Partner's Son Not Bound By Arbitration Clause In Partnership Deed: Madras High Court Refuses Arbitration In Trademark Case

The Madras High Court has refused to refer a trademark infringement and passing-off dispute over the snuff brand “J.S. Madras Snuff” to arbitration, holding that the arbitration clause in a partnership deed covering disputes between partners cannot bind a non-signatory merely because the alleged infringer is the partner's son.

Justice Senthilkumar Ramamoorthy examined Clause 13 of the partnership deed and observed,

“The language of such clause makes it clear that it pertains to disputes or differences arising between the parties to the partnership deed. It is implicit that it should be a dispute pertaining to a matter dealt with at least broadly in the partnership deed. The partnership deed does not discuss the intellectual property of the partnership firm in general and clearly does not refer specifically to the marks forming the subject of this suit.”

The Court further held that the arbitration agreement could not be extended to the first defendant, Gautham Nithyanandham, who is the son of the second defendant, J. Nithyanandham, a partner of the firm, and not a party to the partnership deed containing the arbitration clause.

It observed, “Given that the first defendant is admittedly not a party to the partnership deed, in the absence of any evidence that he agreed to be bound thereby, on prima facie review, I conclude that, merely on the ground that he is the son of the second defendant, he cannot be joined as a party in an arbitral proceeding",

The court also considered whether the dispute was arbitrable and observed, "The position prevailing throughout the country today is that actions for infringement and passing off are only adjudicated by jurisdictional District Courts and High Courts and not by arbitral tribunals"

A partnership deed dated September 14, 2005, was executed between J. Nandakumar, J. Vimalanathan and J. Nithyanandham, partners of M.V.S. Gramany and Sons. Clause 13 of the deed provided that disputes or differences arising between the parties shall be settled by reference to arbitration.

One of the partners alleged that Gautham Nithyanandham, proprietor of TVS Snuff Company, was manufacturing and selling snuff products using the marks “J.S. Madras Snuff” and “M.V.S. Gramany and Sons." They alleged infringement of trademark and passing off.

During the pendency of the suit, Nithyanandham, who is a partner of the firm, approached the court seeking reference of the dispute to arbitration.

He submitted that the dispute was an action in personam and therefore capable of being resolved through arbitration.

The other partners, however, resisted the request, pointing out that the core allegation in the suit concerned acts of infringement and passing off by Nithyanandham's son.

Since he was not a party to the partnership deed, they argued, he could not be forced to participate in arbitral proceedings.

The Court agreed with this objection. It held that the arbitration clause in the partnership deed was narrowly worded and applied only to disputes between the partners in relation to matters dealt with in the deed. The Court also noted that the partnership deed did not deal with the intellectual property rights that formed the basis of the suit.

The court held that the dispute arose from alleged acts of infringement and passing off by a third party and did not relate to a matter that was the subject of the arbitration agreement. The court therefore dismissed the Section 8 application and refused to refer the dispute to arbitration.

For Applicant (J. Nithyanandham): Advocates S. Diwakar for Rajesh Ramanathan.

For Respondents (M.V.S. Gramany and Sons & Ors.): Advocate S. Shivathanu Mohan for Ramesh Umapathy for R1–R3; Advocate Aanchal M. Nichani for Eswar Sabapathy for R4.