The Court reiterates that an arbitration clause survives the termination of the agreement, emphasizing the doctrine of kompetenz-kompetenz.
In a significant ruling, the Delhi High Court has reaffirmed the arbitrability of disputes arising from trademark infringement under a Partner Agreement containing an arbitration clause. The appellate bench, comprising Mr. C. Hari Shankar and Mr. Om Prakash Shukla, set aside the order of the Commercial Court, which had dismissed an application under Section 8 of the Arbitration and Conciliation Act, 1996. This decision pertains to the case of Newgen It Technologies Ltd v. Newgen Software Technologies Ltd., where the respondent had alleged trademark infringement and sought judicial remedy.
The crux of the issue was whether the arbitration clause in the Partner Agreement survived its termination and whether the dispute was arbitrable. The Commercial Court had earlier refused to refer the matter to arbitration, accepting the respondent's claim that the agreement had ended with the change of the appellant's corporate name, thereby nullifying the arbitration clause.
However, the High Court disagreed with this reasoning, reiterating the legal principle that arbitration clauses have a separate existence from the underlying contract, as emphasized in the Supreme Court's judgment in "Interplay Between Arbitration Agreements under Arbitration, 1996 and Stamp Act, 1899". The Court highlighted that such clauses are intended to resolve all disputes arising from the agreement, including those regarding its termination or repudiation.
Dr. Amit George, representing the appellant, argued that the Partner Agreement's Article 18 explicitly required disputes to be settled through arbitration, and the application of Section 16 empowered the Arbitral Tribunal to rule on its own jurisdiction. The Court concurred, noting that the negative aspect of the kompetenz-kompetenz doctrine mandates that the Tribunal should first address jurisdictional challenges before the courts do.
Mr. Sandeep Sethi, counsel for the respondent, argued that the dispute was a straightforward trademark infringement matter, inherently non-arbitrable as it constituted a right in rem. Nevertheless, the Court observed that the dispute was intricately linked to the Partner Agreement, which had provisions for preserving intellectual property rights.
In its detailed judgment, the High Court emphasized that once a prima facie valid arbitration agreement is established, the court must refer the parties to arbitration, leaving jurisdictional questions to the Tribunal. This decision aligns with the Supreme Court's rationale in "Mangayarkarasi v. Sundaresan", which upheld arbitration for disputes interlinked with contractual agreements, even when they involve trademark issues.
The ruling underscores the Indian judiciary's commitment to uphold arbitration as a viable mechanism for dispute resolution, reinforcing the legislative intent of the Arbitration and Conciliation Act, 1996. The parties have been directed to initiate arbitration proceedings as per Article 18 of their Partner Agreement, marking a pivotal step in promoting arbitration for intellectual property disputes in India.
Bottom line:-
Arbitration - Trademark infringement dispute found arbitrable under Section 8 of the Arbitration and Conciliation Act, 1996 - Court held that the arbitration agreement within the Partner Agreement survives its termination and disputes arising from the agreement must be referred to arbitration.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Sections 8, 16
