Synopsis

The Bombay High Court has granted interim protection to the Mumbai branch of Vadilal ice cream, recognizing its long-standing rights to the brand in western and southern India. This ruling stems from a 1993 family settlement, not a revocable license. The court has restrained the Ahmedabad faction from interfering with the Mumbai branch's operations until the arbitration concludes, acknowledging the potential for significant disruption if the brand is discontinued.

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The Bombay High Court on Tuesday granted interim protection to the Mumbai branch of the ‘Vadilal’ ice-cream business, observing that its decades-old rights to use the ‘Vadilal’ brand across western and southern India are prima facie rooted in a 1993 family settlement rather than a revocable commercial licence.

Justice Amit Borkar, in his order, restrained Vadilal Industries Ltd and Vadilal International Pvt Ltd, along with other family members, from interfering with or obstructing the manufacture, sale, distribution and marketing of ice creams and juices by the Mumbai branch that it claims it is entitled to sell under the 1993 family settlement, till the time of the final ruling of the arbitration between both factions.

The Ahmedabad branch has the option to challenge the ruling in the division bench of the High Court.

The Mumbai faction approached the court under Section 9 of the Arbitration and Conciliation Act, seeking interim relief, alleging that the Ahmedabad faction attempted to terminate agreements that had allowed the Mumbai branch to manufacture and sell ice cream and juices under the Vadilal name in Maharashtra, Goa, Karnataka, Kerala and undivided Andhra Pradesh.

At the heart of the dispute is a 1993 settlement that divided the family business between two branches after internal disagreements over management and future expansion. The settlement was implemented through four interlinked documents, including a parent agreement, a branding agreement, an irrevocable power of attorney, and a registered user agreement.

The conflict escalated after Vadilal International, controlled by the Ahmedabad branch, issued a notice on May 26 to terminate the Registered User Agreement (RUA).

The Mumbai faction, led by Shailesh Gandhi and Vadilal Dairy International Ltd., through senior advocate Mustafa Doctor and counsel Hiren Kamod, argued that agreements to use the ‘Vadilal’ brand between family members were inseparable parts of a single family arrangement and that disputes had to be resolved through arbitration under the parent agreement. Faraz Alam Sagar and Surya Sambyal of IndusLaw represented the Mumbai branch.

The Ahmedabad branch, through senior counsel Venkatesh Dhond and Shalaka Patil of Trilegal, argued that repeated quality failures and alleged food safety breaches in products manufactured by the Mumbai faction justified termination.

Representing Vadilal Industries Ltd, senior counsel Zal Andhyarujina and Ativ Patel of AVP Partners argued that the company was publicly listed and that retail shareholders hold a 35% stake. “We have been made a party in the case, whereas we are not a party or signatory in any agreement between family members,” argued Andhyarujina.

“The petitioners have demonstrated that discontinuance of the 'Vadilal' brand after more than three decades is capable of causing extensive disruption,” said the court in its 122-page order. “Equally, the respondents (Ahmedabad branch) have raised concerns regarding protection of the goodwill associated with a registered trademark and the impact of alleged quality deficiencies upon public confidence,” said the order.

The court further observed that the task of the court, therefore, is not to determine which party has a better commercial claim, but to ascertain which course is likely to preserve the subject-matter with the least risk of irreversible prejudice.