Requirements of a Representative Suit and Suits against Government

I have written before on the essential requirements of institution of a representative suit under Order 1, Rule 8. I recently came across two judgements of the Supreme Court which shed more light on its nuances and scope. The first one was delivered in 1963 and the second in 1990.

In the first judgement, the issue before the Court involved a combined interpretation of Section 80 of the CPC (suits against Government) and Order 1, Rule 8. In this case, two individuals issued a notice under Section 80 to the then State Government of Madras notifying the Government of their intention to the sue it and also highlighting the fact that their notice was on behalf of other individuals with similar grievances as them. While the notice did not identify all such individuals, it clearly identified the grievance, the cause of action, names and places of residence of the two individuals issuing the notice and the reliefs sought. Out of the said two individuals, however, only one of them finally sued the Government.

The Government objected to the maintainability of the suit on the ground that (a) the Section 80 notice was not in accordance with the law since it failed to specify the particulars of all individuals who had such a grievance; (b) that before issuing the Section 80 notice on behalf of others their consent was not sought; and (c) that only one of the “noticers” finally sued the Government instead of both of them, which according to the Government was not in accordance with Order 1, Rule 8.

The Supreme Court held that as long as the Section 80 notice clearly identified the grievance along with the particulars of the issuers of the notice and the reliefs claimed, and had a statement to the effect that the notice was representative in nature, the fact that it did not specify the details of other aggrieved individuals did not affect the legality of the notice. The Court also clarified that the consent of the other affected parties was not needed to issue a Section 80 notice on their behalf and categorically rejected the argument that the leave of the Court was needed even before issuing the Section 80 notice.

Keeping with this logic, the Court further held that it was not necessary to seek the permission of all affected parties to sue on their behalf under Order 1, Rule 8 since such permission to sue in representative capacity was, in any case,  to be sought from and granted by the Court to the Plaintiff upon institution of the suit. The Court reasoned that since the provision itself envisaged issuance of a public notice by the trial court to similarly placed individuals/parties at the expense of the Plaintiff, there was no need for the Plaintiff to seek permission from such parties prior to the institution of the suit. The Court also pointed out that there was nothing either in Section 80 or in Order 1, Rule 8 which mandated institution of the suit by everyone who issued the Section 80 notice in order for the suit to be maintainable.

In the second judgement, delivered in 1990, the case involved demands for additional payments issued by the State Housing Board of Tamil Nadu to allottees of housing units. When a representative suit was instituted by the one of the allottees, the State Government objected to its maintainability on the ground that a representative suit could not be filed against monetary claims since the claim amounts would differ from person to person, and that the demand made to each person would give rise to a separate cause of action, thereby precluding the application of Order 1, Rule 8. 

The Apex Court dismissed these contentions on the ground that there was nothing in Order 1, Rule 8 which precluded its application to any class of claims or actions. Importantly, the Court reiterated the position that the fundamental basis of a suit under the provision was a commonality of interest, which in itself would arise from the nature of the cause of action notwithstanding the differences in the quantum of claims. In other words, it could either be argued that the cause of action i.e. the demand for payment, need not be the same for Order 1, Rule 8, or it could be argued that the cause of action in such a case would be the broad fact that similar demands were issued to similarly placed parties/individuals. The net result would be the same.

The following extracts from the judgement capture the position with great clarity:

“The provisions of Order 1 of Rule 8 have been included in the Code in the public interest so as to avoid multiplicity of litigation. The condition necessary for application of the provisions is that the persons on whose behalf the suit is being brought must have the same interest. In other word,s either the interest must be common or they must have a common grievances which they seek to get redressed.

In Kodia Goundar and Another v. Velandi Goundar and others, |LR 1955 Madras 339, a Full Bench of the Madras High Court observed that on the plain language of Order 1, Rule 8, the principal requirement to bring a suit within that Rule is the sameness of interest of the numerous person on whose behalf or for whose benefit the suit is instituted. The Court, while considering whether leave under the Rule should be granted or not, should examine whether there is sufficient community of interest to justify the adoption of the procedure provided under the Rule. 

The object for which this provision is enacted is really to facilitate the decision of questions, in which a large number of persons are interested, without recourse to the ordinary procedure. The provision must, therefore, receive an interpretation which will subserve the object for its enactment. There are no words in the Rule to limit its scope to any particular category of suits or to exclude a suit in regard to a claim for money or for injunction as the present one.

8. Coming to the relevant circumstances in the present case it will be seen that all the allotments in Ashok Nagar were made under the same Scheme and all the relevant facts are common. The basis of the impugned demand of the appellant is equally applicable to all the allottees and the plea of the plaintiff is available to all of them. The trial court was, therefore, perfectly right in permitting the plaintiff to proceed under Order 1, Rule 8 of the Code of Civil Procedure. Nobody in this situation can complain of any inconvenience or injustice. On the other hand, the appellant is being saved from being involved in unnecessary repeated litigation.

9. It is true that each of the allottees is interested individually in fighting out the demand separately made or going to be made on him and, thus, separate causes of action arise in the case, but, that does not make Order 1. Rule 8 inapplicable. Earlier there was some doubt about the Rule covering such a case which now stands clarified by the Explanation introduced by the Code of Civil Procedure (Amendment) Act, 1976, which reads as follows: "Explanation--For the purpose of determining whether the persons who sue or are sued, or defend, have the same interest in one suit, it is not necessary to establish that such persons have the same cause of action as the persons on whose behalf, or for whose benefit, they sue or are sued, or defend the suit, as the case may be."

The objects and reasons for the amendment were stated below: "OBJECTS AND REASONS: Clause 55; sub-clause (iv),--Rule 8 of Order 1 deals with representative suits. Under this rule, where there are numerous persons having the same interest in one suit, one or more of them may, with the permission of the Court, sue or be sued, on behalf of all of them. The rule has created a doubt as to whether the party represent- ing others should have the same cause of action as the persons represented by him. The rule is being substituted by a new rule and an explanation is being added to clarify that such persons need not have the same cause of action." There is, therefore, no doubt that the persons who may be represented in a suit under Order 1, Rule 8 need not have the same cause of action."

Significance of Framing an Issue of Trademark Invalidity under Section 124 of the Trademarks Act, 1999

In the last post, I discussed the purpose and import of framing of issues in a civil suit under Order 14 of the Code of Civil procedure. I took the view that the framing of an issue under Order 14 does not tantamount to the Court taking a position with respect to the contentions of parties on a material question of fact or law. It is a mere act of charting the trajectory and contours of the trial so that the progress of the trial is not waylaid by irrelevant or immaterial issues which have no bearing on the adjudication of the rights and liabilities of the parties. 

The question that I shall address as part of this post is whether there is a difference between the framing of an issue under Order 14 of the CPC and framing of an issue with respect to the invalidity of a trademark registration under Section 124(1)(a or b)(ii) of the Trademarks Act, 1999. Under the said provision of the Trademarks Act, one of the condition precedents for the grant of a stay on a suit for trademark infringement is that a Court must form a prima facie opinion that a party’s contention regarding the invalidity of the other party’s trademark registration is tenable. Should such an opinion be formed, the Court shall raise an issue regarding the same and adjourn the case for a period of three months from the date of the framing of the issue in order to enable the challenging party to apply to the IPAB for rectification/removal of the registered trademark.

This brings out the first distinction between an issue framed under Order 14 of the CPC and an issue framed under Section 124 of the Trademarks Act. While an issue under Order 14 is framed to merely identify material propositions of law or fact on which the parties differ so that the suit may be determined, an issue framed under Section 124 goes a step further because it requires the Court to form a prima facie opinion of the tenability of the contention of trademark invalidity. In other words, while under Order 14 a Court need not and cannot express its prima facie opinion on the strength of the parties’ contentions, it must necessarily do so under Section 124 on the question of trademark invalidity.

Secondly, it follows that in forming such a prima facie opinion under Section 124, the Court has to give reasons for holding in favour of either party, which is the settled law with respect to the standard of reasoning expected from prima facie findings. Although the Delhi High Court in its Full Bench decision in Data Infosys v. Infosys Technologies does not expressly endorse this view, a reading of Paragraphs 31 and 32 of the judgement reflects the Court’s implicit endorsement of the need for reasoning in assessing tenability.

Thirdly, while under Order 14 issues are framed when the stage arrives, an issue under Section 124 may be framed even before the stage of framing of issues for trial. This has been clarified by the Delhi High Court in Data Infosys. Extracted below is the relevant excerpt from Paragraph 31 of the judgement:

"31......The court is of the opinion that Parliamentary intendment is clear that if at the stage of filing of the suit, a rectification application is "pending" before IPAB, there is no choice for the court, but to adjourn the infringement suit. However, if no such application is pending, the court which is later approached with an infringement suit (which "tries" it) has to appraise prima facie tenability of the invalidity plea, whenever taken. It could be urged even by way of amendment. Nevertheless, there cannot be an automatic stay, in view of the express phraseology of Section 124 (1) (ii) which mandates exercise of discretion. To postpone the consideration at the stage of framing issues would be a narrow interpretation, undermining the broad basic distinction between the two contingencies envisioned by Section 124 (1) (b).

Finally, the consequence of an issue framed under Order 14 is vastly different from that of an issue framed under Section 124. While an issue under the former merely captures an aspect of the dispute on which evidence must be led by the parties in trial and judgement must be pronounced by the Court ultimately, an issue under Section 124 decides the very progress of the suit since if the Court does frame an issue of invalidity post a prima facie analysis, the inevitable consequence is a stay on the suit for infringement (unless the party challenging the trademark registration fails to approach the IPAB for rectification within three months from the framing of the issue).

Therefore, it is evident that not only is the object of Order 14 different from that of Section 124, the standard and rigour of analysis called for under the latter is significantly higher than the former.

In the next post, I will discuss a few more aspects of Section 124. 

What is the Purpose and Significance of framing of issues in Civil Suits?

Framing of issues in a civil suit seems like a routine thing and perhaps this is why its actual purpose and significance is sometimes lost or misunderstood in the “routine” of practice. Once in a while it helps to take a step back and ask oneself the true meaning of a certain procedure which is taken for granted. Setting aside preconceived notions as to the object of and procedure for framing of issues, let’s try to cull it out from Order 14 of the CPC.

The title of the Order reads “Settlement of Issues and Determination of Suit on Issues of Law or on Issues Agreed Upon”. Therefore, a suit is determined based on issues of law or other issues agreed upon by parties in a suit. But what is an “issue”? Although the CPC does not define the term, sub-rule 1 of Rule 1 of Order 14 says that issues arise when a material proposition of fact or law is affirmed by one party and denied by the other. In other words, both parties must disagree on a material proposition of fact or law.

Additionally, the Evidence Act also defines “Facts in issue” to mean and include any fact which, either by itself or in connection with other facts, has a bearing on a right or liability asserted or denied in a suit. The Explanation to the definition further says that when a Court records an issue of fact under the CPC, the fact to be asserted or denied in response to such as issue, too would be treated as a fact in issue.

As to what constitutes a material proposition giving rise to an issue, Sub-rule 2 of Rule 1 states that material propositions are those propositions of law or facts which a plaintiff must allege in order to show a right to sue or a defendant must allege in order to constitute his defence. Simply put, a material proposition is one which advances a party’s case factually or legally. Sub-rule 3 mandates that each material proposition on which the parties disagree shall be framed as a distinct issue. Therefore, it could be said that propositions of fact or law which do not further a party’s case are not material and therefore ought not to be framed as issues. However, what is the consequence when a proposition of fact or law, although material, is not framed as an issue despite the parties being at variance with each other?

On this, the Supreme Court has held that non-framing of an issue does not vitiate the proceedings as long as the pleadings of parties bear out that the issue exists and both parties have led evidence at trial to prove their respective contentions on the issue. In other words, a Court can rule on an issue even if it has not been specifically framed, so long as it is material to the determination of the suit.

How does a Court go about framing an issue? Sub-rule 5 of Rule 1 lays down the procedure for this. It says that at the first hearing of a suit, the Court shall, after reading the plaint and the written statement, and after examination under Order 10 Rule 2 and after hearing the parties or their counsels, ascertain upon what material propositions of fact or law the parties are at variance, and shall thereupon proceed to frame and record the issues on which the right decision of the case appears to depend. What does this mean? It simply means that a Court shall understand the respective contentions of parties based on their written pleadings and oral submissions (both being pleonasms) and distil only those propositions of fact and law on which the parties differ and which are “material” for the adjudication of the suit. It is to be understood that the materiality being referred to in sub-rule 5 does not mean evaluation of the tenability of the contentions of parties on factual or legal propositions. It simply refers to testing an issue for its relevance to the determination of the case.

For instance, in a suit for patent infringement, if there is no dispute between the parties as to the ownership of the patent by the plaintiff, there is no point in framing an issue on it since the parties are not at issue on the question of ownership. Therefore, the question of ownership is not a material proposition on which the parties disagree. If, however, in a given case the plaintiff claims to be an exclusive licensee of the patentee and the defendant disputes the assertion on factual and legal grounds, the maintainability of the plaintiff’s action against the defendant has to be framed as an issue (under the Patents Act only a patentee or the exclusive licensee may institute a suit for infringement). Clearly, the issue is material to the enforcement of the patent and hence the adjudication of the suit.

The procedure of framing of an issue needs to be understood with clarity since sometimes there is a tendency to read more into the mere framing of an issue under Order 14 than is warranted. Framing of an issue under Order 14 does not tantamount to the Court taking a position with respect to the contentions of parties on a material question of fact or law. It is a mere act of charting the trajectory and contours of the trial so that the progress of the trial is not waylaid by a slugfest on irrelevant or immaterial issues which have no bearing on the adjudication of the rights and liabilities of the parties. A good decision to read on framing of issues is Makhanlal Bangal v. Manas Bhunia which although delivered by the Supreme Court in the context of the Representation of the People Act, 1951, is relevant since the procedure under the CPC applies to the statute.

Having discussed the procedure and significance of framing of issues under Order 14 of the CPC, in the next post I will compare and contrast it with the framing of an issue under Section 124 of the Trademarks Act in relation to the invalidity of a trademark registration.

Supreme Court's Interpretation of Special Jurisdiction Provisions in IPRS v. Sanjay Dalia

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.” 

134. Suit for infringement, etc., to be instituted before District Court. -- 

(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. 

Compensatory Costs for False or Vexatious Claims or Defenses in IP Disputes

Picture yourself as a new entrant to a field of business who intends to launch a product which strikes the right balance between performance and cost-effectiveness. Just a week before the launch of your product, you get sued for infringement of a patent or a design by a better-placed competitor (“X”) who succeeds in securing an ex parte ad interim injunction which kills the launch of your product. During the course of the litigation, you manage to establish before the Court that X’s suit was malicious and false/vexatious i.e. it was instituted with the specific object of thwarting the launch of your product despite his knowledge that he had no real cause of action against you. Does the law address this situation?

Now put yourself in the shoes of an IP holder, say a patentee, who discovers that a former licensee (“Y”) is continuing to sell the patented invention despite the termination of the license (which has not been challenged by the licensee). Upon being sued, the former licensee Y contests infringement knowing fully well that his product is identical to the product that was sold by him during the subsistence of the license. Further, Y challenges the validity of your patent on multiple substantive grounds despite having satisfied himself of its validity prior to obtaining the licensee from you. You, the patentee, ultimately convince the Court of the false/vexatious nature of Y’s defense of non-infringement and patent invalidity (notwithstanding the fact that Section 140 of the Patents Act does not prohibit Y from the challenging your patent’s validity). Does the law address this situation?

Section 35A of the Code of Civil Procedure, 1908, which governs the conduct of civil suits specifically provides a remedy. Extracted below is the provision:

35A. Compensatory costs in respect of false or vexatious claims or defenses.

(1) If any suit or other proceedings including an execution proceedings but excluding an appeal or a revision, any party objects to the claim of defence on the ground that the claim or defence or any part of it is, as against the objector, false or vexatious to the knowledge of the party by whom it has been put forward, and if thereafter, as against the objector, such claim or defence is disallowed, abandoned or withdrawn in whole or in part, the Court, if it so thinks fit may, after recording its reasons for holding such claim or defence to be false or vexatious, make an order for the payment the object or by the party by whom such claim or defence has been put forward, of cost by way of compensation.

(2) No Court shall make any such order for the payment of an amount exceeding three thousand rupees or exceeding the limits of it pecuniary jurisdiction, whichever amount is less:

Provided that where the pecuniary limits of the jurisdiction of any Court exercising the jurisdiction of a Court of Small Causes under the Provincial Small Cause Courts Act, 1887 or under a corresponding law in force in any part of India to which the said Act does not extend and not being a Court constituted under such Act or law, are less than two hundred and fifty rupees, the High Court may empower such Court to award as costs under this section any amount not exceeding two hundred and fifty rupees and not exceeding those limits by more than one hundred rupees:

Provided, further, that the High Court may limit the amount or class of Courts is empowered to award as costs under this Section.

(3) No person against whom an order has been made under this section shall, by reason thereof, be exempted from any criminal liability in respect of any claim or defence made by him.

(4) The amount of any compensation awarded under this section in respect of a false or vexatious claim or defence shall be taken into account in any subsequent suit for damages or compensation in respect of such claim or defence.

A reading of the provision makes it clear that the remedy of compensatory costs is equally available against a plaintiff’s false/vexatious claim and a defendant’s false/vexatious defense. However, what renders the remedy illusory is the paltry amount of INR 3000 prescribed as the upper limit. This defect in the provision has been pointed by the Supreme Court in several decisions and has been the subject-matter of cogitation by the Law Commission of India in its 240^th Report.

What is also to be noted is that unless the affected party raises the objection of false/vexatious claim or defense, a Court cannot suo motu embark on such an enquiry or grant the remedy provided for under the provision. This aspect too has been addressed by the Law Commission which, among other things, has sought to rechristen ‘compensatory costs’ as ‘exemplary costs'. Following are the amendments to the provision recommended by the Commission:

(1)    Ceiling limit of Rs. 3,000/- prescribed in the year 1976 needs to be enhanced to Rs. 1,00,000/-.

(2)    Out of the costs awarded under Section 35-A (maximum being Rs. 1,00,000/-), part of the costs should be allowed in favour of the party who has been subjected to frivolous or vexatious litigation and a part of the amount of costs should be directed to be deposited in the Judicial Infrastructure Fund to be created by each High Court

(3)  The expression ‘exemplary’ should be substituted for the word ‘compensatory’ wherever it occurs in Section 35-A.

(4) Every Court, on its own, even without an application from one of the parties, shall be empowered to award exemplary costs under section 35-A if the Court is satisfied that the claim or defence is false or vexatious to the knowledge of the party. However, before passing such order, opportunity of hearing shall be given to the party against whom such order is proposed to be passed on the date of pronouncement of judgment

Is a Composite Suit for Design Infringement and Passing off of the Design Maintainable?

Last May, I had reported a full-bench opinion delivered by the Delhi High Court on the following issues:

(1) Whether a suit for infringement of registered design is maintainable against the another registered proprietor of the design under the Designs Act, 2000;

(2) Whether there can be availability of remedy of passing off in the absence of express saving or preservation of common law of Designs Act, 2000 and more so when the rights and remedies under the Act are statutory in nature; and

(3) Whether the conception of passing off as available under the trademarks can be joined with the action under the Designs Act when the same are mutually inconsistent with that of remedy under the Designs Act.

Following is the majority opinion of the Court on these issues:

(i) A plaintiff could institute a suit for infringement of a design against a defendant, who was also a holder of a registered design. The expression "any person" found in Section 22 of the Designs Act would not exclude a subsequent registrant as, according to us, no such words of limitation are found in said Section.

(ii) The plaintiff would be entitled to institute an action of passing off in respect of a design used by him as a trade mark provided the action contains the necessary ingredients to maintain such a proceeding. The argument that such a suit could be instituted only after the expiry of the statutory period provided under Section 11 of the Designs Act, does not find favour with us. This is for the reason that in a given fact situation the plaintiff may have commenced the use of the design as a trademark after its registration. While Section 2(d) of the Designs Act excludes from the definition of a design, any trademark which is defined as such in clause (v) of sub-Section (1) of Section 2 of the 1958 Act or property mark, as defined in Section 479 of the IPC, or any artistic work as defined in clause (c) of Section 2 of the Copyright Act -the use of the design as a trademark post its registration, is not stipulated as a ground for cancellation under Section 19 of the Designs Act.

(ii) (a) In this context we must note the argument of Ms Singh, learned amicus, that passing off action may perhaps be maintainable provided the mark has attained secondary meaning. In our opinion, the issue before us is limited to whether a remedy by way of passing off action would be available qua a registered design used as a trademark by the plaintiff - we are not inclined to comment on the quality of evidence which may be required, if at all, to be produced by the plaintiff to prove whether the mark has acquired the necessary secondary distinctive meaning, for him to secure success, in the action instituted in that behalf.

(iii) We are also of the view that a composite suit for infringement of a registered design and a passing off action would not lie. The Court could, however, try the suits together, if the two suits are filed in close proximity and/or it is of the view that there are aspects which are common to the two suits. The discretion of the court in this matter would necessarily be paramount.

36. Accordingly, our answers to the three issues are as follows:

ISSUE No.I: A holder of a registered design could institute a suit against a defendant who is also in possession of a registered design

ISSUE No.II: A holder of a registered design can institute an action for passing off.

ISSUE No.III: The two actions cannot be combined in one suit

Recently, I had the occasion to re-visit the Court’s opinion on issue 3 i.e. is a composite suit for infringement of a registered design and for passing off of the design maintainable? Simply put, can the two causes of action be combined in the same suit? Both the majority and the minority opinions of the Court had answered in the negative.

I am not sure I agree with the opinion of the Hon’ble Court because if it is possible to file a composite suit for copyright and trademark infringement or a composite suit for trademark infringement and passing off, both of which arise from the same act or series of acts of the defendant, why is a composite suit for infringement of a registered design and passing off of the design not maintainable? Filing of civil suits and combining causes of action are issues dealt with by the Code of Civil Procedure, 1908 (better known as ‘CPC’ as opposed to ‘CCP’). The relevant provision to look into is Order 2, which deals with framing of a suit. In particular, Rule 3 of Order 2 is extracted below:

3. Joinder of causes of action

(1) Save as otherwise provided, a plaintiff may unite in the same suit several causes of action against the same defendant, or the same defendants jointly; and any plaintiff's having causes of action in which they are jointly interested against the same defendant or the same defendants jointly may unite such causes of action in the same suit.

(2) Where causes of action are united, the jurisdiction of the Court as regards the suit shall depend on the amount or value of the aggregate subject-matters at the date of instituting the suit.

Clearly, the provision deals with “joinder” of multiple causes of action in the same suit against the same defendant(s). If it is accepted that infringement of a registered design, and passing off of the design are two independent causes of action which arise from the same act or series of acts in a transaction of the same defendant(s), under Order 2 Rule 3 of the CPC both causes of action may be combined to file a composite suit, provided of course that both causes of action arise within the territorial jurisdiction of the same Court (following the law laid down by the Supreme Court in Dhodha House v. S.K.Maingi).

After all, the running of theme of the framework of the CPC is that multiplicity of proceedings must be avoided wherever it can be avoided. Therefore, if multiple causes of action arise in the same infringing act or series of acts of the defendant, the CPC provides a mechanism to combine the causes of action for a consolidated adjudication by the same Court on multiple aspects of the defendant’s conduct.

Surprisingly, there is no discussion of Order 2 Rule 3 in both the majority and minority opinions. I am honestly unsure of the reason for the absence of a discussion on the applicability of this provision to the issue, since to my mind the provision appears most pertinent to it. Instead, the Court, in its majority opinion, undertook a discussion on Order 2, Rule 2 which deals with inclusion/severability of claims and reliefs. The provision is reproduced below:

2. Suit to include the whole claim

(1) Every suit shall include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action; but a plaintiff may relinquish any portion of his claim in order to bring the suit within the jurisdiction of any Court.

(2) Relinquishment of part of claim. --Where a plaintiff omits to sue in respect of, or intentionally relinquishes, any portion of his claim, he shall not afterwards sue in respect of the portion so omitted or relinquished.

(3) Omission to sue for one of several reliefs.--A person entitled to more than one relief in respect of the same cause of action may sue for all or any of such reliefs; hut if he omits, except with the leave of the Court, to sue for all such reliefs, he shall not afterwards sue for any relief so omitted.

This requires us to understand the distinction between “claim”, “relief” and “cause of action” because clearly they aren’t the same, as reflected by the wording of Order 2 Rule 2 itself. Once the distinction is understood, it becomes easier to appreciate as to which of the two provisions, Order Rule 2 and Order 2 Rule 3, apply to the issue at hand.

“Cause of action” has been defined, and accepted by the Supreme Court to mean “every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the court. It does not comprise every piece of evidence which is necessary to prove each fact, but every fact which is necessary to be proved." Simply put, a fact which has resulted in or amounts to infraction of the Plaintiff’s right that has in turn given rise to a “cause”/ his right to sue is “cause of action”.

Since a “claim” is made in respect of a “cause of action”, it perhaps refers to the redressal sought by way of compensation for the infraction of the Plaintiff’s right. On the other hand, “relief” refers to the form of solace that the law offers to an injured Plaintiff. Consequently, “reliefs” under the law could mean injunctive reliefs, pecuniary reliefs and the like. These “reliefs” constitute “prayers” in the Plaint.

Based on the above, it is clear that infringement of a registered design, and passing off of the design fall under the category of “causes of action”, meaning thereby that in order to understand where the 2 may be combined in a suit, the provision to be looked into is perhaps Order 2, Rule 3, and not Order 2, rule 2.

To summarize, I think it is possible to file a composite suit for infringement of a registered design and for passing off of the design. I look forward to the opinions of our readers.

Does the IPAB have the Power to Review its Own Decisions?

The provision that vests the Intellectual Property Appellate Board (IPAB) with the powers of a civil court is Section 92 of the Trademarks Act, which is reproduced below:

92. Procedure and powers of Appellate Board.-

(1) The Appellate Board shall not be bound by the procedure laid down in the Code of Civil Procedure, 1908 (5 of 1908 ) but shall be guided by principles of natural justice and subject to the provisions of this Act and the rules made thereunder, the Appellate Board shall have powers to regulate its own procedure including the fixing of places and times of its hearing.

(2) The Appellate Board shall have, for the purpose of discharging its functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908 ) while trying a suit in respect of the following matters, namely:-

(a) receiving evidence;

(b) issuing commissions for examination of witnesses;

(c) requisitioning any public record; and

(d) any other matter which may be prescribed.

(3) Any proceeding before the Appellate Board shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196, of the Indian Penal Code (45 of 1860 ), and the Appellate Board shall be deemed to b a civil court for all the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974 ).

This provision is largely identical to Section 77 of the Patents Act and Section 127 of the Trademarks Act. However, the power of review is conspicuous by its absence. Can it be argued that the power of review is an inherent one? 

This issue was addressed in the IPAB’s order no. 134/2009 dated August 21, 2009 in OA/1 /2007/PT/CH. In this decision, the IPAB held that since the Board was the creation of a statute, it could not vest itself with powers of substantive review unless the statute expressly provided for it. The power of procedural review, however, being ancillary to its function, was inherent in it. To support this, the Board cited a few decisions of the Supreme Court, the Grindlays decision being a prominent one.

Reproduced below is the relevant extract from the Grindlays decision:

The decision in Narshi Thakershi v. Pradyumansinghji is distinguishable. It is an authority for the proposition that the power of review is not an inherent power, it must be conferred either specifically or by necessary implication. Sub-sections (1) and (3) of s. 11 of the Act themselves make a distinction between procedure and powers of the Tribunal under the Act. While the procedure is left to be devised by the Tribunal to suit carrying out its functions under the Act, the powers of civil court conferred upon it are clearly defined. The question whether a party must be heard before it is proceeded against is one of procedure and not of power in the sense in which the words are used in s. 11. The answer to the question is, therefore, to be found in sub-s. (1) of s. 11 and not in sub-s. (3) of s. 11. Furthermore, different considerations arise on review. The expression 'review' is used in two distinct senses, namely (1) a procedural review which is either inherent or implied in a court or Tribunal to set aside a palpably erroneous order passed under a misapprehension by it, and (2) a review on merits when the error sought to be corrected is one of law and is apparent on the face of the record. It is in the latter sense that the Court in Narshi Thakershi's case held that no review lies on merits unless a status specifically provides for it. 

Can a Plaintiff/Patentee Withdraw a Suit for Patent Infringement At Will?

The instinctive response to the question is that a Patentee/Plaintiff must not be permitted to withdraw a suit for patent infringement at will. Our sense of fairness might tell us that by suing the Defendants, the Plaintiff has caused the Defendants to incur costs. Also, if the Defendant has suffered due to grant of an ex parte order or an interim injunction against him, the Defendant has a right to expect compensation/restitution for the loss suffered by him.

What are the relevant provisions of the law which help us address the issue? A combined reading of Order 23, Rule 1 and Section 144 of the Code of Civil procedure, 1908 is called for. Order 23 of the CPC deals with Withdrawal and Adjustment of Suits. Rule 1 of Order 23 states thus:

“At any time after the institution of a suit, the Plaintiff may, as against all or any of the Defendants, abandon his suit or abandon a part of his claim”

Clearly, the Plaintiff has the right to withdraw the suit at will, and there is nothing under the law that prevents him from doing so. That said, does this mean that Defendant is left without any recourse to seek restitution of the costs incurred by him during the course of and as a consequence of the litigation?

Section 144 of the CPC provides for a remedy to such a Defendant. The provision reads thus:

“Application for restitution:-- (1) where and in so far as a decree (or an order) is varied or reversed in any appeal, revision or other proceeding or is set aside or modified in any suit instituted for the purpose, the Court which passed the decree or order shall, on the application of any party entitled to any benefit by way of restitution or otherwise, cause such restitution to be made as well, so far as may be, place the parties in the position which they would have occupied but for such decree (or order) or such part thereof as has been varied, reversed, set aside or modified and, for this purpose, the Court may make any orders, including orders for the refund of costs and for the payment of interest, damages, compensation and mesne profits, which are properly consequential on such variation, reversal, setting aside or modification of the decree or order.

Explanation:-- For the purposes of sub-s. (1), the expression "Court which passed the decree or order" shall be deemed to include -

(a) where the decree or order has been varied or reversed in exercise of appellate or revisional jurisdiction, the Court of first instance;

(b) where the decree or order has been set aside by a separate suit, the Court of first instance which passed such decree or order;

(c) where the Court of first instance has ceased to exist or has ceased to have jurisdiction to execute it, the Court which, if the suit wherein the decree or order was passed were instituted at the time of making the application for restitution under this section, would have jurisdiction to try such suit"

Sub-section 1 of Section 144 essentially envisages restitution when a decree or order undergoes variation or reversal in an appeal or revision or “any other proceeding”. The sub-section also envisages restitution upon setting aside or modification of the decree or the order passed in the first suit in a counter-claim/counter-suit instituted for the purpose of setting aside or modifying the decree or the order in the first suit. However, there is no express mention of whether or not such restitution is available in the event of withdrawal of the suit.

That said, the provision is broad enough to accommodate such an eventuality since it refers to variation or reversal in....”other proceeding”. This captures the spirit of the provision which is to provide for a remedy to a Defendant who has suffered losses as a consequence of the Plaintiff’s suit.

When can an application for Section 144 be filed? And who can it be filed before? Sub-section 1 answers both these questions- The Court which passed the decree or the order which was subsequently varied or reversed shall be the Court before which an application under Section 144 may be filed.

Also, such an application must be naturally filed after such variation or reversal of the decree or the order. This also means that once the decree has been varied or reversed by an appellate Court and rendered final, a stand-alone application under Section 144 may be moved before the Court of first instance which passed the original decree or order. This application would stand independent of the Suit and the Court shall be seized of such an application by virtue of being the Court that passed the decree or the order.

A Calcutta High Court decision in Dilip Kumar Dey v. Vishwamitra Ram Kumar throws light on the Section as follows:

“50. Under Order 8, Rule 6D a counter claim is permitted to survive a suit where the suit is discontinued, stayed or dismissed. Similarly, a cross-objection is to survive an appeal in certain circumstances under Order 41, Rule 22(4). In either of these the cross-objection -- or the counter-claim is heard in the very proceedings of the appeal or the suit and unless there was a provision to the contrary once the appeal or the suit stand terminated, there would be no proceeding in which the cross-objection or counter-claim could be adjudicated. They, however, being independent claims of the respondents or the defendant cannot be permitted to become infructuous on the appellant or the plaintiff withdrawing the suit on appeal.

51. In contra-distinction to the aforesaid proceedings, proceedings under Section 144 are not heard in the suit and, therefore, termination of the suit would not ipso facto result in conclusion of the proceedings under Section 144, C.P.C. These proceedings are not proceedings in the suit and they are not heard as a part of the proceedings in the suit and cannot be interlocutory proceedings in the sense implied above. These proceedings are taken distinctly from the suit and as pointed out above may not necessarily be even contemporaneous with the suit. They, therefore, do not need any separate provision to save them after a suit ends.”

Instead of an application under Section 144, can a counter-claim for damages/costs be instituted by the Defendant? Sub-section 2 of Section 144 bars such a counter-suit:

(2) No suit shall be instituted for the purpose of obtaining any restitution or other relief which could be obtained by application under sub-section(1).

Summary

1. Although the Plaintiff may withdraw the suit at will, the Defendant is not without remedy to seek restitution, courtesy Section 144 of the CPC which may be filed as an independent application, notwithstanding the withdrawal of the suit.

2. A remedy which may be sought under Section 144 cannot be sought by way of or as part of a counter-claim or a counter-suit.

I thank Ms.Sneha Jain for her discussions with me on the provision. 

Representative Suits: “Interest”, “Cause of Action” and “Act”

In my last post, I had discussed the requirements of a representative suit under Order 1, Rule 8 of the CPC.  The explanation to O.I, R.8 clarifies that those claiming to file a representative suit need only have the “same interest”, they need not have the “same cause of action”.

Why does the CPC not use the words “acts or transactions” in Order 1, Rule 8, when Order 1, Rule 1 speaks of “acts/transactions”?

Order 1, Rule 1 deals with joinder of parties as Plaintiffs. The Rule permits joinder of parties as Plaintiffs so long as:

1. the relief is sought in respect of the same act or transaction or series of acts or transactions; AND

2. a common question of law or fact would arise if different suits were instituted by the parties seeking relief.

However, in Rule 8, the CPC does not speak of same acts/transactions, nor does it speak of common cause of action, it refers to the “same interest”. First of all, this means "act/transaction" is different from “cause of action”.

Technically, an act gives rise to a cause of action. What this means is that an actionable cause arises from an act since the act amounts to infraction of a party’s right. For instance, selling a patented product without consent is the act, it gives rise to a cause of action since it infringes the patentee’s rights.  

It could so happen that the same act could mean different things for different parties, which means it could gives rise to different cause of actions between different parties. For instance, in the above example, selling a product could involve infringement of patent as well as a trademark, with both rights being held by different persons. In such a case, the causes of action for both right holders would be different although the act concerned is the same.

Both these right holders may be joined as Plaintiffs under Order 1, Rule 1 of the CPC since the act is the same and there is a common question of fact, although there is no common question of law since the rights are different in nature.

This explains the difference between “act” and “cause of action”. But if Order 1, Rule 1 already provides for such joinder of plaintiffs and Order 1, Rule 3 provides for joinder of defendants, where is the need for Order 1 Rule 8?

Order 1, Rule 8 uses the word “interest” to increase the scope for joinder of parties beyond the scope provided for in Rule 1 and Rule 3. The word “interest” has been used to facilitate adjudication of all questions which arise from the same set of acts/transactions. This is basically a provision to avoid multiplicity of litigation where all persons are aggrieved by the same act/transactions.

In particular, Rule 8 has two concrete applications. The first is where the party affected by an act is not a juristic entity. Only a person, natural or juristic, may sue or be sued. In the case of a registered society which is not a juristic person, one member of the society may represent the interests of all members, instead of including all members of the society as “necessary parties”. 

In other words, under Order 1, Rule 1 all Plaintiffs need to be named, however, under Rule 8, one person may represent all other “interested parties”.

For instance, if a host of tenants have an issue with an act of the landlord, instead of filing multiple suits or instead of naming all tenants as parties in one suit, one tenant may represent all the others.

Further, Rule 8 vests the Court with suo motu powers to direct one or more persons to act on behalf of all other parties. In the same landlord-tenant example, the Court may itself direct one tenant to represent the rest.

Therefore, Rule 8 enlarges the scope of joinder of parties so long as there is a communion of interests between the parties.