On July 1, 2015, the Supreme
Court pronounced its verdict
in the much awaited case of IPRS v.
Sanjay Dalia where the issue was the interpretation of the special
jurisdiction provisions, namely Section 62 of the Copyright Act, 1957 and 134
of the Trademarks Act, 1999. The Court held that if the cause of action
incidentally arises at a place where the principal office of the plaintiff is
located, the plaintiff cannot rely upon Sections 62/134 to institute a suit at
a place where its branch office is located.
Reproduced below are the
provisions in question:
62. Jurisdiction of court over
matters arising under this Chapter. --
(1) Every suit or other civil
proceeding arising under this Chapter in respect of the infringement of
copyright in any work or the infringement of any other right conferred by this
Act shall be instituted in the district court having jurisdiction.
(2) For the purpose of
sub-section (1), a "district court having jurisdiction" shall, notwithstanding
anything contained in the Code of Civil Procedure, 1908 (5 of 1908), or any
other law for the time being in force, include a district court within the
local limits of whose jurisdiction, at the time of the institution of the suit
or other proceeding, the person instituting the suit or other proceeding or,
where there are more than one such persons, any of them actually and
voluntarily resides or carries on business or personally works for
gain.”
(1) No suit-- (a) for the
infringement of a registered trade mark; or (b) relating to any right in a
registered trade mark; or (c) for passing off arising out of the use by the
defendant of any trade mark which is identical with or deceptively similar to
the plaintiff's trade mark, whether registered or unregistered, shall be
instituted in any court inferior to a District Court having jurisdiction to try
the suit.
(2) For the purpose of clauses
(a) and (b) of sub-section (1), a "District Court having
jurisdiction" shall, notwithstanding anything contained in the Code of
Civil Procedure, 1908 (5 of 1908) or any other law for the time being in force,
include a District Court within the local limits of whose jurisdiction, at the
time of the institution of the suit or other proceeding, the person instituting
the suit or proceeding, or, where there are more than one such persons any of
them, actually and voluntarily resides or carries on business or
personally works for gain.
It is clear from both provisions,
which are identical in all material respects, that they provide additional
jurisdictional remedies over and above the conventional options available to a plaintiff
under Section 20 of the Code of Civil Procedure, 1908. The central issue before
the Court was the interpretation of the phrase “carries on business” used in
both provisions, which has a bearing on the following scenarios:
1.
Can a place where the branch office of the plaintiff is
located, in the absence of a cause of action which has arisen in such place, be
treated as a place where the plaintiff corporation “carries on business”?
2.
In a situation where a cause of action has arisen at the
place where the branch office is located, is the plaintiff barred from
instituting a suit at a place where he has his registered/principal office
because no cause of action has arisen there? In other words, does the Plaintiff
not have the option of choosing between the principal/registered place of
business, and the branch office where the cause of action has arisen in whole
or in part?
In order to address these
scenarios, it is imperative to understand the construal of the Explanation to
Section 20 of the CPC since it spells out the meaning of “carries on business”.
Reproduced below is Section 20 with the Explanation:
20. Other suits to be
instituted where defendants reside or cause of action arises.- Subject to the limitations aforesaid, every suit shall be
instituted in a Court within the local limits of whose jurisdiction—
(a) The defendant, or each
of the defendants where there are more than one, at the time of the
commencement of the Suit, actually and voluntarily resides, or carries on
business, or personally works for gain; or
(b) any of the defendants,
where there are more than one, at the time of the commencement of the suit,
actually and voluntarily resides, or carries on business, or personally works
for gain, provided that in such case either the leave of the Court is given, or
the defendants who do not reside, or carry on business, or personally work for
gain, as aforesaid, acquiesce in such institution; or
(c) the cause of action,
wholly or in part, arises.
Explanation: A corporation shall be deemed to carry on business at its sole
or principal office in India or, in respect of any cause of action arising at
any place where it has also a subordinate office, at such place.
The phrase “carries on business”
in the Explanation has been interpreted in two other decisions of the Supreme
Court, namely Patel Roadways v. Prasad Trading and New Moga Transport v. United India Assurance. In Para 10 of New Moga Transport, the Court held thus:
“10. On a plain reading of the
Explanation to Section 20 CPC it is clear that the Explanation consists of two
parts: (i) before the word “or”
appearing between the words “office in India” and the words “in respect of”,
and (ii) the other thereafter.
The Explanation applies to a defendant which is a corporation, which term would
include even a company. The first part of the Explanation applies only to such
corporation which has its sole or principal office at a particular place. In
that event, the court within whose jurisdiction the sole or principal office of
the company is situate will also have jurisdiction inasmuch as even if the
defendant may not actually be carrying on business at that place, it will be
deemed to carry on business at that place because of the fiction created by the
Explanation. The latter part of the
Explanation takes care of a case where the defendant does not have a sole
office but has a principal office at one place and has also a subordinate
office at another place. The expression “at such place” appearing in the
Explanation and the word “or” which is disjunctive clearly suggest that if the
case falls within the latter part of the Explanation it is not the court within
whose jurisdiction the principal office of the defendant is situate but the
court within whose jurisdiction it has a subordinate office which alone has the
jurisdiction “in respect of any cause of action arising at any place where it has
also a subordinate office”.”
In light of this ratio and
after having extensively reviewed the object of Sections 62/134, the Supreme
Court in IPRS rightly observed that these
special jurisdiction provisions are exceptions to Section 20 of the CPC only in
so far as they permit the plaintiff to sue at a place of his residence or where
he works for gain or carries on business. In other words, the provisions are
not to be construed as granting cartes
blanches to the plaintiff since there are limitations/riders which apply to
the plaintiff’s ability to sue even under Sections 62/134. This sentiment finds
express endorsement in Para 16 of the decision.
In reading in limitations into the
provisions, the Court relied upon the spirit of convenience of parties
which is embodied in the Explanation to Section 20. According to the
Court, keeping with the spirit of the Explanation, unless a cause of action
arises at a place where the branch office of the plaintiff is located, it cannot be deemed as a place where the plaintiff “carries on business” for the purposes of Sections 62/134. In the absence of such a qualification, plaintiff corporations with branch offices in far flung places could harass defendants by suing them at such places despite the cause of action not having arisen there. Simply put, the convenience
of defendants has not been entirely done away with by Sections 62/134 since balance
is struck by using cause of action as the parameter to determine jurisdiction
in so far as the branch office of the plaintiff is concerned.
Viewed from another angle, the underlying
rationale is that a branch office has not been accorded the same status under
law as a principal place of business for the purposes of jurisdiction.
Consequently, a branch office needs to be supplemented by a cause of action for
it to be deemed in law as a place where the plaintiff "carries on business". In fact, under Sections 62/134, the place where the branch office is located is the only appropriate place for the plaintiff to sue when the cause of action has
accrued there. This approach strikes a balance between the convenience of the
plaintiff and the defendant since the assumption is that the branch office
makes it convenient for the plaintiff to sue, and the accrual of the cause of
action in that place means the defendant’s goods are being sold there and
therefore it is not inconvenient for him to defend himself.
Based on this logic, following are the practical
jurisdictional consequences:
1. If the principal place of business of the
plaintiff is at X, and the cause of action has arisen at Y where there is no branch of office, Plaintiff may sue at X
based on Sections 62/134, and at Y based on Section 20(c) of the CPC.
2. If the principal place of business of the
plaintiff is at X, and the cause of action has arisen at Y where there is a branch office, Plaintiff may sue only at
Y, not X, if the suit relates to the said cause of action.
3. If the principal place of business of the
plaintiff is at X, and the cause of action has arisen at Y, and branch office
is at Z, then plaintiff may rely on Sections 62/134 to sue at X and Section
20(c) of the CPC to sue at Y, but cannot sue at Z under any circumstances
invoking Sections 62/134 or Section 20.
There is another scenario which is possible. The plaintiff could have its principal place of business at
X and a single defendant may give rise to two causes of action simultaneously
at Y (where there is a branch office), and Z (where there is no branch office).
In so far as Y is concerned, the plaintiff cannot sue at X or Z, going by the ratio of the IPRS. Further, with respect
to the cause of action at Z, the plaintiff may sue either at X based on
Sections 62/134 or Z based on Section 20(c). However, both causes of action,
namely with respect to Y and Z, cannot be combined in a composite suit since
the ratio of the Supreme Court’s
decision in Dhodha House would come
in the way.
Comments and clarifications are welcome.
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