On July 1 2015 the Supreme Court issued its much-anticipated decision in IPRS v Sanjay Dalia. The case considered the interpretation of the special jurisdiction provisions in Section 62 of the Copyright Act, 1957 and Section 134 of the Trademarks Act, 1999. The court held that if a cause of action arises at the place where the plaintiff's principal office is located, it cannot rely on Section 62 or Section 134 to institute a suit where its branch office is located.
A review of both provisions – which are identical in all material respects – reveals that they provide additional jurisdictional remedies to the conventional remedies available under Section 20 of the Code of Civil Procedure, 1908. In IPRS, the central issue before the court was the interpretation of the phrase 'carries on business' used in both provisions, which has a bearing on the following questions:
- Can the place where the plaintiff's branch office is located be treated as a place where the plaintiff 'carries on business', despite no cause of action having arisen there?
- If a cause of action arises at a place where the branch office is located, will the plaintiff be barred from instituting a suit where its registered/principal office is located because no cause of action arose there?
In other words, can a plaintiff choose between its principal/registered place of business and the branch office where the cause of action arose in whole or in part?
In order to address this question, the explanation to Section 20 of the Code of Civil Procedure – which elaborates on the meaning of 'carries on business' – must be considered:
"A corporation shall be deemed to carry on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place."
The Supreme Court has interpreted the phrase 'carries on business' in earlier decisions – in particular, Patel Roadways v Prasad Trading and New Moga Transport v United India Assurance. In New Moga Transport, the court held as follows:
"10. On a plain reading of the Explanation to Section 20 CPC it is clear that the Explanation consists of two parts: (i) before the word 'or' appearing between the words 'office in India' and the words 'in respect of', and (ii) the other thereafter. The Explanation applies to a defendant which is a corporation, which term would include even a company. The first part of the Explanation applies only to such corporation which has its sole or principal office at a particular place. In that event, the court within whose jurisdiction the sole or principal office of the company is situate will also have jurisdiction inasmuch as even if the defendant may not actually be carrying on business at that place, it will be deemed to carry on business at that place because of the fiction created by the Explanation. The latter part of the Explanation takes care of a case where the defendant does not have a sole office but has a principal office at one place and has also a subordinate office at another place. The expression 'at such place' appearing in the Explanation and the word 'or' which is disjunctive clearly suggest that if the case falls within the latter part of the Explanation it is not the court within whose jurisdiction the principal office of the defendant is situate but the court within whose jurisdiction it has a subordinate office which alone has the jurisdiction 'in respect of any cause of action arising at any place where it has also a subordinate office'."
In light of this clear rationale, and after extensive review of the common objectives of Section 62 and Section 134, the Supreme Court rightly observed in IPRS that these special jurisdiction provisions are exceptions to Section 20 of the Code of Civil Procedure only insofar as they permit a plaintiff to sue at its residence or the place where it works for gain or carries on business. In other words, the provisions do not grant carte blanche to the plaintiff's ability to sue under Section 62 or Section 134. This sentiment is expressly endorsed in Paragraph 16 of the court's decision.
In reaching this conclusion, the court relied on the doctrine of convenience, which is enshrined in the explanation to Section 20. According to the court, unless the cause of action arises at a place where the plaintiff's branch office is located, the branch office cannot be considered a place where the plaintiff carries on business for the purposes of Section 62 and Section 134. Without this qualification, plaintiffs with branch offices in remote locations could potentially harass defendants, suing them in these locations despite the fact that no cause of action arose in the same. Simply put, Section 62 and Section 134 do not entirely remove a defendant's right to convenience. Instead, a balance is struck by using cause of action as the parameter to determine jurisdiction.
In contrast, according to the court's rationale, the law does not accord branch offices with the same status as principal places of business for the purposes of determining jurisdiction. Consequently, a branch office must be supplemented by a cause of action for it to be deemed a place where the plaintiff carries on business. In fact, under Section 62 and Section 134, the place where the branch office is located is the only appropriate location for the plaintiff to sue if a cause of action arises there. This approach strikes a balance between what is convenient for the plaintiff and the defendant, as the assumption is that the branch office is a convenient location for the plaintiff to sue and, as the cause of action arose at that location, the defendant's goods are being sold there; therefore, it is convenient for the defendant to defend itself.
The Supreme Court's rationale has the following practical jurisdictional consequences:
- If the plaintiff's principal place of business is at X and the cause of action arises at Y (where no branch office exists), the plaintiff may sue at X based on Section 62 or Section 134 or at Y based on Section 20(c).
- If the plaintiff's principal place of business is at X and the cause of action arises at Y (where a branch office exists), the plaintiff may sue only at Y, not X, if the suit relates to the cause of action.
- If the plaintiff's principal place of business is at X, the cause of action arises at Y and the branch office is at Z, the plaintiff may rely on Section 62 or Section 134 to sue at X or Section 20(c) to sue at Y, but cannot sue at Z under any circumstances.
Another scenario is also possible: the plaintiff may have its principal place of business at X and a single defendant may give rise to two causes of action simultaneously at Y (where a branch office exists) and Z (where no branch office exists). Insofar as the cause of action at Y is concerned, the plaintiff cannot sue at X or Z based on the rationale in IPRS. Further, with respect to the cause of action at Z, the plaintiff may sue either at X based on Section 62 or Section 134 or at Z based on Section 20(c). However, both causes of action – in particular, with respect to Y and Z – cannot be combined in a composite suit before the same court, as this would be against the Supreme Court's decision in Dhodha House, which laid down that a composite suit for multiple causes of action may be filed before the same court only if that court has the jurisdiction to adjudicate on each of the causes.
For further information on this topic please contact J Sai Deepak by telephone (+91 120 463 3900) or email ([email protected]).
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