Justice Pratibha Singh of the Delhi High Court, vide judgment dated 3 June 2022 in Vishal Pipes Limited v. Bhavya Pipe Industry, held that all the IPR disputes, irrespective of their valuations, should be listed before the commercial district court judges. If the subject-matter IP is valued below 3 lakhs rupees, the Court will examine whether the valuation is correct or not. If the valuation is found to be below 3 lakhs rupees, the suit will be treated as a normal civil suit by the district commercial court. If the valuation is found to be above or equal to 3 lakhs rupees, the suit will be treated as a commercial suit as per Commercial Courts Act. (paragraph 66).
For the uninitiated, the Commercial Courts Act provides a speedy disposal mechanism for commercial disputes. In order to qualify as a commercial dispute under the Commercial Courts Act, the dispute should fall within the subject-matters listed under the Commercial Courts Act. IP disputes fall under the realm of commercial disputes. The next step is meeting the pecuniary threshold – only those commercial disputes whose ‘specified value’ is equal or above 3 lakhs rupees will be treated as commercial disputes under the Commercial Courts Act. And the district courts are the courts of first instance for IP disputes as per the IP legislations. (paragraphs 62, 63).
In this regard, it is interesting to examine how this case arose. Vishal Pipes Limited filed a suit seeking permanent injunction against Bhavya Pipe Industry for infringement of trademark. The suit was valued way below 3 lakhs rupees. The case was listed before a non-commercial court. The non-commercial court did not grant an ex-parte order of injunction. Aggrieved by the refusal, Vishal Piples Limited approached the Delhi High Court. (paragraphs 1-3)
The Delhi High Court noted that the suit was listed as a non-commercial suit even though the valuation of subject matter IP (which is the trademark in this case), appeared to be much higher. The relevant excerpts are as follows:
“57. The turnover of the Plaintiff as pleaded in the suit and as per the CA Certificate placed on record dated 5th August, 2021, is approximately Rs.67306 lakhs over the last three financial years, i.e., 2018-2021. Moreover, the Plaintiff has stated in its plaint that it has “commanded handsome sales running into Billions of Rupees”. It is also stated to have spent “enormous amounts of money” in advertising and publicity. The said mark, including the label, is stated to have extensive goodwill and reputation, having been adopted in 1988, with copyright and trademark registrations dating back to 2006. The Plaintiff has stated that it has reputed clients such as Uttar Pradesh Jal Nigam, NTPC, BSNL, MTNL, L&T, etc., across India and worldwide. The Plaintiff is also stated to have extensive reach and online presence through both its website and third-party sites like IndiaMART, Facebook, LinkedIn, etc. The Plaintiff also has numerous quality certifications and recognitions, including ISO, BIS, and One Star Export House (recognized by the Director General of Foreign Trade). Despite all these facts, it is puzzling that the reliefs of injunction as also delivery-up, are valued at Rs. 200/- each for Court fee and jurisdiction, which is much below Rs.3 lakhs. The Court fee paid is Rs.100/- for such reliefs. Additionally, the relief of rendition of accounts is valued at Rs. 1000/- and Court fees of Rs. 150/- is paid for the same. Such a course of action appears to be quite unusual and quixotic, as there is no basis in the suit as to why a trademark suit of a brand having such a huge turnover is sought to be valued at such a low threshold. Moreover, the suit in the present case does not mention the ‘specified value’ at all, but merely the value of reliefs sought.“
The Court noted that the existing legislations on valuations of suit do not specify the methodology for valuation of IP disputes. But Section 12 (d) of the Commercial Courts Act clearly lays down that “where the relief sought in a suit, appeal or application relates to any other intangible right, the market value of the said rights as estimated by the plaintiff shall be taken into account for determining Specified Value.” Applying the principle, the specified value of the IP suit should be based on the market value of the subject matter IP and not that of the reliefs claimed. (paragraph 62 (ii) (iii))
For those who are interested in taking a quick glance at the judgment, the relevant paragraphs are 1, 2, 23-30, 33, 34, 36, 37, 39-41, 43-47, 51-53, 54 (c), 57-59, 62 and 63-67. The judgment contains two tables: one table differentiating the commercial suit from the civil suit and the other table listing the methodology for valuation of civil suits (paragraphs 35, 53). The tables aid the understanding of the law.
Comments
Firstly, this is a well-written judgment with headings and sub-headings. Even a layman can easily comprehend the judgment. This judgment is a fit case study for plain english writing. For the uninitiated, plain english writing movement is a movement in common law jurisdictions to simplify legal texts and judgments. From what I gather, this aspect is not given the deserved attention in judicial academies in India.
It also appears that the lawyers appearing in this case constructively contributed to this judgment.
Secondly, this judgment will preclude forum shopping. The judgment duly recognises the intent and purpose of Commercial Courts Act. If the plaintiff can undervalue the suit and avoid the rigours of the Commercial Courts Act, it can cause immense inconvenience to the defendant.
As early as in 1891, the Queen’s Bench in In Re Cassioni cautioned:
“I have had on many occasions, to draft Acts of Parliament, which they may be easy to understand, people continually try to misunderstand and in which therefore it is not enough to attain to a degree of precision which a person reading in good faith can understand; but it is necessary to attain if possible to a degree of precision which a person reading in bad faith cannot misunderstand. It is all the better if he cannot pretend to misunderstand it.”
Thirdly, the judgment safeguards the institutional virtuosity of the system. The judgment ensures that all IP disputes will be listed before the district commercial courts. This will enable a judge to gain expertise in IP matters through repeat play even if she/he does not enjoy any technical background. There are quite a few examples of judges like Judge Randall Rader and Justice Prabha Sridevan who gained expertise in IP matters through repeat-play. The german legal system, for instance, ensures that a judge becomes adept in IP matters through repeat-play. (In the light of comments received, I have second-thoughts on this comment. The market value of the subject matter IP (especially in Delhi) can be above 2 crores. Thus, the density of IP cases may now be higher in the High Court. Please see the comments section for the comments and responses. I thank Eashan and Shobith for their comments and inputs.)
Fourthly, the judgment places a heavy evidentiary burden upon the petitioners in IP disputes who claim the valuation to be below 3 lakhs rupees. The Court categorically notes, ‘It would only be in exceptional cases that valuation of IPR disputes below Rs. 3 lakhs could be justified’. (paragraph 62 (iv)).
Fifthly, there may be a doubt as to whether the Delhi High Court judgment dated 3 June 2022 runs counter to the Supreme Court judgment dated 16 June 2022 in Bharat Bhusha Gupta v Pratap Narain Verma and Anr where the Supreme Court held as follows:
“9.1. It remains trite that it is the nature of relief claimed in the plaint which is decisive of the question of suit valuation. As a necessary corollary, the market value does not become decisive of suit valuation merely because an immovable property is the subject-matter of litigation. The market value of the immovable property involved in the litigation might have its relevance depending on the nature of relief claimed but, ultimately, the valuation of any particular suit has to be decided primarily with reference to the relief/reliefs claimed.”
I do not see a contradiction for the following reasons:
a) The Supreme Court judgment deals with the valuation of suit involving immovable property (and not intangible property). The Court Fees Act does not deal with the valuation of suit that involves intangible property ( rightly mentioned in paragraph 53 of the Delhi High Court judgment).
b) On the other hand, the Commercial Courts Act provides a methodology for calculating the ‘specified value’ of suits involving intangible property.
“12. Determination of Specified Value. —(1) The Specified Value of the subject-matter of the commercial dispute in a suit, appeal or application shall be determined in the following manner:––
(a)
(b)
(c)
(d) where the relief sought in a suit, appeal or application relates to any other intangible right, the market value of the said rights as estimated by the plaintiff shall be taken into account for determining Specified Value;”
The unforseen domino effect that this judgment can create is missed while writing it.
A particular Plaintiff for a particular IP, so far as Delhi is concerned, can either file the suit at District court or HC, since the ‘specified value’ of the IP remains largely the same.
Also, the judgment mandates that in all IP suits specified value of the IP ought to be mentioned which even for the smallest businesses (whose IP is worth infringing) wont be less than 2 crores. The consequence is that the Plaintiff has to come to HC – but the judgment does not clarify what will be the court fee paid in that case – where the SV is 2 Cr but the relief claimed is lower.
Its a judgment burdened with basic legal ambiguities and in ignorance of practicalities, imho, and use of plain language does not help in removing those.
A sorely missed opportunity to rule on a very fundamentally important issue, which seems to have failed to catch attention of the practitioners as well as Judiciary, ever since the CC Act came in 2015.
I notice that Shobhit’s comment above has addressed much of what I’d intended to say so I’ll just reinforce a couple of talking points:
First, there is no actual reason why specified value and valuation from a relief standpoint can’t be drastically different. This judgment proceeds on the basis that such a drastic difference must be suspect, even though there are a string of relevant (and, to be sure, tactical) reasons why this might be so.
Second, the error with the Vishal Pipes proposals, I’m afraid, doesn’t lie in the judgment itself. It lies, more likely, in the framing of the Commercial Courts Act itself. For mine, the baseline mistake the Act makes is its scattered, mechanical use of the expression ‘pecuniary value’ in the Act. This expression is a placeholder in the Act, used interchangeably for value of suit as against value of relief. The reason why this is a problem is clear: the value of a suit (what the Act calls ‘specified value’) is an entry point; the value of relief, of course, is the qualification that gatekeeps the Claimant’s actual access to the relevant court. [Section 12(1)(d) of the Act, which ought to straighten this out is, under this framing, singularly unhelpful.]
To be clear, I’m actually okay with specified value being the sole controlling yardstick at all points of determination. There are, however, two very obvious problems with this: (a) it’ll almost certainly lead to overvaluation by overcautious Claimants (which is a bad thing in itself and not what the Act intended) and (b) as a result of this, the sorting function intended for lower-tier commercial courts will largely be a wash.
And for a judgment that gave itself two problems to solve, surely it is of some concern that, even at its best reading, it furnishes a full answer to only one.
Thanks for the comments.
i) It is not clear as to how this judgment will lead to over-valuation and flooding of cases in the high court. The more the valuation, the more the court fees. That should act as a deterrent against over-valuation. Even in this case, the petitioner wanted to keep the dispute at the district court level. Cost might have been a consideration.
ii) Consider the facts of this case itself. The petitioner presented the case in such a way that the value of the claimed-reliefs and the value of the subject-matter IP does not enjoy any correlation whatsoever. This is a clear attempt to avoid the rigours of CCA. The judgment tries to address this mischief.
iii) On difference between the specified value and value of the reliefs, the remedy lies elsewhere.
a) Since the valuation is de-hyphenated from the value of reliefs, the aggrieved party can now claim for the maximum reliefs (especially when it comes to damages).
b) In Salem Bar Association case, the Supreme Court held as follows: “Judicial notice can be taken of the fact that many unscrupulous parties take advantage of the fact that either the costs are not awarded or nominal costs are awarded on the unsuccessful party. Unfortunately, it has become a practice to direct parties to bear their own costs. In large number of cases, such an order is passed despite Section 35(2) of the Code. Such a practice also encourages filing of frivolous suits. It also leads to the taking up of frivolous defences. Further wherever costs are awarded, ordinarily the same are not realistic and are nominal. When Section 35(2) provides for cost to follow the event, it is implicit that the costs have to be those which are reasonably incurred by a successful party except in those cases where the Court in its discretion may direct otherwise by recording reason therefor. The costs have to be actual reasonable costs including the cost of the time spent by the successful party, the transportation and lodging, if any, or any other incidental cost besides the payment of the court fee, lawyer’s fee, typing and other cost in relation to the litigation. It is for the High Courts to examine these aspects and wherever necessary make requisite rules, regulations or practice direction so as to provide appropriate guidelines for the subordinate courts to follow.” This should be followed in letter and spirit.
Mathews, on your point (i), the point is not over-valuation or under-valuation anymore, but correct valuation. If a brand owner ‘correctly values’ its IP, for perhaps 98% of them, the brand/specified value will be well over Rs. 2 Crores. Even Vishal Pipes for that matter which has a turnover in excess of 600 Crores, brand value cant be less than Rs. 2 Crores and not something they would state on affidavit to be so knowing that its not true.
On your point (ii) and (iii), where the Judgment vaguely leaves at is that all the directions are only given for suits valued less than 3 lakhs. For cases with SV valued above Rs. 3 lacs and less than 2 crores and even more than 2 Crores, same objection can arise since it no longer remains an ‘estimation of what loss could have been caused’ (as in the case of value of relief) but becomes a statement of fact of the ‘value of IP’ already known to the Plaintiff or exclusively within the domain of the Plaintiff.
@Eashan – Cant be more correct on the point on drafting of the Act! Interestingly, the wordings used in the DHC Act for pecuniary jurisdiction also states suit value: “the High Court of Delhi shall also have in respect of the said territories ordinary original civil jurisdiction in every suit the value of which exceeds… “
Thank you for your comments.
IP valuation is a tricky business. Even though there are various methods for IP valuation, it may be the case that many IP suits in Delhi may now end up in the High Court (as you rightly
mentioned). 2 Crores is too small an amount when it comes to market value of subject-
matter IP.
But all that I am saying is, I find the judgment of Delhi High Court to be right in law. It
addresses the potential circumvention of the CCA and adheres to the statutory scheme.
The solution for the problem lies in enhancing the pecuniary jurisdiction of
District Courts.
I believe it is high time we introspect about the original civil jurisdiction of the five high courts.
The high courts should be appellate courts and not courts of first-instances in civil suits.
The top heavy character of higher judiciary, in terms of case load, is notorious. Nick Robinson, in “Judicial Architecture and Capacity”, refers it to an isoscles trapezium. Ideally, it should be like a pyramid. A practical step is to either completely take away the original civil jurisdiction of the five high courts or drastically enhance the pecuniary jurisdiction of district courts. The subordinate judiciary should become more relevant in the resolution of disputes.
Thank you, Eashan and Shobith. I updated the post to reflect our discussion.
My apologies for being a bit late on the issue.
I reckon that as per the SC’s observation, the criteria is not of the type of the property involved (whether immovable or intangible), but of the value of the relief claimed by the plaintiff in the suit, for which, pure liberty (to decide) is granted to him/her under the court fees Act, when the suits are covered under section 7 paragraph (iv).
Paragraph (iv) of Section 7 of the Court-fees Act gives a right to the plaintiff, in any
of the mentioned suits, to place any valuation that it likes on the relief it seeks, subject, however, to any rules made under Section 9 of the Suits Valuation Act, and the Court have, apparently, no power to interfere with the plaintiff’s valuation (unless some materials or objective standards for the valuation of the relief are available, and yet the plaintiff ignores the same and puts an arbitrary valuation – as per the judgement of ‘Commercial Aviation and Travel Company. v. Vimla Pannalal’ case).
And as far as the valuation of the suits ((falling under the classes of suits mentioned in section 7(iv) of Court fees act)) for the purposes of pecuniary jurisdiction is concerned, then as per section 8 of the Suit Valuation Act – such valuation is contingent upon the value of the relief as determinable for computation of court-fees and not vice-versa.
Now, Section 12(d) CCA [read with section 2(xvii) ] technically mandates the filing of suit under CCA, if the relief sought relates to to any other intangible right (market value above 3 lakhs) – regardless of the nature of relief or of the suit for that matter. THIS is where – a terrible mix-up surfaces between the provisions of Court fees Act and Suit valuation Act on one side, and CCA on the other (which are independent to each other)
But, reading harmoniously, what if, a plaintiff merely values a particular relief [lets say – injunction – 7(iv) (d)] as per his discretion for the purposes of court-fees and jurisdiction below 3 lakhs but also values its intangible right as above 3 lakhs to qualify the suit under CCA?.
Would that solve the problem, as per my standpoint, the market value of the intangible property is not required to be taken into consideration for the purposes of valuing the relief under Court Fees Act, but has to be taken into consideration to determine the jurisdiction of Commercial Courts only.
Wait. its chaotic, I know. Just made a bonafide attempt to open more windows.
Enlighten me, there is surely something more to this.
Thank you.
I guess, this argument was raised in prior cases. But not accepted. The Delhi high court judgment refers to this settled legal position.
Oh.. In which case law?..
Would be thankful, if you could refer those cases.
Same question as above!
@Himanshu – happy to see this analysis which unfortunately I still cant find to have been considered anywhere. Perhaps, a mad elephant in the room sent though legislative oversight which no Judge dares to disturb for the havoc it might create!
See paras 42 – 46 of vishal judgment. The Delhi High Court and Kerala High court held that the valuation of the suit for the purposes of Court fee cannot be different from the specified value as contemplated under Section 12 of the CCA. But Karnataka hc has taken a different stand.
See paras 42 – 46 of vishal judgment. The Delhi High Court and Kerala High court held that the valuation of the suit for the purposes of Court fee cannot be different from the specified value as contemplated under Section 12 of the CCA. But Karnataka hc has taken a different stand.
Thats the whole problem with this line of judgment. Even a modest 1000 cr. brand can never protect its IP as the court fee itself for each suit will be in excess of 10 Cr. Also, the Delhi High Court itself is not insisting on this ‘specified value’ computation in the plaint and strangely this direction is only directed to suits filed before district court.
Also, to highlight another interesting development from the ground, an order by a District Commercial Court observing:
“Consequent upon directions of Delhi High Court in
case ‘ Vishal Pipes Limited Vs. Bhavya Pipe Industry’ FAO-IPD
No. 1/2022 & CM APPLs No. 12-14/2022 dated 03.06.2022;
primary sought amendment is with respect to valuation of suit for
jurisdiction and Court fees for the relief of rendition of accounts
and not for valuation of suit for jurisdiction and Court fees with
respect to other reliefs claimed whereas in the filed plaint, inter alia plaintiff is claiming for very huge turnover and big market of
goods and business of plaintiff under the trademark in question.
Whether the proposed valuation of plaintiff for
jurisdiction and Court fees is still under valued ?
Let plaintiff/Counsel furnish brief written
submissions not exceeding three pages in two working days.” (sic)