the Trial Court stayed the hearing of the suit as provided under Section 111 of the Trade and Merchandise Marks Act, 1958 and the stay was to be operative till the disposal of the proceedings in the Calcutta High Court, the said proceedings being a rectification application filed in the Calcutta High Court by the 1st Defendants.
12. In order to understand the plaintiffs' grievances against the order, a few facts may be stated: The Appellants before us who are the plaintiffs to the suit are Pepsico Inc., a Corporation incorporated under the laws of the State of Delaware, U.S.A The 1st Respondent (Defendant No. 1) is a private limited Company. The 2nd Defendant is an individual carrying on business at a village in District 24 Parganas, West Bengal. He carries on business in the firm name and style of Pepsi Soda-Water Company.
13. The Appellants claim to be the registered proprietors in India of three trade marks, viz., “PEPSI-COLA”, “PEPSI” and “PEPSICO”. These three marks have been registered very far back but the registration has been renewed from time to time and we will proceed upon the footing that the registration is still subsisting. The Appellants claim to be one of the largest manufacturers of soft drinks throughout the world and in paragraphs 5 and 6 of the Plaint they have given particulars of their worldwide sales and worldwide advertisement expenses. Accordingly, they claim to enjoy worldwide reputation and the three marks are claimed to be amongst the best known and the most valuable marks in the world. These three words are claimed to be invented words and according to the Appellants, they are identified with the goods originating from the plaintiffs or their authorized users or licensees or representatives. According to the Appellants, commercial sales of the goods bearing these marks commenced in India in 1956 and during the period 1956 to 1961 Pepsi and Pepsi-Cola was bottled and sold extensively in India by the Appellants' associates Messrs. Jagatjit Distilling and Allied Industries Ltd. as permitted users. However, from 1961, according to the Appellants, Government banned the import of essences (concentrate for the manufacture of Pepsi-Cola). The ban on the import of the finished product, viz., the soft drink continued and continues upto-date. However, there were recent attempts to enter into some sort of collaboration and re-start the sale of these goods in India. One attempt was made in 1985, but the proposal was negatived by the Government. Another proposal has been submitted in 1986 and we are told that the same is being actively pursued but is still under the consideration of the Government.
14. The 1st Defendants claim to manufacture the products under the name Pepsi since the beginning or the middle of 1985. However, according to statements made at the Bar and corroborated by the invoices, the 1st Defendants have been using the word “Pepsi” in conjunction with soda or orange syrup or syrups but not in conjunction with a cola drink nor it appears do they claim to be using the word “Pepsi-Cola” for any aerated drink. Mr. Shah appearing on their behalf made a statement at the Bar that the Defendants do not desire nor propose to use the word “Pepsi” on the label of or in connection with any cola drink or in conjunction with the Word “Cola” or “Kola” or any phonetic variation thereof.
15. It would appear that in the beginning of 1985 efforts to introduce Pepsi-Cola in India were noticed by various journals. Some time in the middle of 1985, a Petition was filed in the Calcutta High Court, being numbered as Matter No. 1661 of 1985, under Section 46 of the Trade and Merchandise Marks Act, 1958 and in the said Petition the 1st Respondents as the Applicants prayed for taking off of the marks ‘Pepsi-Cola’ and “Pepsi” from the register of trade marks and cancellation of the said registration and rectification of the trade marks register accordingly. They also sought interim junction restraining the 1st Respondents to the said Petition, viz., the Appellants before us, from using, utilizing and advertising the said mark in relation to mineral and aerated waters, non-alcoholic drinks, beverages and similar other preparations. Ad-interim injunction to this effect appears to have been granted. It would appear that the owners of the trade mark subsequently applied to the Court for vacating the ad-interim injunction where upon the Court has taken up the Rectification Application for hearing. The same is still pending.
16. It appears to be the admitted position that since about 1961 the said aerated drinks, i.e the said marks, have not been sold substantially in India and the circumstances under which this came about have been indicated in the affidavit of one Baldev Kumar Talwar, Director and Secretary of Messrs, Jagatjit Industries Ltd., which affidavit was filed by the 1st Respondent's. According to the said affidavit, the manufacture proved financially not viable and ultimately closure seems to have become necessary since the import of the concentrate was also banned and the American Company, i.e the Appellants, were reluctant to put up any plant for the manufacture of this concentrate in India particularly at Delhi where their associates were carrying on business. After 1961, according to the said affidavit, the said beverage or soft drink Pepsi-Cola has not been manufactured in India and this appears to be the admitted position. However, we may mention that this Talwar seems to have filed an earlier affidavit in similar rectification proceedings adopted in 1982, which rectification proceedings were then rejected. However, that was an affidavit supporting the plaintiffs in which the said Talwar had claimed that although exact figures could not be given, there had been extensive sales of Pepsi-cola in India during the period 1958 to 1961. It would appear further that from 1961 till day limited quantities of Pepsi-cola are being brought to India for being kept in bonded warehouses from where supplies are being made to certain embassies and details of such small scale sales have been indicated in the affidavits. It is upon the basis of these facts substantially that we are called upon to consider the claim of the plaintiffs for interim relief.
17. It was pointed out to us that the claim for interim relief was based upon a twofold footings. Both the footing were examined by the Single Judge and the claim rejected. The two footings may now be indicated.
18. It is claimed in the first place that the plaintiffs as the owners of registered trade mark are entitled to protection in respect thereof and as long as any such mark remained on the register, the plaintiffs claim must be upheld and injunction granted. Our attention was drawn in that behalf to a decision given by a Single Judge of this Court, viz., Hindustan Embroidery Mills Pvt. Ltd. v. K. Ravindra & Co.*, 76 Bom. L.R 146. After referring to certain trade marks, the learned Single Judge has observed that it would not be proper to consider the validity of the registration of a trade mark on a motion for interim injunction taken out by the person who has got the mark registered in his name. According to the Single Judge further, whilst a mark remains on the register (even wrongfully), it is not desirable that others should imitate it. The said judgement also deals with the basis of a passing off action and it is observed that the basis of such action is a false representation by the Defendant. However, according to the Single Judge, no such action for passing off could be maintained unless it is averred and proved prima facie for the purpose of interlocutory relief that the plaintiffs' goods have established a reputation in the market and are identified by the mark which they bear.
19. The second footing on which the plaintiffs have claimed interim relief in the Motion is obviously on the footing of passing off. According to the plaintiffs, they have considerable residual reputation and that they have substantial sales though to a limited category of users and, further according to the plaintiffs, it can be demonstrated that the clear intention on the part of the Defendants is to pass off their goods as the goods of the plaintiffs and this the plaintiffs desire to be substantiated by reference to various invoices and labels in which the Defendants have not only sought to adopt the mark “PEPSI” but also the marks “SEVEN UP”, “COLA” or “COKA” all having international reputation.
20. We propose to deal with the latter argument in the first instance. The learned Single Judge in his exhaustive order has, after referring to the facts and certain authorities cited at the Bar, dealt with the claim to interim relief principally in paragraph 3. Apart from the cases referred to in the judgement of the Single Judge, we were referred to a number of other cases in connection with the question of residual reputation as also the allied question of whether sale to a restricted category can be relied upon for the purposes of a passing off action. We need not repeat the cases discussed by the Single Judge, but it appears it would be appropriate to refer to a case in which there was a position of restricted sale somewhat similar to the case before us. The sales being considered in the said report Anheuser-Busch v. Budejovicky Budyar, (1984) 10 FSR 413, were of American Budweiser Beer Cans which were available in the United States Armed Forces establishments in England and Scotland. Although the sales were fairly extensive, it was held by the Court that the relative sale figures were somewhat low and although it was conceded that the American Budweiser Beer would have acquired some reputation in the U.K, it was not sufficient to maintain an action for passing Off. However, it has to be conceded that as far as the European firm against whom injunction was sought was concerned, the facts did not disclose any dishonesty on their part nor any intention to create a confusion or trade upon the reputation of the American Company. It was submitted that the observations have to be properly understood and should not be applied to the present case where it appears to us fairly obvious that the user by the Defendants was not accidental nor honest but a deliberate adoption of identical words.
21. On behalf of the Appellants our attention was drawn to the reason given by the Respondents for selection of this word “Pepsi” and the user in connection with syrups and soda. The explanation is so ridiculous and so strained that it does not deserve serious consideration. Nevertheless for the purposes of a passing off action, it is not possible to give to the plaintiffs relief merely because of improper conduct or mischief sought to be perpetrated by the Defendants. The principles on which injunctions are granted in passing off action are well settled and need not be repeated. The learned Single Judge has exercised discretion against the plaintiffs mainly because he was not convinced about the extent of the residual reputation enjoyed by their products in India. It has to be remembered that although sitting as a Court of Appeal under Clause 15 of the Letters Patent. Our powers are vast, they are to be exercised in a restrained manner whilst dealing with discretionary orders made by Single Judges of this Court and if the Single Judge has exercised the discretion fairly and reasonably having regard to the facts presented before him, the discretion should not be interfered with ordinarily merely because another approach may commend itself a little more to the Appeal Court. In other words, as far as the claim under the head of passing off is concerned, unless we are in a position to observe that the Single Judge has applied erroneous principles or not appreciated the facts properly, it would not be proper or open to us to set aside that part of his order and hold that even on the ground of passing off the Appellants were entitled to an injunction. In our opinion, the part of the order refusing injunction on the ground of passing off appears to be proper and at least does not call for interference under our appellate powers.
22. We now turn to the second head of claim which does require serious consideration. Our attention was drawn to the observations in a single paragraph of the impugned order in which paragraph the Single Judge has dealt with the claim of the plaintiffs to interim relief on the basis of registered ownership of the three marks. These observations are to be found in paragraph 5 of the order. As far as the said paragraph is concerned, we do not find the discussion very happily worded and it is difficult to appreciate fully the basis of den???al of relief to the plaintiffs on this head on the basis of the reasoning contained in the said paragraph.
23. The fact nevertheless remains that the mark has not been in substantial use on any goods within this country for an extensive period. In this connection, some reference may be usefully made to the provisions contained in Section 46 of the Trade and Merchandise Marks Act, 1958. Under Section 46(1)(b), registered trade mark can be taken off the register if the applicant is able to satisfy the Registrar that the proprietor of the mark upto a date one month before the date of the application and for a continuous period of five years or longer prior thereto has not used the said mark bona fide in relation to those goods. However, subsequently comes a locus poenitentiae. Even in such case of non-user if the registered owner of a trade mark is able to establish that the non-user is due to special circumstances in the trade and not to any intention to abandon or not to use the trade mark in relation to the goods. Then even if the non-user is established, it will not result in the mark being taken off the register. In other words, in order to succeed, the Applicant before the Calcutta High Court will have to establish the requirements indicated in Section 46(1)(b). Even if such requirements are established, it would be open to the Appellants-plaintiffs to avoid the result and the rectification by establishing the special circumstances as indicated in sub-Section (3) of Section 46. According to Counsel for the Appellants, non-user has not been established, which point is somewhat debatable. However, according to the Counsel further, in any case his clients would be able to substantiate the special circumstances as are contemplated under sub-Section (3). It must be conceded that this plea as to special circumstances is, to a considerable extent, borne out by the factual position on the record and from the affidavits on record.
24. In connection with the claim of the registered proprietor of a trade mark, we were referred to a recent decision given by the Delhi High Court in the ‘VISA’ case reported in Philip Morris Belgium S.A… v. Golden Tobacco Co. Ltd.…., AIR 1986 Delhi 145, where at the interlocutory stage, a Single Judge of the. Delhi High Court repelled the defence based on admitted non-user for long period and laches and upheld the plaintiffs claim for injunction basing the same principally upon the fact that the plaintiff was the owner of the registered trade mark ‘VISA’.
25. We may state that in connection with this question, particularly on the question of user as well as special circumstances, we were referred to a number of authorities at the Bar. In our opinion, it is unnecessary to set them out in detail in this Order principally as we have briefly indicated the principles established by them. The fact nevertheless remains that this is not a matter unlike the matter before Vimadalal, J. where the Defendants had raised the plea only in their affidavit in reply in the proceedings for injunction or in the Written Statement that the plaintiffs' mark ought to be taken off the register for non-user. On the other hand, even before the plaintiffs have come to this Court, proceedings have been adopted in the Calcutta High Court which we have already indicated in the earlier part of this judgment in which proceedings the Applicants have obtained interim relief against the plaintiffs. It will have to be conceded, therefore, that the rectification application, although it has not fructified totally in an order for removal of the mark off the register, is a serious proceeding in which the Trial Court has found a fairly strong prima facie case requiring detailed scrutiny. The proceeding together with interim relief is now pending for nearly two years and we were given to understand that it may take a few months more for disposal. It is not possible for us to indicate our concurrence with the approach of the learned Single Judge of the Delhi High Court and to say concurring with him that in these circumstances the pendency of the reference application or the principle of balance of convenience or the question of laches must be regarded as totally irrelevant and that as long as the mark is on the register, the proprietor must be granted an injunction.
23rd June, 1987.
26. To put it in other words, although we are not able to appreciate the reasoning indicated by the Judge in paragraph 5 in rejecting the claim for interim relief based on the claim to be owners of the trade mark and although we are totally dissatisfied with the Defendants' case as to how they came to adopt the name, which reasoning is totally specious we do not think this to be a case in which the owners should immediately be held entitled to the injunction sought for as was done by Vimadalal. J. in the Bombay case or by the learned Single Judge of the Delhi High Court in the “VISA” case. Mr. Chagla appearing for the Appellants urged that he would be able to satisfy this Court that the rectification application was thoroughly misconceived and that the same must be rejected. In his submission, he would be able to satisfy the Calcutta High Court that there was no non-use and that in any event if the Court held against the Appellants on the question of user for a period of five years previous to the making of the application, the Appellants would be able to plead and substantiate their case as regards the special circumstances justifying nonuse. The case of the Appellants as to user was supported by an unreported judgment of a Single Judge of the Calcutta High Court where limited sales of the nature to be found in the present case were held to be user of a trade mark. Our attention was also drawn to a number of judgments in which import restrictions or prohibitions have been held to be special circumstances which would justify the non-user and prevent the mark or marks being taken off the register.
27. We do not think the question can be approached from so simplistic an angle. If the matter is so clear and there is no substance in the rectification application, how did the Calcutta High Court come to grant and thereafter continue the injunction? If the rectification application can be repelled on these two grounds, why has the rectification application remained part-heard and the injunction still subsisting for over two years? These are not easy to answer and in this background it does not appear to be proper for us to consider the merits of the rectification application and to hold that the same is without substance. This is preminently for the Calcutta High Court to do and the fact that it has not been able to hold so for two and a half years and has allowed the injunction to continue seems to suggest prima fade that there is some substance in the application and there are matters requiring serious consideration.
28. Once we come to the conclusion that the position is a little uncertain and the question whether the marks will be retained on the register or removed therefrom is to be decided upon. Would it be proper to apply the same principal as commended itself to Vimadalal, J. as also to Jagdish Chandra, J. (in the ‘VISA’ case)? In our opinion, this would not be the correct approach. Certainly, if the rectification application had been rejected or stands rejected, the Appellants would seem to have a very strong case for obtaining the injunction sought for by them on the footing of their being the owners of the three word marks. However, till the rectification application remains pending, in our opinion, it cannot be held that the Single Judge was in clear error in not granting the injunction though perhaps the reasons which appealed to him and as are reflected in paragraph 5 are not very sound. For different reasons, the rejection of the injunction even on the second footing will have to be upheld. In the result, we are of the opinion that the view taken by the Single Judge that the Appellants are not entitled to any injunction today on the basis of passing off is prima facie correct and does not call for interference in Appeal. Even on the alternative footing of the Appellants being the owners of the registered trade mark, we are of opinion that in the unusual circumstances of the case is will have to be held in the exercise of discretion by the Court that injunction should not be granted to the plaintiffs till the rectification application is disposed of and their marks allowed to remain on the register. We do not accept the reasoning of the Single Judge to be found in paragraph 5 of his order but despite it we agree with the ultimate order that the Appellants (original plaintiffs) ought not to get injunction at least at this stage. We wish to make it clear that as and when the rectification application is disposed of and if the same is rejected, it would be open to the Appellants to seek an injunction from this Court on the ground that they are the owners of a registered trade mark and that the Defendants or any of them are seeking to contravene their rights as proprietors of such trade mark by adopting not a similar device or mark but an identical one. The order of the Single Judge regarding maintaining of accounts will, however, stand.
29. Apart from protecting the Appellants' right to move this Court in future, we wish to record the statement made on behalf of the Respondents and to make it clear that but for the statement we might have been inclined to adopt a slightly different course at least as far as the second footing is concerned. We have already indicated this earlier viz. the statement made by counsel for the Respondents to the effect that the Respondents are intending to restrict user only to the word “PEPSI” and do not intend to use the word “PEPSICOLA” or “Pepsi Cola” and further that the word “PEPSI” will only be utilized for syrups, orange syrups or drinks and soda only and not used in connection with a cola drink whether naturally or artificially flavoured. We do not wish to make further observations as they may prejudice the disposal of the rectification application by the Calcutta High Court or if the said application is disposed of in favour of the Appellants the subsequent proceedings which will be adopted. Thus, subject to this clarification, the operative order made by the Single Judge is maintained. The Appeal will accordingly stand dismissed, but parties are directed to bear their own costs both before the Single Judge and in this Court.