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.

Snippets: Law Minister Moots ‘National Litigation Policy’

30 million/3 crore- This is the number of cases pending before Indian Courts, with a few cases languishing for close to a decade and a half. Is there a solution in sight? Probably (Probably roughly translates to “Sambhaavna” in Hindi, which is THE WORD that the Indian Railways and other Indian Govt. Departments swear by...)

The Union Law Minister, Mr.Veerappa Moily, has mooted the idea of a ‘comprehensive National Litigation Policy’ which envisages the restriction of the period of litigation to 3 years (Where are the Judges to dispose these cases? New ‘Benches’ have been constituted, but quite a few ‘Benches’ remain vacant or atleast sparsely occupied...)

One of the objectives of the policy is to reduce government litigation, which forms bulk of the pending cases. Also in the offing is the Right to Justice Bill (shouldn’t we first try and pass the Judicial Standards and Accountability Bill, 2010 and the Judges Assets Bill? Because if the faith in the Judiciary takes a beating, which citizen would want to exercise his right to justice?).

Lets be cautiously optimistic about the National Litigation Policy seeing the light of the day in the near future...

Food for thought: Should lawyers be optimistic at all about this policy?! ;-) 

(Image Source: www.cartoonstock.com)

Internet Jurisdiction: UK Chancery Court Takes a Restrictive View- II

In the last post, I discussed this judgment of the UK Chancery Court; in particular, the issue of authorization was dealt with. In this post, the remaining highlights of the judgment have been discussed.

Role of the Parent Company in the Infringing act/Joint Liability

The Court recalled authorities/precedents to explain that joint tortfeasance/liability of the parent and the subsidiary companies would follow only if there was active participation on the part of both companies. Mere knowledge of one company of the other’s actions would not suffice to establish joint liability, even if the former had complete control over the assets and management of the latter.

Somehow this principle seems to erode the concept of vicarious liability because it doesn’t ring of conviction when a holding company conveniently claims innocence with respect to a particular questionable activity. I must admit I am not sure of the position under Indian law on this point.

In the instant case, the Court held that both the Swiss and German Defendants were jointly liable because the General terms and Conditions available on the websites of the Swiss Defendant showed that it was responsible for delivering products/services to customers in return for a consideration.

This, the Court felt, established the joint liability of both the defendant entities.

Good Arguable case of Copyright Infringement

The central issue to be decided on this point was if the Defendants’ actions would qualify as communication of the copyrighted content to members of the public i.e. “making available the work to the public” either by electronic transmission or wire/wireless means.

The Court wondered if it could draw parallels between the emission theory associated with satellite broadcasting, and online transmission. The emission theory, as applied to broadcasting, states that the place where the act of broadcast occurs is “where the signals are introduced under the control of the person making the broadcast into an uninterrupted chain of communication”.

In other words, the place where one puts information in a communication conduit is the place of broadcasting, as opposed to the place where the broadcast is received by the end consumer.  The Court seemed to endorse the view that the emission theory applied to satellite broadcasting and online transmission because it did not appear from the UK provision that the principle was applicable only to satellite broadcasting.

Further, the Court was of the view that even if it was within the power of the defendants to restrict access to the content in certain jurisdictions, the absence of any such restriction need not by itself imply that they intended to communicate the information in that jurisdiction. (How is it that this logic did not apply to the issue of authorization?)

The Court also observed that since online transmission of the infringing content could be curtailed within the UK, the application of the emission theory did not render the copyright useless.

In short, the Court held that the infringing act occurred only where the act of online transmission had been committed, which for the Court, was the place where the server was situated.

In light of the above, the following conclusions were reached by the Court:

1. The Court did not have jurisdiction against the foreign defendants since the server of the defendants was located outside the UK, and hence there was no primary infringement by communication by the foreign defendants

2. Since the UK-based entities had not been impleaded, claims had to be amended accordingly for the court to take cognizance of the infringing activities of the UK-based entities.

Observations

The judgment doesn’t appear consistent or coherent because the Court takes the view that:

A. The foreign defendants had authorised reproduction of the infringing content, and yet the Court does not elaborate as to where and how was such authorisation established.

B. Then it proceeds to accept that there was joint liability of the foreign defendants with the UK-based customers for reproduction, extraction and re-utilization.

C. However, since the server of the foreign defendants was outside the UK, there was no communication to the public by the foreign defendants.

Since joint liability of the foreign defendants with UK-based customers for reproduction is another way of stating “authorization of reproduction”, I think the issue hasn't been addressed satisfactorily because the underlying premise of  authorization hasn’t been sufficiently dwelt upon by the Court.

As for the issue of “communication”, communication or transmission, as understood in common parlance, are acts which are not and cannot be termed successful if the information so communicated or transmitted is not received by the recipient. Stated otherwise, there is no complete communication without reception. Accordingly, in this case, since communication to UK-based customers was complete, the foreign defendants ought to have been held as communicating the copyrighted content.

That said, does communication without a specific concerted attempt to cater to customers in the UK, amount to communication to the UK public? If the answer is in the negative, then communication is only by the UK-based entities, and not by the foreign defendants.

What I mean is that since there is no proof to show that the foreign defendants intended to communicate the infringing content to users in the UK, it is the UK-based entities which have themselves ensured the communication of the content to users in the UK by linking to the German website. Therefore, the liability for infringement by communication falls on the UK-based entities, and not on the foreign defendants.

All in all, one is of the opinion that the judgment does not strike a consistent note on the line of logic it adopts to arrive at a decision on both issues of authorization and communication.

Comments/alternative views on the judgment are welcome.

Internet Jurisdiction: UK Chancery Court Takes a Restrictive View- I

A close friend and a confidante of mine passed on this judgment delivered by the UK High Court of Justice (Chancery Division). This judgment will be discussed in this post and the next.

The judgment, regardless of its ability to justify the Court’s stance on the core issue of jurisdiction, is a must-read for litigators, more so for IP litigators. I say this because, seldom do we come across pleadings in India where sufficient attention has been paid to the issue of jurisdiction.

This may be because, although there are quite a few Indian judgments on jurisdiction, Courts in India tend to take only a broad stab on the issue without actually taking Plaintiffs to task. In that sense, I think this judgment gives valuable tips on how must the cause of action be pleaded in sufficient detail to establish jurisdiction of a Court.

I’ll deal with the facts of the case only to the extent to which they are needed for this post. 

The Plaintiffs in the case were UK-based entities, and both Defendants were entities foreign to the UK, one German and the other Swiss, the Swiss entity being the parent company of the German entity.

The Plaintiffs owned an online database “Football Live”, which provided statistics on football matches held by other co-Plaintiffs. The German defendant too ran a competing service called “Sports Live Data”; the Plaintiffs’ grievance was that certain entities, which were UK-based, provided links to the site of the German Defendant.

The German Defendant’s site in turn had pop-up windows that contained match statistics, which the Plaintiffs alleged infringed their copyright and database right.

What is to be noted here is that the UK entities, which provided links to the site of the German Defendant, were not impleaded in the suit.   

The primary questions before the Court were:

1. Had the Plaintiffs sufficiently pleaded the act of authorization of the infringement by the Defendants?

2. Was the Swiss parent company a necessary or even a proper party by virtue of it being the parent company of the first defendant/German entity?

3. Had the Plaintiffs made out a case establishing jurisdiction of the English Court, considering that both defendants were non-English entities? This required the Plaintiffs to establish there was indeed a “good arguable case” that the Defendants had “made available” the copyrighted content of the Plaintiffs.

“Authorization”

It was the Plaintiffs’ case that although the Defendants themselves did not reproduce the copyrighted content, they had “authorised” such reproduction. That said, if authorization had not been pleaded in the statement of claims, there could have been no cause of action disclosed against the Defendants.

At the outset, the Court considered it trite to state that the act of authorization need not have occurred in the UK, so long as the act so authorised has been committed in the UK and is an infringing one.To decide if authorization had been pleaded, the Court referred to Para 37 of the Plaintiffs’ statement of claims, which read thus:

“From a date presently unknown to the Claimants but prior to the issue of the Claim Form in these proceedings, the Defendants have used the whole or a substantial part of Football Live, without the consent of the Claimants or any of them. Pending disclosure and/or evidence, the Claimants rely on the following facts and matters:

(i) The reproduction of data from Football Live on pop-up windows hosted on the Defendants' Website which are linked to from the Bet365 Website and the Stan James Website, during the 2008/2009 and 2009/2010 seasons. These pop-up windows appear when the "Live Score" option on the Bet365 Website and the Stan James Website is clicked on.[Screen prints of the windows from the two websites are then attached and referred to]. These screen prints show examples of the data displayed (at the end of each game) in relation to all of the games played in each of the Leagues, on the relevant dates. The data which is displayed for each game is left on the Defendants' Website until the end of the day on which the game is played.

(ii) By way of further illustration, attached as Annex 4 is a table showing the extent of types of live data displayed…

(iii) By reason of the matter is aforesaid, it is to be inferred that the defendants reproduce and/or authorise the reproduction of the following events for every game in every League…(a) goals; (b) goalscorers (shown by the player's name, and a football icon); (c) own goals (shown by the player's name followed by "(og)" and a football icon); (d) penalties (shown by the player's name followed by "(pen)"; (e) yellow cards (shown by the player's name, and a yellow card icon); (f) red cards (shown by the player's name and a red card icon); and (g) substitution (shown by the names of the players coming on and off, and an icon comprising two circular arrows). …

(iv) By reason of the matters aforesaid, it is to be inferred that the Defendants reproduce and store all of the aforesaid data in an underlying electronic database.”

(v) The Defendants' Website states that the Defendant has been operating an "in-house Live Score service" since February 2005. In the premises, it is to be inferred that the Defendants had carried out the aforesaid (or similar) activities since at least 2005.

The Court took the view that although the Plaintiffs could have connected the allegation of authorization with the act of reproduction better in their pleadings, it would border on inane technicality to conclude that authorization hadn’t been pleaded at all.

As to what amounted to authorisation, the Court quoted the definition provided in Twentieth Century Fox Film Corp v Newzbin Ltd [2010] FSR 21, which is as follows:

""authorise" means the grant or purported grant of the right to do the act complained of. It does not extend to mere enablement, assistance or even encouragement. The grant or purported grant to do the relevant act may be express or implied from all the relevant circumstances. In a case which involves an allegation of authorisation by supply, these circumstances may include the nature of the relationship between the alleged authoriser and the primary infringer, whether the equipment or other material supplied constitutes the means used to infringe, whether it is inevitable it will be used to infringe, the degree of control which the supplier retains and whether he has taken any steps to prevent infringement. These are matters to be taken into account and may or may not be determinative depending upon all the other circumstances."

To restate the above, an act is deemed as an authorizing one, provided it goes beyond mere supply of equipment which can be put to infringing use. The above definition goes a step further and states, rightly so, that even enablement, assistance or encouragement do not amount to authorization.

It’s hard to disagree with this proposition, but one wonders what difference would it make if enablement or assistance or encouragement were to be pleaded instead of authorization? In terms of establishing existence of liability, I am not sure it makes a difference. However, it may certainly affect practical apportionment of liability in terms of damages.

On the specific facts of the case, the Court took the view that the German defendant was in complete control of the content being reproduced in its pop-up windows. This, the Court opined, justified its conclusion that a case of "authorization" had indeed been made out.

I am not clear as far as this finding is concerned because "authorization" is to be construed as referring to authorization of the infringing act i.e. reproduction within the territory of UK Courts. Merely because the German Defendant had complete control over the contents being reproduced on its own website, how did it follow that reproduction within UK by UK-based entities had been "authorised" by the German defendant? 

I would think that authorization would have been made out only if the German defendant had authorized the linking of its contents by the UK entities. Since the website of the German Defendant is universally accessible, the Plaintiffs ought to have shown that there was specific express or implied authorization by the defendant to UK entities to link back to the reproduced content. In the absence of any proof of any such authorization, UK Courts ought not to have seized the matter. 

If I have mis-read the judgment on this issue, I welcome corrections.

The other essential findings of this judgment will be discussed in the next post. 

Corrections in the Post on Art. 226 and 227

 The conclusions arrived in the earlier post on Art. 226 and 227 have been modified after some thought. Those interested may go through the same.

Articles 226 and 227: How are they different?

In an earlier post, I had discussed the scope of revisionary powers of the High Court under section 115 of the CPC. I concluded the post raising the issue of a remedy against the rejection a revision application by the High Court wondering which of the two Articles (226 and 227) would suit the purpose. The relevant portion of the post reads thus:

“Can the decision of a High Court in a revision application be challenged? If yes, how? A decision or order of the High Court in a revision application is not an appealable order under Order 43 of the CPC nor can it be appealed as a decree (under Sections 96 or 100) because the order of the High Court in the revision application is not a decree. Therefore, for a remedy against the order of a Court under Section 115, one has to look beyond the CPC. This would mean the Constitution, but would it be Article 226 or 227?

Article 227 vests the Court with supervisory jurisdiction which it can exercise over subordinate Courts. Since we have already concluded that the High Court is not subordinate to itself, I am assuming Article 226 would be the right provision to invoke in such situations. Of course, I am not very sure of this conclusion, but it seems plausible.”

The question itself has a flaw because instead of seeking a remedy from the rejection of the revision application, one must look for an alternative to the revision application, which may be used despite the rejection of the revision application. To rephrase the question accurately now, one must ask if a writ under Articles 226 or 227 may lie from the order of a subordinate Court after the rejection of a revision petition under Section 115 of the CPC?

The answer is in the affirmative, but which of these is technically the correct provision to be invoked needs to looked into carefully since Courts have often used them interchangeably, and have blurred subtle yet definite distinctions between the two. A 2003 judgment of the Supreme Court compares the two Articles to explain the powers vested in a High Court under each of them.

I am still not clear in my own head, which explains all the more why one needs to think it aloud. The Court in this case has drawn from several sources, commentaries and judgments, to understand the scope of Art.226. The Court observed that a writ of certiorari is but one of the writs that may be issued under Art.226. This writ is employed to keep authorities and Courts subordinate to a High Court within their limits.

This writ may lie from the order of any authority where the authority in question has acted in a judicial or quasi-judicial manner. Further, the Court plays a supervisory role and not an appellate role, therefore it cannot embark on reviewing findings of fact unless there’s a patent error i.e. error which is grossly against the provisions of law. The Court’s primary function is to set right jurisdictional wrongs and to verify if principles of natural justice have been observed where the Court has rightly seized itself of the matter.

In contrast, Art.227 is wider in scope in that it is not bound by technicalities which limit the working of Art.226. Art.227 vests the Court with the power of superintendence which exists independent of its revisional powers under any other law (i.e. CPC). While Art.226, which is the Original jurisdiction of the High Court, may be set into motion only by a party, Art.227 gives a High Court power to call for records suo motu. It can be invoked regardless of a possible alternative to the High Court in the form of an appeal or revision.

Under Art.226, the Court may merely quash the order of the sub-ordinate Court, whereas under Art.227, the Court may direct the sub-ordinate Court as to its proper course of action or may pass an order which replaces the subordinate Court’s order. This explains why a High Court, under Art.227, exercises powers which are similar to appellate powers and hence uses it in parsimony. Only if an appeal is proved to be less efficacious than a writ under Art.227, may the Court entertain such a petition.

That said the situations where Art.227 may be validly raised are similar to the specific situations where a revision may lie before a High Court under section 115(1). This answers our question- when a revision petition is rejected by a High Court, a party may choose to file a writ under Art.226 or a petition under Art.227 depending upon the kind of relief he seeks to elicit from the Court. If he wants the Court to merely set aside the order of the subordinate Court, he may file for a writ of certiorari under Art.226, however if he wants the Court to re-appreciate the case on merits, legal not factual, and chart a course for the sub-ordinate Court, he may file a petition under Art.227. 

Scope of Revisionary Powers of a High Court

Section 115 of the Code of Civil Procedure has figured in quite a few judgments, although it is worded in a reasonably clear fashion. The provision has been explained in great detail in a judgment delivered by the Supreme Court in Khanna v. Dillon. Let’s take a look at the provision:

(1) The High Court may call for the record of any case which has been decided by any Court subordinate to such High Court and in which no appeal lies thereto, and if such subordinate Court appears-

(a) to have exercised a jurisdiction not vested in it by law, or

(b) to have failed to exercise a jurisdiction so vested, or

(c) to have acted in the exercise of its jurisdiction illegally or with material irregularity,

the High Court may make such order in the case as it thinks fit:

Provided that the High Court shall not, under this section, vary or reverse any order made, or any order deciding an issue, in the course of a suit or other proceeding, except where the order, if it had been made in favour of the party applying for revision, would have finally disposed of the suit or other proceedings.

(2) The High Court shall not, under this section, vary or reverse any decree or order against which an appeal lies either to the High Court or to any Court subordinate thereto.

(3) A revision shall not operate as a stay of suit or other proceeding before the Court, except where such suit or other proceeding is stayed by the High Court.

The underlined portions of sub-section 1 are instrumental in understanding the true scope and use of the provision. First, it is established that the power of revision is vested only in the High Court. Second, it states that the Court may call for records suo motu or on the application of a party. Third, it is borne out that the records of any Court sub-ordinate to the High Court may be called for. Fourth, such powers of revision may be invoked only in cases which have been decided. Fifth, it may be invoked only in cases in which no appeal lies thereto.

The import of the first three limbs is that the High Court exercises its power of supervision over subordinate Courts in invoking its revisionary powers under the Code. The import of the fourth limb is that an application for revision may be made only after a case has been decided.

As for the fifth limb, this is the one usually perceived as the most ambiguous. It states that a revision may be sought only in cases “in which no appeal lies thereto”. The word “thereto” has been used for a reason; it is to convey that only in situations where an appeal cannot be filed before the High Court, a revision may be filed.

Stated otherwise, where the High Court may be approached through an appeal, be it the first appeal or a second one under Section 100, the High Court is barred from entertaining a revision application. This is because if the High Court may be approached in either the first or second appeals, then the questions sought to be posed in a revision application may be raised validly in the appeal as well. Therefore, since such questions may be placed before the High Court in appeal, there is no need to provide a party with an additional provision in the form of a revision application.

This provision has often been wrongly interpreted by parties to mean that since an appeal may lie from a decision before a higher appellate authority which is subordinate to the High Court, a revision may not lie before the High Court. In other words, when an appeal before an appellate forum (which is subordinate to the High Court) is available to a party, it is not entitled to seek a revision.

This is patently wrong because the High Court derives its powers by virtue of it being vested with supervisory jurisdiction which it may use to set aside a decision of a sub-ordinate Court on grounds of jurisdiction. This is evidenced from the limited circumstances detailed in sub-section 1 which refer to lack of jurisdiction or transgression of powers by a Court sub-ordinate to the High Court.

The next question is, is a Single Judge of the High Court subordinate to the High Court? It has been held that a Single Judge is not sub-ordinate to the High Court and there shall not lie a revision from his decision. This is also because a letters patent appeal is already available to a party aggrieved by the decision of the Single Judge.

If an appeal normally lies before the High Court either as a first appeal or a second appeal, and the right to file such appeal has expired on grounds of limitation, can a party validly rely on section 115 to file a revision instead of the appeal? This is possible because the section speaks of situations where an appeal does not lie and this could be on account of any reason, including unavailability of the right to appeal on grounds of limitation.

Can the decision of a High Court in a revision application be challenged? If yes, how? A decision or order of the High Court in a revision application is not an appealable order under Order 43 of the CPC nor can it be appealed as a decree (under Sections 96 or 100) because the order of the High Court in the revision application is not a decree. Therefore, for a remedy against the order of a Court under Section 115, one has to look beyond the CPC. This would mean the Constitution, but would it be Article 226 or 227?

Article 227 vests the Court with supervisory jurisdiction which it can exercise over subordinate Courts. Since we have already concluded that the High Court is not subordinate to itself, I am assuming Article 226 would be the right provision to invoke in such situations. Of course, I am not very sure of this conclusion, but it seems plausible. I shall continue the discussion in another post soon with a discussion of this judgment of the Supreme Court.

Inherent Powers of the Court: When Can They be Invoked?

Section 151 of the Civil Procedure Code (CPC) is probably one of most frequently (ab)used(?) provisions and is more often than not, the one provision that saves our (blackcoats’) rears. Sometimes we use it to push through an application before the Court, blissfully ignorant that the CPC specifically provides an express provision to move such an application. Does this go against the structure of the Code? To find an answer to this, I thought I might as well spend some time understanding the “metes and bounds” of Section 151.

There’s this 1983 judgment of the Gujarat High Court delivered in the case of In Re Shri Ambica Mills which sets out the limits of Section 151 in great detail and I think it’s a must read for those who intend to understand the CPC better.

The factual matrix is interesting and helps one understand the reasons for decisions taken by counsels and how the Court sees through some of them.

Facts

In this case, an application was made under Section 151 of the CPC read with Rule 9 of the Companies (Court) Rules, 1959 invoking the inherent powers of the Court to have certain remarks expunged from the judgment of the same Court in an earlier company petition.

The applicants were the managing directors of the company Shri Ambica Mills. The earlier company petition was moved by the company under Section 101 of the Companies Act to get an order confirming the reduction in its equity share capital. The presence of paid-up capital which exceeded the needs of the company was cited as the reason for the decision to reduce the share capital. To this end, a resolution with three quarters majority had been passed by the shareholders of the company.

However, this petition was opposed by a certain group of shareholders whose objection to the reduction in the share capital was that the entire scheme was a humbug, aimed at serving the private interests of the 3 managing directors (MDs), who were brothers. The company petition was accordingly dismissed relying on the said objections.

Prior to moving the 151 application by the MDs, the company had already preferred an appeal before the Division Bench of the High Court which had been admitted too. The MDs i.e. applicants in the instant case, too had filed for a stay order on the decision of the Single Judge of the HC dismissing the company petition.

Subsequent to the application for a stay order, the 151 application was filed to seek expungement of certain remarks in the earlier order made against the MDs. The contention of the MDs was that they were never given the opportunity of being heard or defending themselves in the earlier petition and consequently, such remarks were unwarranted and unnecessary for the purpose of arriving at a decision in the earlier petition.

Discussion

The Court first delved into the issue of maintainability of the 151 application read with Rule 9 of the Company Rules. (Rule 9 too deals with inherent powers of the Court, so it stands on par with s.151 of the CPC.)

The Court first observed that:

1. S.151 is not to be exercised as a substantive power for it is procedural and

2. Use of inherent powers under s.151 cannot have the object or effect of going against the provisions of the Code, express and implied.

These observations were paraphrased from the celebrated decision of Manohar Lal v. Rai Bahadur Rao Raja Hira Lal Seth (AIR 1962 SC 527). I remember this decision particularly well thanks to the booming voice of Barrister Bimol K. Chatterjee (popularly known as BKC) who taught us the fundamentals of the CPC in Law School.

In this case, the Hon’ble Supreme Court observed with clarity that the reason that s.151 should not be interpreted to contravene the provisions of the CPC was not because the latter controlled the former, but because the other provisions reflected the express will of the Legislature and in its wisdom, served the interests of justice in the circumstances envisaged.

Simply put, to use s.151 to read down the other express provisions would go against the cardinal principle of interpretation of statues- to respect and to give effect to the will of the Legislature.

The Court then considered other alternatives which the MDs could have preferred instead of a 151 application. Order 20, Rule 3 accordingly was given some thought; Rule 3 of Order 20 provides for addition to or alteration of the judgment either under Section 152 or through a review under Section 114 read with Order 47.

To this the counsel for the MDs clarified that he had no intention of invoking the review powers of the Court. The Court contended that if review was not sought, and if an application under 152 does not lie since the case was not that of an accidental slip or arithmetic error, then an application under 151 wouldn’t lie either since the impugned remarks were material to the Court’s findings in the earlier petition.

The Court compared s.151 to s.561 of the CrpC and said that remarks which are material to the Court’s analysis cannot be sought to be expunged. Expungement, according to the Court, is possible only if sweeping observations, which are irrelevant to the case, are made by the Court. Such expungement may be sought by parties to the case or a stranger who has been named by the Court in its remarks.

In this case, since the very allegation against the Company was that the whole scheme of reduction of paid-up capital was a sham to feather the nests of the MDs, it was inevitable for the Court to discuss the conduct of the MDs to decide the case on merits.

Going a step further, the Court discussed certain other alternatives as well; the Court observed that since strangers to a case could not avail of the review option, they could resort to a writ under Article 226 wherein the Court could justifiably exercise powers of review.

In short, what the Court was alluding to was that the 151 application was ruse on the part of the MDs since a review was not possible (as an appeal had already been preferred) and an application under 152 wouldn’t lie here since the case was not that of an accidental error.

In light of the Court’s observations on s.151, there’s another question which I feel must be asked. Section 151 may not be used to contravene other express provisions, but can it be used to supplement them? The answer is in the affirmative since quite a few applications which we move before the Court (like the ones under Order 13) are usually read with Section 151 so as to invoke the powers of the Court if express provisions, although invoked, do not adequately provide for suitable remedies.