Wednesday, May 21, 2014

Delhi High Court: Prima Facie Territorial Jurisdiction for Passing Off may be based on Statements made in a Legal Notice

On May 7, 2014, in an appeal from an order of a Single Judge returning the plaint for want of jurisdiction in an action for passing off filed by LT Foods Ltd against Heritage Foods India Ltd over the mark "HERITAGE", a Division Bench of the Delhi High Court held that so long as the plaint contains necessary pleadings to establish the territorial jurisdiction of the Court, it cannot be returned for want of jurisdiction. Following are the relevant extracts from the decision:

“6. It would be evident from the above paragraphs that the appellant/plaintiff had averred the following:-
1. That the plaintiff/appellant received a cease and desist notice from the defendant alleging infringement and passing off of its trade mark HERITAGE;
2. That the defendant had started selling rice under the trade mark HERITAGE;
3. That in the notice dated 4.3.2011 issued by the defendant to the plaintiff, the defendant had stated that the goods of the defendant under the trade mark HERITAGE were being sold or supplied directly or indirectly throughout the length and breadth of the country;
4. That in view of the statement made by the defendant/respondent in the legal notice dated 4.3.2011, the plaintiff/appellant stated that the defendant had admitted that it also sold and supplied goods directly or indirectly in Delhi as Delhi would be included in the length and breadth of the country.

7. On the basis of the above four aspects which have been clearly and categorically averred by the plaintiff/appellant in the said plaint, it has been contended that this Court would have territorial jurisdiction to try the Suit even in respect of a passing off action apart from an action based on the cease and desist notice itself.

8. It is well settled that in examining the case from the stand point of Order 7 Rule 10 CPC the plaint must be taken as it is and the averments made therein must be accepted as true. Only if, on assuming the averments made in the plaint to be true and correct, the Court comes to the conclusion that it would not have territorial jurisdiction, could the plaint be returned for filing the same in a Court having jurisdiction. The Court while examining this aspect of the matter cannot go beyond the facts stated in the plaint. In other words the Court cannot examine any defence contained in the written statement filed on behalf of the defendants. The principles for rejecting a plaint under Order 7 Rule 11 or returning a plaint under Order 7 Rule 10 CPC, are more or less similar. Observations of the Supreme Court in the case of Exphar SA v. Eupharma Laboratories Ltd., A.I.R. 2004 SC 1682 are apposite and they are reproduced herein below:

"9. Besides when an objection to jurisdiction is raised by way of demurrer and not at the trial, the objection must proceed on the basis that the facts as pleaded by the initiator of the impugned proceedings are true. The submission in order to succeed must show that granted those facts the Court does not have jurisdiction as a matter of law. In rejecting a plaint on the ground of jurisdiction, the Division Bench should have taken the allegations contained in the plaint to be correct"

Para 6 of the decision reveals that territorial jurisdiction was sought to be established by the Appellant/Plaintiff on the basis of the statements made by the Respondent/Defendant in the latter’s cease and desist notice to the Plaintiff that its goods bearing the impugned trademark were available “directly and indirectly across the length and breadth of the country”. The Court held that territorial jurisdiction could be established at the prima facie stage on the basis of such statements. Below is the relevant observation of the Court:

13. Ms Prathiba Singh, the learned senior counsel, also pointed out that while in paragraph 26 of the plaint there is mention of the „cease and desist notice dated 04.03.2011, there is also mention of the appellant’s / plaintiff’s reply to the said notice dated 19.04.2011 where the plaintiff has denied the statement of the defendant in the said notice dated 04.03.2011 to the effect that the defendant sold or supplied, directly or indirectly, the goods bearing the trade mark "HERITAGE" throughout the length and breadth of the country. However, we feel that this does not enable the respondent / defendant, at this prima-facie stage, to detract from the position that the respondent / defendant had, in the said notice dated 04.03.2011, clearly stated that it had sold the goods under the said trade mark "HERITAGE" directly or indirectly throughout the length and breadth of the country which, obviously, would include Delhi as well. Whether the respondent / defendant can explain this admission and explain the circumstances so that it is not bound by it is a matter for trial. But at this prima-facie stage, the appellant / plaintiff has founded his cause of action on passing off on this admission on the part of the respondent / defendant and it is immaterial that the appellant / plaintiff had in its reply to the notice taken a contrary view.

One critical lesson that could be drawn from the decision is that statements must not be made in a legal notice without application of mind and without understanding their legal implications in a court of law. 

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