Year: 2020

Consumer is a person or a group who intends to order, orders, or uses purchased goods, products, or services primarily for personal, social, family, household and similar needs, not directly related to entrepreneurial or business activities.

Consumer Goods Sector

The consumer goods sector is a category of stocks and companies that relate to items purchased by individuals and households rather than by manufacturers and industries. These companies make and sell products that are intended for direct use by the buyers for their own use and enjoyment. This sector includes companies involved with food production, packaged goods, clothing, beverages, automobiles, and electronics.

Consumer goods can be broadly categorized as durable or nondurable, and the overall consumer goods sector can be broken down across many different industries. While some product types, such as food, are necessary, others, such as automobiles, are considered luxury items. In general, when the economy is growing, consumer demand grows and the sector will see an increased demand for higher-end products. When consumer demand shrinks, there is an increased relative demand for value products.

Many companies in the consumer goods sector rely heavily on advertising and brand differentiation. Performance in the consumer goods sector depends heavily on consumer behavior. Developing new flavors, fashions, and styles and marketing them to consumers is a priority.

Modern Internet technology has had an enormous and ongoing impact on the consumer goods sector. The ways products are manufactured, distributed, marketed, and sold have all evolved dramatically over the past few decades.

Subsectors

The consumer goods sector includes a diverse array of varied industries. Everything that consumers buy and use can fall into this category, so understanding how their different characteristics can affect industry performance can be important. Broadly, this sector can be divided into durable and nondurable goods. Many nondurable goods can be considered fast moving consumer goods, which are packaged goods with high sales volume, rapid inventory turnover, and often short shelf lives, such as foods. Durable goods include many big-ticket consumer goods, such as cars, major appliances, and household electronics.

Marketing and Branding

Marketing, advertising, and brand differentiation are key considerations for companies in the consumer goods sector. Many consumer goods sector companies are faced with a range of close competitors, substitute goods, and potential rivals. Competition on price and quality is often fierce, so brand identification and differentiation are critical to consumer goods sector companies’ performance.

Technology

Technological advancement is at the heart of consumer goods sector industry trends. Technological advancement has revolutionized supply chains, marketing, and the products themselves in this sector. Continuous and interconnected supply chains are driving operational efficiencies. Using new technologies, many consumer goods sector companies are engaging with consumers in more direct and innovative ways. Consumers research, purchase, and engage with brands digitally, and companies in this sector have to take this into account in their strategies. Consumer participation in brands has moved beyond just buying and consuming the products, with continuous consumer feedback and on-demand access to consumer data in real time. Connectedness and interoperability of consumer products have become key selling points for companies in this sector.

Goods and services are often pronounced in the same breath. These are offered by the companies to the customers to provide utility and satisfy their wants. At present, the success of the business lies in the combination of best quality of goods and customer oriented services. ‘Goods’ are the physical objects while ‘Services’ is an activity of performing work for others.

Goods implies the tangible commodity or product, which can be delivered to the customer. It involves the transfer of ownership and possession from seller to the buyer. On the other hand, services alludes to the intangible activities which are separately identifiable and provides satisfaction of wants.

One of the main difference between goods and services is that the former is produced and the latter is performed.

Goods

Goods refer to the tangible consumable products, articles, commodities that are offered by the companies to the customers in exchange for money. They are the items that have physical characteristics, i.e. shape, appearance, size, weight, etc. It is capable of satisfying human wants by providing them utility. Some items are made for one-time use by the consumer while some can repeatedly be used.

Goods are the products which are traded on the market. There is a time gap in the production, distribution, and consumption of goods. When the buyer purchases goods and pays the price, the ownership is passed from seller to buyer.

Products are manufactured in batches, which produces identical units. In this way, a particular product offered by the company will have the same specifications and characteristics all over the market.

Example: Books, pen, bottles, bags, etc.

Services

Services are the intangible economic product that is provided by a person on the other person’s demand. It is an activity carried out for someone else.

They can only be delivered at a particular moment, and hence they are perishable in nature. They lack physical identity. Services cannot be distinguished from the service provider. The point of sale is the basis for consumption of services. Services cannot be owned but can only be utilized. You can understand this by an example: If you buy a ticket for watching a movie at the multiplex, it doesn’t mean that you purchased the multiplex, but you have paid the price of availing services.

Service receiver should fully participate when the service is provided. Evaluation of services is a relatively tough task because different service providers offer the same services but charges a different amount. It may be due to the method they provide services is different or the parameters they consider in valuing their services vary.

Example: Postal services, banking, insurance, transport, communication, etc.

Differences between Goods and Services

The basic differences between goods and services are mentioned below:

1. Goods are the material items that the customers are ready to purchase for a price. Services are the amenities, benefits or facilities provided by the other persons.
2. Goods are tangible items i.e. they can be seen or touched whereas services are intangible items.
3. When the buyer purchases the goods by paying the consideration, the ownership of goods moves from the seller to the buyer. Conversely, the ownership of services is non-transferable.
4. The evaluation of services is difficult because every service provider has a different approach of carrying out services, so it is hard to judge whose services are better than the other as compared to goods.
5. Goods can be returned to or exchanged with the seller, but it is not possible to return or exchange services, once they are provided.
6. Goods can be distinguished from the seller. On the other hand, services and service provider are inseparable.
7. A particular product will remain same regarding physical characteristics and specifications, but services can never remain same.
8. Goods can be stored for future use, but services are time bound, i.e. if not availed in the given time, then it cannot be stored.
9. First of all the goods are produced, then they are traded and finally consumed, whereas services are produced and consumed at the same time.

Generally, companies keep a stock of goods with itself to fulfill an urgent requirement of goods. It also keeps track of the quantity of goods at the beginning and the end. In contrast to services are delivered as per the request of the customer itself. In short, the production of services depends on the customer’s demand. Both are subject to tax like Value Added Tax (VAT) is levied on goods while service tax on services provided.

Sometimes products offered by the companies in such a way that it‘s hard to segregate goods and services like in the case of a restaurant, you pay for the food you eat as well as for the add-on services of the waiters, chef, watchman and so on.

Defect in Goods

Section 2(1)(f) of the Consumer Protection Act, 1986 defines defect in goods. The defect is defined as any imperfection, fault, a shortcoming in certain parameters of the good which are as follows:

• Quality
• Quantity
• Purity
• Potency
• Standard

The above has a level that needs to be maintained by or under any law in force at that time.

Hence, if any good is not up to the mark or is faulty, that is, does not meet the mark of the laws applicable in the particular period, it is defective.

illustrations of Defective Good

• A consumer purchases a washing machine. It has a wiring problem which results in the destruction of all the clothes put in the machine.
• A consumer purchases a cosmetic product that causes irritation to the skin.
• A consumer purchases a handbag. After purchase, he sees a slit at the bottom of the bag.
• A consumer purchases milk that has been adulterated by mixing with water.
• A consumer purchase socks made of a fabric that causes skin infection.

A defect of Good seen in numerous cases due to its wide ambit. Defects can be present in goods irrespective of their size, shape, colour, dimension, state of matter and so on. The defect in service often causes inconvenience, injury and in aggravated cases, death. Producers of goods must be immensely careful of the goods that are being manufactured by them.

Safety is a major concern which is sought after by all consumers across the globe. A small defect in good can cause a great impact on the consumer who can face a damage. This damage includes physical, mental and economic loss.

Cases of the defect in goods are too many to count and have rapidly increased with the introduction of online shopping. The Consumer Protection Act tries to limit these grievances of the consumers by penalizing the producers of such goods. It is the much-required means of providing justice to those consumers who have been at a loss or inconvenience.

Cases of Defect

Laxmi Engineering Works vs P.S.G. Industrial Institute, Abhay Kumar Panda v. Bajaj Auto Limited and various other cases that resulted in major debates were initially filed as cases for the defect in good. The former saw a defect in a machine while the latter saw a defect in a vehicle purchased. Other prominent cases include Kevin Enterprise vs Joint Cit, and cases at the Supreme Court, Union Of India (Uoi) vs Ratilal Jadavji and Union Of India vs Behari Lal And Co.

These cases show the repercussions of defective goods. While the first two cases resulted in a whole new deliberation upon the definition of the consumer, the later cases were all under the ambit of defective goods. However, all these case complaints find its root in the good received being defective, hence highlighting its meaning and importance.

Online Shopping and Defect in Goods

Online shopping is a recent development in the market. It has introduced a new and modern style of interaction between consumers and sellers by benefitting both consumers and sellers. The consumers find online shopping extremely convenient while the sellers now have a wider access for sale of their products. However, this development in the global sphere also has its repercussions. It has brought in a large number of complaint of defective goods.

In many cases, the good purchased online looks nothing like what was portrayed of the product. Goods have arrived broken, faulty in design, torn, adulterated, impure and so forth. This is a great hurdle in Consumer Protection and is a problem that remains unsolved today.

Online shopping has turned disastrous to the consumer in cases like Anil Kumar v. M/s Naaptol Online Shopping Pvt. Ltd. and M/s Gati Limited, Vinodkumar, Ernakulam Vs. Shoed Merchant, Mumbai & Ebay India and the Chitra Vittal case.

Sellers must take care while sending their goods for transit. The goods should be handled with care during the transportation process. The sellers should not attempt to cheat the consumers by intentionally handing over defective goods to them.

Deficiency of Service

Deficiency of Service sprawls across various fields like medicine, construction, transport and so on. Deficiency in service often causes inconvenience, injury and in aggravated cases, death. Services are to be provided by immensely equipped individuals with utmost proficiency. If services are not provided with care, severe damage can be caused to the receiver. This damage includes physical, mental and economic loss.

Cases of deficiency of service are rampant in India due to inefficiency and negligence. The Consumer Protection Act is a way to penalise curb this lax behaviour and curb negligent activities in future. It is the much-required means of providing justice to those consumers who have been at a loss or inconvenience.

The field of medicine has seen the most complaints, ranging from Ayesha Begum v. All India Institute of Medical Sciences to the famous Indian Medical Association v. V.P. Shantha. The former dealt with a wrong diagnosis leading to economic loss and physical weakness, while the latter argued upon the distinction of the contract of service and contract for service. Other cases in this field include Gulam Abdul Hussain v. Katta Pullaiah Choudhary and Consumer Unity and Trust Society Vs. State of Rajasthan.

The field of construction to has seen cases of deficiency of service, as noted in the case, Lucknow Development Authority v. M.K. Gupta. The field of tailoring involves A.C. Monday v. Cross Well Tailor And Anr.

These cases are the various instances where the Indian law rightly intervened and redressed the consumers. It poses as a strong deterrent to all those service providers who indulge in fraudulent or negligent means of operation.

Contract of Service of Contract for Service

As clearly mentioned in the definition of service, a contract of service is excluded from service. But what does this term actually mean? The concepts are as follows:

A Contract of Service involves an employer and an employee, similar to a master-servant relationship. All the actions of the employee are monitored, controlled and regulated by the employer. The employee acts on the directions of the employer, hence he is told what task to do and precisely how to do it.Hence, the employee is not personally liable for the acts done by him. The employee can be hired and fired at any time, on the discretion of the employer. The acts of an employee arising out of a contract of service is not a service and hence cannot be deficient.

A customer can lodge a case in consumer court against a service provider or a seller in case of faulty product delivery, improper service or harassment. The government of India controls the judiciary hearings regarding consumer grievances. Below we will discuss about the entire procedure to file a complaint in consumer court.

All you need to know about Consumer Court in India

Consumer Protection Act, 1986 has established Consumer Court in order to redress and compensate disputes in India. These courts are divided into three categories depending on the monetary transaction limit. If the transaction amount is below 20 lacs, the case is handled by District Forum. Similarly State and National Commissions handles the cases of between 20 lacs to 1 crore and above 1crore respectively.

Consumers are eligible to receive quality products and standard services. But in numerous situations, consumers become victims of flawed goods or substandard services. To compensate the customers for defective products and provide a redressal technique the Consumer Protection Act was passed in 1986.

Consumer rights are those rights belonging to a consumer that to protect him/her from being cheated by a salesman/manufacturer. The Consumer Protection Laws of India ensure fair trade and well-being of the consumer in the market. A consumer can be defined as a person who purchase goods or services for his own use and to resell or use such goods in production and manufacturing.

According to Section 2(1)(e) of the Consumer Protection Act, ‘ a Consumer Dispute’ means a dispute where a person against whom a complaint has been made, denies or disputes the allegations contained in the complaint. If the other party agrees to the complaint, dispute ceases.

Generally, laws in relation to product or service liability differ from nation to nation. The main objective of product or service liability is protection and safety of the consumer even if the consumer is himself responsible for his own loss. Product liability generally involves claims against companies and business organizations including retailers, marketers and manufacturers.

Often, we come across situations where a particular company make various promises in order to sell products but seldom fail to keep such promises. For example, x purchases a mixer grinder from M/s Y & Co. operating in the same town. The grinder malfunctions within the warranty period of 1 year. Both the manufacturer and the seller failed to rectify mixer grinder.

To tackle such day to day problems which a consumer suffers, Consumer Rights were created to protect the rights of the consumers. The Consumer Protection Act, 1986 was enacted to ensure speedy redressal of consumer grievances.

In order to ensure protection and promotion of consumers, a three tier quasi judicial machinery was enacted at the national, state and district level. The National Commission deals with complaints involving costs higher than INR 1 crore. Similarly, the State Commission and the District Forum deals with complaints involving costs between INR 20 lakhs and INR 1 crore and less than INR 20 lakhs, respectively. The consumers can file cases depending upon the cost along with the documents required for filing the complaint.

The Consumer Courts may seem to be quasi-judicial Tribunals, however every order made by the District Forum, State Commission or National Commission is enforced like a decree of the Court. The order passed shall be binding on all the parties. If any such person fails to comply with the order passed by the District Forum, State Commission or National Commission, then he may be punished with

Imprisonment from 1 month to 3 years; Fine raging between INR 2000 to INR 10000;Or both.

Eligibility criteria to file a complaint

1. Certainly, a consumer only can make a complaint, but to do that, he or she needs to fulfill two conditions-

• The consumer has paid money to purchase products or availed services in exchange of money.
• The person have purchased the product for personal use only and not for resale purpose.

2. A registered voluntary consumer association under Companies Act or other law.
3. The Government, be it central or state.
4. Consumers with same interest.
5. Legal heir or relative of a deceased consumer.

A complaint is a written allegation and thus, the complainant must fall under the definition of a consumer.

Conditions to lodge a complaint

• Unfair or restricted trade practice by a service provider.
• Defective or substandard products, which is already bought or agreed to be purchased by the consumer.
• Service Deficiency, whether hired or confirmed to be hired.
• Overcharging of goods when the price is fixed by the law, displayed on packaging or agreed between both parties.
• Selling goods that are hazardous for life, safety and property.

Different Consumer Forums responsible for redressal and consumer protection:

When it is determined to file a case, consumer needs to estimate the monetary transaction limit. Based on the pecuniary limit, Consumer Forum is categorized into three tier format.

1. District Consumer Disputes Redressal Forum (DCDRF)

Each district has a Forum consisted of 3 members each. When the amount is under 20 lakhs, DCDRF orders to file an appeal in SCDRC.

2. State Consumer Disputes Redressal Commission(SCDRC)

If the pecuniary value is between 20 lakhs to 1 crore, then an appeal is filed from SCDRC order to NCDRC. This commission is established in every state.

3. National Consumer Disputes Redressal Commission(NCDRC)

This forum is situated in New Delhi and considered as the highest tier of Redressal system. If the value of the claim exceeds 1 crore then the jurisdiction lies in hands of NCDRC. Also, an appeal from NCDRC order lies to Supreme Court.

Procedure to file a case in the consumer court

1. Intimation

The aggrieved party sends a notice to service provider who sold the product. This notice informs about the intention of the customer to take action for receiving substandard or defective goods. It is an attempt for settlement between both parties without going to Forum.

2. Drafting of the complaint

If the seller or service provider is not ready to offer compensation, a formal complaint is lodged under Consumer Protection The process doesn’t necessarily need a lawyer and can be dealt by the customer himself. The customer must mention the following details:

• Name, address and description of both the parties.
• Cause of action, approximate date, time and place.
• Relevant causes behind the action.
• The compensation or remedy claimed by the consumer.
• Signature of the complainant or authorized lawyer.

3. Attach required documents

Materialistic evidence and documents are required to support your complaint to produce in the court. They include-

• Copy of bill, delivery receipt, packaging, record of online booking.
• Warranty/Guarantee cards.
• Copy of the written complaint and notice.

4. Appropriate Commission

The consumer needs to choose the proper forum to file the complaint according to pecuniary jurisdiction i.e. the total value of product or service availed. Mention the compensation amount that is fixed.

5. Pay court fee

A certain amount of money is needed to be paid along with the complaint. The amount depends on the type of the forum, the value of the product bought and the compensation sought.

6. Submit Affidavit

While filing the case it is necessary to submit an affidavit in the court. It is the proof that the facts described by the complainant are true to their knowledge.

Company law (also known as business law or enterprise law or sometimes corporate law) is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. The term refers to the legal practice of law relating to corporations, or to the theory of corporations. Corporate law often describes the law relating to matters which derive directly from the life-cycle of a corporation. It thus encompasses the formation, funding, governance, and death of a corporation.

While the minute nature of corporate governance as personified by share ownership, capital market, and business culture rules differ, similar legal characteristics – and legal problems – exist across many jurisdictions. Corporate law regulates how corporations, investors, shareholders, directors, employees, creditors, and other stakeholders such as consumers, the community, and the environment interact with one another.[ Whilst the term company or business law is colloquially used interchangeably with corporate law, business law often refers to wider concepts of commercial law, that is, the law relating to commercial or business related activities. In some cases, this may include matters relating to corporate governance or financial law. When used as a substitute for corporate law, business law means the law relating to the business corporation (or business enterprises), i.e. capital raising (through equity or debt), company formation, registration, etc.

Characteristics of Company

The following are the defining characteristics of a company:-

1. Separate Legal Entity

On incorporation under law, a company becomes a separate legal entity as compared to its members. The company is different and distinct from its members in law. It has its own name and its own seal, its assets and liabilities are separate and distinct from those of its members. It is capable of owning property, incurring debt, borrowing money, having a bank account, employing people, entering into contracts and suing and being sued separately.

2. Limited Liability

The liability of the members of the company is limited to contribution to the assets of the company upto the face value of shares held by him. A member is liable to pay only the uncalled money due on shares held by him when called upon to pay and nothing more, even if liabilities of the company far exceeds its assets. On the other hand, partners of a partnership firm have unlimited liability i.e. if the assets of the firm are not adequate to pay the liabilities of the firm, the creditors can force the partners to make good the deficit from their personal assets. This cannot be done in case of a company once the members have paid all their dues towards the shares held by them in the company.

3. Perpetual Succession

A company does not die or cease to exist unless it is specifically wound up or the task for which it was formed has been completed. Membership of a company may keep on changing from time to time but that does not affect life of the company. Death or insolvency of member does not affect the existence of the company.

4. Separate Property

A company is a distinct legal entity. The company’s property is its own. A member cannot claim to be owner of the company’s property during the existence of the company.

5. Transferability of Shares

Shares in a company are freely transferable, subject to certain conditions, such that no share-holder is permanently or necessarily wedded to a company. When a member transfers his shares to another person, the transferee steps into the shoes of the transferor and acquires all the rights of the transferor in respect of those shares.

6. Common Seal

A company is a artificial person and does not have a physical presence. Therefore, it acts through its Board of Directors for carrying out its activities and entering into various agreements. Such contracts must be under the seal of the company. The common seal is the official signature of the company. The name of the company must be engraved on the common seal. Any document not bearing the seal of the company may not be accepted as authentic and may not have any legal force.

7. Capacity to sue and being sued

A company can sue or be sued in its own name as distinct from its members.

8. Separate Management

A company is administered and managed by its managerial personnel i.e. the Board of Directors. The shareholders are simply the holders of the shares in the company and need not be necessarily the managers of the company.

9. One Share-One Vote

The principle of voting in a company is one share-one vote. I.e. if a person has 10 shares, he has 10 votes in the company. This is in direct contrast to the voting principle of a co-operative society where the “One Member – One Vote” principle applies i.e. irrespective of the number of shares held, one member has only one vote.

Distinction between Company and Partnership

A Partnership firm is sum total of persons who have come together to share the profits of the business carried on by them or any of them. It does not have a separate legal entity. A Company is association of persons who have come together for a specific purpose. The company has a separate legal entity as soon as it is incorporated under law. Liability of the partners is unlimited. However, the liability of shareholders of a limited company is limited to the extent of unpaid share or to the tune of the unpaid amount guaranteed by the shareholder. Property of the firm belongs to the partners and they are collectively entitled to it. In case of a company, the property belongs to the company and not to its members. A partner cannot transfer his shares in the partnership firm without the consent of all other partners. In case of a company, shares may be transferred without the permission of the other members, in absence of provision to contrary in articles of association of the company. In case of partnership, the number of members must not exceed 20 in case of banking business and 10 in other businesses. A Public company may have as many members as it desires subject to a minimum of 7 members. A Private company cannot have more than 50 members. There must be at least 2 members in order to form a partnership firm. The minimum number of members necessary for a public limited company is seven and two for a private limited company. In case of a partnership, 100 % consensus is required for any decision. In case of a company, decision of the majority prevails. On the death of any partner, the partnership is dissolved unless there is provision to the contrary. On the death of the shareholder the company’ existence does not get terminated.

Trademark infringement

Section 29 of the Trademark Act, 1999 provides remedy in cases of trademark infringement. The statutory provision also enlists the circumstances under which a mark is infringed:

1. Infringement of a mark occurs when a person not being registered proprietor uses a mark which is identical or deceptively similar to a registered mark in relation to goods or services in respect of which the trademark is registered.
2. When a person not being a registered proprietor uses a registered trademark which because of its identity with registered trademark and similarity with goods or services is likely to cause confusion in public.
3. When a person not being registered proprietor of a mark uses mark which is identical or similar to the registered trademark in relation to similar goods or services and the registered mark has a reputation in India.
4. A registered trademark is infringed by a person if he uses such registered trademark as part of his trade name of his business concern dealing in goods or services in respect of which the trade mark is registered.
5. A registered trademark is infringed by any advertising of that trademark if such advertising takes unfair advantage and is detrimental to its distinctive character.

Cases on Trademark Infringement

When mark adopted by Defendant is identical to Plaintiff’s registered trademark

If on comparison of the trademarks of the two parties in case the trademark adopted by the Defendant is identical to that of the Plaintiff, the Plaintiff may not be required to prove anything further. Section 29 of the Trademark Act, 1999 statutorily mandates so as well. However, when the two marks are not identical, then the plaintiff would be required to establish that the mark used by the defendant so nearly resembles the plaintiff’s registered trademark as is likely to deceive or cause confusion in the minds of the consumer public.

Onus to prove infringement on Plaintiff

The Supreme Court in the case of Kaviraj Pandit Durga Dutt case held that in an action for infringement the onus would be on the Plaintiff to establish that the trade mark used by the defendant in the course of trade in the goods in respect of which his mark is registered, is deceptively similar.

How can the Plaintiff establish that the Defendant’s mark is identical or resembles the Plaintiff’s mark?

This issue was elaborately discussed by the Delhi High Court in the case of Atlas Cycle Industries Ltd. v. Hind Cycles Limited, wherein the Court stated that in a case of trademark infringement, the plaintiff may establish that its trademark is identical with or so nearly resembles the plaintiff’s work either visually or phonetically or otherwise, that it is likely to deceive or cause confusion in relation to the case in respect of which the plaintiff got his mark registered.

Thus, if the essential features of the trade mark of the plaintiff have been adopted by the defendant, the fact that there are some additional features in the defendant’s mark which show marked differences is immaterial in an action for infringement.

Trademar Passing-off

Section 27 of the Act  recognizes common law rights of the trademark owner to take action against any person for passing of goods as the goods of another person or as services provided by another person or remedies thereof. The remedy made available under Section 27 of the Act protects the rights of the proprietor of an unregistered trademark to register complaint against another person for passing off his goods as goods the goods of proprietor. An unregistered proprietor of trademark can also oppose an application for registration on grounds as enumerated under Section 11 of the Act.

In an action of passing off, the Plaintiff has to establish prior use to secure an injunction and that the registration of the mark or similar mark in point of time, is irrelevant.

Lord Oliver in the case of Reckitt & Colman Products Ltd. v. Borden Inc. enumerated three elements for a successful passing off action:

• Goodwill owned by a trader
• Misrepresentation
• Damage to goodwill

Thus, the passing action is essentially an action in deceit where the common law rule is that no person is entitled to carry on his or her business on pretext that the said business is of that of another.

Tests in the case of passing off– The Supreme Court in the case of Cadila Healthcare Ltd. v. Cadila Pharmaceutical Ltd., laid down the test of passing off and observed that a passing off action depends upon the principle that nobody has a right to represent his goods as the goods of some body. In other words a man is not to sell his goods or services under the pretence that they are those of another person. As per Lord Diplock in Erwen Warnink BV v. J.Townend & Sons[, the modern tort of passing off has five elements, namely

• A misrepresentation
• Made by a trader in the course of trade
• To prospective customers of his or ultimate consumers of goods or services supplied by him
• Which is calculated to injure the business or goodwill of another trade (in the sense that this is a reasonably foreseeable consequence), and
• Which causes actual damage to a business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so.

Further in the case of Corn Products Refining Co. v. Shangrila Food Products Ltd., it was observed that the principle of similarity could not to be very rigidly applied and that if it could be prima facie shown that there was a dishonest intention on the part of the defendant in passing off goods, an injunction should ordinarily follow and the mere delay in bringing the matter to Court was not a ground to defeat the case of the plaintiff.

Is fraud an essential element of passing-off?

According to Kerly Law of Trademarks– Passing off cases are often cases of deliberate and intentional misrepresentation, but it is well-settled that fraud is not a necessary element of the right of action, and the absence of an intention to deceive is not a defence though proof of fraudulent intention may materially assist a plaintiff in establishing probability of deception. The burden to prove passing off is on the Plaintiff or goods, besides the essential features which are sufficient to distinguish the same from that of the plaintiff. Thus, while in an action for infringement of a registered trade mark the plaintiff has to establish either an use of his registered trade mark as such or of an identical mark or of a deceptively similar mark by the defendant, he has to establish in an action for passing off that the defendant’s mark or goods are such that the defendant can pass off his goods as those of the plaintiff.

Difference between Trademark Infringement and Passing Off

The difference between a passing off action and an action for trademark infringement was expounded by the Delhi High Court in the case of Cadbury India Limited and Ors. v. Neeraj Food Products as under:

• An action for passing off is a common law remedy whereas an action for trademark infringement is a statutory remedy.
• Passing off action in essence is an action of deceit that is, a passing off by a person of his own goods as those of another whereas in case of infringement, the Plaintiff on account of being registered proprietor of the disputed trademark, claims to have an exclusive right to use the mark in relation to those goods.
• The use by the defendant of the trademark of the plaintiff may be prerequisite in the case of an action for infringement while it is not an essential feature of an action for passing off.
• If the essential features of the trademark of the plaintiff have been adopted by the defendant, the fact that the getup, packing and other writing or marks on the goods or on the packets in which the defendant offers his goods for sale show marked differences or indicate clearly a trade origin different from that of a registered proprietor of the mark, would be immaterial for the case of infringement of the trademark. The liability of the defendant for such infringement may be absolute. In the case of passing off, the defendant may escape liability if he can show that the added material is sufficient to distinguish his goods from those of the plaintiff.

The distinction between passing off and infringement was examined by Judge Clauson in the case of Listen Ltd. V. Harley, wherein he opined that if you are restraining the infringement of a registered mark, you can restrain the man from using the mark; but, restrain him from selling the articles under the label containing that word without clearly distinguishing his goods from the goods of the Plaintiff is quite a different thing.

The Supreme Court in a recent case of S. Syed Mohideen v. P. Sulochana Bai, stated that passing off right is a broader remedy than that of infringement. This is due to the reason that the passing off doctrine operates on the general principle that no person is entitled to represent his or her business as business of other person. The said action in deceit is maintainable for diverse reasons other than that of registered rights which are allocated rights under the Act.