Judgements and orders passed by Delhi High Court on Code of Civil Procedure

In Master Anant Narayan Rai v. Siddharth Rai [33], the Court observed that the general proposition that no suit can be thrown out for non-joinder of parties as enshrined in the proviso to Order I Rule 9 of the Code of Civil Procedure, 1908 (‘CPC’) would not apply when there is non-joinder of essential and necessary parties. The Court further observed that even though procedural defects and irregularities should normally not be permitted to defeat substantive rights, however in a case where a party had, despite objections from the other side, persisted in not curing the said defect, the harsh consequence of rejection of the suit must necessarily flow.

In Economics Transport Organisation Limited v. Mohan Investments & Properties Private Limited [34], the Court held that a suit seeking an injunction against a defendant from interfering with possession of the plaintiff cannot seek to interject the enforcement of an ejectment decree obtained by the defendant against the predecessor-in-interest of the plaintiff, and the correct remedy in this regard for the plaintiff would be to approach the executing court under Order XXI Rules 98 to 105 of the CPC.

In Natasha Kohli v. Mon Mohon Kohli [35], the Court reiterated that if with the passage of time, it is discovered that the original cause of action on the basis of which a litigation was initiated had ceased to exist, then the Court would not permit the said litigation to continue any further.

In Aruna Oswal v. Gen Y Commodities Private Limited [36], while reiterating the principle of “debtor must seek the creditor”, the Court held that in a suit for recovery of money based on an acknowledged liability, the court within whose jurisdiction the plaintiff is residing would have territorial jurisdiction.

In Kapil Tanwar v. Usha Dutt [37], the Court reiterated that when the purport of an averment in a written statement can be explained and if the said explanation falls short of an admission, then Order XII Rule 6 of the CPC would not come into operation and no judgment on admission could be passed.

In Mrs. Pravin Chatterjee v. Mr. Lakshman Das Bhatia [38], the Court observed that merely because a subsequent suit has been filed challenging a conveyance deed executed by the DDA in favour of the person claiming to be the owner, the said fact could not be taken as a defence in the suit which had been filed seeking possession of the premises on account of termination of lease at an earlier point in time.

In Archana Rawal v. Vijay Kataria [39], the Court while relying on Order XLI Rule 7 of the CPC, observed that a statutory appeal under the CPC could not be decided on merits in the absence of the appellant and it was only open to the concerned court to dismiss the appeal for non-prosecution.

In India Affordable Housing Solutions, (IAHS) v. Konark Infra Developers Private Limited [40], the Court held that once an order granting leave to defend subject to deposit of a certain amount had attained finality, and pursuant to the non-deposit, a final decree had followed against the defendant and challenge to which decree was also unsuccessful, then a review petition against the original order granting leave to defend would not be maintainable at that stage.

In Neha Dutta v. Capitol Art House Private Limited [41], the Court observed that a plaint cannot be rejected in exercise of jurisdiction under Order VII Rule 11 of the CPC on the solitary ground that the validity of the document upon which the suit was premised was also subject matter of certain other proceedings between the parties.

In Ajay Kumar v. Om Prakash [42], the Court held that when a suit filed by a party was seemingly hit by the principles of res-judicata and issue estoppel, then the necessary corollary would be that the accompanying application for interim relief under Order XXXIX Rule 1 & 2 would suffer rejection on account of lack of a prima-facie case.

In Delhi Development Authority v. Anup Kumar [43], the Court reiterated the different considerations which weighed with the Court while examining an application for condonation of delay in filing the written statement in a commercial suit as distinct from an ordinary suit, and further observed that in the case of the latter a more lenient approach could be adopted.

In North Delhi Municipal Corporation v. Dhingra Construction Company [44], the Court issued directions to the district courts to specifically indicate the timeline for filing a written statement while issuing the summons depending on whether the suit in question was a commercial suit or an ordinary suit, and in the case of the former to clearly indicate that the outer limit for filing of a written statement is 120 days.

In Navshakti Educational Society v. Laxman Public School [45], the Court observed that when the documents sought to be exhibited are a record of the judicial proceedings conducted before the High Court and there is no cavil as to the authenticity of the said record, then in the said situation even non-certified copies of the said documents could be permitted to be exhibited.

In Brij Prakash Gupta v. Ashwini Kumar [46], after a detailed examination of the legal position in relation to filing of an examination-in-chief by way of an affidavit and the contents of such an affidavit, the Court deprecated the practice of en-masse mechanical reproduction of the contents of the plaint in the affidavit in lieu of the examination-in-chief, and remarked that the affidavit should only contain facts which are to the personal knowledge of the party concerned. The Court further observed that while it is correct that the contents of the affidavit cannot travel beyond the pleadings, when any such objection is taken the same should be recorded and decided at the stage of final adjudication of the suit and, subject to the same, the cross-examination of the witness should proceed in the meantime. The Court held that deletion of portions from the affidavit of evidence should only be ordered at a preliminary stage when it was ex-facie evident that the relevant averments were totally irrelevant or beyond the pleadings.

In Embassy Restaurant v. Atma Ram Builders Private Limited [47], the Court observed that when there was a specific pleading in a suit that there was an oral agreement between the parties that the house tax would be a part of the rent, and after which inclusion the property would not be covered under the provisions of the Delhi Rent Control Act, 1958, then the said aspect would require a detailed trial and the suit could not be rejected upon an application being filed under Order VII Rule 11 of the CPC.

In Arun Kumar Jain v. Bhagwant Singh Pabla [48], the Court held that inasmuch as a mere finding by a Court during a certain stage of the proceeding cannot be challenged unless and until a consequential decree follows, and therefore the said finding which is incapable of being challenged or appealed against cannot operate as res-judicata. While reiterating that a decree under Order XII Rule 6 of the CPC could only be passed if there was a categorical or unconditional admission, the Court in Hunny Sharma v. Ved Prakash Sharma [49], cautioned against adopting a ‘shortcut’ procedure when faced with long pendency of suits inasmuch as the same would adversely affect the rights of the parties.

In a similar vein, in Vir Singh v. Chandra Lata [50], the Court reiterated that an admission within the meaning of Order 12 Rule 6 of the CPC must be unequivocal in nature and a vague or stray averment in a pleading would not be sufficient.

In Kishori Lal v. Akhtar Alam [51], the Court observed that an objector in an execution proceeding could not be permitted to take materially improved and additional averments at the appellate stage as compared to the objections raised before the executing court.

In Ashok Kumar Oberoi v. Raj Kumar Kapoor [52], the Court allowed an application under Order XII Rule 6 inasmuch as it found that there were clear admissions in the earlier proceedings between the same parties and that the averments in the instant suit were mechanically denied by the defendant without any real engagement.

In Rajeev Sethi v. Sidharth Gupta [53], the Court rejected an application for leave to defend in a summary suit under Order XXXVII of the CPC inasmuch as it found that there where various acknowledgements of the debt by the defendant including undertakings on stamp paper, a formal memorandum of undertaking, various cheques as also promissory notes. The Court refused to countenance the plea of the defendant that the aforesaid overwhelming number of acknowledgements were obtained under a misconception and by utilising undue influence.

In East India Auto Manufacturing Company Private Limited v. Ishwar Singh [54], the Court observed that an application for impleadment was required to be allowed when the party concerned did seem to have a connection with the transaction which was subject matter of the suit, and at that stage a detailed consideration of the evidence was not required to be undertaken.

In Charanjeet Singh v. Raj Kumar [55], the Court held that mere lack of clarity in the drafting of the prayer in a suit cannot disentitle the Plaintiff from the reliefs sought when the relevant narration in the plaint in this regard was otherwise quite clear.

In Sanjiv Tiwari v. Deepak Poptani [56], the Court held that a counter-claim could not be permitted to be filed after framing of issues in a suit and the same could be permitted only in exceptional cases wherein it could be demonstrated that the recording of evidence pursuant to framing of issues had not commenced.

In Kapil Kumar v. M/s M&A Designs [57], the Court observed that it was not permissible to direct the director of a company to file an affidavit of personal assets in the course of execution of a decree against the company, without first arriving at a finding as to whether there was sufficient ground for lifting the corporate veil.

In Kuldeep Gupta v. Mahendar Kumar [58], the Court observed that the lawyers abstaining from attending courts on whatsoever grounds cannot be permitted to have debilitating consequences for the litigants, and the courts hold a duty to safeguard the interests of the latter in the case of a strike called by lawyers.

In Kusum Lata Jain v. North Delhi Municipal Corporation [59], the Court held that serious allegations of forgery cannot be made in a reckless manner, and without any basis or foundation.

In Rev. Dinesh Das v. Baptist Church Trust Association [60], the Court held that inasmuch as an application seeking stay of a pending suit under Section 10 of the CPC goes to the very root of the matter, the Court is required to necessarily consider the said issue at the outset without proceeding further with the matter.

https://www.barandbench.com/columns/the-delhi-high-court-in-review-february-2020-part-i

Judgments and Orders passed by Delhi High Court "Banking and Finance"

In Trans Asian Industries Exposition Private Limited v. Jammu and Kashmir Bank Limited [29], the Court held that the expiry of the cumulative period of 30 days plus 30 days as provided for under the second and third provisos to Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (‘SARFESI Act’) would not mean that the Chief Metropolitan Magistrate would be rendered functus officio to pass any further orders in the proceedings. The Court further held that the said provisos were intended to ensure that the matters where taken up with utmost urgency and were not to be read in a manner which would defeat the spirit of the SARFESI Act itself.

In Canara Bank v. Leatheroid Plastics Private Limited [30], the Court reiterated that the parties are bound by the rate of interest agreed to between them along with the periodical rests and the Debt Recovery Tribunal (‘DRT’), would ordinarily not be justified in modifying the same till the date of filling of the application before it. It was noted, however, that for the period that the matter was pending before the DRT as also for the stipulation of interest for the future, the DRT has the requisite discretion and jurisdiction to fix a reasonable rate of interest considering the relevant facts and circumstances.

In Mayank Sharma v. Santhosh Sharma [31], the Court observed that once the suit property had been put to auction in furtherance of appropriate proceedings before the DRT, then an evidently collusive suit filed by a family member of the defendants seeking to demonstrate that the property in question was a Hindu Undivided Family (‘HUF’) property was liable to be rejected.

In Power Max (India) Private Limited v. Jindal Urban Waste Management (Guntur) Limited [32], the Court held that the mere fact that an unconditional bank guarantee incorporated the term ‘indemnified’ at a solitary instance could not convert the document into a letter of indemnification.

https://www.barandbench.com/columns/the-delhi-high-court-in-review-february-2020-part-i

Judgments and Orders passed by Delhi High Court on Arbitration

In a case involving enforcement of a foreign award under Sections 48 and 49 of the Arbitration and Conciliation Act, 1996 (‘Arbitration Act’), the Court in Cairn India Limited v. Union of India [1], held that Article 136 of the Limitation Act, 1963 which provides for a limitation period of 12 years for executing a decree would also apply to a petition seeking to enforce a foreign award.

In Meera Goyal v. Priti Saraf [2], the Court held that when an arbitral tribunal had while deciding an application challenging jurisdiction under Section 16 of the Arbitration Act, deferred a final decision on the concerned application to a subsequent stage in the proceedings, the said determination could not be read as a rejection of the objections articulated in the application and the order could not be said to be an interim award within the meaning of Section 31(6) of the Arbitration Act inasmuch as no issue stood conclusively determined thereby.

In Power Mech Projects Limited v. SEPCO Electric Power Construction Corporation [3], the Court observed that in appropriate circumstances, it could direct the deposit of the entire sum awarded under the arbitral award before considering a challenge petition under Section 34 of the Arbitration Act or before staying the enforcement of the award.

In Parmeet Singh Chatwal v. Ashwani Sahani [4], while hearing a challenge to an arbitral award wherein the arbitration clause in question was printed in tiny font at the bottom of a receipt, the Court set aside the arbitral award while noting that the mere signature on such a receipt would only indicate the acceptance of goods as against consent for referring disputes to arbitration. The Court further observed that a vague arbitration clause purportedly providing for institutional arbitration without any specifics about the constitution of the arbitral tribunal or the status of the entity which would purportedly supervise the arbitration, could not be sought to be unilaterally acted upon by a party.

In Union of India v. M/s B. S. Aggarwal [5], the Court reiterated that the period of limitation for filing an appeal under Section 37 of the Arbitration Act against an order allowing or rejecting a petition under Section 34 of the Arbitration Act was 120 days, and any delay beyond the said period could not be condoned.

In Neha Aviation Management Private Limited v. Air India SATS Airport Services Private Limited [6], the Court reiterated that upon a clarificatory judgment as regards the ineligibility of a particular class of persons to act as arbitrators being pronounced, Section 14 of the Arbitration Act would come into play automatically and result in a de-jure termination of the mandate of similarly placed arbitrators.

In MBL Infrastructures Limited v. Rites Limited [7], the Court held that the amended Section 29A(5) which was introduced by way of the Arbitration & Conciliation (Amendment) Act, 2019 (‘2019 Amendment Act’) could not be said to have retrospective operation, in the background of the fact that the Court on an earlier occasion had already been approached by the parties by means of an application under the un-amended Section 29A. It is relevant to note that a Coordinate Bench of the Court in an unreported decision in Shapoorji Pallonji and Co. Pvt. Ltd. v. Jindal India Thermal Power Limited [8], in a case where there had been no previous application for extension of time under the un-amended Section 29A, held that the amended Section 29A(5), being procedural law, would have retrospective operation and apply to pending arbitrations as well.

In Ames Impex Electricals Private Limited through its Director v. New Delhi Municipal Council [9], the Court held that when the final operative relief awarded by the arbitral tribunal is manifestly contrary to its earlier findings in the arbitral award, then the award could be said to be an unreasoned one and would be liable to be interfered with in exercise of jurisdiction under Section 34 of the Arbitration Act.

In Ircon International Limited v. C. R. Sons Builders and Development Private Limited [10], the Court reiterated that in a case involving attribution of responsibility of delay, an arbitral tribunal is entitled to rely on the fact that extensions of time were granted by the counter-party without imposition of liquidated damages. The Court further reiterated that apportionment of responsibility between the parties is a purely factual exercise which is well within the jurisdiction of an arbitrator.

In Arvind Kumar Jain v. Union of India [11], the Court held that the endeavour of one of the parties to an agreement in seeking to pressurise and compel the other to furnish a waiver from the applicability of Section 12(5) of the Arbitration Act would be a pernicious and unacceptable practice.

In ICCG India Private Limited v. Plant Lipids Private Limited [12], the Court held that a clause which proscribed a particular genre of claims pertaining to non-payment of fees under an agreement to be non-arbitrable could not defeat the right to reference to arbitration of a claim which was for an amount not towards simpliciter fees but towards cost and other miscellaneous charges.

In BVSR-KVR (Joint Ventures) v. Rail Vikas Nigam Limited [13], the Court held that even in a case where the unamended provisions of the Arbitration Act alone where applicable, this would not preclude the Court from taking judicial notice of a judgment rendered under the provisions of the Amended Act, which had invalidated the arbitrator-appointment mechanism in an identical clause which was the subject matter of controversy before the Court.

In Sudha Gupta v. A. K. Gupta [14], the Court proceeded to set aside an arbitral award to the extent that it had awarded a claim to the director of a company in his personal capacity whereas the claim was made by the company itself.

In Godwin Construction Private Limited v. Tulip Contractors [15] the Court reiterated that with the Micro, Small and Medium Enterprises Development Act, 2006 (‘MSMED Act’) being a beneficial legislation, a supplier that was already in existence at the time of the commencement of the MSMED Act and which had not obtained registration within the period prescribed but had done so after entering into a contract with the buyer, was entitled to seek recourse to the provision of statutory arbitration as contained in the MSMED Act.

In Sporty Solutionz Private Limited v. Badminton Association of India [16], the Court observed that a person who had accepted the amount payable under an arbitral award without any reservation whatsoever would be estopped from challenging the said award in the future. The Court further observed that once the validity of an alleged forged document had been conclusively pronounced upon by the arbitral tribunal after due consideration of the opposing evidence led before it, such a factual finding could not be sought to be assailed in the limited scope of jurisdiction under Section 34 of the Arbitration Act.

In India Waste Energy Development v. Government of NCT of Delhi [17], the Court observed that once a finding has been arrived at that a challenge to an arbitral award was barred by limitation on account of it having been filed beyond the period stipulated under Section 34(3) of the Arbitration Act then there should not have been a further deliberation on the merits of the case in the usual course.

In Union of India v. M/s Prominent Builders [18], the Court upheld the finding of the arbitral tribunal that the imposition of a minor sum of liquidated damages by a party upon a counter- party as opposed to the full limit permissible under the contract, coupled with acceptance of the work and issuance of completion certificate would defeat any counter-claim for loss of reputation and poor workmanship on the part of the department.

In Leaseplan India Private Limited v. Topsgrup Services [19]. the Court observed that issuance of notice by a Court when presented with a petition challenging an award under Section 34 of the Arbitration Act is not automatic in nature, and the Court is required to consider whether any of the statutory grounds of challenge are made out and as to whether the petition has been filed within limitation or not.

In SSIPL Lifestyle Private Limited v. Vama Apparels (India) Private Limited [20], the Court held that if an application under Section 8 of the Arbitration Act was filed with undue delay i.e. the same was not filed till the date by which the Statement of Defence could have been filed in terms of the applicable law, then such application would be liable to be rejected and the suit would be proceeded with.

In SPML Infra Limited v. Graphite India Limited [21], the Court held that cogent reasons have to be provided for condoning the period of delay under Section 34 (3) of the Arbitration Act and simplistic and stereotypical averments that the authorised representative of the petitioner was pre-occupied with other legal issues or that detailed deliberations had to be entered into before filing the petition would be of no avail.

In Steel Stripes Wheels Limited v. Tata AIG General Insurance Company Limited [22], the Court reiterated the vital parameters which were required to be complied with before a valid filing within the meaning of Section 34 (3) of the Arbitration Act could be said to have been achieved.

In Huawei Telecommunications (India) Company Private Limited v. Bharat Sanchar Nigam Limited (BSNL) [23], the Court refused to refer a non-signatory party to a composite arbitration between two others viz. a contractor and a sub-contractor, inasmuch as it found that even though the agreement between the contractor and the sub-contractor in the said case had an arbitration clause, the employer/ non-signatory party was not a party thereto, and neither did the agreement between the contractor and the sub-contractor make a detailed reference to the terms of the agreement between the employer and the contractor.

In Samsung India Electronics Private Limited v. Vishal Video and Appliance Private Limited [24], the Court held that when there was no express prohibition in an agreement, the reasoned decision of the arbitral tribunal towards awarding commission on a pro-rata basis of the actual sales target actually achieved, though the stipulated benchmark was not achieved, was a pure finding of fact based on evidence and could not be interfered with in exercise of limited jurisdiction under Section 34 of the Arbitration Act.

In Union of India v. Annavaram Concrete Private Limited [25], the Court held that even where the reasoning of the arbitral tribunal is found to be somewhat sketchy, if the said reasoning is sufficient for the Court to discern the basis upon which the arbitral tribunal arrived at its ultimate conclusion, then the same could not be interfered with in exercise of limited jurisdiction under Section 34 of the Arbitration Act.

In Morgan Securities & Credits Private Limited v. Videocon Industries Limited [26], the Court held that when an arbitral award was silent on the specific amount upon which future interest would be payable, then by dint of the statutory fiction under Section 31(7) of the Arbitration Act the future interest would be payable on the entire sum awarded i.e., the principal amount plus the past and pendente-lite interest awarded till the date of the arbitral award.

In National Building Construction Corporation Limited. v. JR Construction [27], the Court held that when no objection had been taken before the arbitral tribunal that any of the claims were ‘excepted matters’, the same could not be taken for the very first time in a petition under Section 34 of the Arbitration Act. The Court further observed that inasmuch as the regime of costs of arbitration proceedings had found statutory recognition under Section 31A of the Arbitration Act, costs could be awarded to the successful party even in the absence of an explicit claim having been raised in this regard in the statement of claims filed before the arbitral tribunal.

In Reliance Industries Limited v. GAIL (India) Limited [28], while reiterating that waiver requires an intentional relinquishment of a known right, the Court held that the finding by an arbitral tribunal rejecting a plea of waiver and estoppel is purely factual in nature and could not be sought to be assailed in exercise of jurisdiction under Section 34 of the Arbitration Act, unless the same was demonstrably perverse.

https://www.barandbench.com/columns/the-delhi-high-court-in-review-february-2020-part-i

Supreme Court: No Hearing of Petitions and No New Petitions Can be Filed Due to Covid-19

 Supreme Court of India has indefinitely extended the period of limitation on filing petitions, applications, suits, appeals, and other proceedings at courts and tribunals across the country in light of the present circumstance caused by the Covid-19 pandemic.

Addressing a writ petition, the court said it had taken suo moto cognizance of the challenges faced by the country on account of the existing limitations. Still, it has decided to extend the restriction period, which was declared on March 15, 2020.

A suo moto cognizance is a Latin term which means an action taken by a government agency, court, or other central authority based on their apprehensions if they receive information about the violation of rights or breach of duty through media or a third party’s notification.

For the renewable energy sector, just like all other sectors, there will be no hearing of any petitions across the board, and neither can new petitions be filed. For the renewable energy sector, it means, if any stakeholder who has appealed to the Appellate Tribunal For Electricity (APTEL) and is not satisfied with their order, they will not be able to file a new petition unless it is urgent.

Also, the Supreme Court has extended the period of limitation on filing petitions. This means if a petitioner decides to appeal to a higher court since they are not satisfied with the order or judgment of a lower court, generally, there is a period within which they can appeal to a higher court. The Limitation Act, 1963, provides the period of filing appeals. It states that the appeals against an order can be filed in a High Court within 90 days and other courts in 30 days from the date of the order. If an appeal is filed after the expiry of the time limit, it is struck by the law of limitation. So, for any appeal, if the limitation period falls when the courts are closed due to the Covid-19 pandemic, then this period is indefinitely extended.

It said that this was to ensure that lawyers and litigants did not have to physically be present to file proceedings in courts and tribunals across the country, thereby putting them and others at risk. It added that the limitation will stand extended until it issues further orders concerning the present proceedings.

The Supreme Court directed that its order must be brought to the notice of all high courts, and through them, it should be communicated to all subordinate courts and tribunals in their respective jurisdictions.

Considering the adverse impact of the Coronavirus pandemic on the global economy, the Ministry of New and Renewable Energy (MNRE) recently issued an official memorandum which states that the time extension in scheduled commissioning of renewable projects due to the disruption of supply chains will be treated as a ‘force majeure’ event.

Earlier, the Ministry of Finance (Department of Expenditure Procurement Policy Division) issued a clarification that coronavirus will be covered in the force majeure clause (FMC) and should be considered as a case of natural calamity. Further, the ministry has stated that this clause can be invoked wherever appropriate.

https://mercomindia.com/supreme-court-no-hearing-petitions-covid-19/

Delhi High Court Reverses Decision: E-Commerce Platforms Now Allowed To Sell And Advertise Products Of Direct Selling Entities Without Consent

In a landmark judgement in Amazon Seller Services Pvt. Ltd. v. Amway India Enterprises Pvt. Ltd. & Others, FAO(OS) 133/2019, a Division Bench of the Delhi High Court has permitted e-commerce platforms to sell and advertise products of Direct Selling Entities ("DSEs") without their consent. In doing so, it has set aside the Single Judge's order in Amway India Enterprises Pvt. Ltd. v. 1Mg Technologies Pvt. Ltd. & Anr., CS(OS) 410/2018 passed in July 2019 by a Single Judge bench of the same Court, which had restrained various e-Commerce platforms including Amazon, 1MG, Flipkart, Healthkart, Snapdeal and independent sellers from selling, offering to sell, advertising, or displaying products in breach of third party agreements. An article summarising the main arguments and issues laid down in the Single judge's order is available on our blog ( See).

Under the concept of direct selling, sellers' market, distribute and sell manufacturers' products and provide services, directly to consumers. Such sale is regulated by agreements between the manufacturers and sellers, and a code of ethics/code of conduct regulated by the manufacturers. The Direct Selling Guidelines, 2016 ("the Guidelines") (See) also safeguard the interests of direct sellers. Clause 7(6) of the Guidelines recommends that any e-Commerce platform or marketplace should obtain prior written consent before selling products of direct sellers.

Direct Selling Entities argued that e-Commerce platforms were offering their products for sale and advertising them on their platforms without their (DSEs) consent, and in contravention of the Guidelines.

In response to appeals filed against the July 2019 order, the Division Bench held that the previous judgment was passed without considering whether the grant of injunction would have an adverse impact on online marketing, and whether it would deprive unwary consumers of exercising their choice to buy such products on online platforms, while ensuring free flow of trade.

The Division Bench also rejected the DSE's argument (specifically, Amway) that e-commerce platforms (specifically, Amazon) had sold tampered, damaged and counterfeit products and held that there was no material or conclusive proof at present, and this could only be determined after trial.

Four major issues were discussed in this judgement, as follows:

Legal validity of Direct Selling Guidelines, 2016

In the original July 2019 order, the Single Judge had held that even though the Guidelines were issued as advisory instructions, once Gazette notifications were issued and implemented by various State Governments, they became binding executive instructions, and thus had force of law. That order had also stated that sellers on e-commerce platforms cannot claim to have a fundamental right under Article 19(1)(g) of the Constitution (the right to practice any profession or to carry on any occupation, trade or business to all citizens) to sell the goods of DSEs without their consent and were bound by these guidelines.

Reversing this decision, the Division Bench clarified that mere notification in the Gazette does not confer the status of "law" on the Guidelines, and that they remained only advisory in nature.

Trademark violation, and abuse of goodwill and reputation

The doctrine of exhaustion of trademark rights came up here again: the principle states that a trademark owner's rights end with the first sale of the product being made, and thus, cannot stop the sale of genuine products on e-Commerce platforms.

The Single Judge had said that the exhaustion of trademark rights could not legitimise the tampering, mutilation, wrongful pricing, or unauthorized sale of products. Accordingly, the Single Judge had held that the use of the marks and the manner of sale on the e-Commerce platforms constituted passing off, misrepresentation and dilution/tarnishment of the marks, products and businesses of the DSEs.

In contrast, the Division Bench pointed out that the e-Commerce platforms had not asserted or even mentioned anything about trademark registration in its plaint. In fact, the suits were not filed for passing off or infringement under the Trade Marks Act and would accordingly not fall under commercial suits. Further the Division Bench relied on Kapil Wadhwa v. Samsung Electronics Company Limited, MIPR 2012 (3) 0191, where it was held that the use of a registered trademark in relation to the goods to be sold in any place, or exported to any market, would not constitute an infringement. It was held that once the goods have been lawfully acquired, if they are put into the market and further sold, there would be no infringement, regardless of whether it was an international market or a domestic market.

The Division Bench also held that once the title to a product passes through sale, no further condition can be imposed on the buyer to restrict "post-sale alienation". Clause 7 (6) of the Guidelines imposes one such condition that the buyer cannot resell the product online. Such a condition was held to be not an enforceable law in the present case, as there was no contractual obligation to that effect between the DSEs and the e-commerce platforms.

Safe harbour protection not contingent on intermediaries' compliance with Guidelines

The third issue was whether e-Commerce platforms could be termed as intermediaries and if they could obtain Safe Harbour protection under the Information Technology Act and the Intermediary Guidelines of 2011.

The Information Technology Act, 2000 ("IT Act") exempts intermediaries from liability for hosting third party content in certain instances (Section 79). "Safe harbour protection" is available where intermediaries merely facilitate and host/list third party information/data or provide a communication link.

The Single Judge had concluded that e-Commerce platforms were not merely passive non-interfering platforms but providers of a large number of value-added services, thus taking them out of the ambit of being termed mere intermediaries.

The Division Bench contrarily held that the Single Judge had misinterpreted Section 79 of the IT Act in concluding that it is restricted to passive intermediaries. The Division Bench concluded that under Section 79, an intermediary would not be liable for any third-party information, data or communication link posted by it, as long as it complies with Sections 79 (2) or (3) of the IT Act.

For this, the court relied on Shreya Singhal v. Union of India, (2015) 5 SCC 1, where it was held that the obligation of an online platform to remove content arises only if there is a court order or a notification from a government agency on the grounds mentioned in Article 19(2) of the Constitution. Thus, allegations from DSEs without a supporting court order or government notification was not sufficient to trigger a takedown obligation.

The Division Bench added that providing value-added services would not dilute safe harbour protections. The definition of an intermediary under the IT Act along with the policy laid down under Press Note No. 2 of 2018 (See) permits entities following the marketplace-based model to provide such value-added services and claim to be a mere intermediary. Infact, Section 2 (1) (w) of the IT envisages that such intermediaries could provide value-added services to third party sellers. This interpretation is reinforced by Press Note No. 2.

Contractual relationships between DSEs and e-commerce platforms

The original order had held that the continuous sale of DSEs' products on e-Commerce platforms, without the consent of the DSEs, results in inducement of breach of contract, and tortious interference with the contractual relationships of the DSEs with their distributors. As e-Commerce platforms were not merely passive non-interfering platforms, upon being notified by the DSEs of unauthorised sales, the Judge had said that they had a duty to ensure that the contractual relationships were not unnecessarily interfered with by their businesses.

The Division Bench, on the contrary, held that the tort of inducement to breach of contract necessitates that there be a contract in the first place between the platforms and the DSEs. The mere fact that online platforms may have knowledge of the Code of Ethics of the DSEs, and the contractual stipulation imposed by such DSEs on their distributors, is insufficient to lay a claim of tortious interference.

In the present case, the Division Bench stated that whether the platforms induced a breach of contract between the DSEs and its sellers/distributors had to be proved and could not be inferred. In fact, the Division Bench held, "by permitting private entities like Amway to restrict downstream distribution of genuine goods, by enforcing contractual stipulations against third parties, the judgment of the learned Single Judge recognizes a monopoly that can be exercised in perpetuity. There is also force in the contention that this runs contrary to the legal position explained in Kapil Wadhwa v. Samsung Electronics."

CONCLUSION

Effectively, the Division Bench has overwritten the Single Judge's ruling in favour of e-Commerce platforms. This has come at a time when courts and the Government have been strictly enforcing due diligence obligations on intermediaries. It remains to be seen as to whether the enactment of the Consumer Protection (Direct Selling) Rules (See) (which have stayed long-pending) will add to the uncertainty on the e-Commerce selling module or fortify the Direct Selling Guidelines by offering more clarity on e-commerce businesses. Arguably, the e-Commerce marketplace wars are not over yet.

http://www.mondaq.com/india/Intellectual-Property/907934/Delhi-High-Court-Reverses-Decision-E-Commerce-Platforms-Now-Allowed-To-Sell-And-Advertise-Products-Of-Direct-Selling-Entities-Without-Consent

Delhi HC restrains DMW e-rickshaw from using mark deceptively similar to that of German automobile manufacturer, BMW

The Delhi High Court has restrained an e-rickshaw manufacturer, bearing the mark ‘DMW’, from using any mark which is identical or deceptively similar to that of the German automobile manufacturer, BMW. [BMW vs Om Balajee Automobile (India)]

The interim order was passed by a single Judge Bench of Justice Jayant Nath in a suit filed by Bayerische Motoren Werke AG (Plaintiff) seeking to permanently restrain e-rickshaw manufacturer, Om Balajee Automobile (India) [Defendant] from manufacturing, exporting or otherwise dealing with goods bearing the mark 'DMW' or any other mark which is identical or deceptively similar to BMW.

The Plaintiff submitted that it had been manufacturing motorcycles under the BMW mark since 1923 and motor cars since 1928.

The Plaintiff stated that the first trademark registration for the famous BMW logo was in 1917 and the earliest Indian registration for the BMW mark was in 1956.

It was further argued that BMW marks were well-known due to extensive and continuous use in India and qualified as a well-known trademarks as envisaged in section 2(1)(zg) and section 11(6) of The Trademarks Act, 1999.

The Plaintiff claimed that in 2016, it had a revenue of 94.163 million Euros and sold a total of 20,03,359 vehicles under the BMW marks around the world. It was added that in the same year, a sum of Rs.6.030 million Euros was spent only on advertising.

The Plaintiff informed the Court that in July 2016, it spotted e-rickshaws with trademark DMW plying on the road and subsequently, moved the High Court.

It argued that the Defendant’s mark DMW was deceptively similar to in appearance, sound and structure to the 'BMW' mark and was thus is in complete violation of the Plaintiff’s trademark rights.

The Plaintiff contended that the Defendant was using DMW mark in relation to goods such as e-rickshaws which were somewhat similar to automobiles covered by the BMW mark.

On the basis of the above, it was asserted that it was a clear case of dilution of the the Plaintiff's trademark in terms of section 29(4) of the Trademarks Act.

The Defendant, on the other hand, argued that the nature of the product, class of buyers and trade channels of the product of the two were entirely different. It was also stated that colour, font and size of the two marks were not deceptively similar.

The Defendant stated that it was not using any logo for its product, unlike the Plaintiff, and while the total value of its product was about Rs 50,000, and the Plaintiff's was a minimum of Rs 35 lacs.

After considering the submissions made by the parties and perusing the two trademarks, the Court opined that the Defendant had adopted the essential features of the trademark of the Plaintiff.

"There is clearly a visual and phonetic resemblance in the marks. The essential features of the plaintiffs marks are copied in the defendants’ mark and the same are likely to deceive and cause confusion.", the Court said.

The Court also rejected the Defendant's argument based on the different nature of the products manufactured by the two companies.

Observing that the strength of the Plaintiff's trademark could not be disputed, the Court said,

..the use of the mark DMW by the defendant prima facie appears to be a dishonest act with an intention of trying to take advantage of the reputation and goodwill of the brand of the plaintiff. It is likely to mislead an average man of ordinary intelligence..Such use by the defendant is detrimental to the reputation of the registered mark BMW of the plaintiff company.

Delhi High Court

In conclusion, the Court stated that 'DMW' was visually and phonetically similar to 'BMW' and the former's usage by the Defendant on its product constituted a prima facie infringement within the meaning of Section 29(4) of the Trademarks Act.

In view of the above, the Court remarked that the balance of convenience was in favour of the Plaintiff and proceeded to pass an ad interim injunction, restraining the Defendants, its officers, agents etc. from manufacturing, exporting, importing or offering for sale, advertising or in any manner dealing with goods not limited to E-Rickshaws bearing the mark DMW or any other mark which are identical or deceptively similar to the plaintiff’s BMW marks.

Source: https://www.barandbench.com/news/litigation/delhi-hc-restrains-dmw-erickshaw-from-using-mark-deceptively-similar-to-that-of-german-automobile-manufacturer-bmw