Last Tuesday, the Delhi High Court dismissed three lawsuits — HSIL v. Imperial Ceramic, HSIL v. Gujarat Ceramic Industries, and HSIL v. Max Ceramic Industries — by way of a common order.
Filed in August 2016, the three actions had succeeded in securing the Claimants, sanitary-ware manufacturers under various trademarks, orders of interim injunction, ex parte against Gujarat-based Defendants.
The cases were brought to interim hearing on a motion by the Defendants to dismiss the claims under Order 7, Rule 10 of the CPC. Under this motion, the Defendants argued that the Claimants lacked jurisdiction to bring the suits in Delhi in the first place, and that the suits should be dismissed outright for this reason. In response, the Claimants brought their own motion to amend their claims, seeking to add averments that would support a finding of territorial jurisdiction in Delhi.
The Proposed Amendments
The Claimants’ proposed amendments were two-fold.
First, they sought to support the territorial jurisdiction claim in Delhi by adding material to the effect that the Defendants were doing business in Delhi. This is important, for the original claim was set up as a pure Claimant-based invocation of jurisdiction under Section 134(2) of the Trade Marks Act. By now saying that the Defendants were also doing business in Delhi, the Claimants sought to add another lever to the jurisdiction claim under Section 20(c) of the CPC; one that was entirely absent in the original claim.
(Though left untouched by the judge’s opinion here, it is significant that the additional particulars were rooted in events supervening the filing of the claim. Both factual additions related to events in October and November 2017 which preceded the Claimants’ amendment motion in December 2017. However, presumably, they were not within the Claimants’ field of vision when they filed suit in August 2016.)
Second, the Claimant sought to include a claim to the effect that, even minus proof of actual sales by the Defendants in Delhi, the Defendants selling their products in Delhi was, at least, a credible and imminent apprehension.
[A more tenuous factual addition further claimed that the Claimants had information that the Defendants, after the institution of these claims, had begun to accept orders from and supply products at Delhi. (This is a point of some confusion in the opinion itself, as paragraph 31 recants this submission but says “Plaintiff” where I presume it means “Defendants”.) This could conceivably have set up a territorial jurisdiction claim for part or whole of the cause of action under Section 20(c) of the CPC. The judge did not rule on this but left the Claimants at liberty to raise it in a later suit, if warranted.]
Questions before the Court
This presented two questions for adjudication before Mr Justice Endlaw.
First, when confronted with a motion to dismiss the claim for lack of jurisdiction and a motion to cure the claim via amendment for that lack of jurisdiction, which should be decided first? The question is of relevance since, if the latter is permitted in full, it would likely have the effect of negating the former.
Second, is there a bar on the Claimant using an amendment motion to cure a lack of territorial jurisdiction? (I state these questions in the sequence in which they appear in the decision, though, clearly, they flow better if the order is flipped.)
Answers by the Court
Mr Justice Endlaw found against the Claimant outright on the second question, saying a court “cannot even entertain” such a motion. However, his support for this finding, by his own admission, was rooted in precedent that speaks of prohibiting such amendments when the error sought to be cured relates to pecuniary and not territorial jurisdiction.
On the first question, too, he found against the Claimant. However, this is a qualified finding. The judge notes that though the motion to amend the claim would ordinarily be considered first, this privilege does not extend to a Claimant (a) whose averments in the claim as they stand do not disclose sufficient material to support territorial jurisdiction and (b) the amendment is sought to plug this specific gap.
The sole basis for this position was located by Mr Justice Endlaw in a little cited 2005 Supreme Court decision in Modi v. DLF Universal. Though virtually unheard of in intellectual property circles, it sets out a couple of uncontroversial propositions. First, it says that a court has no jurisdiction over a dispute in which it cannot give effective judgment. Second, consequently, if a court lacks jurisdiction over the subject matter of a lawsuit, any orders passed by it in such a case have no legal force.
Two Further Contentions
Mr Justice Endlaw then proceeded to shut down two further contentions by the Claimants.
First, the Claimants urged the court to permit the amendment because denying it would be to deny a legal remedy on a technicality. A rejection here, said the Claimants, would only set them back by the precise amount of time it would take to file suit afresh with the amended jurisdiction claim.
Mr Justice Endlaw cut the legs out from under this line sharply, making clear that the Claimants’ “own fault and negligence” in failing to include the relevant averments supporting jurisdiction “is to blame for the position in which [the Claimants are] today”. He went a step further, saying that he knew that the real reason behind West Bengal-headquartered Claimants opting to sue Gujarat-based Defendants in Delhi to begin with was “to have an unfair advantage over the Defendants”.
This impression also contributed to his rejection of the Claimants’ second contention. The Claimants requested, in the alternate, for the suit to be held in abeyance presently in order to permit them to complete an imminent corporate rearrangement.
The rearrangement, they said, would enable a successor entity to reprise its role as Claimant, but with a principal place of business in Delhi, one which would enable a straight jurisdiction finding under Section 134(2).
Mr Justice Endlaw was unimpressed. Waiting on in this manner, he said, could neither be entertained nor would it, in the absence of an affirmative finding on jurisdiction with which to bind over the case, serve any purpose.
Finally, the door was closed on the Claimants’ case by the weight of a previous finding against them in Marvel Ceramics. Indeed, the Marvel Ceramics finding is a pre-disposition that hangs heavy over the Claimants throughout this ruling. (It may be recalled that Mr Justice Endlaw himself had rejected a claim at the threshold under similar circumstances against different Defendants in January 2017. The ruling was confirmed on appeal in November 2017 and on special leave by the Supreme Court last month.)
With Marvel Ceramics having attained finality, the rejection of these three cases followed in a straight line. “ The courts,” said Mr Justice Endlaw, “cannot be seen as forming different opinions in different suits on the same facts.”
Three Points of Concern
Three difficulties jump out immediately from this ruling.
The first has to do with the mechanics of Order 6, Rule 17 of the CPC itself. One of the most frequently employed provisions in Indian civil procedure, Order 6, Rule 17 is accompanied by a raft of case law which sets out some well-rehearsed boundaries for its exercise.
In general, Order 6, Rule 17 jurisprudence is extremely liberal to Claimants. It functions on the understanding that pre-trial motions, if necessary to bring to the table facts and material not already before the court and if not causing prejudice to Defendants, ought ordinarily to be permitted.
While several cases rejecting Order 6, Rule 17 motions have also been aggregated over time, the clearest category for such rejections that is relevant here speaks to amendments that seek to alter the nature of the claim or the relief sought. These are usually not permitted.
The field on this furrow of Delhi High Court law in trademark cases is held by September 2010’s Archie Comic Publications. It frames the amendment rule essentially as one against mischief. It says, firstly, that the correction of defective pleadings ought to be curable as a general rule if the facts supporting the cause of action in the jurisdiction in question were “not ab initio completely absent”. It is, in this sense, meant to weed out claims that are “completely unconscionable”, and which do not reveal anything conferring jurisdiction on the court.
It is relevant to observe that this chimes completely with Mr Justice Endlaw’s “own fault and negligence” stance regarding the Claimants’ failure to bring sufficient jurisdiction facts before the court at the time of filing.
However, Archie Comic Publications goes further. It finds:
“But if it is a case of unclear or ambiguous pleadings, the same may be allowed to be amended to clarify the already pleaded facts till the same does not give rise to addition of a new cause of action or pleading new facts.”
This is a standard that Mr Justice Endlaw has not tested these HSIL claims on at all. It is arguable, of course, that they do amount to adding a new cause of action or pleading new facts — the October-November 2017 additions, in particular, would run the Claimants into trouble here — but, regardless, this is a legal determination that this court has failed to make.
Further, it can certainly be contended that the Claimants’ offer of facts, as they stood at the time of the December 2017 amendment motion, supported an affirmative finding of jurisdiction. If this is true, throwing out the claim now, when that offer of facts is on the table, makes little sense. It can, to be sure, open an inquiry into what the appropriate path of conduct should be for the time elapsed — i.e. between the filing of the claim in August 2016 and the Claimants bringing these new facts to judicial notice in December 2017. (It would be a merited inquiry, too, considering the Claimants enjoyed an interim injunction for much of this time.)
However, dismissing the claim outright when there undoubtedly is sufficient material to support jurisdiction on a fresh claim filed on the same facts today does, in fact, privilege technicalities over law. This is something Mr Justice Endlaw himself had indicated he was at great pains to avoid.
The second concern presented by the HSIL cases has to do with recent Delhi precedent. Two cases are relevant to the specific point considered by HSIL on the permissibility of amendment motions regarding territorial jurisdiction.
November 2017’s Bajaj Resources crosses the Archie Comic Publications bridge by satisfying the court that the proposed amendments added material to a claim that was already sufficient to sustain the suit on territorial jurisdiction.
December 2017’s Travellers Exchange appears to endorse a like position. It, too, suggests that such an amendment could only be permitted where the Claimant was adding material to support a positive finding on territorial jurisdiction that would, if push came to shove, keep the suit in Delhi even without the amendment. However, Mr Justice Garg, while permitting the amendment, offered the formal reason that it was “necessary to ascertain and to decide the [Defendants’ motion for dismissal] under Order 7, Rule 10 of the CPC”.
This is critical.
It lends support to the position that an amendment bringing on board new facts that speak to cause of action within the jurisdiction is, in fact, to be permitted before deciding a motion to dismiss the claim under Order 7, Rule 10.
Mr Justice Endlaw, whichever way one slices his opinion, has now ruled the other way. To be clear, he has done so for the reason that the original claim did not disclose sufficient material to support an affirmative finding of jurisdiction. However, given that it puts his opinion in antagonism with that of another recent one on the same subject, there is certainly room to frame this as a question worth taking to an appeals court.
This sense is further strengthened by established precedent such as December 2015’s Bigtree Entertainment, where Mr Justice Mehta offered a Claimant, then ex parte against the Defendant, an opportunity at the hearing itself, to shift its territorial jurisdiction reliance from Section 134(2) to Section 20(c) on the basis of his preliminary review of the facts before him. Again, given that HSIL’s were formal applications for amendment of their claims, it is certainly worth reviewing whether Mr Justice Endlaw fell into error in not permitting the Claimants to make jurisdiction on present facts here.
If it is possible that there was judicial error in this case, it would have the consequence of permitting the Claimants’ motion for amendment of their claims. This opens up a third difficulty with Mr Justice Endlaw’s view: if this additional material clears the Order 6, Rule 17 hurdle on admissibility, the nature of the material becomes relevant.
One of the additions is a claim that the threat of the Defendants selling and doing business related to their products in Delhi is credible and imminent. This, plainly, takes us into quia timet territory. If construed as such, it is equally plain that February-March 2017’s Delhi appeals court decisions in the Allied Blenders cases must attach.
Under Allied Blenders, the court of first instance is to presume any allegation raised by the Claimant as to the Defendants’ activities in the jurisdiction to be true. To be sure, this is an intensely disagreeable position, but it is law in Delhi for the moment. If applied in its intended sense, it is clear that an affirmative jurisdiction finding for these Claimants on these facts is there for the asking.
Appeal or Re-File?
Whether HSIL validates my initial sense and assesses this decision to be appeal-worthy remains to be seen. This doubt is especially pronounced since the remedy of simply filing suit afresh is one that Mr Justice Endlaw has left wide open. Armed with the facts as they stand, it is likely that the initial hurdle on admissibility will be comfortably cleared.
All that really does, though, is confront HSIL once again with the Marvel Ceramics objections. The tremendous impact of the Marvel Ceramics ruling on their trademark claims in Delhi going forward is now clear. Unfortunately for these Claimants, it is an impact that is now compounded by this set of rejections.
However, the more I think about it, the more I am convinced that it is an effect that Delhi’s law on trademark jurisdiction will feel just as profoundly as HSIL.
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