Unauthorised Sales After Agreement Ended Attract Liability; Delhi High Court Bars Former Distributor And Affiliates From Selling CREED Products Or Using Mark; Orders ₹37.42 Lakh in Damages
Sanchayita Lahkar
The High Court of Delhi Single Bench of Justice Manmeet Pritam Singh Arora granted a permanent injunction in favour of Fontaine Limited, restraining a former distributor and its affiliates from selling CREED products or using the CREED trademark after the distribution agreement ended. The Court found that the defendants continued to market remaining stock and presented themselves as still authorised to deal in the brand. It directed them to pay Fontaine damages of Rs 37.42 lakh and legal costs of Rs 7.97 lakh for unauthorized trademark use. The Bench further ordered return of all seized goods, holding that the conduct violated post-termination obligations and amounted to misuse of the CREED mark.
Fontaine Limited, owner of the CREED luxury perfume brand, sought relief after its distribution arrangement in India came to an end. The earlier agreement, executed between the brand’s predecessor and an Indian distributor, granted exclusive rights to import, sell, and promote CREED products. After acquiring global rights in 2020, Fontaine informed the distributor of the transfer and continued supplying products for retail sale through the distributor’s affiliated store at Chanakya Mall. The agreement expired by efflux of time in August 2022. Fontaine alleged that the distributor and its related entities did not comply with the contractual requirement to facilitate closure, return unsold products at landed cost, or cease use of the brand’s materials.
Fontaine stated that, despite legal notices, the defendants continued to sell remaining stock, represented themselves as associated with the brand, and used the CREED name at the store and on a WhatsApp business account. Test purchases, WhatsApp conversations, and invoices were submitted to show continued sales after termination. A Local Commissioner’s inspection recorded empty packaging, promotional material, and a list of CREED products found at the premises. Fontaine relied on the Distribution Agreement terms, including clauses governing termination and product return, and sought damages for unauthorized use of the trademark and profits earned from post-termination sales.
The Court noted that the plaintiff “owns and operates the brand CREED, which is a high end, luxury perfume house” and that Defendant No. 2 had been authorized to distribute CREED products until 09.08.2022. It recorded that Defendant No. 1 admitted operating the Chanakya Mall store “till 29.04.2023, even though the Distribution Agreement expired on 09.08.2022.”
It observed that the defendants failed to respond to the plaintiff’s notice dated 30.08.2022 and “unauthorisedly continued to use the CREED trademark for selling the unsold inventory to the customers.” The Court stated that WhatsApp sales through the account “CREED The Chanakya” and invoices issued by Defendant Nos. 3 and 4 corroborated the plaintiff’s case.
Regarding admissions, the Court noted: “Defendant No. 1 has merely parroted a single line assertion that the said paragraphs do not warrant any reply… and has therefore effectively admitted the contentions in the plaint.” It held that Defendant No. 1 “failed to explain the nature of operations… after the termination… till 29.04.2023.”
The Court recorded that Local Commissioner’s report showed inventory matching the plaintiff’s allegations and that the defendants had “not disputed the ‘quantity’ of unsold inventory.” It accepted Document 1 and Document 2 for quantifying inventory and prices, noting: “the price attributed by them to the individual product would also be reasonable.”
Discussing summary judgment under Order XIII-A CPC, the Court cited Su-Kam Power Systems Ltd. v. Kunwer Sachdev, observing that trial was not required where the defendant lacked “real prospects of successfully defending the claim.” It held: “this suit does not merit trial, and this is a fit case where a Summary Judgment… deserves to be passed.”
On unauthorized sales, the Court stated: “Defendants by misrepresenting its continuing association with Plaintiff… persuaded the customers to purchase the unsold products… and the Plaintiff is entitled to damages.”
The Court further observed that Defendants Nos. 2–7 were “deemed to have admitted the allegations” due to no appearance, and that all defendants were “related parties,” noting that abstention was “a mere smoke and mirrors.”
The Court recorded: “the sales undertaken by the Defendants post termination… by showing false association… makes the Defendants liable for damages for loss of profits, business opportunity, and brand reputation.”
The Court accepted the plaintiff’s restricted claim of damages of Rs. 37,42,737 and legal costs of Rs. 7.97 lakhs under Rule 20 of the IPD Rules.
The Court “decreed the suit vis-à-vis relief of permanent injunction in terms of prayer clauses at paragraph 95(a), (b), (c) and (d) of the plaint… in favour of the Plaintiff and against the Defendant Nos. 1 to 7,” and “the interim injunction order dated 18.08.2023 as confirmed on 01.05.2024 shall merge into the decree.”
“The claim for damages to the extent of Rs. 37,42,737/- as calculated by the Plaintiff is allowed and legal costs to the extent of Rs. 7.97 lakhs are ordered. The Defendants are directed to pay the said decretal amount [‘damages + legal cost’] within a period of four (4) weeks failing which they will be liable to pay interest at 12% per annum on the decretal amount from the date of this judgement until realisation. The decree for damages and costs as well shall apply jointly and severally against Defendant Nos. 1 to 7.”
“The Defendants are also directed to deliver up and handover all the products and packaging material which were seized by the Local Commissioner and handed over on superdari to the Defendant No. 1, within four (4) weeks.”
“The suit stands decreed in the aforesaid terms. Interim Orders, if any, stands merged to the final decree,” and that “All future dates stand cancelled.” It clarified that the digitally signed order “shall be treated as a certified copy… No physical copy of order shall be insisted by any authority/entity or litigant.”
Advocates Representing the Parties
For the Plaintiff: Mr. Abhijnan Jha, Mr. Sadhvi Chhabra, Mr. Pranav Tomar, Advocates
For the Defendants: Mr. Gaurav Gupta, Mr. Nikhil Kohli, Mr. Tushar Mudgil, Mr. Kushank Garg, Advocates
Case Title: Fontaine Limited v. Berkeley Beauty Brands Pvt. Ltd. & Ors.
Case Number: CS(COMM) 564/2023
Bench: Justice Manmeet Pritam Singh Arora
