D-Mart vs 'd mart' courtroom drama ahead of IPO

Delhi HC issues notice as namesake moves for restraint order on alleged trademark infringement

It was March 7, hours before the D-Mart initial public offering (IPO) opened for subscription in the bourses. The top executives and bankers of mothership Avenue Supermarts were busy with last-minute errands and calls. Hundreds of miles away in the Delhi High Court, a petition came for hearing before judge Rajiv Sahai Endlaw. Dolphin Mart, a firm based in the capital’s Okhla Industrial Area, sought an injunction against the usage of the ‘D-Mart’ name.

 

Promoted by K V Rao, a former executive of the Shriram group’s Usha International in 1992, Dolphin Mart deals in what it calls ‘Lifestyle Retail’.  Its ‘dmart Exclusif’ deals in “aspirational and lifestyle collectibles”.

 

Rao, from a textile family, studied nuclear physics and industrial management at the Bengaluru-based Indian Institute of Science, according to the group’s website. While Rao is chairman of the company, the next generation led by son Praveen Rao have taken charge of day to day operations.

 

Dolphin sued Avenue Supermarts and its Managing Director, Ignatius Neville Noronha, “for injunction restraining infringement of the trademark ‘D-Mart’ of the plaintiff by adopting the mark ‘D-Mart’ thereby and passing off their goods/services as that of the plaintiff”. It also sought damages for the alleged infringement.

 

Dolphin’s lawyers pushed the matter citing the upcoming IPO, though they said they did not know if any stores have been set up under the D-Mart brand. “It is however contended that the defendants are coming out with a Public Issue and attention is invited to pages 73 and 74 of the plaintiff’s documents. On enquiry, it is informed that the Public Issue as per the schedule announced, is releasing tomorrow i.e. 8th March, 2017.”

 

An ex parte order could have been a major embarrassment for Avenue, incorporated in 2000 by ace stock market investor Radhakishan S Damani. But, judge Endlaw wanted to be doubly sure, considering the IPO was opening the very next day. In the order on March 7, he directed issue of summons and notice electronically returnable on March 8.

 

“Having not myself seen any store of the plaintiff in Delhi, I have enquired from the senior counsel for the plaintiff how the store of the plaintiff look like from outside and as to how the trademark claimed is displayed thereon. Similarly, it has been enquired about the store of the defendants. The senior counsel for the plaintiff states that the plaintiff has neither placed on record nor the counsel is carrying pictorial depiction of the plaintiff’s store. With respect to the defendants, it is stated that the suit is based on the basis of the website of the defendants and the application made by the defendants for registration of the trademark,” the March 7 order said.

 

At Avenue, the summons came like a bolt from the blue. But, somebody quickly recalled an earlier occasion when the matter had come up. The legal team left for Delhi by the next available flight.

 

On Wednesday, even as the Rs 1,870-crore IPO opened and began making waves with spiralling subscription numbers, Avenue’s lawyers were waiting for their turn.

 

Once it came, they explained D-Mart was a registered trademark of Avenue and Dolphin had suppressed some material information. “The mark of the defendants is older than the year 2003 and in the year 2003, extensive correspondence was exchanged between the parties, all of which does not appear to have been disclosed in the plaint.” They also contended “the action of the plaintiff of bringing the present suit on the eve of the Initial Public Offer (IPO) of the defendants is by way of extortion”.

 

When asked why the earlier communication was not disclosed, Dolphin’s lawyers said, they had no instructions in this regard. Lalit Sharma, senior manager (operations) of Dolphin, who was in the court, denied that there were any such correspondence with the defendants. However, on further enquiry, he stated he was employed with the plaintiff for only the past 10 years.

 

But, the court did not dismiss the matter right away. It directed a reply be filed in four weeks. It asked Dolphin to supply all the documents to Avenue’s lawyers.

 

Dolphin was restrained from advertising the issue when the matter was pending. And, the hearing on whether an interim relief to be granted was posted for May 1.

 

Ramakant Baheti, CFO, Avenue Supermarts, in an e-mail response referred to the March 8 order: “As the matter is sub judice, we are not able to offer any opinion other than the orders of the honourable Delhi High Court.”

 

Repeated attempts to reach Dolphin executives failed. An e-mail to the company’s official id also went unanswered.

 

According to regulations, Avenue had to issue an addendum to its prospectus, citing the high court’s directions. Even as subscriptions continued to break records, an addendum dated March 9 detailing the court directions was published in some newspapers. And, filed with Sebi. The addendum was published on the regulator’s portal on March 20, long after investors had notched subscription of 104.5 times.