The Supreme Court’s decision in IPRS v. Sanjay Dalia continues to torment IP owners who have been abusing the law to create jurisdiction before the Delhi High Court. The victims this time are Pepsico and the owners of the Rasna trademark.
In two different judgments, Justice R. K. Gauba has rejected lawsuits filed by both these trademark owners under Section 134 which is the special jurisdictional clause of the Trade Marks Act, 1999. This clause, like Section 62 of the Copyright Act allows the Plaintiff to sue at its place of business. These clauses are ‘special’ because under conventional jurisdictional clauses such as Section 20 of the CPC, a lawsuit can be instituted only at the place where the defendant resides or where the cause of action arises.
In this case, Plaintiff No. 1 was Pepsico Inc. a corporation incorporated under the laws of North Carolina, USA and Plaintiff No. 2 was Pepsico (India) Holdings Pvt. Ltd., a subsidiary incorporated under the laws of India with its registered office in Gurgaon. The jurisdiction of the Delhi High Court was invoked on the grounds that the Plaintiff No. 2 had a branch office within the jurisdiction of the Delhi High Court. This is exactly the mischief sought to be remedied by the Supreme Court in the Sanjay Dalia case when it held that a company can be deemed to conduct its business only at the place of its registered office and not at its branch office. The special jurisdictional clauses in Section 62 of the Copyright Act and Section 134 of the Trade Marks Act thus can be invoked only before the courts within whose jurisdiction, the plaintiff has its registered office as that is the only office where it is deemed to be carrying on business.
When this lawsuit was originally filed in 2014, the Delhi High Court had issued an ex-parte interim injunction along with an Anton Piller order. A raid was then conducted under the supervision of court appointed commissioner, on the premises of the Defendant in West Bengal. Thereafter the Single Judge decided to proceed ex-parte against the Defendant.
When the roster changed and the matter came up before Justice Gauba, not only did he decide that his predecessor had wrongly proceeded against the defendant ex-parte but also ruled that the Delhi High Court lacked the jurisdiction to hear the matter. In his judgment, dated December 21, 2016 dismissing the lawsuit, Justice Gauba reasoned that since Plaintiff No. 2 had only a branch office, rather than a registered office, in New Delhi the plaintiffs could not take advantage of Section 134 of the Trade Marks Act. While this is true, the more robust line of reasoning would have pointed to the fact that the trademarks in question were actually owned by Plaintiff No. 1 i.e. Pepsico Inc., an American company with its registered office in North Carolina. This is true for most Indian subsidiaries – they are neither owners nor licensees of the trademarks that belong to their foreign parents. Which means that even if these subsidiaries have a registered office in Delhi they cannot invoke S. 134 to sue before the Delhi High Court. Unfortunately, this fact has been lost on the Delhi High Court for several years now.
The second judgment by Justice Gauba rejecting the lawsuit filed by the owners of the ‘Rasna’ trademark is relatively straightforward. This lawsuit too was filed in 2014 and an interim injunction was granted ex-parte before notice was even issued to the Defendant. In this case, the second Plaintiff has its registered office in Ahmedabad and only a branch office in Delhi. The branch office in Delhi was invoked as the basis of the jurisdiction of the Delhi High Court. However since it is now settled that only the address of the registered office and not the branch office can be the basis of invoking jurisdiction of the Court under S. 134 it was relatively easy for Jusice Gauba to dismiss the suit for lack of jurisdiction. All previous injunctions against the Defendant were also vacated.
I don’t see the Supreme Court’s Sanjay Dalia judgement as necessarily meaning that business cannot be carried on in a place other than the plaintiff’s head office. This was not a question before the Court and the Court did not overrule the definition of “carries on business” laid down in the Supreme Court’s decision in Dhodha House v Maingi Lal, also by a two-judge bench, of the meaning of the term “carries on business”. Think about it.
A footnote to my last comment. In Sanjay Dalia both parties had their head offices in the same place. The ratio cannot apply where, say the plaintiff has its head office in Mumbai, the defendant has its head office in Guwahati, but the cause of action arises in (say) Kolkata where the plaintiff has a branch office and carries on business within the Dhodha House meaning. Would you apply Sanjay Dalia to insist that the plaintiff must file in Mumbai and not in Kolkata?
Hi Mr. Sagar,
Sorry for the late reply, for some reason the comments aren’t coming into my inbox.
There is already a split between the Delhi High Court and Bombay High Court on the Supreme Court’s decision in Sanjay Dalia.
Regarding the hypothetical that you have provided – I would argue that per Sanjay Dalia, the plaintiff can sue either in Mumbai (under S. 62) or in Kolkata (per Section 20(c) – CPC). I don’t think the Sanjay Dalia curbs that right. Ideally the Supreme Court should have written a much better decision – its judgment wasn’t clear enough.
Sorry, my hypothetical didn’t express my intention. Suppose the plaintiff’s head office is in Mumbai, the defendant’s in Guwahati, but the plaintiff has a branch office in Kolkata where it carries on business within the meaning the Dhodha House judgement; and the cause of action arises in Bhubaneshwar. I don’t believe that the defendant would be aggrieved if the plaintiff sued it in Kolkata rather than in Mumbai. The plaintiff could sue either in Kolkata or Mumbai, in this situation. I don’t believe this conclusion is inconsistent with the Sanjay Dalia decision, which was a about an altogether situation; though I do agree that the Sanjay Dalia decision could have been written more clearly.
I don’t think the Plaintiff can sue at its branch office under Section 62 – it can sue at the location of its branch office only if the cause of action arises there – this would be under Section 20(c) obviously.
At the crux of the Sanjay Dalia case was the interpretation of the explanation to Section 20 of the CPC which states that corporation is deemed to be carrying on business only at its registered office. If I’m not mistaken Dhodha House was regarding composite suits right?
Regards,
Prashant
Dhodha House also dealt very clearly, with the meaning of the term “carries on business”. Please see it again. In terms of Dhodha House a branch office could well–indeed is likely to be–carrying business. If it is carrying on business, Section 62(2) has to apply to it except where the Sanjay Dalia decision applies. In Sanjay Dalia the Supreme Court interpreted Section 62(2) in terms of legislative intent, and (not without reason) found it to be beyond the actual intent of the legislature (which was to facilitate the copyright owner, not otherwise to harass the defendant) for the copyright owner to sue in Delhi when both the plaintiff and the defendant had their head offices in Mumbai and the cause of action also arose in the jurisdiction of the Bombay High Court. That ratio, based on legislative intent, cannot apply to the situation I have hypothesised above. Assuming the cause of action arose in Panipat, the defendant had its head office in Gurgaon, and the plaintiff had a branch office in Delhi where it carried on business though the plaintiff’s head office was in Mumbai. Under the clear language of section 62(2) the plaintiff could sue either in Mumbai or in Delhi; and It would be absurd for a defendant to be aggrieved at being sued in Delhi rather than in Mumbai. I repeat, that is not what Sanjay Dalia was about. It is very well settled–a dozen or so SC judgements–that a judgement is only an authority on the case it decides; its text cannot be read like a statute. The Sanjay Dalia judgement was not about this situation, nor did it overrule Dhodha House.
Pls see Exxon judgment pronounced by a DB if the DHC wherein HMJ BD Ahmed has also taken a similar view and returned a TM infringement suit where jurisdiction was asserted on basis on Plaintiff No.2, who was a permitted user, having office in Del. Court has held that unlike Copyright Act, TM Act does not allow a permitted user to institute a Suit and consequently it cannot be a person instituting a suit interms of Sec 134 of TM Act.
The word ‘dismissed’ is misleading, The plaint would have been returned.