Seven Towns V. Kiddland: Delhi High Court On Trade Dress Protection

The concept of trade dress, although closely associated with trademarks is not explicitly recognized in Indian legislations unlike its U.S.A. counterpart. In Indian context, upon looking closely at the definitions of "mark" and "package" under S. 2 of the Trade Marks Act, 1999 we see that the trade dresses are also protected.

To define it, trade dress is the visual or sensual experience of a product and is inclusive of the packing, shape and combination of colours used in packaging, such that it distinguished the product from the ones of its competitors. So anything from the wrapping of Cadbury chocolates to the design of flagship stores of Apple Inc. would fall within the ambit of trade dress now.

A landmark case discussing the concept is the case of Walmart Stores v. Samara Brothers[1] where trade dress was defined as "a category that originally included only the packaging, or 'dressing,' of a product, but in recent years has been expanded by many courts of appeals to encompass the design of a product."

However, the case of Vision Sports Inc. v. Melville Corp.[2] draws a distinction as to the protection of trade dress and trademark protection wherein it was held that – In contrast, trade dress involves the total image of a product and may include features such as size, shape, colour combinations, texture, or graphics. Trade dress protection is broader in scope than trademark protection, both because it protects aspects of packaging and product design that cannot be registered for trademark protection and because evaluation of trade dress infringement claims require the court to focus on the plaintiff's entire selling image, rather than the narrower single facet of trademark. This was also reiterated in the case of Colgate Palmolive v. Anchor Health[3].

In the recent case, Seven Towns v. Kiddland[4], the concept of trade dress is discussed in detail along with comments on the previous case laws discussing the same subject matter. The dispute is with regard to infringement of trade dress of the Rubik's cube by the product of the defendant called Rancho's cube, in terms of not only the product in itself but also the packaging and labelling.

Brief Facts of the case:

The plaintiff in this case, Seven Towns and Funskool are the original manufacturers and distributors of the product called "Rubik's cube" which has been sold since 1975, all across the globe. The inventor of the cube, Mr. Rubik had the invention of the toy patented, in addition to the product being trademarked after his own name, after an amendment to the original name of "Magic Cube". The plaintiffs allege that the defendants have used a deceptively similar trade dress to that of their product in order to confuse the consumers and take undue advantage of their goodwill. Hence Plaintiff filed suit for permanent injunction, restraining infringement of copyright, passing off, dilution, and various other reliefs against the defendants along with the application for seeking various interim reliefs against the defendants.

Arguments of the Petitioner:

In order to prove that the defendants have used a deceptively similar trade dress to that of Plaintiff's  product in order to confuse the consumers and take undue advantage of their goodwill, plaintiffs in the form of a table shown the similarities in the packaging of their product with that of the defendant like – copying of the diagonal shape of packaging which gives an impression of a 3D triangle bulging out, the usage of 6 primary colors to denote the product's name, its font and a label that denotes the appropriate age for the product being placed at the lower left hand of the label to name a few. The Plaintiffs did not claim rights over the cube per se, but the expression of the cube i.e. a cube comprised of 36 smaller cubes, 3X3X3 cube with black as its base and green, red, blue, yellow, white and orange being the different colors on each surface of the cube. The petitioners also rely on the fact that they have obtained considerable goodwill and reputation in the market as manufacturers of the cube and how they have been vigilantly acting against any company that infringes their product, in addition to the worldwide recognition and reputation wherein the toy in itself is referred to "Rubik's cube". This petition is thus presented before the High Court against the defendants for the tort of passing off and infringement of trade dress, which has resulted in considerable loss to the plaintiff. The plaintiff further relied on the case law of Ideal Toy Corporation v. Plawner Toy Mfg. Corp.[5] where the U.S. Court of appeals relied on acquired distinctiveness and trade dress serving the purpose of identification of source, apart from determining the trade dress of the plaintiffs and how it was considerably reputed and recognized. Further reliance is also placed on the case law of Heinz Italia v. Dabur India Ltd.[6] which states that an injunction must follow where it prima facie appears that the adoption of the mark in itself was dishonest, thus praying for the interim relief of an injunction against the defendants.

Arguments of the Defendants:

The defendants denied that the trade dress of the plaintiff is distinctive or well recognized and hence, the same cannot acquire goodwill or be reputed. They also claim that the product is not of superior quality and that they have substantially invested in the advertising of their product. A dissimilarity table is produced on behalf of the defendants and reliance is placed on the sale of units, the difference in price to show that the plaintiffs wish to eliminate the serious competition that they fact from the defendants. The defendants also mention the difference in name, in the place of manufacture as points of distinction in addition to stating that the trade dress of the plaintiff fails to be a well known mark as specified under s. 11(6) and s. 2(zg) of the Trade Marks Act, 1999 as the plaintiffs have failed to provide any documentary proof of the same.  The defendants further bring forth the concept of trans-border reputation stating that "The trademark registrations in other countries would show that the trade dress of the Rubik's Cube enjoys statutory protection, recognition and popularity in a significant number of countries worldwide. The goodwill and reputation as part of products of plaintiff No.1 in India and its recognition and popularity has seeped into India on account of transborder reputation."[7] The defendants further rely on several judgments to show that trade dress must be examined in its entirety and not looking at specific elements like L'oreal India Pvt. Ltd. v. Henkal Marketing India Ltd.[8] and Kellogg Company v. Pravin Kumar Bhadabhai[9] and the case law of Frito Lay India v. Uncle Chips Pvt. Ltd.[10]which states that competition must be free. Additionally, reliance is placed on s. 15(2) of the Copyright Act, 1957 and the case of Microfibres Inc v. Girdhar Co.[11] which states that copyright ceases to exist when more than 50 copies of the product are made. In addition to this, the defendants also state that only colors cannot be monopolized as they are not distinctive and lack creative or artistic input, relying on Colgate Palmolive v. Anchor Health.[12] Further, the primary colors of the cube are a functional element of the puzzle and cannot be monopolized. The defendants also allege that the patent to the invention of "Magic Cube" has expired and the product is now in the public domain. Furthermore, reference to the puzzle as "Rubik's Cube" is not an indicative of the reputation and good will that the product carries, quoting the examples of packaged drinking water being known as 'Bisleri' commonly and photocopies being called 'Xerox'. The defendants also rely on Cipla v. M.K. Pharmaceuticals[13] to indicate as to how the trade dress of medicine worked in favour of the second entrant to the market.

Observations & Conclusions of the Court

Manmohan Singh, J. decided the matter on September 6, 2016 making interesting observations with regard to the general nature of trade dress, deciding on the test against which passing off and deceptive similarity must be determined, the extent of unfair trade practice by the second or subsequent entrant in addition to the actual dispute of granting of an interim relief to the plaintiff on the existence of a strong prima facie case.

In the case of Hodgkinsons and Corby v. Wards Mobility[14], the English courts had held that the test for determination of passing off was a 3 step process where – the plaintiff must have considerable goodwill in the market, there must be misrepresentation by the respondent and there must be consequent damage caused to the plaintiff. Justice Singh relies on Microlube India Ltd. v. Rakesh Kumar Trading as Saurabh[15] to state that regardless of subsistence of design right or its exhaustion, a passing off action can lie in given cases and discusses the observations of the case of Laxmikant V. Patel v. Chetanbhat Shah and Another[16], to state that passing off would be when a competitor initiates sale of goods and services in the same name or imitates the name causing injury to the business of the one who has property in that name. While commenting on the general nature of trade dress and thus what would comprise of passing off, Justice Singh uses the case of William Grant and Sons v. McDowell & Co. Ltd.[17]which further states for injunction there must be material disclosing that the public associates the object in question only with the plaintiffs. The case of William Edge & Sons Limited v. William Niccolls & Sons Limited[18] is relied on to explain that simply naming a product that was previously unnamed but had considerable popularity in the market as belonging to the subsequent entrant would not be distinguishing of the goods but would give the impression as belonging to the original manufactures and hence, passing off. The case of Anglo Dutch Paint Colour and Varnish Works Pvt. Ltd. v. Indian Trading House[19] is also reiterated to explain that the subsequent entrant had no reason to use the applicant's color arrangements save as with the improper motive of benefitting from his good will and the essential question that needs to be asked is why the same colours would be used but to attract the plaintiff's goodwill and trade reputation which would amount to passing off. Justice Singh also uses the case law ofReckitt & Colman Products Ltd. v. Borden Inc. & Ors.[20] to reiterate that the question that needs to be asked here is not whether the plaintiff can sell his product the way he does but why the defendant would deliberately adopt the same and the case of Colgate Palmolive v. Anchor Health[21] which states that "Trade dress is the soul of identification of a product" and the test for passing off is likelihood of confusion or deceptiveness and it is the duty of the subsequent comer to avoid unfair competition and become unjustly rich. This is also explained in the case of Cadbury v. Neeraj Food Products[22]where it is stated that deception is the essence of the tort of passing off.

Justice Singh clarifies the position with respect to where similarities or dissimilarities are to be considered in the case of the tort of passing off, stating that it was the points of similarity that need to be considered rather than the points of dissimilarity thus taking into consideration the judgments of S.M.Dyechem v. CadburyIndia Ltd.[23]and Cadila Healthcare Ltd. v. Cadila Pharmaceuticals Ltd[24]. Relying on the judgment of Sanjay Kapur v. Dev Agri Farms[25] and several other judgments cited within the case, the learned judge in this judgment states that affixing their own label does not amount to exclusive trade dress capable of distinction and there must be clear distinctions and the duty lies on the second entrant to ensure that he is not indulging in unfair trade practices or free riding the goodwill and reputation of an existing competitor. Justice Singh also states that monopoly over a single colour can surely not be enjoyed but that is certainly not the case here as it is the combination of colours that the plaintiff allege as infringed and is protected as their trademark. There exists considerable goodwill on the side of the plaintiff and they do have a huge reputation in the market, thus ensuring that the mark is well known under s. 11(6) of the Trade Marks Act. In arguendo, although the defendants claim that they can change the shape of the cubes to make them distinctive of the plaintiff's product, Justice Singh states that this question can be answered later, when such case arises. The defendants relying on the case of Cipla v. M.K. Pharmaceuticals[26] is also declared as wrong as the purchase of toys is distinct from that of medicines which is elaborated in the judgment.

Therefore, the Delhi High Court in this case ruled in favour of the plaintiff finding a prima facie case and granted them an injunction against the product of the defendants while also clarifying significant changes with respect to trade dress protection. This case is certainly an essential to understand the concept of trade dress and the extent of protection in the light of monopoly over colours, the test of similarities and labeling products if indicative of distinctiveness. However, Hon'ble Court has also specifically mentioned that the findings are tentative in nature and the same shall not have any bearing when the same would be decided on merits. It would be interesting to note the final outcome of the suit.

References:

1. Wal-Mart Stores vs. Samara Bros., 529 U.S. 205, 120 S. Ct. 1339 (2000).
2. Vision Sports, Inc. v. Melville Corp. 12 USPQ 2d 1740.
3. Colgate Palmolive v. Anchor Health, 108 (2003) DLT 51.
4. Seven Towns v. Kiddland, I.A. No.13750/2010 in CS(OS) No.2101/2010, as decided on September 06, 2016.
5. Ideal Toy Corporation v. Plawner Toy Mfg. Corp, 685 F.2d 78 (3rd Cir. 1982).
6. Heinz Italia v. Dabur India Ltd., (2007) 6 SCC 1.
7. Seven Towns v. Kiddland, Para 16.
8. L'oreal India Pvt. Ltd. v. Henkal Marketing India Ltd, 2005 (6) BomCR 77.
9. Kellogg Company v. Pravin Kumar Bhadabhai, 1996 (36) DRJ 509.
10. Frito Lay India v. Uncle Chips Pvt. Ltd., (2000) 86 DLT 31.
11. Microfibres Inc v. Girdhar Co, (2006) 128 DLT 238.
12. Colgate Palmolive v. Anchor Health, 108 (2003) DLT 51.
13. Cipla v. M.K. Pharmaceuticals, MIPR 2007 (3) 170.
14. Hodgkinsons and Corby v. Wards Mobility, [1997] FSR 178.
15. Microlube India Ltd. v. Rakesh Kumar Trading as Saurabh, (2013) 198 PTC 120.
16. Laxmikant V. Patel v. Chetanbhat Shah and Another, (2002) 3 SCC 65.
17. William Grant and Sons v. McDowell & Co. Ltd., 55 (1994) DLT 80.
18. William Edge & Sons Limited v. William Niccolls & Sons Limited, (1911) AC 693 at 709.
19. Anglo Dutch Paint Colour and Varnish Works Pvt. Ltd. v. Indian Trading House, AIR 1977 Delhi 41.
20. Reckitt & Colman Products Ltd. v. Borden Inc. & Ors., 1990 R.P.C. 341 at page Nos.414 to 416, 422, 426.
21. Colgate Palmolive v. Anchor Health, 108 (2003) DLT 51.
22. Cadbury India Ltd. v. Neeraj Food Products, 142 (2007) DLT 724.
23. S.M.Dyechem v. Cadbury India Ltd., (2000) 5 SCC 574.
24. Cadila Healthcare Ltd. v. Cadila Pharmaceuticals Ltd., (2001) 5 SCC 783.
25. Sanjay Kapur v. Dev Agri Farms, 2014 (59) PTC 93 (Del).
26. Cipla v. M.K. Pharmaceuticals, MIPR 2007 (3) 170.

Source: http://www.mondaq.com/india/x/545258/Trademark/Seven+Towns+V+Kiddland+Delhi+High+Court+On+Trade+Dress+Protection

NGT sword on vintage car rally

Every December, enthusiasts wait for the high-profile car rally organised by the Constitution Club of India. But this year, it's likely to be a lacklustre affair, with the vintage cars of the MPs not being allowed in the rally due to the stipulations of the National Green Tribunal (NGT). However, the vintage cars will be put in display for the visitors.

This is followed by NGT's order that bans running vintage cars on Delhi roads. However, experts told Mail Today, that the green tribunal allows vintage car rallies when permission is sought. "The Constitution Club organises just a car rally in which there can be vintage cars. In earlier editions of the rally, such vintage cars did participate," said Tutu Dhawan, auto analyst and organiser of the CCI car rally. Vintage cars have been major attractions of this car rally. It was pioneered by the present Punjab governor VP Singh Badnore, who was the convener of the CCI car rally when he was a Rajya Sabha member. The old cars earned praises from all quarters, including Vice President Hamid Ansari.

"Vintage cars never fail to attract because of their classic looks. Each one of them has an identity and an equally amazing history," Dhawan added. With this car rally, the Parliamentarians also try to spread the message of safe driving. "This year, the car rally will be held on December 11. The theme of the rally is road safety," a CCI official said. "The rise in number of road accidents leading to loss of life is a serious concern. Our politicians spend a lot of time travelling on the roads while campaigning and meeting people. Safety and discipline on roads is very important. We are attempting to convey the message of road safety by organising a car rally every year," said organising committee member Shahnawaz Hussain. The rally is expected to be attended by people from across the social spectrum.

AskMe Ashok Rajagopal gets interim bail

Ashok Rajagopal, former director of defunct e-commerce firm AskMe who represented the majority investor Malaysia’s Astro on the board, got interim bail on a case filed by one of the online sellers My Limo Trading Company. The seller had accused AskMe of not paying the company the money the latter had collected on its behalf from buyers for goods sold on the e-commerce platform.

Though Rajagopal was not in charge of day-to-day affairs at AskMe, My Limo filed a case against him since he had represented Astro, the 98.5% stakeholder in Getit Infoservice Pvt Ltd, the company that ran AskMe. Rajagopal had sought anticipatory bail in this case in the court of district and sessions judge, Patiala House, New Delhi, after a first information report (FIR) was registered against him on complaints filed by My Limo Trading Company.

My Limo claims AskMe owes the former around Rs 1.5 crore.

The court has ordered not to take any coercive action against Rajagopal till 8 January, when the bail application would again be considered. Rajagopal and Astro spokesperson did not respond to queries regarding the legal proceedings.

The legal imbroglio involving Astro and AskMe is getting more complex with another FIR being registered against former AskMe board members on a case filed by My Limo’s affiliate company EBiz International seeking Rs 2.5 crore of defaulted payments.

AskMe suspended operations and top management led by CEO Sanjiv Gupta left the company in August when Astro stopped funding the company. A number of sellers are now filing cases against former directors while Gupta and the investor Malaysian conglomerate Astro are slugging it out at the National Company Law Tribunal (NCLT).

NCLT has scheduled for hearing on the winding down petition moved by Astro along with several other petitions related to this matter for 12 December.  Various parties including hundreds of online sellers and 4,000 unpaid employees of AskMe are awaiting the conclusion of the legal battle that was set off end-August following the collapse of talks regarding a management buyout.

Corporate Insolvency - National Company Law Tribunal

On November 25 2016, the provisions of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (SICA Repealing Act) were notified with effect from 1 December 2016. This means that the Sick Industrial Companies (Special Provisions) Act 1985 stands repealed and consequently, the Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (Appellate Authority) are dissolved. On the same day, Section 4(b) of the SICA Repealing Act, as substituted by the Eighth Schedule of the Insolvency and Bankruptcy Code 2016 (Code), was also notified with effect from 1 December 2016. It seems that as a corollary to these notifications and possibly to avoid creating a vacuum in the legal process, the Government of India decided to notify substantive parts of the Code relating to corporate insolvency resolution process on 30 November 2016, effective from 1 December 2016.

In our Ergo Newsflash of 25 November 2016 we had outlined that the Code was being notified in phases and that the provisions dealing with intermediaries had been notified into law on 27 November 2016. In May 2016, we had shared our thoughts on the broad contours of the Code with you. In addition to these, we provide below in FAQ format (i) a brief outline of what has been notified; and (ii) the implication of notifying the SICA Repealing Act on the Code.

The Code is here; long live the Code

What provisions of the Code have been notified?

Per the latest notification issued on 30 November 2016, the provisions relating to corporate insolvency have been notified into law, namely:

Sections 4 to 32: These deal with the substantive as well as procedural aspects of initiating a corporate insolvency resolution process, moratorium, constitution of the committee of creditors, and appointing of insolvency professionals, etc.;

Sections 60 to 77: These deal with offences and penalties for various actions;

Section 198: This allows the National Company Law Tribunal (NCLT) to condone any delay by the Board for reasons recorded in writing;

Section 231: The section bars the jurisdiction of civil courts in respect of any matter which the NCLT is empowered to pass orders on;

Sections 236 to 238: These sections (i) empower the special courts created under the Companies Act 2013 to try offences under the Code; (ii) empower the High Court to hear appeals and revisions from the special court; and (iii) make clear that the Code overrides all other laws in India;

Sections 239(2)(a) to (f): These sections empower the Central Government to make rules for various purposes; and

Sections 246 to 248 and 250 to 255: These sections amend various other laws and were notified prior to 1 December 2016.

In addition, the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016 were also notified with effect from 1 December 2016. These regulations are substantive guidelines which outline how a corporate insolvency resolution process can be triggered, what constitutes proof of claim, the governance of the committee of creditors, and the power of the insolvency professional, amongst other things.

Impact of the notification of the SICA Repealing Act

What does notifying the SICA Repealing Act and, inter alia, Part II (Chapter 1 and 2) of the Code (both effective from today, 1 December 2016) mean for pending cases under the erstwhile SICA?

Section 252 of the Code, notified on 1 November 2016, amended the SICA Repealing Act by substituting Section 4(b) therein with the Eighth Schedule of the Code. This was later followed by the notification on 25 November 2016 notifying the SICA Repealing Act itself with effect from 1 December 2016. The net effect of this is that BIFR and the Appellate Authority are, as of today functus officio (ie defunct). In terms of the Eighth Schedule of the Code, it means that any appeal preferred to the Appellate Authority or any reference made to the BIFR or any inquiry pending before the BIFR or any other authority or any proceeding of whatever nature pending before the Appellate Authority or the BIFR immediately before the commencement of the SICA Repealing Act stand abated. Any company in respect of which such an appeal or reference or inquiry stands abated has been given an option to make an application to the NCLT under the Code within 180 (One hundred and eighty) days from the commencement of the Code in accordance with the provisions therein. The provisions of the Code giving such an option have come into force from 1 December 2016.

What is the impact of the SICA Repealing Act on the orders passed either under Section 22 of SICA or scheme sanctioning order or any other order affecting the rights of the parties therein?

As stated above, the SICA Repealing Act read together with Section 252 of the Code, does state that all proceedings pending before the BIFR or Appellate Authority, shall stand abated with effect from 1 December 2016. However, the SICA Repealing Act also contains a "savings" section. The way this section is drafted, it intends to "save" any rights and obligations which have vested in a party under SICA upon its repeal. Given the substantive nature of the above orders passed under SICA, it may be argued by some that these orders are saved. Having said this, considering that the criteria for reference to NCLT and declaration of moratorium under the Code are substantively different from what was prescribed under SICA, it remains to be seen if such an interpretation is maintainable and merits a clarification from the Government to remove ambiguity.

Do the notified provisions of the Code apply to all companies (and not just industrial companies)? What is the test for "sickness" under the Code?

The Code is a significant change from the erstwhile SICA regime, particularly on this point. As a remedy, the Code is available for and against all companies and partnerships in India, but as of now only against companies and limited liability partnerships. Further, as a remedy it is available not just to scheduled commercial banks in India but to all financial creditors (ie lenders or beneficiaries of corporate guarantees) and operational creditors (ie trade creditors).

Furthermore, the balance sheet test under SICA for determination of "sickness" has been replaced with a low threshold cash flow test. Where a corporate debtor has committed a default of INR 100,000 (Indian Rupees One lakh) or more, an operational creditor or a financial creditor or corporate applicant itself may initiate a corporate insolvency resolution process.

Source: http://www.mondaq.com/india/x/549680/Corporate+Commercial+Law/India+Steps+Into+A+New+Era+For+Corporate+Rescue+And+Insolvency

Changes in debt recovery laws growth positive

Secured credit is the driving force of the economy and growth of credit creates wealth and generates employment. Recent Amendment Act to change debt recovery laws passed by Parliament proposes certain path-breaking changes in the registration systems as well as in priority to secured credit over taxation dues. This will create an environment conducive to growth of credit not only by banks and financial institutions (FIs) but by all other secured lenders.

In terms of amendments to the SARFAESI Act, the Central Registration System established under the Act is to be extended to all secured lenders who will be able to register any security interest created in favour of the lender over immovable, movable or intangible property belonging to the borrower. The registration system is also to be extended to attachment orders on property issued by any taxation or other authority or by any court. Such registration system when implemented will result in creating a national database of all encumbrances on property rights and all lenders will be in a position to ascertain whether the property offered as security for any loan is already encumbered or under attachment.

One other aspect of the new registration system is that it is not compulsory and secured lenders have the option to register particulars of a property mortgaged, charged or hypothecated to them or any modification or satisfaction of such charge. But one distinct advantage of registration will be that there will be public notice of security created and any dealings with such property shall be subject to registered security interest. Hence, there is adequate incentive to register security interests over any property right for secured lenders. Similarly, enabling provision is made to extend the registration system to all taxation authorities having powers to issue attachment orders.

As far as priority to secured creditors over taxation dues is concerned, all the taxation authorities whether at central, state or local authority level operate on the principle that Crown debts have a priority over all other claims, including claims of secured creditors. Many states have incorporated provisions in tax laws declaring that arrears of tax dues shall have a first charge on the assets of the assessee and, in such cases, banks and FIs as secured creditors rank below the revenue claims. Further, revenue authorities have powers to charge penal interest on delayed tax payments and, in many cases, substantial part of the recoveries made by banks / FIs has to be paid to tax authorities.

Exception to the principle of priority to claims of revenue over secured creditors is provided under insolvency laws. Sections 529 & 529A of the Companies Act, 1956 now incorporated in the Sections 325 & 326 of the Companies Act, 2013 recognise the rights of secured creditors to claim priority over taxation dues subject to priority extended to workmen’s dues on pari passu basis.

Similar priority was recognised under the insolvency laws for individuals and non-corporates. The above principles contained in old insolvency laws have been incorporated in the new Insolvency and Bankruptcy Code, 2016.

Outside the insolvency laws, banks/ FIs have rights of recovery under the SARFAESI Act, 2002 and RDDB & FI Act, 1993. In the absence of any provisions in the above debt recovery laws recognizing priority to secured creditors over taxation dues, the Supreme Court had held that priority given under the state laws shall prevail over debt recovery laws and secured creditors cannot have priority over taxation dues.

Recent amendments to the SARFAESI Act and RDDB & FI Act have totally changed the status of banks/ FIs in the order of priority. Newly inserted Section 26E of the SARAFESI Act and Section 31B of the RDDB & FI Act recognise priority of banks/ FIs as secured creditors over taxation dues. This amendment is also conducive to promote low-cost credit by enhancing availability of secured credit.

Such amendments to debt recovery laws for banks / FIs are related to the legislative powers of Parliament to legislate on ‘banking’, because lending is the principal business activity of banks and speedy recovery of loans is part of the banking laws. The provisions made in the Union law passed pursuant to legislative powers of Parliament shall prevail over the state laws making contrary provision giving priority to state taxation dues under article 254(1) of the Constitution. Hence, the amendments made to the debt recovery laws are constitutionally valid and shall override state laws.

States need to appreciate that secured credit is the engine of growth in the economy. Such priority provided to secured credit will create an environment of growth for low-cost secured credit, which will trigger creation of wealth, generate employment and facilitate overall growth and development in the economy, and better tax collection by states.

http://blogs.economictimes.indiatimes.com/et-commentary/changes-in-debt-recovery-laws-growth-positive/

Supreme Court backs move to ban highway liquor vends

The Supreme Court indicated on Wednesday that it would order shutting of all liquor vends on national and state highways for the safety and security of commuters who get “distracted” after seeing the shops, causing accidents.

A bench headed by Chief Justice TS Thakur came down heavily on states for not heeding the Centre’s advice to not give licences to the vends on the highways. Instead, the states have increased the number of licences, the bench pointed out. The first communiqué was released in 2007, since then the Centre has been sending notices to the states.

“We would not like any vend on national highways, state highways, advertisements, or signage about the availability of liquor shops. We will direct all highway authorities to remove all sign boards. It should be absolutely free from any distraction or attractions. It should not be visible. Visibility is the first temptation,” Justice Thakur said.

The court was hearing petitions challenging various high court verdicts, which disapproved the sale of liquor on highways. The courts have held that the shops be located at a distance from where they are neither visible nor accessible to the commuters.

“You can start a door delivery of liquor,” the bench told counsel for Jammu and Kashmir who argued if the vends are away from the highway, people would have problems accessing them due to the terrains.

Punjab government counsel also faced the court’s ire for defending the liquor lobby’s interest. “You are acting like a mouthpiece for the liquor lobby by defending the policy,” the bench told the advocate who pleaded the ban should be made effective from April 1, 2017 to avoid a revenue loss of `1,000 crore to the exchequer.

Supreme Court Orders Facebook, Google, Microsoft To Block Rape Videos Circulating On Their Platforms

There is an evil side to social media as well, the one which we sometimes conveniently ignore or refuse to accept its existence. But, that evil is lurking around, choosing its next victim online.

One such evil is the circulation of rape videos on various social media platforms. Videos of sexual exploitation and rape are actually sold in large numbers in states like UP, Bihar, Rajasthan for as low as Rs 50. Shady dealers from rural hinterland acquire these videos, and make a business out of that.

And as per reports, these dealers acquire such sick videos from social media portals like Youtube and Dailymotion. And once a customer buys this video, it is again been re-circulated on the social media via WhatsApp, Facebook and the trauma of the victim continues.

Understanding the gravity of the situation, Supreme Court has ordered Facebook, Google, Microsoft to immediately place a ban on these videos.

A bench headed by Justice Madan B Lokur said, “The social media which is used to circulate the explicit clips should also be called in to ascertain their view as to how this can be curbed. We are issuing notice”,

This order was passed to Additional Solicitor General Maninder Singh.

Representing Govt. of India, Additional Solicitor will now issue notices to these social media portals and ask them to devise methods which can stop the sharing and viewing of these videos.

Why Supreme Court Intervened?

The Bench was hearing a PIL filed by Sunitha Krishnan who had initiated the popular #ShameTheRapistCampaign. Under this campaign, she received rape videos of more than 200 victims, which are being shamelessly shared across social media platforms, and instead of damaging the ‘reputation’ of the rapists, is destroying the life of the victims.

After her campaign, Govt. instructed CBI to investigate these videos, and book the culprits – both the rapists and those who are buying such videos and then circulating them on social media.

Interestingly, last month, the Court asked whether social media portals can held accountable and declared as accused in this case? This observation was made because these social media portals are the mediums through which such videos propagate, and if they are declared as accused along with the rapists and buyers of such videos, then it can turn out to be an interesting legal case study.

Analysts are saying that social media portals are mere platforms for sharing content, and hence, they cannot be held responsible for the type of the content. But yes, they can certainly block some specific type of content, if it harnesses evil and hatred.

Taking actual data from National Crime Record Bureau statistics, the apex court has asked the Centre to point out measures taken by the Govt. to stop cyber crimes against women and children.

As per arguments made by the Centre, it was revealed that Home Ministry has established exclusive Indian Cyber Crime Coordination Centre, which will work to stop such cyber crimes, including sharing of rape videos.

A statement from the Home Ministry said, “In order to tackle cyber crimes comprehensively, MHA has already set up an expert committee to recommend a roadmap for tackling the menace,”

Trademarks : Iceland v. Iceland : The battle for exclusivity

Iceland (the country ) is a leading exporter of frozen fish and seafood to several countries in the EU. Recently, native companies like ‘Clean Iceland’ and ‘Iceland Gold’ have faced trouble in marketing their products due to confusion over the name which clashes with ‘Iceland Foods’ – a renowned frozen food supermarket chain that has subsisted since the 70’s.

‘Iceland Foods’ for several years used to be under the control of Icelandic investors and later Icelandic banks. As the spokesperson for the retailer said, “the relationship came to an end with a £1.5bn buyout of the company in 2012, but Iceland the company has continued to have a good relationship with Iceland ,the country through the ownership of three Iceland stores there, export sales of Iceland products to other retailers throughout the country, and sponsorship of the Icelandic national team in this year’s European football championships.”

‘Iceland Foods’ is currently a UK-based but South African owned supermarket chain.

The Icelandic government has begun legal proceedings to ensure that the trademark of ‘Iceland’- that is exclusively owned by the supermarket chain is cancelled. These steps have been taken primarily to protect native companies that are unable to promote themselves abroad in association with their place of origin, as is their right, for it is a place that they are rightly proud of and which enjoys a positive national branding.

The supermarket’s founder and chief executive, Malcolm Walker, said: “A high-level delegation from Iceland Foods is preparing to fly to Reykjavik this week to begin negotiations, and we very much hope for a positive response and an early resolution of this issue.”

The negotiations are hoped by both sides to bring an end an issue that has the potential to erupt into a long-term battle. According to Iceland Foods, they have no desire to stand in the way of a country that is making use of their own name to promote their goods as long as it does not conflict with the long standing business that the supermarket chain had established over the years.

The Icelandic government has also been clear on its stance and it does not intend to force the supermarket to register a new name, it is only seeking to end the company’s right to assert the Iceland trademark to block native companies from using “Iceland.”

Gujarat High Court Passes Verdict Against Entry Tax On Ecommerce Goods - Reduces Liability On Marketplaces

In the case of E-commerce Marketplaces Vs Gujarat State Entry Tax, the Gujarat High Court has reportedly granted some relief to the companies. The tax liability can now be reduced to the extent of central sales tax paid in the state of origin.

The order was passed by a division bench of Justice MR Shah and Justice BN Karia of Gujarat High Court, in a case relating to Flipkart and its group company Instakart. The ruling will ensure that the total tax paid on the goods purchased by consumers in Gujarat from ecommerce companies is equal to the tax paid levied on similar goods in the state.

The decision is in line with the judgement given by the Supreme Court on November 11, 2016, wherein the states were allowed to impose an entry tax on ecommerce goods, but also mandated to ensure that it should not discriminate when compared with the tax imposed on similar goods by a state on its local traders.

Long Story Short.

The Gujarat government passed the bill to levy entry tax on goods purchased through ecommerce portals in March 2016. As per the government, the previous bill affected the local traders as the goods on ecommerce websites were sold at a much cheaper price as no taxes were levied on these goods.

The ecommerce marketplaces including Flipkart, Amazon and Snapdeal alleged that they are a facilitator and an intermediary. The tax, if applicable, should be imposed on the merchant directly, and not on the marketplace. However, looking at the innumerable transactions happening via ecommerce marketplaces, states find it easier to impose the tax on the marketplace or delivery entity instead of the seller.

After Flipkart, Amazon too filed a case against Gujarat State Government for imposing Entry Tax. Flipkart also sued the states of Uttarakhand, Assam, Rajasthan, and Madhya Pradesh on similar lines.

Prior to this, in October 2015, Flipkart, Amazon and Snapdeal had collectively decided to stop delivering products exceeding INR 5,000 in value, in UP and Uttarakhand. The decision was made citing the harassment by tax authorities, wherein buyers needed to file VAT form and provide the details of vehicle shipping good while purchasing goods from them.

Other States With Taxes On Ecommerce Goods

Uttarakhand: In December 2015, the Uttarakhand government had imposed 10% tax on all ecommerce goods entering the state. In response, Flipkart filed a case against the state of Uttarakhand for imposing this entry tax on ecommerce goods.

Jammu and Kashmir: Tax is levied in case of non-registered dealers and individuals for goods above INR 4,999.

Maharashtra: The state has an entry tax on ecommerce goods.

Sikkim and West Bengal: Both the states have 1% tax on ecommerce goods.

Bihar: Shipments below INR 10,000 have tax applicable.

Himachal Pradesh: If the TIN is not mentioned then entry tax is levied. A 5% entry tax for individual & non-registered dealers, and 3% for government bodies.

Madhya Pradesh: In his budget speech, Madhya Pradesh Finance Minister Jayant Malaiya said the government wishes to impose an entry tax of 6% on goods purchased online to compensate for the loss due to ecommerce.

Assam: According to recent reports, Assam was also planning to levy a tax on ecommerce goods.

A few state governments charge these taxes in form of octroi and the amount ranges from 3% to 6% in different states. The situation is expected to become clear with the induction of the GST in April 2017, provided ecommerce marketplaces are defined correctly, so as to have the right kind of tax levied on them.

The development is first reported by ET.

India’s Supreme Court Says Movie Goers Must Listen to National Anthem Before Screenings

India’s millions of Bollywood-mad movie goers will soon start a trip to the cinema with a mandatory dose of patriotism.

The country’s Supreme Court said in an order Wednesday that all movie theaters should play the national anthem with an image of the Indian tricolor on the screen before the start of any feature film. All those present in the hall “are obliged to stand up to show respect,”

The national anthem has long has been played in theaters in a few Indian states including Maharashtra, home to Mumbai where the Bollywood movie industry is based, but this is the first time that the apex court has given an order making it mandatory in all cinemas across the country.

The court’s ruling comes at a time when patriotism is in the headlines as Prime Minister Narendra Modi tries to rally the diverse nation behind him to fight corruption, untaxed money, and terrorism.

“Be it stated, a time has come, the citizens of the country must realize that they live in a nation and are duty bound to show respect to national anthem which is the symbol of the constitutional patriotism,” the two-judge bench’s order said, invoking India’s constitution, which says respecting the national anthem is one of the fundamental duties of every Indian citizen.

The court said it had issued the directives “for love and respect for the motherland is reflected when one shows respect to the national anthem as well as to the national flag.”

The court was hearing the petition from Shyam Narayan Chouksey, a 77-year-old retired government engineer and social activist based in the city of Bhopal in central India. Mr. Chouksey said in an interview that he wanted the court to “clear all the doubts and confusions regarding the proper use of the national anthem.” He said he was unhappy with what he saw as the rampant misuse and commercialization of the national anthem.

Mr. Chouksey said that the idea came from his youth days when cinemas played the anthem after the movie ended. “But the people were in a rush to go and they rarely paid attention.”

“In Europe and America, people don’t throw garbage and litter everywhere because they have public spirit,” Mr. Chouksey said. “In India, people don’t have that public spirit, which begins through respect for the national ideals and symbols like the national anthem.”

The court said the order should be enforced within 10 days. It didn’t specify what action the authorities could take against violators but said that it was giving directives only as an “interim measure” awaiting the response of the federal government in New Delhi. The next hearing in the case is on Feb. 14.

A lawyer for the Indian government told the court that the government will bring the order to public attention through electronic and print media.

Some critics said Wednesday that the order took the tradition of playing the national anthem at events too far, citing Nobel Laureate Rabindranath Tagore, composer of the song.

“It is my conviction that my countrymen will gain truly their India by fighting against that education which teaches them that a country is greater than the ideals of humanity,” he wrote in a 1917 essay on nationalism.

Source: http://blogs.wsj.com/indiarealtime/2016/12/01/indias-supreme-court-says-movie-goers-must-listen-to-national-anthem-before-screenings/