Buying a property

Before buying any property or land in India, following legal documents or legalities should be checked.

1.Title deed / certificate of title of the land

When you are planning to buy any property, first and foremost thing is to check down the title deed of that property. The property title deed is the legal document which proves the ownership of property. The title deed presents certain rights and freedom to the person who holds it and such deeds are required where person wants to transfer his ownership.It includes description of property along with the person’s name that holds it and multiple persons can be listed as owner as well. An official seal is used to point out that the deed is recorded officially and normally it is signed by an owner(s) and a witness who may be a regional officer or a clerk.

So as a buyer you have to ask for original deed not a Xerox because sometimes the seller might have taken a loan and given in the original deed.

You should make sure through the title deed that the property is in the name of solely a seller and no one else is and he has all rights to sell it. The best practice is to get reviewed the property deed by an expert lawyer just to make sure that there are no loop holes.

As a good buyer you may also ask for a previous deed and get reviewed by a lawyer.

2. Encumbrance certificate

The encumbrance means any liabilities or charges created on any property in terms of any security of any debit by property owner which is not discharged as on date. It might be held as security against bank loan against property. Encumbrance certificate is necessary to check the title clearance of property when buying any property. This legal document is issued by registering authority. Government authorities and financial institutes like bank is requested encumbrance certificate for the period of 13 years but you can ask for up to 30 years as well to be checked. Then after if you still have any doubts, you can get possession certificate of ownership for a particular land from village office.

3. Torrence Plan

Torence plan is detailed plan of the property which is done by a licensed surveyor. All the measurements details in it are accurate in terms of length, width, borders etc. this plan is necessary for some specific areas only.

4. Pledged land

Many property owners take bank loan by pledging their property. So check they have paid the entire amount due when you are going to buy that property. If they have paid entire amount due then bank has issued them a “Release certificate”. Ask for the same as this release certificate is necessary whenever you want to take any loan in future.

5. Property Tax receipts

Property taxes are first charge on property that is paid to government or municipality. So you have to make enquiry in government and municipal offices to ensure whether all tax has been paid as on date. You can ask for latest tax receipt from owner. In this way you can check whether any notices or requisitions are issued on property or any tax due on the property. While you are checking property tax receipt, there are two columns in it. One is for owner’s name so verify it and other is for tax payer. In some cases, the tax receipt is not with owner. In such cases, you should contact village office with the survey number of land and confirm the original owner.

6. Measurement of Property 

It is prudential to measure the land before registering any property. In this way you can ensure the measurements and borders of land are perfect and accurate. You should get done it with authorized surveyor as you will avoid many problems coming in future. For the sake of your knowledge you should take surveys sketch from survey department and do ensure the accuracy.

7. Owner or Owners

In some cases, it’s possible that there will be more than one owner of property. In that case get No Objection Certificate or Release certificate from other owners.

8. NRI owner

An NRI can also sell his property in India. For this he gives Power of Attorney to third person whom he give rights for selling the property on behalf of him. The most important thing is to ensure the Power of Attorney is witnessed and is duly signed by an officer of the Indian Embassy. The Power of Attorney signed by a notary public has no legal support I such a case.

9. Deed/ Sale Agreement

After sorting out all the things whether financial or any other between buyer and seller, it’s now turn for advance payment and agreement between them. The agreement is done on 5o Rs stamp paper. It includes the final actual amount, advance payment, time limit to pay due amount and how to pay in installments, time indication when the actual sale should take place. It also includes what to do to cover loss if one of buyer or seller makes default. This ensures that the seller does not defer cost in any case after finalization and he doesn’t sell to another party meanwhile. This agreement can be done by an expert lawyer and signed by both the parties with two witnesses. After doing this agreement, if one from both parties makes any default then another one should take legal action against him.

10. Property Registration

All property sales will be held illegal unless the transaction is by means of a sale deed duly stamped and registered. After collecting and checking all the documents, you have to register land/ property at the Sub-Registrar or the SDM (Sub District Magistrates) of your area.

http://www.lawyersclubindia.com/articles/Documents-to-be-verified-before-buying-any-property-6065.asp#.U4lqMHKSzko

Due Diligence - Purchasing a property

During the process of acquisition of property, taking a legal opinion is an important constituent of the due diligence exercise. Legal opinion is the opinion given by a legal expert on the property transaction. The knowledge of individuals on the nitty gritties involved in the property acquisition is limited. Property acquisition is a complicated process. There are number of laws, rules and regulations covering property transactions. An ideal and reliable source of legal opinion is an advocate who specializes in property matters.

Getting the legal opinion is all the more important in case you are planning to purchase an old property, that is a property from an existing owner rather than a property developer or builder. There may be many issues. The property may be held jointly, or the seller may not have proper title or authority to sell the property. The property may have already been sold by the seller or it may be encumbered, that is a charge already created on the property.

It is difficult for an individual purchaser to check out on all these areas. As such, it is better to take the services of an expert in the matter. Although a purchaser can do an initial review of the documents checked by legal expert.

Scanning through property documents is a complex process. Land records are generally in a local language. The purchaser needs to go through a number of documents to trace the ownership of the property. The legal experts are better placed to review and give their opinion on the status of the property.They can be asked to prepare a search report.

The search report traces the history of the property, that is who the original owners of the property were and how it has been transferred over time before reaching the present seller. It also traces out any charges or encumbrances created on the property and the present status, That is whether the charges have been paid and the property released or if there are some charges pending. This search on the title of the property is for a period of the past 30 years.

A seller should annex a copy of this report to the ‘agreement for sale’ with the intended purchaser of the property. It would state whether or not there is any existing mortgage, litigation, condition or claim, which is likely to affect the title of the buyer adversely.

A legal opinion covers details regarding the status of the property, such as who the legal owner of the property is, what has been the chain of holding and transfer of property, whether the property is free from encumbrances, whether the property has been already offered as a security for loan, is there any dispute on the ownership of the property, whether the seller has complied with all the requirements for getting the ownership of the property, whether the seller is competent to transfer the property etc.

In case you want to avail a housing loan, the title of the property should be clear and marketable, that is the seller should be the genuine and actual owner of the property. Also, the property should not be under any dispute or litigation.

A search report and title certificate can be obtained from an advocate who will conduct a survey of the title of the property by visiting the office of registrar. A legal opinion reduces the chances of getting into disputes at later stage. It acts as a safety device for purchasers.

In case you are getting the property purchase financed by bank, generally the bank will obtain a legal opinion before sanctioning the loan. The bank will have its own legal experts who specialize in this field. The cost is nominal and is built up in the processing and administration charges applicable for sanctioning and disbursing the loan.

How to get property with a clear and marketable title

During the process of acquisition of property, taking a legal opinion is an important constituent of the due diligence exercise. Legal opinion is the opinion given by a legal expert on the property transaction. The knowledge of individuals on the nitty gritties involved in the property acquisition is limited. Property acquisition is a complicated process. There are number of laws, rules and regulations covering property transactions. An ideal and reliable source of legal opinion is an advocate who specializes in property matters.

Getting the legal opinion is all the more important in case you are planning to purchase an old property, that is a property from an existing owner rather than a property developer or builder. There may be many issues. The property may be held jointly, or the seller may not have proper title or authority to sell the property. The property may have already been sold by the seller or it may be encumbered, that is a charge already created on the property.

It is difficult for an individual purchaser to check out on all these areas. As such, it is better to take the services of an expert in the matter. Although a purchaser can do an initial review of the documents checked by legal expert.

Scanning through property documents is a complex process. Land records are generally in a local language. The purchaser needs to go through a number of documents to trace the ownership of the property. The legal experts are better placed to review and give their opinion on the status of the property.They can be asked to prepare a search report.

The search report traces the history of the property, that is who the original owners of the property were and how it has been transferred over time before reaching the present seller. It also traces out any charges or encumbrances created on the property and the present status, That is whether the charges have been paid and the property released or if there are some charges pending. This search on the title of the property is for a period of the past 30 years.

A seller should annex a copy of this report to the ‘agreement for sale’ with the intended purchaser of the property. It would state whether or not there is any existing mortgage, litigation, condition or claim, which is likely to affect the title of the buyer adversely.

A legal opinion covers details regarding the status of the property, such as who the legal owner of the property is, what has been the chain of holding and transfer of property, whether the property is free from encumbrances, whether the property has been already offered as a security for loan, is there any dispute on the ownership of the property, whether the seller has complied with all the requirements for getting the ownership of the property, whether the seller is competent to transfer the property etc.

In case you want to avail a housing loan, the title of the property should be clear and marketable, that is the seller should be the genuine and actual owner of the property. Also, the property should not be under any dispute or litigation.

A search report and title certificate can be obtained from an advocate who will conduct a survey of the title of the property by visiting the office of registrar. A legal opinion reduces the chances of getting into disputes at later stage. It acts as a safety device for purchasers.

In case you are getting the property purchase financed by bank, generally the bank will obtain a legal opinion before sanctioning the loan. The bank will have its own legal experts who specialize in this field. The cost is nominal and is built up in the processing and administration charges applicable for sanctioning and disbursing the loan.

Source:,http://www.indianrealestateforum.com/buying/t-how-to-get-property-with-a-clear-and-marketable-title-752.html

The Real Estate (Regulation and Development) Bill-2013- A Giant Step in Real Estate Sector

The real estate sector in India has been largely disorganised and for a long time a need has been felt to regulate and organise the sector. The last few years have seen tremendous growth in the sector and prices of properties have gone up accordingly. There has been a spurt in foreign investment as well. To address the emerging need, Government has been trying for several years to introduce a Real Estate Bill. Hence, A Bill providing for setting up a regulator for the real estate sector and having provisions like a jail term of up to three years for developers who make offences like putting up misleading advertisements about projects repeatedly was presented in the Rajya Sabha in the current session of the Parliament.

 

The Real Estate (Regulation and Development) Bill, approved by the cabinet, seeks to provide a uniform regulatory environment to the sector. It also intends to make it mandatory for developers to launch projects only after acquiring all statutory clearances from relevant authorities.

The Bill makes it mandatory for builders to clarify the carpet area of the flat. This would be made uniform for the entire country. This rule would make the concept of super area - which is often used to mislead owners - virtually non-existent. The Bill has provisions under which all relevant clearances for real estate projects would have to be submitted to the regulator and also displayed on a website before starting the construction, sources said. The proposed legislation has tough provisions to deter builders from putting out misleading advertisements related to the projects carrying photographs of the actual site. Failure to do so for the first time would attract penalty which may be up to 10 per cent of the project cost and a repeat offence could land the developer in jail.

 

The Ministry of Housing and Urban Poverty Alleviation is working on bringing all projects under a single-window clearance. While the Airports Authority of India and municipal bodies have come on board, there are some objections from the Environment Ministry which are being looked into.

 

As per government sources, nearly 22 states had given their approval to the Bill while five states wanted certain amendments. These changes have been incorporated in the Bill presented in the Rajya Sabha. Chhattisgarh is the sole state to still oppose the Bill.

 

While the Regulator in the states will be appointed by the state governments, in Delhi the Urban Development Ministry will appoint the regulator. DDA is likely to be made the regulator in Delhi, sources said. The Regulator will also be the appellate authority in cases of dispute. This will save the owners the hassle of running around to different authorities for redressal.

 

The latest draft of the Real Estate (Regulation and Development) Bill, 2013 (the Bill) was approved by the Union Cabinet on June 4, 2013. (Real Estate Bills have been formulated by Maharashtra and Haryana State Governments. When enacted, the Central Act would prevail over any State legislation and any provisions repugnant to the Central Act would be void.) The Bill proposes to establish a regulatory oversight mechanism to enforce disclosure, fair practice and accountability norms in housing transactions and to provide dedicated adjudication machinery for speedy dispute resolution in the real estate housing sector.

 

Salient features of the Bill and the problems it seeks to resolve are as follows:

 

Residential projects – The Bill aims to promote transparency in the real estate sector and to establish mandatory governance standards pertaining to all private residential projects of more than 4,000 square meters. There is no prescribed limit on the number of dwelling units. The Bill only seeks to cover large residential projects; commercial projects are not covered.

 

Regulators – A two-tier dispute resolution mechanism is proposed comprising a Real Estate Regulatory Authority (the Authority) and adjudicating officers at state-level and a central Real Estate Appellate Tribunal to adjudicate upon matters relating to residential projects covered under the Act. Currently real estate transactions are largely governed by the agreements between the parties, which are considered generic contracts relating to immoveable properties with remedies including specific relief (if applicable) and damages for breach available under civil and criminal law. Pursuant to enactment of the proposed legislation, civil courts shall not have jurisdiction in respect of any matter covered under the Act.

 

Advisory council – A Central Advisory Council is proposed to advise the Central Government on implementation of the Act, with a mandate to make recommendations on major questions of policy, to protect consumer interests and to foster growth and development of the real estate sector. The proposed Council will possibly take over the role of The National Real Estate Development Council, which was set up in 1998 by the Housing Ministry as an autonomous self-regulatory body to assure transparency and ethics in the real estate business, and seeks to formulate real estate policies through advisory and consultative processes with both Industry and Government.

 

Mandatory registration – The Bill proposes registration of developers, their projects and their real estate agents with the Authority to accredit and monitor projects.

 

Project launch after approvals – The Bill contemplates launch of new projects only after all approvals are in place. Accordingly, development, conversion or commencement of construction of immoveable property would be permissible only after obtaining requisite approvals and registration with the Authority.

 

Mandatory disclosures – Developers would be required to upload information and documents on the Authority’s website relating to land title, encumbrances over land, number and carpet area of units, layout plan, proposed facilities, proposed completion date, etc. These provisions have been introduced to ensure that customers are able to procure complete information and there is no ambiguity with respect to the status of approvals and stage of construction of the project. This will also substantially reduce disputes between the parties that largely arise due to lack of transparency. Presently consumers are unable to procure complete information or hold developers to account in the absence of effective regulation.

 

Agreements – Developers would also be required to provide to the Authority proposed advertisements relating to the project, formats of the agreements to be executed with buyers and lists of bookings in the project on the basis of the agreements with proposed buyers. This will further protect the interest of the buyer and avoid hardship due to one-sided agreements.

 

Carpet area – The Bill provides for developers to clearly specify the carpet area for each unit. As per current practices, developers usually mention “super built-up area” of a unit, which can be very misleading, as the super built-up area may be 25-40 per cent more than the carpet area.

 

No pre-launch bookings – The practice adopted by developers to commence sale of units in pre-launch booking before obtaining mandatory approvals for the project and at times even before acquisition of the land is to be curbed. Issuance of advertisements or booking of units in a project would be permissible only pursuant to registration of the project.

 

Use of funds – The Bill proposes acceptance of an advance/deposit for the proposed sale of a unit in a project by developers only pursuant to execution of a written agreement with the buyers. Further, 70 per cent or a lower percentage (as prescribed by the Authority) of the funds received are to be deposited in a separate bank account to be used only for the relevant project. This provision was introduced to the Bill to ensure that funds collected for a particular project are not diverted for other purposes.

Adherence to approved plans – Developers under the proposed Bill must adhere to approved plans and project specifications and are liable to rectify, at their own cost, any major structural defect or deficiency in the unit or services incidental thereto for one year from the date of handing over possession. If developers fail to rectify such defects within a reasonable time, they shall be liable to pay appropriate damages or compensation to the buyers as may be determined by the Authority.

 

Transparency – Developers would be required to make available information and documents to proposed buyers to ensure transparency in development of the proposed project such as approvals, site plans, structural designs, specifications, construction schedule, etc.

 

Delayed possession – The Bill provides that if the developer is unable to complete construction to give possession of the flat to the buyer, the developer would be liable to refund the deposit received along with interest at the rate prescribed by the Authority. Correspondingly, the buyer must make payments in a timely manner and would be liable to pay prescribed interest in case of delayed payment. These provisions in the Bill have been introduced to ensure timely delivery of possession/completion of the project. The Bill also strives to strike a balance by ensuring that the buyer makes timely payment to the developer.

 

Revocation of registration – In case of wilful default of the provisions of the proposed Act, or unfair practice by a developer, including false representation of the quality of services or status of approvals, the Authority may revoke registration of the developer.

 

Punishment – The provisions for punishment in case of contravention and/or non-compliance with the provisions of the proposed Act currently include imprisonment for a term of up to three years, or a penalty of up to 10 per cent of the estimated cost of the real estate project, or both.

 

Few practical problems in implementation of the Bill include the setting up of regulatory authorities at national and state levels, which is likely to be a long-term process. Developers may structure their projects so that each phase is less than 4,000 square metres to escape the reach of the proposed Bill; as each phase developed separately would be considered as a stand-alone project. Furthermore, the provision in the Bill for opening a separate bank account for funds collected for a project may not serve its purpose as State Governments may allow developers to maintain even less than 70 per cent of the funds collected for the project, thereby allowing for utilisation of funds for some other purpose.

 

Even otherwise the Bill has only been approved by the Union Cabinet, and has to be approved by the Parliamentary Standing Committee, passed by both houses of the Indian parliament, and then submitted for approval of the president pursuant to which it can be enacted as legislation. There are likely to be many more discussions and changes to the Bill following the recommendations of the Standing Committee and debate in the parliament.

 

The impact of the proposed regulatory Bill can be only assessed over time as to whether it is able to effectively address the issues facing the housing sector including standardization of sale agreements, efficacy in resolution of complaints and encouragement of private equity through effective regulations. This would also depend on the extent to which the major players are able to find loopholes, the Government’s resolve to plug them and its commitment to regulate growth of the real estate housing sector.

 

Anurag Tiwari, Advocate

Points to remember before purchasing a Re-Sale property

A resale property:

Who does not wish to live in a house of their own? Buying a new flat will take a long time, so some of us may wish to settle for buying a resale property.  However buying a resale property could involve many legal and other procedural requirements. It is prudent to first understand the various procedures and safety measures for buying resale property to avoid hassles in future. 

Buying Resale Property –A Guide

Consult Experts:

It may be ideal to engage a good real estate agent to locate a resale property. He would be in a position to locate sellers as well as guide you regarding the price of such properties in different localities. They would also be in a position to tell you about the seller of the property. Most real estate agents charge a fee and also help with registration, payment of stamp duty and other paper work involved in the purchase of resale property. In addition, taking the help of a good lawyer would also help to make sure that things are clear legally also.

Title of the property:

It will help engaging experts like real estate agents and lawyers to help you, but it is always better to be well-informed yourself when entering into deals for buying resale property. The first step in this regard would be to establish the title of the seller; whether he is the real owner of the property or has been given the power of attorney to transact the deal. All the documents with regard to the property need to be clear. In addition you need to make sure that all the original documents with regard to the property that were given by the builder or original developer are in order.

Documents:

Buying resale property seems great, but it could become a big problem if the documents regarding the original purchase and subsequent transfer of title are not properly stamped. Firstly it could pose great problems especially if you want to apply for a loan for purchase of the resale property. Subsequently it could prove to be unacceptable in case you wish to transact further on the property.

Existing Loan:

It is also necessary to make sure that the property documents are not lying mortgaged in the bank’s custody against a loan taken by the seller. The bank will consider a loan only once the loan taken by the seller is repaid and the documents released.  

Loan Eligibility:

Buying a resale property would definitely provide you with a bigger space in case of older properties. However it is best to note that some banks may not lend money on buildings older than 10 years. This may be due to the reason that they may not want to take the risk of the price of the property going down. Banks also make sure to ensure that the bank’s outstanding loan should always be lower than the value of the property in the market.

Property Valuation:

Next it is imperative to note that the loan amount is highly dependent on the cost of the property. Technical experts would evaluate the property. However it would be useful to yourself avail the services of a property valuer at a small fee before approaching the banks. The bank’s property valuer may valuate the property at a much lower rate. They would also like to safeguard their interests against the fall in the price of the property in future.

More Down Payment:

Most banks wish to make sure that you be responsible for the maintenance and good upkeep of the resale property. So banks would expect you as the purchaser of the resale property to pay a certain percentage of the price as down payment. You may have to pay about 20% of the price as down payment; property of 50 lakhs requires 10 lakh as down payment.

Age of the property:

This down payment could be more in case of older properties. In addition, banks usually lend only on properties that are unto 50 years old. The tenure of the loan also decreases with the age of the property.

Flat Society:

The bank may grant the loan and you may make the down payment, but there could be another problem. It arises out of the need for some Flat societies that require the payment of a heavy price for change of ownership. It is best to consider this cost also when coming to a conclusion while purchasing resale property in cooperative and other societies.

Conclusion:

Buying resale property would give you a chance to settle in your own house fast and save you of high rents paid and the need to frequently shift your place of living. Taking a loan from the bank could give you tax deductions on the interest paid soon. You would not have to wait till the possession as in the case of new flats. It is always prudent to be well   informed about the various details of the resale property. 

http://www.agarwalandco.com/

Delhi HC judgment in Lt Foods Ltd v. Sunstar Overseas Ltd &Anr.

The Delhi HC, in Lt Foods Ltd v. Sunstar Overseas Ltd &Anr., decided on a bunch of interim applications filed by the parties in the cross-suits, seeking injunction against each other. The parties, in the instant case, claimed ownership rights over the mark “HERITAGE” used in respect of rice. While plaintiff claimed to be the user of the mark since 1997, the defendant claimed to be the user from 1985.The parties did not dispute that the marks used by them viz., “HERITAGE” by plaintiff (Registration no. 799246) and “INDIAN HERITAGE” & “INDIAN HERITAGE SELECT” (Registration no. 1149872) by defendants were deceptively similar.

Background

The plaintiff, in March 2009, came to know that the defendant exported rice under the mark “INDIAN HERITAGE”. The plaintiff, along with an interim application, filed the first suit (CS (OS) No. 612/2009) for permanent injunction restraining the infringement of trademark, passing off, rendition of accounts of profits/damages etc. against the defendants. The defendants filed a separate suit against the plaintiff (CS (OS) No. 639/2009) for permanent injunction restraining the infringement of trademark, passing off, rendition of profits etc. The plaintiff filed its second suit (CS(OS) No. 653/2009) wherein it made additional statements based on subsequent events. The plaintiff, in the aforesaid suit, argued that the invoices adduced by the defendant were dubious and fabricated and did not establish any substantial, continuous and genuine commercial use of the mark “INDIAN HERITAGE SELECT”. The instant judgment, discussed in this post, decided upon a bunch of interim applications filed by the parties in the above mentioned cross-suits, seeking injunctions against each other.

Judgment

Considering Section 28(3) of Trade Marks Act, 1999, the Court held that the suits filed by them against each other for infringement of trademark were not maintainable. [ Section 28(3): Where two or more persons are registered proprietors of trademarks, which are identical with or nearly resemble each other, the exclusive right to the use of any of those trademarks shall not (except so far as their respective rights are subject to any conditions or limitations entered on the register) be deemed to have been acquired by any one of those persons as against any other of those persons merely by registration of the trademarks but each of those persons has otherwise the same rights as against other persons (not being registered users using by way of permitted use) as he would have if he were the sole registered proprietor.] However, suit for passing off was held to be maintainable.

The Court, in this context, examined the evidence adduced by parties for determining the prior user of the mark in question. The Court appointed Local Commissioners to verify the copies of invoices presented before the Court by the plaintiff and the defendant. On perusing the evidence produced by the plaintiff (application for registration dated 20.04.1998 in class 30, statement of total annual sales during the period 1998 – 2009 & invoices during the period 1998 – 2009), the Court prima facie determined that the plaintiff was using the mark continuously since 1998.

The Court, however, dismissed the documents filed by defendants as “not genuine”. Considering the report of Local Commissioner which stated that the defendant did not use the mark “HERITAGE” in any of the exports as evidenced by the shipping bills and supporting documents made available by the customs department, it was held that the defendants argued their case based on documents which were prima facie forged and fabricated. The report of the Local Commissioner noted that the defendants interpolated the mark “HERITAGE SELECT”by replacing the words “SUPER” or “KITCHEN KING” marks in the invoices produced before the Court.

The judgment noted that there was not any clear and cogent evidence available on record to show use of mark prior to 11.11.2002 (date of application filed by defendant) by the defendant. It was noted that the defendant did not furnish sales figures for any financial year. It was also noted that the defendants did not produce and furnish the originals in spite of being given ample opportunities. The Court applied the principle of adverse presumption viz., the Court can draw an adverse presumption against the party if the party withholds a document or evidence knowing that the said document will operate to his disadvantage and held that Court would not assist a party whose case was founded on falsehood. The Court accordingly dismissed the interim applications filed by the defendant. The defendants, their licensees and franchisees were restrained from selling, exporting or dealing in rice under the impugned marks “INDIAN HERITAGE SELECT”/ “HERITAGE SELECT” or any other mark which might be deceptively similar to the mark “HERITAGE” of the plaintiff till the disposal of the suit. Further, the defendant was asked to deposit INR 50,000 with the Prime Minister’s Relief Fund for wasting the time of the Court.

Analysis

The conduct of defendant prima facie did give an impression that the case was built on forged and fabricated documents. It will be highly unfortunate (both legally and ethically) if it is conclusively determined in the final judgment. Further, the judgment is a warning to those who fail to adduce originals as and when they are required to be produced before the Court- especially in a suit for passing off as it is imperative to produce clear and cogent evidence in such a suit. Passing off protects a mark only if goodwill and reputation are effectively demonstrated. The burden is upon the aggrieved to gather survey evidence for demonstrating the possibility or existence of confusion.

The judgment also highlighted the law of adverse presumption by referring to the Supreme Court judgment in Pradip Buragohain v. Pranati Phukan (2010 (11) SCC 108): “We may in this regard refer to illustration (g) to Section 114 of the Evidence Act which permits the Court to draw an adverse presumption against the party in default to the effect that evidence which could be but is not produced would, if produced, have been unfavourable to the person who withholds it. The rule is contained in the well-known maxim: omniapraesumuntur contra spoliatorem. If a man wrongfully withholds evidence, every presumption to his disadvantage consistent with the facts admitted or proved will be adopted.”

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http://www.agarwalandco.com

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Source: http://spicyipindia.blogspot.in/2012/06/note-on-delhi-hc-judgment-in-lt-foods.html

Passing Off Action by Mid-Size Foreign Companies Having Unregistered Marks in India

There are often cases that we undertake for representation, wherein the cases relate to enforcement of trademarks by/of mid-sized foreign corporations that have not been filed and/or used in India against Indian companies that have deceptively used their marks thereby constituting misrepresentation, which might amount to passing off. Rupkatha and Poorva, interns at Khurana & Khurana, look at some of these cases and try to identify certain parameters based on which the mid-sized foreign companies can protect their interest.

Perry v. Truefitt[1], the English case where the tort of passing off was first articulated had clearly pointed out that “a man is not to sell his own goods under the pretence that they are the goods of another trader.” The House of Lords further laid down the essential elements of passing off in Reckitt & Colman Ltd v Borden Inc [2] as:

• The existence of claimant’s goodwill
• Misrepresentation
• Damage or likely damage

Section 27(2) of the Trade Marks Act, 1999 authorizes any trader to institute passing off action against another in spite of the fact that his mark is unregistered. The Hon’ble Supreme Court of India has laid down three elements that need to be fulfilled in order to institute a passing off action by the plaintiff in Satyam Infoway Ltd. v. Sifynet Solutions Pvt. Ltd.[3]:

• The defendant must have sold its goods or offered its services in a manner which has deceived or would be likely to deceive the public into thinking that the defendant’s goods or services are the plaintiffs.
• The likelihood of confusion in the minds of the public that the goods or services offered by the defendant are the goods or the services of the plaintiff.
• The likelihood of confusion in the minds of the public that the goods or services offered by the defendant are the goods or the services of the plaintiff.

Unregistered Marks of Foreign Companies

Section 18 of the Act allows foreign nationals to register their mark in India. Once a mark is registered, the company can take action for infringement against any person who tries to do so. The problem arises when the mark is unregistered. Is there any remedy for the company in such a situation? Or will it remain at the receiving end?

The Indian judiciary has played its role of filling up the gap in the law in such situations. Time and again it has granted relief to foreign companies who are yet to register their marks in India even though the defendant had registered its mark. In N.R Dongre v. Whirlpool Corporation[4], injunction was granted in favour of Whirlpool Corporation based on the fact that although their mark was not renewed, they had gained enough goodwill and reputation in the Indian market which was being wrongly used by the defendant.

The general trend has been to grant relief only to multinational corporations who have a good market in India or who are big names in the international arena. The Hon’ble Bombay High Court in Centrol Industrial Alliance Ltd. versus Gillette U.K. Ltd.[5], the Hon’ble Delhi High Court in Jolen Inc. vs Doctor & Company[6] and Indian Shaving Products Ltd. v. Gift Pack[7] and several other High Courts have held that in order to get injunction in favour of a foreign company with an un-registered trademark, goodwill in the Indian market is an essential pre-requisite.

The problem then arises with the mid-sized companies. There are about 40 marks in the latest trademark journal published by the Controller General of Patents, Designs and Trademark which are deceptively similar or rather have been ‘copied’ from the trademark of some foreign company, big or small. Till now, the trend has been to provide no relief to companies having without any trans-border reputation. The Intellectual Property Appellate Board rejected the opposition posed by the appellant in Kraft Jacobs Sucharc Ltd. v. Government of India by Secretary[8] on the ground that the opponent did not have any presence in the Indian market and did not intend to come to do business here in the near future.

The road ahead

The Court has definitely observed in the Jolen Inc. case[9] “even if it is assumed that such advertisements or marks do not travel beyond the borders of the countries where the plaintiff has the business, still it has a right to protect its reputation and goodwill. It is more so where the trade name has been pirated in totality and not by way of having deceptive or confusing similarity.” The Supreme Court in Milment Oftho Industries & Ors. v. Allergan Inc.[10] held that non-use in India would be irrelevant if the plaintiff was the first in the world market. However, the decision carried a word of caution that foreign brand owners who have no intention of coming to or introducing their product in India will not be allowed to stifle an Indian company by not permitting it to sell a product in India, if the Indian company has genuinely adopted the mark.

Therefore, if it can be shown that the defendant had adopted the complete mark knowing very well that another company of some other country has already adopted that mark, then mala fide on part of the Indian company can be argued.

Now, the Indian courts have been conservative in their approach and constantly relied upon the circulation of magazines, journals and extent of Indian travellers going abroad while deciding these types of cases. This approach is outdated in the light of modern means of exchanging information. The internet, for example, provides a global forum for any product manufactured in one country. Thus, when an Indian company launches a website bearing the trademark of some foreign company, it becomes easier to hold it liable. The Internet Corporation for Assigned Names and Numbers (ICANN) manages the top-level development and architecture of the internet domain name space. It authorizes domain name registrars through which domain names can be registered and re-assigned. Thus, any person who seeks to register a domain name is informed about the availability of that domain name. Rule 2 of the Uniform Domain Name Dispute Resolution Policy[11] requires an applicant to determine that the domain name for which registration is sought does not infringe or violate another’s rights. Thus, if the proposed domain name violates another person’s trademark rights, it will violate Rule 2 of the policy. In such eventuality, the registrar can refuse to register the domain name. Thus, a domain name that is properly registered under international requirements is still subject to the Trademarks Act if a rights owner successfully proves that it has rights flowing from the act.

It was held in the celebrated UK case of Marks and Spencer’s v. One in a Million[12] that any person who deliberately registers a domain name on account of its similarity to the name, brand name or trademark of an unconnected commercial organization must expect to find himself on the receiving end of an injunction to restrain the threat of passing off. This was reiterated by the Delhi High Court in Yahoo!, Inc. v. Akash Arora[13]. After the celebrated case of Satyam Infoway Ltd. v. Sifynet Solutions Pvt. Ltd.[14], there is no doubt that internet domain names are subject to the legal norms applicable to trademarks.

Conclusion

A person who has directly copied the trademark of a foreign company having a proper accessible website and trading in the same goods and services, cannot take the plea that he was not aware of his opponent’s presence in the market. Further, it is strongly recommended that the plight of the mid-sized companies be addressed soon and internet as an advertising and communicating forum gets acknowledged. After all, this is a wrong committed by the Indian company and thus a remedy must be sort out.

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[1] (1842) 6 Beav. 66

[2] [1990] 1 All E.R. 873

[3] 2004(6) SCC 145

[4] 1996(5) SCC 714

[5] 1998 PTC (18) (DB)

[6] 2002 (25) PTC 29 (Del.)

[7] [1998] PTC 698 (Del)

[8] 2004 (29) PTC 376 IPAB

[9] Supra n6

[10] 2004 (28) PTC 585 (SC)

[11] It is a process established by ICANN for the resolution of disputes regarding the registration of internet domain names. It currently applies to all .aero, .asia, .biz, .cat, .com, .coop, .info, .jobs, .mobi, .museum, .name, .net,.org, .pro, .tel and .travel top-level domains,and some country code top-level domains. Refer to http://www.icann.org/en/help/dndr/udrp

[12] 1998 FSR 265

[13] 78 (1999) DLT 285

[14] AIR 2004 SC 3540

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Source: http://iiprd.wordpress.com/2012/06/02/passing-off-action-by-mid-size-foreign-companies-having-unregistered-marks-in-india/