Holding

An unregistered user who, with the proprietor’s consent, passes off goods under the proprietor’s trade mark is a bona‑fide user for the purposes of Section 46(1)(b), and the High Court’s refusal to rectify the mark was proper.

Summary

The appellant, Cycle Corporation of India Ltd., sought rectification of the trade mark ‘Raleigh’ owned by the respondent, T.I. Raleigh Industries Pvt. Ltd., alleging that the proprietor had not used the mark bonafide for a continuous period of five years and that neither the respondent nor any registered user was using it. The High Court dismissed the application, holding that the appellant, although an unregistered user, was a bona‑fide user in passing off bicycles under the proprietor’s mark, and that the presumption of use under Section 48(2) was not rendered otiose. The Supreme Court affirmed this view, stating that an unregistered user who passes off goods with the proprietor’s consent is deemed a bona‑fide user for the purpose of Section 46(1)(b), that the burden of proving special circumstances of non‑use lies on the proprietor, and that the High Court had properly exercised its discretion. Consequently, the appeal was dismissed.

Issues considered

The applicability of Section 46(1)(b) of the Trade and Merchandise Marks Act, 1958 to an unregistered user who passes off goods under the proprietor’s mark.
Whether the presumption of use under Section 48(2) extends to unregistered users and renders that provision surplusage.
The burden of proof for the special‑circumstances exception under Section 46(3).
Whether the High Court correctly exercised its discretion in refusing rectification.

Legislation cited

Indian Evidence Act, 1872
Trade and Merchandise Marks Act, 1958s. 46(1)(b), s. 46(3), s. 48(1), s. 48(2)

Subjects

Trade markNon‑useSection 46Section 48Bona‑fide userRectificationPassing offSpecial circumstancesBurden of proofDiscretion

Judgment

A CYCLE CORPORATION OF INDIA LTD.
v.
T.I. RALEIGH INDUSTRIES PVT. LTD. AND ORS.

MAY 10, 1996

B [K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.]

17Je Trade & Merchandise Marks Act, 1958 (43 of 1958)-Sections
46(l)(b) and 48(2)-Trade Mark-Bonafide use of-Admittedly, registered
proprietor using the trade mark through pennitted user vide an agreement-Ap~
C pellant succeeded pemtitted user by statut01y operation-Appellant using the
trade mark in passing off the goods-After expi1y of the agreement period,
application for rectification of the trade mark filed before High Court-Plea
that after expi1y of the agreement period, the trade mark was not used by tiie
registered proprietor, neither appellant nor the pemtitted user was a registered
D user-Rejection of application by High Court-Held, the appellant must be
presumed, by course of conduct, that he is bonafide user for the purpose of
Section 46( l)(b), though the deemed presumption u/s 48(2) is referable to the
pennitted or registered user, the act of passing off the goods would connect
the registered proprietor and the user of the trade mark by unregistered licen-
see-Hence, High Court conect in declining to rectify the trade mark-If con-
E nection between the proprietor of trade mark and the pennitted user, in passing
off the goods, is proved by a bonafide user, it does not render section 48(2)
surplusage or otiose.

Section 46(3)-Exception-Special circumstances for non use of trade
mark-Appellant bonafide using the registered trade mark of registered
F proprietor, through admittedly registered uso--Plea that trade mark not used
by the registered proprietor for a long period and that he has also not proved
non user due to special circumstances--Held, In the facts and circumstances
of the case, there is no discontinuance or non-use of trade mark by the
registered proprietor to establish special circumstances.
G Section 46(3)-Exceptions-Burden to prove non user of trade mark
due to special circumstances--Held, lies on the registered proprietor of the
trade mark-Indian Evidence Act, 1872.

The respondent registered the trade mark 'Raleigh under Indian
H Merchandise Marks Act, 1889 and under Trade marks Act, 1940 (Both the
820
CYCLE CORPN. OF INDIA LTD. v. T.i. RALEIGH INDS. PVT. LTD. 821

Acts were repealed and Trade and Merchandise Marks Act, 1958 come into A
force.) Respondent was prevented to use the trade mark due to ban on
import of Raleigh bicycles. The respondent entered into a collaboration
agreement 11ith 'S' to give technical assistance, for manufacturing bicycles
and marketing them under Raleigh Indian Trade mark. Pursuant thereto
an Indian company was formed and was registered as permitted user of B
the trade mark in 1954. Vide agreement dated December 29, 1962 the .
company was permitted user till November 1, 1976. The company was
taken over by Government of India, before the expiry of the agreement
dated December 29, 1962 and vide agreement dated December 20, 1976,
between the appellant corporation and the respondent, the trade mark was
used by the appellant for 5 years. A joint application by the Company, as C
registered user, and appellant corporation, duly signed by the respondent
as proprietor was made before the Registrar. Subsequently, the Company
\\'as nationalised and vested in appel.lant corporation vide notification
under Industries Developn1cnt and Regulation Act. The joint application
was rejected as abandoned for non-compliance of statutory ret1uirements. D
On October 25, 1980, the respondent had allowed the appellant to
manufacture bicycles and pass off the goods under their trade marks. After
expiry of period of 5 years from the date of' agreement dated December 20,
1976 respondent gave notice to appellant to prevent it by restraint proceed-
ings to use the trade mark.
E
Appellant filed application for rectification of the trade mark, before
the High Court, against the respondent, pleading that the respondent had
failed to provide technical assistance to the company after November 1,
1976 and that after November 1, 1976 neither the Company nor the
appellant was registered user of the trade mark upto the date of filing of F
the application and thus, the respondent has not bonafide used the trade ·
mark for a continuous period of 5 years.

Single Judge dismissed the application and declined to rectify the
trade mark. On appeal, the Division Bench of the High Court confirmed
the order of the Single Judge & dismissed the appeal holding ihat there is G
no specific bar for an unregistered licensee to use reg.istered trade mark
so long as there is connection in the course of the trade between the
licensor and the licensee.

Jn appeal to this Court, the appellant contended that the registered H
822 SUPREMECOURTREPORTS [1996] SUPP. 2S.C.R.

A user must he understood to be the user by proprietor or authorised user
registered u/s 48, and that the construction put by High Court, renders
Section 48(2) surplusage or otise, which is impermissible; that since the
respondent was not using the trade m;irk since 1954, the plea or special
circumstance cannot be taken by it and that the burden to prove the same
is on the respondent, which it has Failed to prove and that the High Court,
B while exercising its discretion, should look into not only commercial
interest or parties but also public interest. The respondent contended that
the appellant was using the trade mark as an agent and that the admitted
position being that respondent was registered proprietor, rectification
application cannot be ordered until it is proved that trade mark was not
C used to pass off the goods manufactured by the appellant and the appellant
discontinued the user and 5 years lapsed therearter. Though respondent
was prevented to use the trade mark due to ban on import, but it continued
to use the same by collaboration agreement and that having used the trade
mark, appellant cannot contend that be is not permitted or bo11afide user
D or the trade mark.
Dismissing the appeal, this Court

HELD : 1. The High Court declined for good reasons, to rectify the
trade mark under Section 46(1) (b) or the Trade and Merchandise Marks
E Act since the appellant, as a Fact, had used the trade mark or the respon-
dent in passing off the bicycles manufactured by it. (834-A-B]

2.1. In view or the fact that the appellant came to succeed Sen
Releigh, who was a registered user under Section 48, by statutory opera-
tion, it is not a case or getting the trade mark registered under the
F Predecessor Act and continuing under the Act for tratlicking or the trade
mark. [831-E-}"]

An1e1ican Honie Products Co1poration v. Mac Laborato1ies Pvt. Ltd. &
A11r. (1986] 1 SCC 465, rererred to.

G 2.2. On admitted position and in the facts and circumstances, the
appellant was a bona fide user of the trade mark of the respondent in
passing off the bicycles under the trade mark of the respondent, who
admittedly is a registered proprietor. The appellant must be presumed by
course of conduct that he is a bona fide user for the purpose of Section
H 46(1) (b). Though the deemed presumption under Sub-section (2) of Section
CYCLE CORPN. OF INDIA LTD. v. T.I. RALEIGH INDS. PVT. LTD. 823

48 is referable to the pern1ittecl user or the registered user and it does not A
extend to unregistered pern1iltcd user, the connecting link or passing olf
the goods between the licensor's trade mark and the licensee should
bonafide be with the permission or consent which may be express or implied
by long course of dealings. It would connect the registered proprietor and
the user of the trade mark by the unregistered licensee. (831-A; H; 832-A]
B
2.3. It is not correct that when connection between the proprietor of the
trade mark and the permitted user in relation to passing off the goods under
the trade mark are proved by a bona fide user of an unregistered user, it does
not render sub-section (2) of Section 48 surplusage or otiose. (832-D]

K.R. Beii & Co. v. The Metal Goods Mfg. Co. Pvt. Ltd. & Anr., AIR
c
(1980) Delhi, 299, referred to.

.. 3.1. Sub-section (3) of Section 46 is not attracted to the facts of this
case. Circumstances do not attract sub-section (3) of Section 46 to relieve
the respondents to establish non-user. Sen Raleigh, admittedly was a D
registered user through which the appellant had bona fide used the
registered trade mark of the registered proprietor. There is no discon-
tinuance or non-use of the trade mark by the respondent to establish the
special circumstances in this case. (833-A-B]
E
3.2. The burden lies on the registered proprietor of the trade mark to
establish the exceptions provided under Section 46(3). Equally, the N'"
plicant for rectification also p1ima facie shows non-user for relevant period.
Then the burden shifts to the proprietor of the trade mark to affirmatively
prove the special circumstances for non-nser of trade mark. It must be
shown that the non-use of trade mark is due to special circumstances of the F
trade and not due to some other cause which would have operated, whether
the special circumstances had arisen or not. The special circumstances of
trade taken by themselves would have prevented the use of trade mark. If
the nonauser was, in fact, due to some other circumstances and \\'ould have
occurred whether the circumstances had followed or not, sub-section (3) G
would not apply. It must, therefore, be duty of the registered proprietor to
. .,,, show that non-user was strictly due to the special circumstances of trade
and not of any intention on the part of the registered proprietor not to use
the trade mark during the relevant period. (832-E-G]

4. The High Court has properly exercised its discretion and refused H
I
/''
>/. f ----,
824 . SUPREME COURT REPORTS (!996] SUPP. 2 S.C.R.
. -!
A to rectify and strike off the trade mark from the register or trade marks
or the Registrar. While exercising ~iscretion, the Court ~~der, Section 46
. or the Act should take into consideration not only commercial interest of
the parties, but also public interest. Though ordinarily the mark will be
expunged· (taken oft) when the factual circu~stances necessary for the.
removal are established unless it is shO\m that the case comes '"ithin
B exceptions provided .in Sub-section (3). [833-C-F] · ··

Law of Trade Marks and Passing-off by P. Narayanan (4th Edn.), Para
21.82 of Page 386, referred to.

C CIVIL APPELLATE JURISDICTION: Civil Appeal No~ 8266 of
·1996.

From the Judgment and Order dated 3.6.94 of the Calcutta High
Court in A. No. 13 of 1991. "

P.H, Parekh and Raju Ran;achandran, for the appeari~g parties.

The Judgment of the Court was delivered by

K. RAl\IASWAl\IY, J. Leave granted ..

We have heard learned counsel on both sides.
E
The admitted fads are that the respondents through their agents had
·.registered trade mark ".Releigh" and other trade marks (12 marks} under
the Indian Merchandise Marks Act, 1889 (4of1989} and the Trade Marks
Act, 1940 (5 of 1940). The Trade and Merch~ndise Marks Act, 1958 (43
F of 1958} (for .short, the 'Act) which came into force "ith effect from
, October 3, 1958 has repealed the Pred.ec~or, Act and now the Act is in
operation. The.respondents entered into an a'greement with Sudhir Kumar
Sen ·an· November 3, 1948 to render technical know-how to the Indian
. Conipariy to be ·formed which would mJriufacture bicycles and· market
. G ·them under Releigh's Indian Trade marks,•Prirsuant thereto, a company
called Sen Raleigh Ltd.' came into existc;,c.e'which manufactured cycles
\vith technical assistance by the respondents· Raleigh Industries of U.K. and.
marketed the bicycles with a brand name anu trade marks belonging to the
re.<pondents. On Aprii 24, 1954, Sen Ral~igh was recorded as permitted .
users of the trade marks. By agreement ·dated December 29, 1962, Sen
··H Raleigh and the respondents agreed that ·sen Raleigh was registered user
CYCLECORPN. OF INDIA LTD.'· T.l. RALEIGH INDS. PVT. LTD. !K. RAMASWAMY. J.J 825

for further period upto 1976. Sen Raleigh was taken over by the Govern- A
ment of India on September 8, 1975 under the !DR Act and the Govern-
ment took over the management of Sen Raleigh Ltd. The agreement dated
December 29, 1962 was modified and the respondents were given option
to terminate the agreement. An agreem.ent' dated December 20, 1976 was
. entered into. between the appellant, as registered user and the respondent
in respect of 12 trade marks for a period. of 5 years. On March 28, 1978,
B
foint application by Sen Raleigh and the appellant duly signed by the
respondent as proprietor and Sen Raleigh Ltd. as registered user came to
be made before the Registrar of Trade Marks. On October 24, 1980, Sen
Raleigh was nationalised and got vested in the appellant-Corporation by
publication of the notification under !DR Act. On March 5, 1982, the c
respondent wrote a letter to the appellant that in the absence of a new
agreement they were instructing their advocate to prevent the appellant by
restraint proceedings to use the trade mark effective from April 1, 1982.

On March 24, 1982, the appellant made an application under Section D
. 32, 46 and 56 of the Act against the respondents in the High Court of
Calcutta in Suit No. 266/92 pleading, i11ter alia, that the respondents had
failed to provide technical assistance by passing the technical know-how to
Sen Raleigh after November 1, 1976. Neither the appellant nor Sen Raleigh
were registered users of the trade mark after November 1, 1976 under
Section 48(2) of the Act upto the date .of one month before filing that E
rectification application. A continuous period of 5 years or longer had
passed and the trade mark had not been boita fide used by the respondent.
Having regard to the extended nature of non-user of the concerned trade
mark after November 1, 1976, any further use of the said trade marks by
the respondents was likely to deceive and cause confusion among to trade F
and public alike in India etc. Simultaneously, an application for registration
of three trade marks in their favour was filed by the appellant on March
25, 1982. By proceedings dated June 13, 1984, the Registrar of Trade Marks
informed the appellant that the registered user's applications were aban-
doned since the appellant failed to comply with th.e statutory requirements.·
The learned single Judge dismissed the application by his judgment dated G
September 13, 1990 holding, inter alia, that a11yprop1ietor mentioned in
Sectio11 46(l)(b) of tire Act extends to bona fide user other than registered
users. Special circumstances as a defence were available to the respondent
for non-user; even after l.979, the supply of technical know'how by the
respondent was not totally absent. After termination ·of the collaboration H
826 SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.

A and user agreement between the appellant and the respondents it was likely
to cause confusion and deception amongst the trade and public. The
conduct of the respondents was not violative of Section 32(b) and (c). The
Court in those circumstances declined to rectify the trade mark and strike
it off from the register of trade marks. On appeal, the Division Bench in
Appeal No. 13/91 confirmed the same holding that on and from October
B 25, 1980, the respondent had allowed and permitted the appellant to
manufacture bicycles etc. according lo its specifications and to pass off the
goods under their trade marks. Though the collaboration and registered
user agreements stood expired from October 31, 1981, no agreement came
to be executed nor continued to use the specifications on technical know·
C how. There is no specific bar for an unregistered licensee to use registered
trade mark so long as there is a connection in the course of trade between
the licenser and the licensee. The appellant was unable to prove that there
had been no such user of the trade mark for a continuous period of 61
months or longer and the lack of bona fide intention. The ex'Pression "by
D any registered proprietor" in Section 46(1)(b) should not be restricted to
user by proprietor or registered user who should also include bona fide or
authorised user. The legislature did not intend the registered proprietor to
be deprived of their properly at the instance of user whose use is un-
registered. The expression, therefore, should not be restricted to user by
the proprietor himself or any registered user but should also take into
E account bona fide authorised user. Non registration of the user agreement
by Sen Raleigh and the appellant was due to the default of the latter. The
appel!ant had not taken any steps lo withdraw registered user applications
and as such should not be permitted to take such a contradictory stand of
applying for rectification at the same time. The power under Section 46 is
discretionary. In view of the appellant's conduct, it was taking advantage
F
of its own wrong. The discretion, therefore, was not to be extended in
favour of the appellant. Thus, this appeal by special leave.

Shri Raju Ramchandran, learned senior counsel for the appellant,
raised three-fold contentions. It is his pivotal contention that undisputedly
G \Vhen the respondent was not in use of trade mark as 11 a registered
proprietor" or its agent Sen Raleigh as "permitted user" for a period of 5
years immediately preceding the date of the application under Section 46 ·,-
for removal of the trade mark from the Register, there was no bona fide
user thereof in relation to those goods by the proprietor himself. The
H respondents admittedly did not use the same. The appellant cannot be said
CYCLE CORPN. OF INDIA LTD.•'· T.L RALEIGH !NOS. PVT. LTD. fK. RAMAS\VAMY, J.J 827

to be either the proprietor of the trade mark since 1976, since the agree- A
ment lapsed or permitted user. The High Court, therefore, was wrong in

- holding that 5 years' period had not lapsed. The harmonious construction
should be put up in such a way that Section 48(2) and Section 46(l)(b) of
the Act could be permitted to have their full play in their operational
structure. The construction put up by the High Court renders sub-section
B
(2) of Section 48 otiose or surplusage which interpretation is impermissible.
It is contended that the registered user must be understood to be the user
by the proprietor or authorised user registered under Section 48. The
-period ofj years should be computed from the date of expiry of registered
user. The Division Bench, therefore, was wrong in its conclusion that the
appellant has failed to establish it. On the other hand, it is for the c
respondent to prove the same. He further contended that the special
circumstances enumerated in sub-section (3) of Section 46 must be such
that the respondents had intended to use the registered tr Jde mark. For
over a long period, the trade mark was not used by the respondents as its
registered proprietor. The respondents did not prove that they were D
,. prevented from using the same for 5 years or more preceding the date of
the application. The burden is on the respondents to prove that non-user
. was due to special circumstance of the trade and not due to some other
cause which would have operated whether special circumstances had arisen·
or not. Since the respondents were not using the trade mark since April
20, 1954, the plea of special circumstances is not available to the respon- E
dents. The Division Bench or the learned single judge did not record any
finding as to the period upto which the bicycles could be imported into
India and the period during which the ban was imposed but for which the
respondent had an intention to impurt bicycles but were prevented from
doing so due to the ban. In the absence of such a finding, the High Court
F
was wrong in law in refusing to rectify the trade mark and striking it off
the register. The Court while exercising its discretion under Section 46
should look into not only commercial interest of the parties but also public
interest. In normal circumstances, when it is established that the trade mark
was not used either by the registered proprietor or the permitted user, the
public interest of supply of the quality of the goods marketed by the G
appellant should be taken into factual consideration for remqval of the
.,. trade mark from the register.

Shri Ashok Desai, learned senior counsel for respondents, resisted
the contentions. According to the learned counsel, the respondents have H
828 SUPREME COURT REPORTS (1996] SUPP. 2 S.C.R.

A collaboration agreement with Sen Raleigh which was taken over by the
Government under IDR Act and the appellant came to manufactnrc, with
the technical know-how supplied by I he respondents, the Raleigh bicycles
under the trade mark registered by the respondents in the register of the
Registrar under the Act. The appellant was using the same as an agent.
B The operation of Section 48(2) must be construed in such a way that the
. bona fide user even by a non-registered user, so long as there exist a
rational connection between the proprietor of the trade mark and passes
off the goods in the market manufactured by the appellant, is construed to
be a bona fide user for and on behalf of the registered proprietor, namely,
the respondents. Admitted position is that the respondent being the
C registered proprietor, until it is proved that its trade mark was not used to
pass off the goods manufactured by the appellant and that the appellant
had discontinued the user and 5 years lapsed thereafter, the non-use of the
trade mark continues thereafter, the rectification application under Section
46(1)(b) would be ordered. In view of the prohibition to import bicycles,
D the respondent was prevented from using the trade mark but by collabora-
tion agreement it was continuing to use the trade mark by the permitted
user. The special circumstance is that the appellant filed an application for
registration under section 48(1) and continued it till it was abandoned. It
would also be considered as a special circumstance for non user. The
discretion exercised by the Court must be judged in the light of the facts
E and circumstances. The appellant having used the trade mark, it does not
lie in the mouth of the appellant to contend that he is not a permitted user
or a bona fide user of the trade mark.

In view of the diverse contentions, the question arises : whether the
High Court was right in refusing to rectify and strike off the trade marks
F of the respondents from the register of trade marks? Section 46(1)(b) reads
as under:

46. Renioval froni register and in1positio11 of lbnitations on ground
11

of non-use. - (1) Subject to the provisions of section 47, a registered
G trade mark may be taken off the register in respect of any of the
goods in respect of which it is registered on application made in
the prescribed manner to a High Court or to the Registrar by any
person aggrieved on the ground either -

H (a) xxxx xxxx xxxx xxxx
CYCLECORPN. OF INDIA LTD. v. T.I. RALEIGHINDS. PVf. LTD. [K. RAMASWAMY,J.] 829

(b) that up to a date of one month before the date of the applica- A
tion, a continuous period of five years or longer had elapsed during
which the trade mark was registered and during which there was
no bona fide use thereof in relation to those goods by any
proprietor thereof for the time being."

Sub-section (3) envisages that "an application shall not be entitled to
B
rely for the purpose of clause (b) of sub-section (1) or for purpose of
sub-section (2) on any non-use of a trade mark which is shown to have
been due to special circumstances in the trade and not to any intention to
abandon or not to use the trade mark in relation to the goods to which the
application relates''. Section 48 provides for registered users which reads c
thus:

"48. Registered use1~. - (1) Subject to the provisions of section 49,
a person other than the registered proprietor of a trade mark may
be registered as the registered user thereof in respect of any or all D
of the goods in respect of which the trade mark is registered
otherwise than as a defensive trade mark; but the Central Govern-
ment may, by rules made in this behalf, provide that no application
for registration as such shall be entertained unless the agreement
between the parties complies with the conditions laid down in the
rules for preventing trafficking in trade marks. E

(2) The permitted use of a trade mark shall be deemed to be use
by the proprietor thereof, and shall be deemed not to be used by
a person other than the proprietor, for the purpose of section 46
or for any other purpose for which such usc is material under this
Act or any other law."
F

It would, thus, be apparent that subject to Section 46, for a registered
trade mark up to a date within one month before the date of making
application for rectification for a continuous period of 5 yeafs or longer, if
registered trade mark had not been used during the period, there was no G
bona fide user in relation to those goods by the proprietor thereof for the
time being. The trade mark should be taken off and struck out from the
register of trade marks in respect of any goods in respect of which the trade
mark is registered. Sub-section (3) enables the registered proprietor to
show special circumstances for the non-use of t)le trade mark due to which H
830 SUPREME COURT REPORTS [1996) SUPP. 2 S.C.R.

A circumstances in the trade, he could not use the trade mark for the above
period and not with any intention lo abandon the use of trade mark or
not lo use the trade mark in relation to goods Lo which the application for
rectification relates. Sub-section (2) of Section 48 give defence to "per-
n1itte<l user 11 in relation to a registered trade mark. It means the use of the
B trade mark by a registered user of the trade mark in relation to goods with
which he is connected in the course of a trade and in respect of which the
trade mark remains registered for the time being and for which he is
registered as a registered user and which complies with any conditions or
restrictions to which the registration of the trade marks is subjected to.
Section 48(1) envisages that subject to the provisions of Section 49, person
c other than the registered proprietor of a trade mark may he registered as
a "registered user" thereof in respect of any or all of the goods in respect
of which the trade mark is registered otherwise than as a defensive trade
mark. The permitted use of trade mark shall be deemed to be used by the
proprietor thereof and shall be deemed not to be used by a person other
D than the proprietor for the purpose of Section 46 or for any other purpose
for which such use is material under the Act or any other law. The Central
Government is empowered lo prevent trafficking in trade mark.

It would, therefore, be clear that a permitt~d use of the trade mark
E should be done m;ider sub-section (1) of Section 48. It should be either by
the registered proprietor of the trade mark or a person other than the
registered proprietor registered under Section 48(1) to use the trad,e mark
by operation of sub-section (2). An unregistered person under Section
48(1) or a person who did not register under Section (1) of Section 48 shall
not be deemed to be a registered user for the purpose of Section 46 or any
F other law.

The High Court recorded a finding and it is not disputed across the
bar, that the appellant had entered into an agreement with Sen Raleigh
which was a permitted user and used the trade mark till November 1, 1976
G and thereafter by registered user agreement dated December 20, 1976 used
trade mark for a period of 5 years. It is not in dispute that till dale of tiling
of the application, the appellant used the trade mark in passing off the
bicycles under the trade mark of the respondent. The question, therefore,
is : whether the appellant must be deemed to be a bona fide user of the
H trade mark, though there was no agreement nor was it registered as
CYCLECORPN. OF INDIA LTD."· T.l. RALEIGHJNDS. PVT. LTD. [K. RAMA S\VAMY, J.J 831

permitted user under Section 48(1)? On admitted position and in the facts A
and circumstances, we are of the view that the appellant was a bona fide
user of the trade mark of the respondent in passing off the bicycles under
the trade mark of the respondent who, admittedly, is a registered
proprietor. It is true, as held by this Court, that lo get a trade mark
registered without any intention to use it in relation to any goods but merely B
lo make money out of it by selling it lo others, the right to use it as a
commodity would be trafficking in that trade mark. It requires to be
prevented and prohibited. The Court would not lend assistance lo such
registered proprietors of the.trade mark. There must be real trade connec-
tion between the proprietor of the trade and licensee of the goods and the
intention to use the trade mark must exist at the <late of the application
c
for registration of trade mark and such intention must be genuine and bona
fide and continue to subsist in order to disprove the charge of trafficking
in trade n1ark. It is a question of fact in every case. The question is :
whether the trade connection exists to dispel the charge of trafficking in
the trade mark? This question \Vas considered by this Court in An1erican D
Home Products C01poration v. Mac. Laborat01ies Pvt. Ltd. & Am", [1986) 1
sec 465 in paragraphs 38 and 39 and they need no reiteration.
It is seen that preceding the nationalisation of the cycle manufactur-
ing industry under the !DR Act, the respondent had a collaboration E
agreement with Sen Raleigh who was a registered user under Section 48.
From him, the appellant came to succeed by Statutory operation. It was,
therefore, not a case of getting the trade mark registered under the
Predecessor Act and continuing under the Act for trafficking of the trade
mark. It is true that under Section 48(1) either the registered proprietor
F
or a permitted person is required to register as permitted user. The benefit
of Section 46 would be available during the period for which the agreement
registered and user continued in furtherance thereof. It appears that even
an unregistered licensee, so long as there is unbroken connection in the
course of the trade between the licensor and the passing off or licensee's
goods under the trade mark, there would be sufficient connection in the G
course of the trade between the proprietor and bona fide user of the trade
mark by unregistered user. It must, therefore, be held that though the
deemed presumption under sub-section (2) of Section 48 is referable to the
permitted user or the registered user and it does not extend to unregistered
permitted user, the connecting link of passing off the goods between the H
832 SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.

A licensor's trade mark and the licensee should bona fide be with the permis-
sion or consent which may be express or implied by long course of dealings.
It would connect the registered proprietor and the user of the trade mark 6ij
by the unregistered licensee. The appellant must be presumed by course j
of conduct that he is a bona fide user for the purpose of Section 46(1)(b).

B In K.R. Be1i & Co. v. 77ie Metal Goads Mfg. Ca. Pvt. Ltd. & Anr. AIR
(1980) Delhi 299, the Division Bench construed Section 48(2) and held that
an unregistered user of the trade mark even with the consent of the
proprietor cannot be construed to be a registered user under Section 48(1)
and such construction renders sub-section (2) of Section 48 surplusage or
C otios, which is impermissible by statutory construction. We have given
anxious consideration to the reasoning therein. On strict interpretation, the
view of the Division Bench may be correct but it is not correct to hold that
a bona fide user of an unregistered user when connection between the
proprietor of the trade mark and the permitted user in relation to passing
D off of the goods under the trade mark are proYed, renders sub-section (2)
of Section 48 surplusage or otios.

It is true that the burden lies on the registered proprietor of the trade
mark to establish the exceptions provided under Section 46(3). Equally, the
E applicant for rectification also p1i111a facie shows non-user for the relevant
period. Then the burden shifts to the proprietor of the trade mark to
affirmatively prove the special circumstances for non-user of trade mark.
It must be shown that the non-use of the trade mark is due to special
circumstances of the trade and not due to some other cause which would
have operated, whether the special circumstances had arisen or not, al-
F though the special circumstances of trade taken by themselves would have
prevented the use of the trade mark. If the non-user was, in fact, due to
some other c;ircumstanccs an_d would have occured whether the cir-
cumstances had followed or not, sub-section (3) would not apply. It must,
therefore, be duty of the registered proprietor to show that non-user was
G strictly due to the special circumstances of trade and not of any intention
on the part of the registered proprietor not to use the trade mark during
the relevant period.

Though there was a ban on import of the Raleigh cycles manufac-
H lured outside India and passed off under the registered mark of the
CYCLE CORPN. OF INDIA LTD. v. T.I. RALEIGH INDS. PVT. LTD. [K. RAMASWAMY,J.] 833

respondents as a registered proprietor, the circumstances do not attract A
sub-section (3) of Section 46 to relieve the respondents lo establish non-
user, but on the facts of this case, we have the admitted position that Sen
Raleigh, admittedly, was a registered user through which the appellant had
bona fide used the registered trade mark of the registered proprietor.
There is no discontinuance or non-use of the trade mark by the respondent B
to ~stablish the special circumstances in this case. It is also not necessary
to go into the question whether the application filed by the appellant under
Section 48(1) and its pendency would be a special circumstance in favour
of the respondent. Suffice it to hold that sub-section (3) of the Section 46
is not attracted to the facts in this case.
c
The question then is : whether the discretion has been properly
exercised by both the Division Bench as well as the single Judge in refusing
to take off the trade mark from the register by striking off trade mark from
the register of the Registrar of Trade Marks?
D
It is true that while exercising discretion, the Court under Section 46
of the Act should lake into consideration not conly commercial interest of
the parties but also public interest. In para 21.82 at page 386 of the Law
of Trade Marks and Passing-off by P. Narayanan (4th Ed.), it is stated that
the Court or the Registrar has discr~lion in granting or refusing an applica- E
tion for rectification. Ordinarily, however, the mark will be expunged
(taken off) when the factual,circumstances necessary for the removal are
established unless it is shown that the case comes within the exceptions
provided in the sub-section (3). The High Court refused to exercise the
discretion to strike off the trade mark from the register. It is seen that the
appellant had not abandoned, at any point of time, the use of the trade F
mark of the respondent-registered proprietor Lill filing of the application.
Though the appellant has not used the trade mark by itself since 1954 and
after the expiry of the permitted use by Sen Raleigh until the notice was
issued by the respondent directing the appellant not to use the trade mark,
the appellant came to use the same in passing off bicycles manufactured G
by it under trade mark of the respondent. It is not relevant for the purpose
of Section 46(1)(b) whether the bicycle were manufactured with the assis-
tance of technical know-how passed on by Sen Raleigh or the permitted
user. Suffice it to state that the appellant as a fact, had used the trade mark
of the respondent in passing off the bicycles manufactured by it. The High H
834 SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.

A Court, in our view, declined, for good reasons, to rectify the trade mark
under Section 46 (l)(b) of the Act. We are also not persuaded to t~ke a
different view from that of the High Court. In these circumstances, we are
of the view that the High Court has properly exercised its discretion and
refused to rectify and strike off the trade mark from the register of trade
B marks of the Registrar.

The appeal is accordingly dismissed but, m the circumstances,
without costs.

K.K.T. Appeal dismissed.