In case of domestic arbitrations, The ‘Court’ is Principal Court of Civil jurisdiction including High Court

Liberty Footwear Company Vs Liberty Shoes Limited (Delhi High Court)

Conclusion: The Hon’ble High Court while dismissing the Petition observed that in case of domestic arbitrations, the ‘Court’ is the Principal Court of Civil jurisdiction including the High Court where it exercises original jurisdiction over the subject matter of the arbitration and the negative covenant is that once an application has been filed in such a Court having jurisdiction and being a competent Court, all subsequent applications shall not be made in any other Court.

Facts: In present facts of the case, Petitioner has been engaged in the business of marketing and manufacturing of footwear and fashion products and is the first user and proprietor of well-known trademark ‘LIBERTY’. On 01.04.2001, Petitioner and Respondent entered into a Registered User Agreement in respect of trademark ‘LIBERTY’ in Class 25 for a period of three years. On 28.03.2003, Petitioner became the exclusive owner of the ‘LIBERTY’ trademark and its formative marks. Trademark License Agreement (hereinafter referred to as the “License Agreement”) was executed between the parties on 31.03.2003 for a period of 7 years commencing 31.03.2003 with automatic renewal for a further period of 3 years, if not terminated by either party. According to the Petitioner, Respondent company defaulted on several obligations under the License Agreement since 2018-19. From 2019 onwards, Petitioner issued repeated notices and reminders to the Respondent pointing out persistent material breaches of the License Agreement. A demand notice was issued to the Respondent on 04.11.2019 under Section 8 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) in respect of license fee due in 2019-20. Petitioner filed a petition under IBC before NCLT, Chandigarh on 20.02.2020 for a sum of Rs.9,51,15,334/- in respect of shortfall in license fee paid by the Respondent for the period 2019-20 and the same is currently pending.

On 27.09.2022, one of the partners of the Petitioner firm issued notice to the Respondent to terminate the License Agreement. Respondent, in turn invoked the arbitration agreement vide notice dated 20.10.2022 but at the same time refusing to stop the use of LIBERTY marks or make payments, as per the agreed terms. Finally, on account of the alleged continuous material breaches of the terms of the License Agreement by the Respondent, Petitioner issued a notice dated 04.05.2023 to the Respondent, under Clause 9 of the License Agreement, terminating the said Agreement and calling upon the Respondent to forthwith cease use of Petitioner’s LIBERTY trademarks. As the Respondent continues to use ‘LIBERTY’ marks, which according to the Petitioner, violates its statutory and common law rights, present petition has been filed.

Respondent submitted that this Court has no territorial jurisdiction to entertain the present petition as apprehending termination, Respondent approached the learned District Court, Karnal, where registered offices of both the parties are situated, under Section 9 of the 1996 Act, seeking interim injunction against the Petitioner from taking any unlawful action, including termination of the License Agreement, which is otherwise valid till 31.03.2028.

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