Anita Sumanth, J.:— O.A. Nos. 515 to 517 have been filed by Life Style Equities (CV) (in short and henceforth, ‘Life Style’), a Dutch Limited Partnership based at Amsterdam, Netherlands seeking interim relief under section 9 of the Arbitration and Conciliation Act 1996 (in short and henceforth, ‘Act’).
2. The interim prayers sought for are the following:
O.A. No. 515 of 2017 has been filed seeking the grant of an interim order of injunction prior to and pending arbitral proceedings restraining the respondents, its directors, partners or proprietor as the case may be, affiliates, subsidiaries, assigns in business, franchisees, licensees, distributors and agents from using, adopting, selling, offering for sale, sharing with any person or entity, directly or indirectly dealing with in any other manner, or the garment styles developed, including graphics used on the apparel, and the Tech Packs collated, for the Fall’ 17 Collection, Spring’ 17 Collection, Fall’ 16 Collection and Spring 16’ Collection, under the Agreement for and on behalf of the petitioner, or claiming any rights in the said garment styles, including its graphics, or Tech Packs directly or indirectly.
3. O.A. No. 516 of 2017 has been filed seeking the grant of an interim direction prior to and pending arbitral proceedings restraining the respondents its directors partners or proprietor as the case may be affiliates subsidiaries assigns in business franchisees licensees distributors and agents from committing any act which has the effect of impairing/preventing the petitioner from using the garment styles developed for the Fall'17 Collection for and on behalf of the petitioner and undertaking production activities for the Fall'17 Collection and future seasons.
4. O.A. No. 517 of 2017 has been filed seeking the grant of an order or direction prior to and pending arbitral proceedings restraining the respondents its directors partners or proprietor as the case may be affiliates, subsidiaries, assigns in business, franchisees, licensees, distributors and agents from asserting any rights in any garment style, including graphics, created, developed, rearranged or collated under agreement for and on behalf of the petitioner.
5. An additional affidavit has been filed praying for the grant of an interim injunction restraining the respondents, its men, agents or anyone claiming under them from in any manner acting in derogation of Agreement dated 30.4.2014 including by issuing groundless threats or preventing the petitioner from using the garment styles developed for production activities for the Fall'17 Collection and future seasons or misusing the garment styles developed, including graphics used on the apparel and the tech packs collated for the Fall 17, Spring 17, Fall 16 and Spring 16 collections under the Agreement.
6. By order of this court dated 12.05.2017, the following interim protection was granted by this court in the vacation sitting:
“Though larger relief sought for in the application, this Court is inclined to restrict the injunction to the extent as stated below:
An interim injunction restraining the respondents, its men, agents, or anyone claiming through or under them, from in any manner acting in derogation of the agreement, dated 30.4.2014 including by issuing groundless threats or preventing the petitioner from using the garment styles developed for production activities for the Fall'17 Collection and future seasons or misusing the garment styles developed, including graphics used on the apparel, and the Tech Packs collated, for the Fall’ 17 Collection, Spring’ 17 Collection, Fall’ 16 Collection and Spring’ 16 Collection, under the agreement, for a period of four weeks.
The learned counsel for the applicant/petitioner is permitted to take notice to the respondents along with the copy of the affidavit, order and paper book filed in support of the application and file the proof to the registry.’
7. A. No. 3176 of 2015 has been filed by QDSeatoman Designs Pvt. Ltd., Quintessential Designs India Pvt. Ltd., and Quintessential Designs India Pvt. Ltd. (in short, and henceforth, ‘QDS’) seeking to vacate the interim orders dated 12.05.2017. Counter affidavit and reply have been filed by the parties.
8. A. No. 4263 of 2017 has been filed by QDS praying for permission to file a suit and a counter has been filed by Life Style.
9. Detailed submissions of Mr. Satish Parasaran, learned senior counsel appearing for learned counsel Mr. Thrambayak Kannan for the petitioner/respondent and Mr. P.S. Raman, learned senior counsel appearing for Mr. M.S. Bharat learned counsel appearing for the respondent/applicant have been heard.
10. At the outset, a preliminary objection is raised as to the maintainability of the present application under Section 9 of the Act on the ground that the disputes that are sought to be referred to arbitration are incapable of being resolved in a private forum such as Arbitration. Mr. Raman would argue that the core of the dispute between the parties is the vesting of an Intellectual Property Right that is a right in rem, enforceable against the world at large, thus not amenable to the process of arbitration.
11. Life Style and QDS entered into an agreement dated 30.6.2014 whereunder QDS was engaged to perform certain services relating to the manufacture, promotion and distribution of apparel under the brands owned by Lifestyle. According to Mr. Raman, the reliefs sought hinge upon the ownership of an intellectual property right in the apparel which is incapable of determination in arbitration, being a right in rem. He would rely on the following judgments to buttress his submissions.
12. Booz Allen and Hamilton Inc. v. SBI Home Finance Limited ((2011) 5 SCC 532), where the Supreme Court extracting from Mustil and Boyd, states thus:
Mustill and Boyd in their 2001 Companion Volume to the 2 Edn. of Commercial Arbitration, observe thus:
“Many commentaries treat it as axiomatic that ‘real’ rights, that is rights which are valid as against the whole world, cannot be the subject of private arbitration, although some acknowledge that subordinate rights in personam derived from the real rights may be ruled upon by arbitrators. The conventional view is thus that, for example, rights under a patent licence may be arbitrated, but the validity of the underlying patent may not… An arbitrator whose powers are derived from a private agreement between A and B plainly has no jurisdiction to bind anyone else by a decision on whether a patent is valid, for no one else has mandated him to make such a decision, and a decision which attempted to do so would be useless.”
13. Explaining the basis of his argument, he would refer to the decision of the Delhi High Court in Hdfc Bank Ltd.… v. Satpal Singh Bakshi…. (2013 (134) DRJ 566) (FB), wherein the Bench holds as follows:
‘37. It may be noticed that the cases referred to above related to actions in rem. A right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and judgment in rem refers to a judgment against a thing, right or status or condition of property which operates directly on the property itself.’
14. He would point out that the Supreme Court in the case of Ayyasamy v. Parameswari, (2016) 10 SCC 386) had enumerated the categories of disputes that are generally accepted to be non-arbitrable including specifically, patents, trademarks and copyrights.
15. Referring to the interim prayer in the additional affidavit filed, he would state that the reference to ‘groundless threats’ indicated without doubt that the relief sought was with reference to an intellectual property right thus rendering the present petition non-maintainable.
16. Mr. Parasaran on the other hand would argue that the application under Section 9 of the Act, and the reliefs sought, are valid. He would draw attention to the nature of relief sought for in Applications 515 to 517 emphasising that none related to a declaration regarding the Intellectual Property Rights or akin thereto. In response to Mr. Raman's argument relating to the protection sought from groundless threats, he would state that that by itself did not take the matter out of the ambit of section 9 of the Act as it was in the nature of an interim protection pending arbitration.
17. He would argue that while it was a settled position of law that rights in rem cannot be decided in Arbitration, rights in personam flowing from such rights in rem can well be decided by an Arbitrator. Mr. Parasaran would cite the judgement of the Supreme Court in Suresh Danuka v. Sunita Malhotra ((2012) 1 SCC 578), wherein the Full Bench heard a matter relating to conflicting claims made by parties in relation to a trademark ‘Naturoma Herbal’. Though the Bench was not specifically concerned with whether the disputes related to an action in rem or one in personam and also probably for the reason that proceedings for arbitration were at an advanced stage, the Bench confirmed the order of the District Judge in the following terms in paragraph 38 thereof;
‘38. As far as the first two questions are concerned, the terms of the Deed of Assignment clearly indicate that the Respondent had of her own volition parted with 50% of her right, title and interest in the Trade Mark “Naturoma Herbal” with proportional goodwill of the business concerning the goods in respect of which the Mark was used, absolutely and forever, from the date of the Deed, namely, 1st October, 2000. It is no doubt true that on behalf of the Respondent it has been claimed that the Deed of Assignment had never
been acted upon and that, in any event, the same had been revoked on 25th September, 2007, when the
Agreement dated 1st April, 1999, was cancelled. However, in view of the provisions of the Deed of Assignment, it is yet to be adjudicated upon and decided as to whether by virtue of the revocation of the Deed of Assignment by the Respondent, the Appellant was no longer entitled to the benefits of the Trade Mark which had been transferred to him to the extent of 50% absolutely and forever. In such circumstances, the order passed by the District Judge, Khurda, in ARBP No. 576 of 2007, restraining the Respondent from marketing her products through any person, other than the Appellant, was more apposite in the facts of the case, as the rights of both the parties stood protected till such time as a final decision could be taken in arbitral proceedings, which, in effect, is the object and intention of Section 9 of the Arbitration and Conciliation Act, 1996.’
18. He also cited the decision of the Delhi High Court in Indian Shaving Products Ltd. v. Gift Pack reported in, wherein the Bench held as follows:
‘52. It was next argued by the learned counsel for the defendant that the said trade mark Ultra is being used by several other persons/companies besides the defendants such as Toshiba, National and Sonly. Thus the same has become publici Jurisdiction and the plaintiffs cannot claim any exclusive right therein.
53. Admittedly, the said parties are not before this Court. Neither the said parties are claiming any relief against the plaintiffs nor the plaintiffs are claiming any relief against them. Hence the said defence, that other persons are also using the said trade mark, is not available to the defendants. The Court is called upon to decide disputes in between the parties which are before it. The Court cannot be expected to adjudicate upon a dispute which is not before it. A matter very much akin to the matter in hand came up before a Single Judge of this Court. It was observed in Cool ways India v. Princo Air Conditioning and Refrigeration 1993 (1) ALR 401. The contention that a plaintiff himself is usurping or infringing the trade mark of a third party was not to be gone into by the Court while deciding the issue in between the parties. What is to be seen by the Court is as to whether the plaintiff has acquired good-will and reputation for his products. Moreover, the plaintiffs have placed on record a report on Urban Market for Batteries, October, 1997. A perusal of the same shows that Sony New Ultra was sold only one unit during the month of May, 1997. There is no sale in the month of June, July, August, September, 1997. Similarly, Sonly has got no market share during the months of May, June, July, August and September, 1997. Thus the same is absolutely of no avail to the defendants. To the same effect is the view expressed by a learned Single Judge of this Court in Amrit Soap Company v. New Punjab Soap Factory 1989 (2) ALR 242. “The allegation that some other manufacturers are also using the same trade mark is of no consequence as the Court is concerned with parties before it only.”
19. Useful reference may be made to the observations of the Supreme Court in the case of A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386. That was a matter that travelled to the Supreme Court from a decision of the Madras High Court. The question raised was whether an allegation of fraud, raised by a party to an arbitration could be considered by the arbitral tribunal or whether the appropriate remedy was to approach the Civil Court by way of a suit. The Bench notes by way of a ‘pertinent observation’ as they say, that ‘insofar as the Arbitration and Conciliation Act 1996 is concerned, it does not make any specific provision excluding category of disputes terming them to be non arbitrable’.
20. The Bench then refers to their earlier judgment in Kvaerner Cementation India Limited v. Bajranglal Agarwal, (2012) 5 SCC 214 which also reiterates the importance of limiting judicial intervention in such matters bearing in mind the object of the Arbitration and Conciliation Act 1996, in particular, Section 16 which provides that the tribunal itself is empowered to consider arbitrability of matters raised before it. The Bench, then, referring to the commentary of Sri. OP. Malhotra on ‘the Law and Practices of Arbitration and Conciliation’ authored by Indu Malhotra, extracts therefrom, the six categories of disputes that are judicially looked upon as being non arbitrable;
‘(i) patent, trade marks and copyright;
(ii) anti-trust/competition laws;
(iii) insolvency/winding up;
(iv) bribery/corruption;
(v) fraud;
(vi) criminal matters’
21. Reference is then made to the case of Booz Allen (supra) where there is a detailed discussion on what would be the disputes that are capable of settlement by arbitration and reference is made to paragraphs 35 to 38 in the SCC report (pages 546 to 547) as follows:
‘35. The Arbitral Tribunals are private fora chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public fora constituted under the laws of the country. Every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public fora (courts and tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes.
36. The well-recognised examples of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.
37. It may be noticed that the cases referred to above relate to actions in rem. A right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject-matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, a judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and a judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself. (Vide Black's Law Dictionary.)
38. Generally and traditionally all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule. Disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable.’
22. The argument of QDS is to the effect that the dispute inter se parties is not arbitrable, relating as it does, to a declaration of proprietary right in one or the other party. Before proceeding further, it is imperative that the nature of the claim between the parties is identified and determined. In present case it appears to me that all that the parties claim is a right to use the designs that have been created for the spring and fall 2016 and 2017 seasons.
23. It is not in dispute that neither of them has chosen statutory protection under the Copyright Act 1957 or the Designs Act 2000 in respect of these works.
24. The Act does not exclude any category or dispute as being outside the purview of its application. The note of caution is sounded by Sections 34(2)(b) and 48(2) of the Act which stipulate that an arbitral award would be liable to be set aside if it encroaches upon a subject matter of dispute/differences which is not capable of settlement by arbitration under the law for the time being in force.
25. In the facts as they stand before me, all that the parties want is a determination of their rights of usage of the spring and fall collections 2016 and 2017, which constitutes the exploitation of a commercial right and not a declaration of a statutory right. The former is certainly a matter that could be resolved by arbitration while the latter falls beyond.
26. I could no better than to quote Justice G.S. Patel in Eros International Media Limited v. Telemax Links India Pvt. Ltd., (Bombay High Court) cited by Mr. Parasaran to the following effect:
‘16. Section 62 of the Copyright Act 1957 corresponds almost exactly to Section 134 of the Trade Marks Act 1999: infringement and passing off actions cannot be brought in a court lower than a jurisdictionally competent District Court, one within whose limits the plaintiff resides or works for gain. I do not think these sections can be read as ousting the jurisdiction of an arbitral panel. All that they mean is that such actions are not to be brought before the registrar or the board, viz., an authority set up by either of those statutes. In fact, Section 134 of the Trade Marks Act, 1999, correctly read, answers in full Mr. Dhond's case of having to pursue a remedy given by statute in a particular forum; for that Section contains the same provision as regards trade mark passing off actions and it is well settled that an action in passing off is not in pursuit of a statutory remedy but one in common law. It is a mistake, I think, to see these so-called ‘intellectual property’ statutes as relating to rights that stand wholly apart from the general body of law. These are special rights to be sure, but they are, at their heart, a species of property and share much with their more tangible cousins to whom acts such as the Sale of Goods act or the Transfer of Property Act apply. Even those acts confer certain ‘rights’; and the registration of a document of title to land (or, for that matter, to a motor scooter) is also in one sense a right against the world, i.e., any other who would lay claim to it. I see no material distinction between in this regard between being the owner of land and the proprietor of a mark. What Sections 62 of the Copyright Act, 1957 and the Trade Marks Act, 1999 seem to do, I believe, is to define the entry level of such actions in our judicial hierarchy. They confer no exclusively and it is not possible from such sections, common to may statues, to infer the ouster of an entire statute. These sections do not themselves define arbitrability or non-arbitrability. For that, we must have regard to the nature of the claim that is made.
17. I must therefore consider that is it precisely that Mr. Dhond Possibly means when he says that these are “rights in rem”. I find it very difficult to accept this proposition stated like this. It seems to me to be altogether too broad. As between two claimants to a copyright or a trade mark in either infringement or passing off action, that action and that remedy can only ever be an action in personam. It is never an action in rem. In trade mark law it is true that the registration of a mark gives the registrant a right against the world at large. It is possible that an opposition to such an application (before the Registrar) would be an action in rem, for it would result in either the grant or non grant of the registration, good against the world at large. But an infringement or passing off action binds only the parties to it Take an example. A may allege infringement and passing off by B.A. may succeed against B. That success does not mean that A must necessarily succeed in another action of infringement and passing off against C. The converse is also true. Should A fail in his action against B, he may yet nonetheless succeed in his action against C This applies equally to copyright actions, A man may be able to demonstrate that his copyright in a film, a literary work, an artistic work or any other work in which copyright is said to subsist is infringed by a certain party. But he may not be able to show such an infringement at the hands of another party. Both are actions in personam. What is in rem is the plaintiffs or registrant's entitlement to bring that action. That entitlement is a result of having obtained or acquired copyright (either by authorship or assignment) or having statutory or common law rights in a mark.
23. Not to put too fine a point on it, Mr. Dhond's argument misses a fundamental aspect of the Supreme Court's decision in V.H. Patel. What the Supreme Court had before it in that case was a reference to arbitration that related to three trade marks and injunction claims in relation to these. One of the arbitral declarations was that the three registered trade marks continued to be the assets of a particular firm. Others before the arbitrator were declared by arbitral award to have no right, title or interest in these marks. The arbitrator issued an injunction permanently restraining those others from using or explosing in the course of trade or otherwise any of those marks in any territory. No question was ever raised before the Supreme Court in V.H. Patel about the award on the issue of the trade marks being bad on account of non-arbitrability, nor did that issue give the Supreme Court pause. The only question of arbitrability was about the dissolution of the firm, and there, as we have seen, the Supreme Court found that reference to arbitration was indeed competent’
27. Chapter X of the Copyright Act 1957 deals with the registration of a copyright. Section 44 of the Act provides for the maintenance of a Register of Copyrights in which the Registrar of Copyrights may, upon receiving an application to register, cause due enquiry and, upon being satisfied, make an entry of such a work. This is not the relief sought for by Lifestyle. In fact, at paragraph 14 of the section 9 application, the petitioner has gone out of the way to confirm that it has not sought protection for any of its garment styles anywhere in the world including, in India. They would also specifically confirm that since the designs have been reproduced more than fifty times, no Copyright subsists in the same.
28. This in tandem with section 15 of the Indian Copy Right Act that states as under:
‘Special Provision regarding Copyright in designs or capable of being registered under the Designs Act, 1911 -
(1) Copyright therein subsists under this Act in any design which is registered under the Designs Act 1911;
(2) Copy Right in any design, which is capable of being registered under the Designs Act 1911, but which has not been so registered, shall cease as soon as in Article to which the design has been applied has been reproduced more than fifty times by an industrial process by the owner of the Copyright or, with his licence, by any other person.’
29. The provisions of Section 15 (2) extracted above are by admission of parties, applicable in the present case and as such, neither QDS nor Life Style have sought statutory protection for the designs stated to have been created by either of them.
30. It is thus, nobody's case that the lis between the parties relates to a declaration that the intellectual property contained in the design belongs to either Life Style or QDS. I, therefore, see the issue as one relating to the usage of the designs commercially. This, and the settlement of the money claim made by QDS upon Life Style are then both capable of being referred to and resolved by arbitration.
31. Mr. Raman, at this juncture would refer to a judgement of this court in In R.K. Productions Pvt. Ltd. v. N.K. Theatres Pvt. Ltd. reported in 2013-1-Law Weekly 485, where this Court holds as under:
‘19. Considering the present case in the light of the above principles, the dispute pertains to exploitation of Telugu dubbing rights of suit film. The subject matter of the suit interalia raises the issues - (i) whether the last instalment of Rs. 2,35,00,000/- was paid by the 1st defendant to the plaintiff; (ii) without paying the last instalment, can 1st defendant assign Telugu dubbing rights and remake of the suit film to the 2nd defendant; (iii) based on the agreement executed by 1st defendant for which amount is stated to be due, whether defendants 2 and 4 can exploit the rights and (iv) whether the plaintiff is entitled to the relief of injunction restraining the defendants 2 and 4 from infringing their copyright All the above issues are inextricably mixed and those issues cannot be split up. Bifurcation of the issues would only lead to delay in resolving the dispute. Since the cause of action and subject matter of dispute arise against all of them i.e. defendants 1 to 4 and applying the ratio of Sukanya Holdings case, the subject matter of the suit cannot be bifurcated by referring the matter to arbitration.’
32. In the light of the above decision, Mr. Raman would urge that since the disputes relate to both the establishment of a right in rem, being the intellectual property rights asserted by the parties, as well as a money claim by QDS, the matter cannot be referred to arbitration in a truncated fashion bifurcating the claims as those that would lie before court and others before an arbitrator. The facts of the above case are distinguishable. Based on the facts of the present case, I have found that neither party seeks the declaration of a right. Moreover, dubbing rights in the case of R.K. Productions (Supra) arose against persons who were not parties to the suit. Thus, applying the ratio of the judgement of the Supreme Court in Sukanya Holdings, the Bench concluded that the cause of action was not liable to be split up. This case does not thus advance the case of the applicant.
33. Mr. Raman would also refer to the decision of this court in the case of the celebrated violinist Lalgudi G Jayaraman v. Cleveland Cultural Alliance. The matter arose from a suit filed by the plaintiff praying for a declaration that he is the joint owner of the copyright in an artistic work. As noted by me earlier, in the present case, neither party would claim any statutory right or declaration. On the contrary, they have expressly eschewed the same. This case also, then, does not further the case of the applicant any further.
34. For the sake of completion, I will refer to an extract from the commentary of McCarthy on Trademarks and Unfair Competition (J. Thomas McCarthy, Fourth Edition Volume 5, pages 31-280 to 31-282), circulated by Mr. Parasaran on the appropriateness of Jus tertii as a defence in Trademark proceedings. The registration of a Trade mark Jus tertii (‘third party rights’) itself is the legal classification for an argument made by a third party (as opposed to the legal title holder) which attempts to justify entitlement to possessory rights based on the showing of the legal title in other person. The commentary states that modern thinking in American Courts seems to be inclined to reject a just tertii defence in Trade Mark litigation. In Krug Vins Fins de Champagne v. Rutman Wine Co., 197 U.S.P.Q.572 (T.TA.B.1977), the Court observes thus:
“The fact that the third persons might possess some rights in their respective marks which they could possibly assert against petitioner in a proper proceeding can avail respondent nothing herein since respondent is not in privity with nor is the successor in interest to any rights which such persons have acquired in their marks….. Petitioner need not have exclusive rights in a mark in order to seek to cancel the registration….. That is, the conflict here is between petitioner and respondent and not between petitioner and the world.’
35. Thus the allegedly superior right of a third party is a relevant defence if the defendant was in privity with that third party.
36. Let me summarise. There is no quarrel with the proposition that the grant of registration of a copyright or design under the relevant statutes can be achieved only by the statutory authorities constituted under the respective Statutes. In the present case, both parties are in reality claiming a better right of usage vis-a-vis the other. This would clearly bring the facts of the present case within the realm of a right in personnam rather than a right in rem.
37. As I see it, the demarcation between an action in rem and an action in personam is not so much a rigid Lakshman Rekha, but a pliant set of determinants to be constructed having regard to the nature of rival claims as well as surrounding circumstances. The applications are held to be maintainable.
38. The second issue relates to the scope of work entrusted to QDS under contract dated 30.6.2014. The relevant facts are as follows:
Life Style is the proprietor of the trademarks ‘Beverly Hills Polo Club’, ‘BHPC’ and ‘BHPC LOGO’ both domestic and International (hereinafter referred to collectively as ‘Brand’). According to Lifestyle, the Brand, including the logo, was established in 1981 and has become iconic both in USA and elsewhere in the globe. The products of the applicant include lifestyle and personal care products sold through trade channels such as retail shops and online retain portals. The reach of the applicants' products through its business partners are extensive in USA, Europe, Asia, South America and the Middle East including India.
39. Consistent with its brand strategy, the stylistic features of the apparel in use for every fashion season's collection worldwide would be based upon styles earlier used by the applicant either in Europe or America. Thereby the applicant claims to have maintained the basic and fundamental features and styles of apparel that have been designed by it, consistent with its strategy for brand recall.
40. To this end, Life Style develops regional partnerships with entities that customise existing styles, aligning the same with regional tastes by improvisation and modification of the basic and fundamental styles in use by it applicant worldwide. The applicant would contend that the product offering every season would only constitute a rearrangement of essential features of the styles already developed over the years, keeping in mind the sensibilities and requirements of each region, in this case. India. The creative designs in use by the applicant would be credited by it to one Ms. Laura G. Wilson, the erstwhile Head Designer under employment previously in the applicant organisation.
41. The respondents, QDSeatoman Designs and Quintessential Designs, were engaged to render services to Life Style in 2008. The terms of the business relationship were reduced to writing vide agreement dated 30.06.2014 and the relevant clauses in the agreement are extracted hereunder:
‘QDSeatoman Designs Pvt. Ltd. (QDS) its affiliates and partners Quintessential Designs India Private Limited (QDIPL) & Quintessential Designs India Pvt. Ltd. - Apparel Ventures (QDIPL-A V) having their registered office at 5th floor, Status Quo, 38 Sterling Road, Nungambakkam Chennai 600 034., are in the business of Apparel Manufacturing; Sourcing; Design; Product Development; Technical Design; Process Management and Quality controls et.al, and offer varied turnkey/one stop brand solutions to its customers, herein after referred to as the ‘PROVIDER’.
Lifestyle Equities CV (LE-CV) having its registered office at 200 Prins Bernhardplein, 1097 JB Amsterdam, The Netherlands., is the owner of a Fashion Brand whose subsidiary, engages in licensing, management and acquisition; LE-CV has interests worldwide with various entities through varied business models, herein after referred to as the “BRAND’.
The BRAND is the absolute owner of the trademark “Beverly Hills Polo Club” for the specific territories referred herein and for the purpose of this agreement.
Both the ‘PROVIDER’ and the ‘BRAND’ have decided to enter into an Agreement on a Principal to Principal basis.
The ‘BRAND’ has approached the ‘PROVIDER’ to manage certain select defined creative services such as Product transla tion. Technical design and Production administration together with other relevant supporting creative services; hereinafter referred to as “BRAND SERVICES”.
The “BRAND” has further approached the ‘PROVIDER’ to act as the ‘BRANDS NOMINATED AGENT” managing for its “Licensee & Retail Partners” - Production Planning; Quality Process Management and Controls; and other Sourcing Requirements of the Brand & Buyer; hereinafter referred to as the “NOMINATED AGENT SERVICES”.
The “BRAND” has also requested of the “PROVIDER” to act as its nominated agent to service the BRANDS retail partner and licensee's namely; Apparel Group in the UAE and Major Brands in INDIA hereinafter referred to as the “BUYERS” and as such directed the BUYER to use the PROVIDER as its nominated Agent to source and resource and carry out all its apparel buying through the “PROVIDER” acting on behalf of the “BUYERS” for the brand “Beverly Hills Polo Club” (BHPC).’
42. QDS was retained to provide brand services on a monthly retainer of 15,000 US dollars, increased to 21,000 US dollars in 2016 and 21,500 US dollars in 2017. QDS was also engaged to act as the ‘nominated agent’ for the agencies and retail partners of Life Style as well as act as its buyer to manage sources, reserves and carry out all its apparel buying. It was also to provide services of production, plan, quality process management and control and sourcing as well as advice on production time lines and planning and execution of the same in a timely manner. As consideration for the same, the buyers of Life Style were to pay 6 % commission on the invoice value of the goods sold by QDS vendors to Life Style buyers. The percentage agreed upon was conditional upon 35% of the overall annual business of the brand from all its licensees/partners/buyers being placed with QDS' factories for woven apparel.
43. Mr. Parasaran, learned counsel appearing for Life Style would point out that the agreement thus envisaged rendition of services by QDS as a ‘one stop shop’. He drew attention to Article 9 of the agreement that stated that ‘it is the complete responsibility of the provider to organise, hire and support the Brand Beverly Hills Polo Club for its needs to service the workload outlaid by the brand1.
44. Mr. Raman, arguing on behalf of QDS would however argue that the scope of services agreed upon under the contract did not include the component of ‘design’. A distinction was sought to be made by Mr. Raman to the effect that ‘creative design’ of apparel was separate and distinct from ‘technical design’ of the apparel. The services of QDS, according to Mr. Raman, had been contractually enlisted by Life Style for ‘technical design’ of the apparel. However, after the sudden exit of the in-house designer of Life Style, QDS had been called upon to render ‘creative design’ services in addition to those contracted for by the parties. As a result, QDS has raised a invoice dated 20.05.2017 for the creative design services rendered by it for an amount of 1.99 million US dollars that is outstanding.
45. The dispute between the parties is thus, simply put, whether contract dated 30.06.2014 is an agreement for all services including creative design or one that excluded creative design.
46. A perusal of agreement dated 30.06.2014 reveals that the parties recognise the existence of two different kinds of design as can be seen from the description of activities that QDS is normally engaged in, which specifies ‘design’ and ‘technical design’ separately. The parties then proceed to agree upon only certain selected services to be rendered by QDS to Life Style, such as ‘Product translation, Technical design and Production administration together with other relevant supporting creative services’ where the component of ‘creative design’ is conspicuous by its absence. Therefore, what QDS has been engaged to perform are technical design services together with other relevant supporting creative services and not creative design services per se.
47. Technical design is achieved by producing what the fashion industry refers to as a ‘tech pack’ - a blue print of the product, required by the manufacturers to bridge the transition from the designers' table to a finished garment. A tech pack, as I understand, is an information sheet that is based on a creative design that communicates to a manufacturer all the necessary components needed to construct a product. Typically designers will include measurements, materials, colors, trim, hardware, grading, labels, tags, and all and any crucial aspect of the creative design in a tech pack and the more detailed a tech pack is, the less room there is for error. Thus, the starting point of the exercise is the creation of the design by the designer (creative design), then, the formation of the tech pack that will contain the blueprint of the product (the technical design) and lastly, the execution of the technical design by the production team into a finished product.
48. There is also dispute between the parties on the agreement itself in so far as Mr. Raman would point out that the reference to the supply of ‘tech packs’ at clause 12 is an insertion in handwriting, not validated by QDS. This is countered by Mr. Parasaran referring to an e-mail dated 21.3.2017 sent by QDS to a buyer where QDS has itself attached a copy of the very same agreement with the handwritten insertions, thus establishing both knowledge as well as acceptance of the same.
49. Is there any difference at all, between ‘creative design’ and ‘technical design’? The answer appears to be an emphatic ‘yes’. Creative design would entail application of one's aesthetic sense and inspiration to conceptualize, visualize and create a garment. This results in a traditional paper sketch or a computer aided design which is sent to a ‘technical designer’ who is the engineer of the industry, one who works on the details that will bring the creation to life. Once the technical designer produces the tech pack that is the blue print or the executable format for the design, the production team brings the two inputs together to create the finished apparel. The role of a creative designer and a technical designer are thus distinct and they co-exist, along with the production team, to bring the finished product to the market.
50. I thus hold that the scope of services as enumerated in the agreement dated 30.06.2014 is restricted only to preparation of the technical designs which are blue prints for detailing the specifications for converting the creative design into a marketable product. This issue is held in favour of QDS.
51. Serious disputes have been voiced by both learned counsel on the alleged poaching of the designs by the parties. Allegations and counter allegations have been made that I refrain from addressing since it is a matter of evidence to be gone into and decided by the Arbitrator in the course of proceedings before him. I also refrain from commenting on the appropriateness in terms of quantum, of the invoice raised by QDS for design services as this is a matter to be addressed in Arbitration having regard to the evidence let in by both parties and the precise extent of work undertaken.
52. Life Style, has, in the application under Section 9 of the Act, expressed its intention to invoke the arbitration clause. In the counter to Application No. 4263 of 2017 filed by QDS seeking permission of this Court to pursue statutory remedies by way of suit, Life Style states that in response to notice of arbitration issued by them dated 13.06.2017 and letter of nomination dated 05.07.2017 QDS had sought for time to respond but not chosen to do so. Accordingly, Life Style has now, in affidavit dated 25.07.2017 stated, that an Application has been filed by it under Section 11 of the Act before the Supreme Court given that the arbitration falls within the scope of an International Commercial Arbitration in terms of Section 2(1)(f) of the Act numbered as A. No. 35 of 2017.
53. In the interregnum, I issue the following directions for protection of the subject matter of the proposed arbitration and in the interests of both parties:
(i) Lifestyle shall deposit a sum of Rs. 1 crore to the credit of this Original Application in an interest bearing account in any Nationalised Bank, the disbursal of which will depend on the outcome of the arbitration relating to the claims of the parties;
(ii) Upon complying with the condition in (i) above, Lifestyle shall proceed with the launch of the Fall 2017 Collection in order to ensure that the slim window available for the fashion season is not lost. However, separate accounts of the business relating to Fall 2017 shall be maintained and the proceeds deposited in an escrow account pending proceedings for arbitration. (iii) Parties are at liberty to approach the Arbitral Tribunal, once constituted for interim direction, in terms of Section 17 of the Act and in accordance with law.
54. This application is closed with the above directions. Consequently all other applications stand closed learving the parties to bear their own costs.