The Delhi High Court in Ultra Homes on IP Jurisdiction

[Raghav Kacker is an Advocate practicing before the High Court of Delhi and various Tribunals and Ruchi Chaudhury is a postgraduate in anthropology and currently an LLB candidate at Jindal Global Law School] 

A plaintiff in an infringement suit is bestowed with a generous choice of jurisdiction in addition to what the Code of Civil Procedure, 1908 (“CPC”) provides. Several Supreme Court decisions have confirmed this premise that avenues for jurisdiction in copyright and trademarks infringement suits are meant to embody legislative policy and to convenience the aggrieved plaintiff. Yet, subsequent High Court decisions have sought to narrow the standard of statutory convenience by stifling the plaintiff’s choice of jurisdiction in their institution of intellectual property (“IP”) protection suits. This post seeks to highlight the unwarranted turn of events which led to subordinate courts misreading and (mis)applying the law. Their insistence that jurisdiction in copyright and trademarks suits be normatively governed by the restrictive provisions of the Civil Procedure Code are illegitimate and repugnant to statutory provisions, as well as Supreme Court jurisprudence.

The focus shall particularly be in regard to corporate plaintiffs who are endowed with the choice of instituting suits from the place of their residence as well as the principal place of their business. More often than not, the two are not without nexus, and they may be synonymous and multiply existing as well. It is a statutory right of owners and users of copyright and trademarks to be able to lawfully avail themselves of the safeguards enacted by the legislature. These safeguards enhance their ease of instituting suits of infringement, particularly at their “residence” and “place of business”. There is always the possibility of a nexus between business and company residence. Ultra Home denies this and renders entirely nugatory the object of the two statutes in how they seek to bestow upon IP holders convenient recourse mechanisms in case their rights are infringed.

Jurisdictional Blues

Soon after the Supreme Court’s seminal IPRS v. Sanjay Dalia ruling, High Court benches began narrowing the extent of plaintiff-friendly jurisdiction in sections 62 and 134. In doing so, they confounded the jurisdictional issues which were clarified and confirmed by the Supreme Court decision. The irony is that the distortion was achieved with the aid of the same ruling meant to settle the law on jurisdiction. The key problematic decision in this regard is Ultra Home Construction v. Purushottam Kumar Chaubey, delivered by a division bench of the Delhi High Court in 2016.

Ultra Home was one of the foremost High Court decisions that applied the Sanjay Dalia ruling. In this case, the act of infringement had occurred in Jharkhand, where Ultra Home Construction had a subordinate branch office. However, they chose to sue from Delhi, where their principal office was situated. This decision appeared legitimate based on the jurisprudence at that time. However, the High Court refused to accept this. It illustrated the Sanjay Dalia decision with various circumstances involving different locales of both the plaintiff and defendant’s residence, business, and causes of action. One of these illustrations was:

“where the plaintiff has a principal office at one place and the cause of action has arisen at the place where its subordinate office is located. In this eventuality, the plaintiff would be deemed to carry on business at the place of his subordinate office and not at the place of the principal office. Thus, the plaintiff could sue at the place of the subordinate office and cannot sue (under the scheme of the provisions of section 134(2) and 62(2)) at the place of the principal office.”

It must not be forgotten that the avenues available to plaintiffs under copyright and trademarks law are additional avenues made for their benefit if they wish to sue for infringement. Thus, they are in surplus of what the CPC already provides, such as the defendant’s place of residence, or business. The High Court visually casted the Sanjay Dalia decision on the aspect of where the cause of action arises (also an avenue under the section 20 of the CPC). However, the High Court departed from the norms on jurisdiction. According to the High Court, if the cause of action arose in the locale of the plaintiff’s subordinate office, it is barred from invoking the jurisdiction of the place of their principal office. This is incorrect and not what the Supreme Court ordained in Sanjay Dalia. In concluding its ruling, the Supreme Court observed that there is

“No doubt about it that a suit can be filed by the plaintiff at a place where he is residing or carrying on business or personally works for gain. He need not travel to file a suit to a place where defendant is residing or cause of action wholly or in part arises. However, if the plaintiff is residing or carrying on business etc. at a place where cause of action, wholly or in part, has also arisen, he has to file a suit at that place ….”

There is nothing in the above to indicate that the plaintiff is entirely barred from filing the suit in the jurisdiction of their residence just because they have a subordinate office in the same place where the cause of action has arisen. The jurisdiction of residence in this case would be analogous to a registered office. The former jurisdiction remains to be the place where the Plaintiff corporation, being a separate legal entity resides, albeit not where its business intersects with the cause of action. As such the decision rendered in Ultra Home (supra) has the effect of deleting the jurisdiction of the plaintiff’s “residence”, thereby restricting the corridor sought to be opened by the IP law provisions on jurisdiction.

Corporate Residence and Place of Business

The Ultra Home decision erroneously shrinks the statutory benefit of the two IP laws to exclude the jurisdiction of a place where a plaintiff corporation has its main office, just because an infringing act occurred at a place where its branch office happened to be situated. The scenario virtually obliterates the option of residence as an operative place of business, which the Court forgot is of significance to corporations. Incorporated companies are juristic personalities with rights and liabilities of their own. They enjoy legal personhood status with the concomitant enjoyment of contractual rights, property-holding and full ownership, suing rights, etc. Corporate law in India determines the residential status of companies on the basis of where it predominantly conducts its business or manages its affairs.

A company incorporated in India is an Indian resident and it is the same for a company which is not incorporated in India, but whose “control and management” of affairs is situated in India. On the obverse, a company is deemed to be non-resident when its “place of effective management” does not fall within Indian borders. Corporate law conflates the destination of conduct of business or predominant management of business affairs with the official residence of a corporate entity.

A facet of the Ultra Home ruling is contradictory to corporate law norms on a company’s residence and its place of business. Certainly, it is not necessary that the two are perpetually related or mutually inclusive at all times, but it cannot be so strictly circumscribed as Ultra Home suggests. Consider this: a film production house with its principal place of business in Mumbai finds out that an unlicensed distributor is using pirated versions of their productions to create and sell merchandise in Raipur. Its Mumbai office is registered as its place of residence. Its Mumbai office employees and legal team are set to task and begin to prepare its infringement and injunction suit. It so happens that among the several branch offices they have in most Indian cities, their warehouse with only a manager and two goods-delivery employees are based out of Raipur. The warehouse contains film merchandise which is to be sold in a neighbouring city for profit. The Ultra Home logic governs that the production house, in order to institute an infringement suit, travel all the way from Mumbai to Raipur even though they are logistically most equipped to do so in Mumbai. This despite the fact that the warehouse, which holds merchandise to be sold as part of their business, barely comprises a viable employee infrastructure to undertake any substantial enormity of film production, let alone file a suit.

Ultra Home turns corporate business logic on its head. It appears tone deaf to the reality that corporations carry on multiple facets of a single primary business at various locales and in various degrees. Multiply transacted businesses at various subordinate branch offices notwithstanding, it does not take away the fact that the place of primary business more often than not happens to be the corporate residence. Excluding the option of residence in jurisdiction is defiant to corporate logic, as well as law.

Conclusion

It is inconceivable that a High Court would insist on the curtailment of statutory right when the Supreme Court itself has clarified what the statute clearly mandates — that the plaintiff has a lawful right to invoke jurisdiction on the basis of their residence or place of business in addition to what the CPC already bestows upon them. Unfortunately, it appears that High Courts since 2016 have continued to apply the Ultra Home logic, relying on the erroneously interpreted Sanjay Dalia ratio, to decide the outcome of valid jurisdiction for infringement cases before them.

In a discordant, yet hopeful move, the Bombay High Court in 2016 visibly disagreed with the misstatement of law. It is time that the Supreme Court corrects the erroneous position taken by the Delhi High Court and overrule it to the extent of the stifling conclusion. The position on jurisdiction ought to be clarified so that the misapplication of law does not percolate any further to create needless hurdles for IP right-holders.

Raghav Kacker & Ruchi Chaudhury

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