A case comment on the Apex Court decision of Lombardi Engineering Limited v Uttarakhand Jal Vidyut Nigam Limited delivered on 6 November 2023.
Party autonomy is a fundamental principle of arbitration, which allows parties to a contract to freely agree on the terms of their arbitration agreement, including the scope of the arbitration clause, the choice of arbitrator(s), and the seat of arbitration.
The Supreme Court of India has held that party autonomy is the “brooding and guiding spirit of arbitration” and that it is essential to the success of arbitration as a dispute resolution mechanism. However, the Supreme Court has also held that party autonomy is not absolute and that it may be limited in certain circumstances, such as where the arbitration clause is contrary to public policy or where it would lead to an unjust or unfair outcome.
In many commercial contracts, the parties agree that if and when in a situation the claimant seeks to file its claims against the respondent then in all such cases the claimant would first have to deposit a percentage of the prayed claim with the Court appointing the arbitrator or with the arbitral tribunal itself where the arbitrator is appointed directly without court intervention under Section 11 of the Arbitration & Conciliation Act, 1996. The intention behind such clauses is usually to prevent excessive, arbitrary and frivolous claims which does not have any basis in the evidence / documents which the claimant is bound to provide during the course of the arbitration proceedings.
I. BRIEF FACTS OF THE CASE
The Petitioner, a Swiss design consultancy firm, entered into a contract with the UPDCC, a wholly owned corporation of the Government of Uttarakhand, for the consultancy services and preparation of a modified comprehensive and bankable Detailed Project Report of the Arakot Tiuni Hydro Electric Project. The contract value was Rs. 1,39,45,000/- and the petitioner was to complete the work within 24 months, ie, by 25.09.2021. The respondent, a newly formed corporation, took over the said Project from the UPDCC in May 2020 and the Contract was novated to the extent that the respondent stepped into the shoes of UPDCC and took over all the obligations under the Contract.
The contract was between a foreign entity (the petitioner) and a government entity (the UPDCC). The contract was for a major infrastructure project. The contract was novated to a new government entity (the respondent).
Some disputes arose between the parties in pursuance of which the Petitioner vide notice invoking arbitration dated 6 May 2022 invoked the arbitration clause. The invoked arbitration clause is reproduced as here under:
“(a) All question and disputes relating to the meaning of the specification design, drawing and instructions herein and as to the quality of workmanship or materials used on the work or as to any other question claim, right, matter or thing, whatsoever in any way arising out of or relating to the contract, designs, drawings, specification, estimates instructions, orders or these condition or otherwise concerning the works or the execution or failure to execute the same, whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof, shall be conducted in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof and the rules made the under and for the time being in force, shall apply to the arbitration proceedings. However, the Party initiating the arbitration claim shall have to deposit 7% of the arbitration claim in the shape of Fixed Deposit Receipt as security deposit.”
Since, the Petitioner was a foreign company, hence, the Petitioner filed a petition for appointment of arbitrator under Section 11 before the Hon`ble Supreme Court of India. It is in this context that the Hon`ble Supreme Court interpreted the Arbitration Clause and ruled in favor of the Petitioner thereby declaring a substantive portion of the Arbitration Clause as being not enforceable.
II. FINDINGS OF THE SUPREME COURT
The recent decision of Supreme Court in Lombardi Engineering Limited v Uttarakhand Jal Vidyut Nigam Limited (Arbitration Petition No. 43 of 2022) has discussed the jurisprudence on this subject at length. It has concluded after much discussion that such clauses requiring mandatory deposit by the claimant of a percentage of the claim amount at the outset of an arbitration proceedings will be required to be seen on a case to case basis. In essence this judgment laid down that no overarching principle of law can be enunciated which strikes all such clauses as void being in teeth of public policy. If the arbitration clause provides for refund of the security deposit amount back to the Claimant in cases where its claim has been partly allowed (refund being in proportion to the percentage of claim allowed vis a vis the claim pleaded) then such clauses would be enforceable.
For eg. In a given contract between ABC (Claimant) and XYZ (Respondent) the arbitration clause mandates that If ABC (claimant) files a Statement of Claim praying for an award of 10 crores (by way of multiple sub claims) then such claimant would have to deposit a sum of Rs. 1 crore by way of a security deposit with the Arbitral Tribunal at the outset before the start of arbitration proceedings. This arbitration clause further mandates that in case only Rs. 4 crores is awarded by the Arbitral Tribunal in favor of ABC (Claimant) then the entire amount of security deposit i.e. Rs. 1 crore would be refunded back to ABC. Hence, as per such a clause, only when the entire Statement of Claim of the Claimant has been dismissed, could the Arbitral Tribunal forfeit this security deposit amount and give the same i.e. Rs. 1 crore (or any amount less than this as per discretion of the Arbitral Tribunal) to the Respondent.
Such a clause as per this recent Supreme Court judgment would be a valid clause.
The relevant excerpts from the judgment (while quoting from other past precedents forming the operative part of the judgment) are as follows:
“14. It will be noticed that in this judgment there was no plea that the aforesaid condition contained in an arbitration clause was violative of Article 14 of the Constitution of India as such clause is arbitrary. The only pleas taken were that the ratio of Central Inland Water Transport Corpn. [Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Ganguly, (1986) 3 SCC 156 : 1986 SCC (L&S) 429] would apply and that there should be a cap in the quantum payable by way of security deposit, both of which pleas were turned down by this Court. Also, the security deposit made would, on the termination of the arbitration proceedings, first be adjusted against costs if any awarded by the arbitrator against the claimant party, and the balance remaining after such adjustment then be refunded to the party making the deposit. This clause is materially different from Clause 25(viii), which, as we have seen, makes it clear that in all cases the deposit is to be 10 per cent of the amount claimed and that refund can only be in proportion to the amount awarded with respect to the amount claimed, the balance being forfeited and paid to the other party, even though that other party may have lost the case. This being so, this judgment is wholly distinguishable and does not apply at all to the facts of the present case.
23. The important principle established by this case is that unless it is first found that the litigation that has been embarked upon is frivolous, exemplary costs or punitive damages do not follow. Clearly, therefore, a “deposit-at-call” of 10 per cent of the amount claimed, which can amount to large sums of money, is obviously without any direct nexus to the filing of frivolous claims, as it applies to all claims (frivolous or otherwise) made at the very threshold. A 10 per cent deposit has to be made before any determination that a claim made by the party invoking arbitration is frivolous. This is also one important aspect of the matter to be kept in mind in deciding that such a clause would be arbitrary in the sense of being something which would be unfair and unjust and which no reasonable man would agree to. Indeed, a claim may be dismissed but need not be frivolous, as is obvious from the fact that where three arbitrators are appointed, there have been known to be majority and minority awards, making it clear that there may be two possible or even plausible views which would indicate that the claim is dismissed or allowed on merits and not because it is frivolous. Further, even where a claim is found to be justified and correct, the amount that is deposited need not be refunded to the successful claimant. Take for example a claim based on a termination of a contract being illegal and consequent damages thereto. If the claim succeeds and the termination is set aside as being illegal and a damages claim of Rupees One crore is finally granted by the learned arbitrator at only ten lakhs, only one-tenth of the deposit made will be liable to be returned to the successful party. The party who has lost in the arbitration proceedings will be entitled to forfeit nine-tenths of the deposit made despite the fact that the aforesaid party has an award against it. This would render the entire clause wholly arbitrary, being not only excessive or disproportionate but leading to the wholly unjust result of a party who has lost an arbitration being entitled to forfeit such part of the deposit as falls proportionately short of the amount awarded as compared to what is claimed.”
However, in the same example as given above, if the arbitration clause would have mandated that the refund of security deposit would only be of the proportionate amount in proportion to the claim which has been awarded in favor of ABC (Claimant) and remaining balance amount to be forfeited and given to XYZ (Respondent). So in the above example, the Arbitral Tribunal would forfeit Rs. 60 lacs and pay the same to XYZ (Respondent) thereby only refunding Rs. 40 lacs to ABC (Claimant).
Such a clause as per this recent Supreme Court judgment would be a void and unenforceable clause as the same would discourage the remedy which lies with the Claimant as provided under the 1996 Act read with the Arbitration clause itself.
The relevant excerpts from the judgment (while quoting from other past precedents forming the operative part of the judgment) are as follows:
“25. In M/s ICOMM Tele Ltd. (supra) the objectionable clause 25(viii) was struck down which was for 10% deposit. In the event of an award in favour of the claimant, the deposit was to be refunded to him in proportion to the amount awarded with regard to the amount claimed and the balance if any was to be forfeited and paid to the other party. Resultantly, the Apex Court came to the conclusion that nine times of the deposit could be forfeited by the parties who lost in the arbitration proceedings and despite the fact that the party has an award against it. Thus, the clause was held to be wholly arbitrary …
However, in case in the same example as given above, if the arbitration clause would have mandated that the refund of security deposit would only be of the proportionate amount in proportion to the claim which has been awarded in favor of ABC (Claimant) and remaining balance amount to be forfeited and given to XYZ (Respondent) then such clause would be not enforceable as the same would discourage the remedy which lies with the Claimant as provided under the 1996 Act read with the Arbitration clause itself. So in the above example, the Arbitral Tribunal would not be able to forfeit Rs. 60 lacs and pay the same to XYZ (Respondent) thereby only refunding Rs. 40 lacs to ABC (Claimant)…
Also, the security deposit made would, on the termination of the arbitration proceedings, first be adjusted against costs if any awarded by the arbitrator against the claimant party, and the balance remaining after such adjustment then be refunded to the party making the deposit. This clause is materially different from Clause 25(viii), which, as we have seen, makes it clear that in all cases the deposit is to be 10 per cent of the amount claimed and that refund can only be in proportion to the amount awarded with respect to the amount claimed, the balance being forfeited and paid to the other party, even though that other party may have lost the case…
20. The first important thing to notice is that the 10 per cent “deposit-at-call” of the amount claimed is in order to avoid frivolous claims by the party invoking arbitration. It is well settled that a frivolous claim can be dismissed with exemplary costs. …
21. It is therefore always open to the party who has succeeded before the arbitrator to invoke this principle and it is open to the arbitrator to dismiss a claim as frivolous on imposition of exemplary costs…
Take for example a claim based on a termination of a contract being illegal and consequent damages thereto. If the claim succeeds and the termination is set aside as being illegal and a damages claim of Rupees One crore is finally granted by the learned arbitrator at only ten lakhs, only one-tenth of the deposit made will be liable to be returned to the successful party. The party who has lost in the arbitration proceedings will be entitled to forfeit nine-tenths of the deposit made despite the fact that the aforesaid party has an award against it…
Furthermore, applying the above said ratio to the facts of the case at hand, the Supreme Court held that since the Arbitration Agreement in the instant case was silent on the aspect as to in what manner and how much would be the security amount which would be refunded back to the Claimant at the end of the Arbitration Proceedings by the Arbitral Tribunal, hence, the Arbitration Clause was void and unenforceable.
III. PROBLEMS WITH THE VIEW TAKEN BY THE HON`BLE SUPREME COURT
The underlying premise of the view taken by the Hon`ble Supreme Court and also the view taken by this Court in the past is that since a Claimant has succeeded in the Arbitration Proceedings and hence, it should not be burdened with any mandatory costs as per a pre agreed arbitration clause. However, the Supreme Court fails to define and dissect what exactly “succeeds” means in the context of an Arbitration Proceedings. The Hon`ble Supreme Court fails to distinguish between a minimal success, partial success, substantial success and complete success of the Claim as filed by the Claimant. The Court simply gives its verdict on the basis of a broader view taken by the Arbitral Tribunal as to whether the Claim of the Claimant should be allowed or dismissed. The process of adjudication of claims by an Arbitral Tribunal is not simply about “succeeding” or “failing”. There are 50 shades of grey lying somewhere between these two ends of a continuum.
It is no revelation that the Claimants in many cases file Statement of Claims which include exaggerated and frivolous claims. In a number of cases, the first 2 – 3 claims are duly backed by evidence and scientific reasoning whereas the last 3 – 5 claims are arbitrary and exaggerated claims. Such arbitrary and exaggerated claims are filed in order to possibly put the respondent under some kind of pressure by showing a potential exposure of huge liability which the respondent may suffer in case he is unsuccessful in defending its case. This essentially results in abuse of the contractual remedy of arbitration which the Claimant has under the Arbitration Clause. Therefore, while the Supreme Court has pronounced this above judgment with the laudable objective of ensuring that the arbitration remedy of the Claimant is not stifled or hampered in any manner. However, the Court has failed to address the problem relating to the potential abuse of such remedy. All of these reasons coupled with the fact that both parties pre agreed for a scenario in which a minimum percentage of the claim amount was to be paid by the Claimant to the Arbitral Tribunal by way of a security deposit amply highlights how the Hon`ble Court may have taken an incorrect view in this matter thereby ignoring the principle of party autonomy.
This view taken by the Hon`ble Supreme Court will give a free hand to the Claimants who seek to file exaggerated Statement of Claims. The question that needs to be asked is that isn’t it the duty of a responsible litigant to file only those claims which are prima facie valid and backed by appropriate evidence and scientific reasoning? Isnt it true that in many cases, the Claimant files a Statement of Claim in which only the first two or three claims are well backed by evidence and the remaining claims are inflated, not backed by any evidence and in some cases not at all maintainable under law?
In order to address some of the issues above, the Hon`ble Supreme Court relied upon Section 31A of the Arbitration & Conciliation Act, 1996 and opines that the Arbitral Tribunal always has the discretion to impose “costs” on the Claimant if it finds that the Claimant has filed arbitrary, frivolous or exaggerated claims. However, the Court, in my humble opinion, fails to appreciate that Section 31A of the Act has a limited mandate and there is only a limited discretion given to the Arbitral Tribunal to award “costs”. Reliance is placed on the Explanation appended to Section 31A(1) which stipulates that the maximum costs which can be awarded by the arbitral tribunal is a cumulation of fees of arbitrators, courts, witnesses and lawyers. Although, the word “maximum” is not provided in the text of this Explanation, however, the same is implicit on a reading of Section 31A(1).
Therefore, when the Arbitrator has a limited discretion to provide for “costs” under Section 31A(1) and in contradiction to this the parties have mutually agreed at the outset (vide an Arbitration Clause) that in cases of partly allowed claims or no allowed claims, the Arbitral Tribunal shall forfeit the security deposit and pay the proportionate share of the same to the Respondent then there is no reason to declaring such clauses as unenforceable thereby emasculating the powers of an Arbitral Tribunal to appropriately penalize the deviant Claimant who did not file his Statement of Claims with utmost propriety and bona fide intention.
Author
At what stage can a Section 9 petition be filed and maintained by the Petitioner has been a question that has often been raised in several litigations and arbitration claims decided by the courts. Historically, under the conventional Code of Civil Procedure, 1908 context, an application for interim relief can only be raised when the underlying substantive proceedings have been filed and is pending before the adjudicating forum. Therefore, in classic civil suits, the application under Order 39, Rule 1 and 2 cannot be maintained or decided unless the court has on its record the Civil Suit in which the final substantive reliefs have been prayed for. This is also important for the reasons that any adjudication forum will be better equipped to deal and adjudicate the prayers for interim relief when it is privy to the context of the substantive claim along with final reliefs which have been raised by the Plaintiff/Claimant.
For instance, a suit is filed by the plaintiff seeking declaration that a particular sale deed is null and void owing to the seller not having any title over the suit property at the time of the sale. In such a case, the plaintiff also seeks interim relief that the defendant cannot create any third-party interest in the suit property during the pendency of the suit. The fact that a substantive suit containing elaborate pleadings and final reliefs is before the Hon`ble Court will only mean that the Hon`ble Court is in a better position to be able to assess the overall context of the case and decide on the interim application seeking interim relief of non-creation of any third party interest by the defendant. The substantive suit shall provide a complete chronology of facts and also other ancillary details relating to the claim.
However, the above-mentioned is not the norm or the law when it comes to Section 9 remedy under the Arbitration Act, 1996. As per Section 21 of the Arbitration Act, 1996, an arbitral proceeding commences on the issuance of Section 21 notice by the claimant to the respondent. It will be appropriate to reproduce the text of Section 21 of the Act here:
“21. Commencement of arbitral proceedings.—Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.”
Therefore, it can be said that unless and until the Section 21 notice has been issued detailing in brief about the substantive claims of the claimant, the arbitral proceeding is deemed not to commence. The question which begs an answer in such a situation is:
- Whether a Section 9 petition can be filed before the Hon`ble District Court/ High Court seeking interim relief in relation to the subject matter of the claim even before the issuance of notice under Section 21 by the Claimant to the Respondent?
- Whether a Section 17 petition can be filed and maintained before the Arbitral Tribunal seeking interim relief even before the filing of the Statement of Claim by the Claimant?
A. Whether a Section 9 petition can be filed before the Hon`ble District Court/ High Court seeking interim relief in relation to the subject matter of the claim even before the issuance of notice under Section 21 by the Claimant to the Respondent?
It will be appropriate to reproduce Section 9 at this stage to highlight the key phrases in the same to answer the above question.
“9. Interim measures, etc., by Court.—1[(1)] A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court—
(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely: —
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.
2[(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.
(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.]”
The text of Section 9(1) is clear and unequivocal. It says that “A party may, before or during arbitral proceedings or at any time after the making of the arbitral award” may apply to the court for interim reliefs seeking preservation, interim custody or sale of any goods/interim injunction or other interim measures. From a bare perusal of the text of this Section, it is amply clear that Section 9 petition can be moved before the notice is sent under Section 21 of the Arbitration Act, 1996 thereby invoking arbitration. This is in stark contrast to the principles governing substantive and interim reliefs claimed under the suits filed in accordance with the provisions of the Code of Civil Procedure, 1908.
It is important to analyze the reasons why the arbitration law in India has departed from the conventional principles enshrined under the Code of Civil Procedure, 1908.
One of the reasons as cited by the Hon`ble Supreme Court in the matter of Sundaram Finance v NEPC India, Manu/SC/0012/1999 in support of the above mentioned proposition was that it is a known fact that it is difficult to sometimes serve the respondent with the Section 21 notice and hence, in all such cases, the prayer for interim relief under Section 9 cannot be made to wait till the time the Section 21 notice has been served on the Respondent. The relevant portion of this judgment is reproduced as under:
“It is not unknown when it becomes difficult to serve the respondents. It was, therefore, necessary that provision was made in the Act which could enable a party to get interim relief urgently in order to protect it’s interest. Reading the section as a whole it appears to us that the Court has jurisdiction to entertain an application under Section 9 either before arbitral proceedings or during arbitral proceedings or after the making of the arbitral award but before it is enforced in accordance with Section 36 of the Act.”
Furthermore, in the same judgment, the Hon`ble Supreme Court also held that the invocation of Section 9 itself is prima facie proof of the fact that there does exist an arbitration agreement and the arbitration proceedings will be starting sometime in the future. Therefore, prima facie, the Section 9 relief is premised on some sort of underlying substantive claim which will be coming in the future. The relevant portion of the judgment is reproduced below:
“20. When a party applies under Section 9 of the 1996 Act it is implicit that it accepts that there is a final and binding arbitration agreement in existence. It is also implicit that a dispute must have arisen which is referable to the arbitral tribunal. Section 9 further contemplates arbitration proceedings taking place between the parties.”
The most important and fundamental reason behind advancing the proposition that Section 9 claims should be allowed to be filed before the Court of Original Jurisdiction even when the arbitral proceedings have not commenced is that the entire regime of Arbitration jurisprudence as per international model laws and framework is to give primacy to the urgent interim relief so that under no circumstances whatsoever the underlying claims of the Arbitral proceedings gets frustrated. Reliance is drawn on the following observations made by the Hon`ble Delhi High Court in Sanjay Arora & Ors v Rajan Chadha & Ors, MANU/DE/2643/2021:
“55. Empirically, in ordinary civil law, an application for interlocutory relief would lie only in substantive proceedings, claiming the main relief. The arbitral protocol, under the 1996 Act is, however, somewhat peculiar in its dispensation. Section 9 itself envisages grant of interim protection, by a Court, before institution of arbitral proceedings and can be invoked, in an appropriate case, even before the notice of arbitration, under Section 21, is issued. The reason is that, while considering the prayer for interim protection under the 1996 Act, whether under Section 9 or under Section 17, apart from the troika of a prima facie case, balance of convenience and irreparable loss, the Court, or Arbitral Tribunal, is also required to preserve the sanctity of the arbitral process, which is the very raison d’etre of the 1996 Act. All efforts to foster and promote the arbitral process, and prevent its interception or interdiction have, therefore to be made. The Court under Section 9, or the Arbitral Tribunal under Section 17 is also, therefore, empowered to grant interim protection where any possibility of the arbitral proceedings being frustrated is found to exist, whether such frustration be before the arbitral process is initiated, during the arbitral process or even after the passing of the Award. If, therefore, before a Statement of Claim is filed, the situation that presents itself is such that interim protection has to be granted, to ensure the preservation of the arbitral process, the Court under Section 9, and the Arbitral Tribunal under Section 17, is empowered to grant such protection. In view of this peculiar dispensation, unique to arbitration, I am of the opinion that the filing of Statement of Claim under Section 23 cannot be treated as a sine qua non for the maintainability of an application for interim protection under Section 17.”
Having laid out the reasons behind the position of law that Section 9 petitions can be maintained even before the commencement of the Arbitral proceedings, it would be apposite to mention that the Claimant seeking relief under Section 9 would have to prove that the petition is bona fide by prima facie suggesting the following:
- That it has a manifest intention to take recourse to the arbitral proceedings if, at the time when the application under Section 9 is filed, the proceedings have not commenced under Section 21 of the 1996 Act.
- That there does exist a valid arbitration agreement and the applicant intends to take the dispute to arbitration.
- That the Court adjudicating the Section 9 application may pass conditional orders to put the Claimant to such terms as it may deem fit with a view to see that the effective steps are taken by the Claimant for commencing the arbitral proceedings.
The above-mentioned pointers can be gathered from the observations made by the Hon`ble Supreme Court in Sundaram Finance v NEPC India, Manu/SC/0012/1999.
Therefore, it is clear that while the norm and the advisable route to take is to first commence the arbitral proceedings by serving a Section 21 notice on the Respondent by the Claimant. However, in cases of grave emergency and especially when the Claimant is hard-pressed for time to draft and send a substantive Section 21 notice detailing all the claims, the Claimant may file a Section 9 petition directly without sending a Section 21 notice. Needless to mention here is that if the Claimant takes the latter path, it will have to observe and be bound by directions of the Section 9 court as mentioned in the three pointers above.
B. Whether a Section 17 petition can be filed and maintained before the Arbitral Tribunal seeking interim relief even before the filing of the Statement of Claim by the Claimant?
The case of Section 17 is different from the case of Section 9 as under Section 17, the words used are “during the arbitral proceedings” and not “before or during the arbitral proceedings”. Therefore, on a plain reading of the text of Section 17, it becomes clear that a Section 17 petition can only be moved after Section 21 notice has been issued and the arbitral proceedings have been started. However, what is not very clear from the provision is as to whether Section 17 petition can be filed and maintained before the substantive Statement of Claim is filed before the Arbitral Tribunal/ Sole Arbitrator.
An answer to this question is much desirable under Arbitration Law as there are multiple cases in which the solicitors/advocates contesting an Arbitration proceeding do not have enough time and resources to file the substantive Statement of Claim before the Section 17 application is filed seeking interim relief from the constituted Arbitral Tribunal/Sole Arbitrator. In such cases, an option for filing the Statement of Claim post the filing of the Section 17 application for interim relief will go a long way for the Claimant and Claimant`s team of lawyers in filing a well-researched and strategized Statement of Claimant after having taken its own sweet time once the Section 17 petition has been filed and possibly argued.
This question has been dealt with recently in a judgment pronounced by the Hon`ble Delhi High Court in Sanjay Arora & Ors v Rajan Chadha & Ors, MANU/DE/2643/2021 wherein the Court held that a Section 17 petition can be filed and maintained even before the claimant has filed the substantive Statement of Claim before the Arbitral Tribunal/Sole Arbitrator. Noteworthy to mention here is that, the Hon`ble Delhi High Court has disagreed with a view taken by the Bombay High Court in Tasty Korner v. Merwan’s Confectioners Pvt., Arbitration Petition (L) 1300/2019, 6th January 2020 wherein the Hon`ble Bombay High Court held that no Section 17 petition can be filed and maintained unless and until the claimant has filed the substantive Statement of Claim before the Arbitral Tribunal/Sole Arbitrator. The relevant portions of this judgment as pronounced by the Hon`ble Delhi High Court are:
“53. The legal proposition, as advanced by Mr. Mehta appears, at first blush, to be almost axiomatic. It appears incongruous that, in the absence of a substantive challenge (in the form of a Section 23 Statement of Claim), an application for interlocutory relief would lie. Possibly for this reason, the Bombay High Court, speaking through G.S. Patel, J., has observed, in Tasty Korner v. Merwan’s Confectioners Pvt. Ltd6, that “it also goes without saying that Section 17 Application cannot be disposed of or even taken up unless a statement of claim has (sic been?) filed to begin with”.
54. Despite the high estimation in which I hold Patel, J., I regret my inability to agree with this proposition.
55. Empirically, in ordinary civil law, an application for interlocutory relief would lie only in substantive proceedings, claiming the main relief. The arbitral protocol, under the 1996 Act is, however, somewhat peculiar in its dispensation. Section 9 itself envisages grant of interim protection, by a Court, before institution of arbitral proceedings and can be invoked, in an appropriate case, even before the notice of arbitration, under Section 21, is issued. The reason is that, while considering the prayer for interim protection under the 1996 Act, whether under Section 9 or under Section 17, apart from the troika of a prima facie case, balance of convenience and irreparable loss, the Court, or Arbitral Tribunal, is also required to preserve the sanctity of the arbitral process, which is the very raison d’etre of the 1996 Act. All efforts to foster and promote the arbitral process, and prevent its interception or interdiction have, therefore to be made. The Court under Section 9, or the Arbitral Tribunal under Section 17 is also, therefore, empowered to grant interim protection where any possibility of the arbitral proceedings being frustrated is found to exist, whether such frustration be before the arbitral process is initiated, during the arbitral process or even after the passing of the Award. If, therefore, before a Statement of Claim is filed, the situation that presents itself is such that interim protection has to be granted, to ensure the preservation of the arbitral process, the Court under Section 9, and the Arbitral Tribunal under Section 17, is empowered to grant such protection. In view of this peculiar dispensation, unique to arbitration, I am of the opinion that the filing of Statement of Claim under Section 23 cannot be treated as a sine qua non for the maintainability of an application for interim protection under Section 17.”
The rationale of the above-mentioned is absolutely clear that primacy needs to be accorded to saving/preserving the subject matter/property of the substantive claim in an arbitration proceeding. Under no cost or situation can and should the substantive arbitration proceedings be rendered infructuous owing to the underlying subject matter/property being destroyed or alienated by the respondent or any other third party as the same would lead to the frustration of the entire mandate of the arbitral tribunal.
In light of the above-mentioned conflict in the ratio as observed by the Hon`ble Bombay High Court and the Hon`ble Delhi High Court, it is desirable that the Hon`ble Supreme Court settles the position of law on this issue. Meanwhile, till the same is done, the Hon`ble Delhi High Court being a later judgment can be considered to have a higher persuasive value thereby suggesting that the Section 17 application for interim relief can be filed before the filing of the Statement of Claim in an arbitral proceeding.
Author
Suit for recovery filed by the plaintiff before a Civil Court and claim for money filed by a claimant under the given arbitration clause are 2 remedies under law which are regularly invoked by lawyers on behalf of their clients. It is common knowledge that a suit for recovery will take as long as 3 to 4 years and an arbitration claim for recovery of the amount will take as long as 1 to 2 years before getting finally decided. One of the requests which is frequently made by the client from their respective lawyer is that pending this suit or arbitration claim the amount which is claimed under the litigation may be secured by way of a fixed deposit, bank guarantee or any other mode in a way that the said amount is protected from being alienated by the respondent or defendant pending the litigation/recovery process.
Above mentioned provisions of law become even more important and relevant in cases where the defendant or the respondent company is facing financial turmoil and maybe on the brink of insolvency. A litigation or an arbitration where there is very less chance of being able to receive the fruits of the decree or the award is a legal process which likely is going to end up in wastage of time, resources and money for all the stakeholders involved. Hence, in such circumstances the importance and purport of Order XXXVIII Rule 5 of the Code of Civil Procedure 1908 and section 9(1)(ii)(b) of the Arbitration Act 1996 becomes important.
It is settled position of law that principles governing the Code of Civil Procedure 1908 and the provisions under the same is not mandatorily applicable to proceedings under the Arbitration Act 1996. However, it is also common knowledge that a vast amount of jurisprudence and detailed procedure has evolved under the Code of Civil Procedure 1908 in the last more than 100 years. Arbitration Act 1996 is relatively new and hence has time and again been inspired by the principles and procedure laid down under the Code of Civil Procedure 1908.
The question therefore is that whether the legal process of securing the amount involved in an arbitration under Section 9(1)(ii)(b) will be bound by the principles as enshrined under Order XXXVIII Rule 5 of the Code of Civil Procedure 1908. This article intends to comment on the above-mentioned question in a structured manner wherein the first part of this article shall deal with the ingredients which a litigant has to satisfy before the appropriate court in order to secure an interim order thereby protecting the claim amount in dispute pending the arbitration. The second part of this article shall deal with the relationship between Order XXXVIII Rule 5 of the Code of Civil Procedure 1908 and section 9(1)(ii)(b) of the Arbitration Act 1996 from the perspective of the claimant whose endeavour is to secure the claim amount pending the arbitration.
INGREDIENTS WHICH THE CLAIMANT NEEDS TO SATISFY IN ORDER TO SUCCESSFULLY SECURE AN INTERIM ORDER UNDER SECTION 9(1)(ii)(b) OF THE ARBITRATION ACT 1996
There are 2 mandatory prerequisites which need to be established and satisfied by the claimant in order to successfully secure an interim order under Section 9(1)(ii)(b) of the Arbitration Act 1996. The first prerequisite is to show a prima facie case which is extremely strong and credible on the face of it. There are numerous judgments of the Honourable Supreme Court and the High Courts which state that when the nature of the claim is prima facie not tenable or the debt in the litigation is not crystallised and is in some sort of dispute, then in such cases the underlying amount of the arbitration shall not be ordered to be secured by way of any interim order. There can be no cavil to the proposition that any defence setup by the respondent against an alleged claim cannot be frivolous and totally baseless. Such a defence will not create any plausible doubt in the tenability of the claim as claimed by the Claimant and hence, the debt of the Claimant in such cases would continue to remain crystallized.
A strong prima facie case usually means that the claimant was able to adduce his or her claim along with documents which are of high evidentiary value. For eg. the claimant is able to produce an admission of liability which may have been made by the respondent at any time prior or post the commencement of the arbitral proceedings. Such admissions strengthen the case of the claimant and show that prima facie the respondent is indeed liable to make the payment of the alleged amount to the claimant. In such cases once a prima facie determination has been made that the amount is payable from the respondent to the claimant, the balance of convenience is in favour of the claimant and hence the respondent is required to secure the amount in question so that later whenever the award or decree is passed the same may not be defeated due to any circumstances which are beyond the control of the claimant.
It will be apposite to mention the following precedents with the relevant portions from the same to corroborate the above said:
1.) Sepco Electric Power Construction Corporation v. Power Mech Projects Ltd., (2021) 10 SCC 792:
“34. Section 9 of the Arbitration Act confers wide power on the Court to pass orders securing the amount in dispute in arbitration, whether before the commencement of the Arbitral proceedings, during the Arbitral proceedings or at any time after making of the arbitral award, but before its enforcement in accordance with Section 36 of the Arbitration Act. All that the Court is required to see is, whether the applicant for interim measure has a good prima facie case, whether the balance of convenience is in favour of interim relief as prayed for being granted and whether the applicant has approached the court with reasonable expedition.”
The same was reiterated by the Hon’ble Supreme Court in Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited, 2022 SCC OnLine SC 1219.
2.) Adhunik Steels Limited v. Orissa Manganese and Minerals (P) Ltd., (2007) 7 SCC 125:
“10. It is true that Section 9 of the Act speaks of the court by way of an interim measure passing an order for protection, for the preservation, interim custody or sale of any goods, which are the subject matter of the arbitration agreement and such interim measure of protection as may appear to the court to be just and convenient. The grant of an interim prohibitory injunction or an interim mandatory injunction are governed by well-known rules and it is difficult to imagine that the legislature while enacting Section 9 of the Act intended to make a provision which was de hors the accepted principles that governed the grant of an interim injunction. Same is the position regarding the appointment of a receiver since the Section itself brings in, the concept of ‘just and convenient’ while speaking of passing any interim measure of protection. The concluding words of the Section, “and the court shall have the same power for making orders as it has for the purpose and in relation to any proceedings before it” also suggest that the normal rules that govern the court in the grant of interim orders is not sought to be jettisoned by the provision. Moreover, when a party is given a right to approach an ordinary court of the country without providing a special procedure or a special set of rules in that behalf, the ordinary rules followed by that court would govern the exercise of power conferred by the Act. On that basis also, it is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and the concept of just and convenient while passing interim measures under Section 9 of the Act.”
The second prerequisite for the claimant in order to successfully secure an interim order under Section 9(1)(ii)(b) is to show that there is a strong possibility that the assets of the respondent will be dissipated or are being dissipated during the course of the proceedings and hence, there won’t be anything left on the basis of which the Claimant would be able to enjoy the fruits under the arbitral award. This second pre-requisite, in most cases, is even more of an important ingredient than the first pre-requisite mentioned in the preceding paragraphs. The burden on the claimant is to show that the respondent, in all likelihood, is in the process of selling / alienating his or her assets so that the respondent does not have to bear the burden of the eventual liability. The claimant can also show that the respondent is undergoing major financial turmoil and may be at the brink of insolvency proceedings. The larger point which needs to be advanced by the Claimant along with some prima facie evidence is that if the amount in the claim is not secured by way of an interim order (fixed deposit, bank guarantee etc) then the fruits of the award will not be enjoyed by the Claimant.
It will be apposite to mention the following precedents with the relevant portions from the same to corroborate the above said:
1.) Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited, 2022 SCC OnLine SC 1219 observed:
“48. Section 9 of the Arbitration Act confers wide power on the Court to pass orders securing the amount in dispute in arbitration, whether before the commencement of the arbitral proceedings, during the arbitral proceedings or at any time after making of the arbitral award, but before its enforcement in accordance with Section 36 of the Arbitration Act. All that the Court is required to see is, whether the applicant for interim measure has a good prima facie case, whether the balance of convenience is in favour of interim relief as prayed for being granted and whether the applicant has approached the court with reasonable expedition.
49.If a strong prima facie case is made out and the balance of convenience is in favour of interim relief being granted, the Court exercising power under Section 9 of the Arbitration Act should not withhold relief on the mere technicality of absence of averments, incorporating the grounds for attachment before judgment under Order 38 Rule 5 of the CPC.
50.Proof of actual attempts to deal with, remove or dispose of the property with a view to defeat or delay the realisation of an impending Arbitral Award is not imperative for grant of relief under Section 9 of the Arbitration Act. A strong possibility of diminution of assets would suffice. To assess the balance of convenience, the Court is required to examine and weigh the consequences of refusal of interim relief to the applicant for interim relief in case of success in the proceedings, against 17 the consequence of grant of the interim relief to the opponent in case the proceedings should ultimately fail.”
2.) Indiabulls Housing Finance Limited v. Ambience Projects & Infrastructure Private Limited & Ors, MANU/DE/0557/2021:
“44. To my mind, on the face of it, these assertions are woefully insufficient to maintain a prayer for interim protection, under Section 9 of the 1996 Act. No particulars, of the manner in which the making of payments, to Vistra, by APIPL, would “grossly undermine the ability” of APIPL to make payments to IHFL, are forthcoming. No basis for the “apprehension” that the assets of Respondents 12 to 26 are at the risk of being sold off/ transferred/alienated is, either, provided in the petition. (This aspect is, strictly speaking, not relevant for the present order, as Mr. Nayar restricted his prayer for ad interim relief to a restraint, against APIPL, from making payments to APL or to any other creditors or group companies.) How, even if payments were to be made by APIPL to APL, or to Vistra, towards satisfaction of the MoU dated 14th January, 2021, the arbitral proceedings relating to the present dispute would be rendered infructuous, is also not apparent either from the pleadings or from the material placed on record. There is no averment, in the petition, that, if APIPL were to make further payments to APL, or to Vistra, it would be rendered financially incapable of liquidating its debts towards IHFL-assuming, that is, that these dues are found to be payable in the arbitral proceedings, which are yet to commence…
…
45. This Court has, in its judgment in Avantha Holdings MANU/DE/1548/2020, observed thus, in this context:
26. That said, the mere satisfaction of these criteria does not, ipso facto, make out a case for ordering interim measures under Section 9. Additionally, the Court is also required to satisfy itself that the relief, being sought under Section 9, cannot await the constitution of the arbitral tribunal, or the appointment of the arbitrator, and the invocation, before such arbitrator or arbitral tribunal, of Section 17. Emergent necessity, of ordering interim measures is, therefore, an additional sine qua non, to be satisfied before the Court proceeds to grant relief under Section 9 of the 1996 Act. While passing orders under Section 9, therefore, the Court is required to satisfy itself that (i) the applicant, before it, manifestly intends to initiate arbitral proceedings, (ii) the criteria for grant of interim injunction, which apply to Order 39 of the CPC, stands satisfied, and (iii) circumstances also exist, which renders the requirement of ordering interim measures an emergent necessity, which cannot await a Section 17 proceeding, before the arbitrator, or arbitral tribunal. In assessing whether such an emergent necessity exists, or not, the Court would, essentially, have to satisfy itself that failure to order interim measures, under Section 9, would frustrate, or would render the recourse, to arbitration-which is yet to take place-futility.”
The chances of the Claimant receiving an interim order in his or her favor becomes really high if the Claimant is able to satisfy the appropriate court on the above mentioned 2 factors. Being able to receive an interim order under Section 9(1)(ii)(b) of the Arbitration Act 1996 comes with benefits for the Claimant. The primary benefit which such an order provides is that in cases where the Claimant ends up being successful and secures the arbitral award in his / her favor then in all such cases, the execution proceedings are not required to be filed or even if filed then the same remains mostly a formality. Since, the claim amount under the dispute has already been secured, the execution proceedings are mostly left for the purposes of securing the interest and costs on the claim amount. Usually, in cases where the courts have ordered interim relief under Section 9(1)(ii)(b) of the Arbitration Act, 1996, in all such cases the courts at the time of pronouncement of the final award also orders the release of the amount to the Claimant which was secured vide the interim order.
RELATIONSHIP BETWEEN ORDER 38 RULE 5 OF THE CODE OF CIVIL PROCEDURE, 1908 AND SECTION 9(1)(b)(ii) OF THE ARBITRATION ACT 1996
To what extent should the principles under Order 38 Rule 5 of the Code of Civil Procedure, 1908 should govern the exercise of jurisdiction under Section 9(1)(b)(ii) by appropriate courts in cases of recovery of money is a subject of some debate. Some courts have taken the view that Order 38, Rule 5 has a much higher threshold and burden for the Plaintiff to prove in order to be able to secure an interim order as compared to the threshold and burden of the Claimant under Section 9(1)(b)(ii). In Delta Constructions v. Narmada Cement, (2002) 2 BOMLR 225, the Bombay High Court pronounced:
“10. …All this makes it clear that Act of 1996 itself has provided for interim measures that can be granted by the court and by the Arbitral Tribunal. Insofar as the Court is concerned, there is further power conferred that the court meaning thereby the court having jurisdiction can exercise all the powers available to it as the court under the provisions of the Code of Civil Procedure. The substantive power conferred on the court by Section 9 is to be effected by the procedural provisions as contained in the Code of Civil Procedure. The Code of Civil Procedure for example under Order 38 has provided for the security by way of arrest before Judgment and attachment before judgment. The Court before issuing the warrant of arrest or attaching the property and/or in the event, defendant does not furnish security has to satisfy itself that the various predicates as set out in Order 38 of Code of Civil Procedure have been satisfied. The corresponding power in the court under Section 9 would be of securing the amount in dispute in the arbitration. The power of the court to secure the amount in dispute under arbitration is not hedged by the predicates as set out in Order 38. All that the court must be satisfied is that an interim measure is required. In other words, the party coming to the court must show that if it is not ‘secured, the Award which it may obtain would result in a paper decree or a decree which cannot be enforced on account of acts of a party pending arbitral process. Therefore, the court would not to be bound by the requirement of Order 38 Rule 5. Since the power is discretionary, the court must be satisfied that it is in the interest of justice, based on the material before it to pass order to secure the petitioner before it. The discretion to be exercised would be based as set out earlier on the material before it and the petitioner making out a case that there is need for an interim measure of protection. However, once the court passes the order, then the order to secure would be as per the procedure as laid down in the Code of Civil Procedure. Insofar as preservation, interim, custody etc. is concerned, the power as conferred under Order 39, Rule 7 is also provided by Section 9(ii)(c). Appointment of Receiver is covered by 9(ii)(d). Power to sell goods at interim stage is specifically provided for in Section 9(ii)(a). Apart from that there is general power reserved in the courts for such interim measure as it may thought proper under Section 9(ii)(a). The substantive provisions of granting interim relief as provided for in the Code of Civil Procedure therefore, cannot be read into Section 9. There are independent provisions in the Act itself. The exercise of the power must be construed, bearing in mind the object of the Act and the need to dispose of the matter as expeditiously and not hedged in, by the provisions of the Code of Civil Procedure. To my mind, therefore, it is not necessary for the court when called upon to secure the amount in dispute to find out whether the respondent before it is seeking to dispose of the property or taking the property outside the jurisdiction of the court. The court is not hedged by such restriction. If it were to be so, the legislature considering that the petition lies to the Civil Court could have provided that court can exercise all the powers it has under the Civil Procedure Code for granting interim relief. On the contrary only procedural provisions to give effect to the power under Section 9 have been conferred. Considering that, to my mind, the observation of the learned Judge of the Delhi High Court in M/s Global (supra) when it noted that the principles of the Code of Civil Procedure will have to be borne in mind would only restrict the exercise of powers under Section 9. The power under Section 9 cannot be fettered by reading into it the requirements for granting interim reliefs which are not provided. To that extent, I am unable to agree with the view expressed by the Delhi High Court.”
However, some other courts have indeed pronounced that the principles governing the grant of interim order under Order 38, Rule 5 will indeed be considered by the appropriate courts while granting an order under Section 9(1)(b)(ii) of the Arbitration Act, 1996. In Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited, 2022 SCC OnLine SC 1219, the Supreme Court relied upon the observations made by the Bombay High Court in Valentine Maritime Ltd. v. Kreuz Subsea Pte. Ltd. & Anr, 2021 SCC Online Bom 75 the following terms:
“46. In Valentine Maritime Ltd. v. Kreuz Subsea Pte. Ltd. & Anr., the High Court held :-
95. Insofar as judgment of this Court delivered by the Division Bench of this court in case of Nimbus Communications Limited v. Board of Control for Cricket in India (supra) relied upon by the learned senior counsel for the VML is concerned, this Court adverted to the judgment of Hon’ble Supreme Court in case of Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd., (2007) 7 SCC 125 and held that in view of the decision of the Supreme Court in case of Adhunik Steels Ltd., (supra) the view of the Division Bench in case of National Shipping Company of Saudi Arabia (supra) that the exercise of power under section 9(ii)(b) is not controlled by the provisions of the Code of Civil Procedure, 1908 cannot stand. This court in the said judgment of Nimbus Communications Limited (supra) held that the exercise of the power under section 9 of the Arbitration Act cannot be totally independent of the basic principles governing grant of interim injunction by the civil Court, at the same time, the Court when it decides the petition under section 9, must have due regard to the underlying purpose of the conferment of the power upon the Court which is to promote the efficacy of arbitration as a form of dispute resolution.
96. This court held that just as on the one hand the exercise of the power under Section 9 cannot be carried out in an uncharted territory ignoring the basic principles of procedural law contained in the Code of Civil Procedure, 1908, the rigors of every procedural provision in the Code of Civil Procedure, 1908 cannot be put into place to defeat the grant of relief which would sub-serve the paramount interests of justice. A balance 15 has to be drawn between the two considerations in the facts of each case. The principles laid down in the Code of Civil Procedure, 1908 for the grant of interlocutory remedies must furnish a guide to the Court when it determines an application under Section 9 of the Arbitration and Conciliation Act, 1996. The underlying basis of Order 38 Rule 5 therefore has to be borne in mind while deciding an application under Section 9(ii) (b) of the Arbitration Act.”
Therefore, it seems like both the Claimant and the Respondent have something on which they can possibly rely to bring their burden under law to a threshold which is much lower than that as required under Order 38, Rule 5 of the Code of Civil Procedure, 1908. Needless to mention that this is important at the time of arguing and contesting the interim application under Section 9(1)(b)(ii) as any interim order granted or declined in money claims can possibly have a game changing impact on the entire arbitration proceedings itself.
Author
“Whoever imposes severe punishment becomes repulsive to people while he who awards mild punishment becomes contemptible. The Ruler just with the rod is honoured. When deserved punishment is given, it endows the subject with spiritual good, material well-being and pleasures of senses.”
-Kautilya
INTRODUCTION
Economic offence is a distinct type of criminal offence. Economic crimes not only cause financial hardship for individuals, but they can also have major consequences for the overall economy. Economic crimes such as forgery, currency counterfeiting, financial scams, fraud, money laundering, and so on are important concerns that have an impact on the nation’s security and governance. Thus, the punishment in cases of such offences should not be so lenient that it does not have an adequate deterrent effect on the society at large. It is, therefore, the solemn duty of the Court to strike a proper balance between the nature of the crime and loss caused to the public exchequer and the sentence awarded, as awarding a lesser sentence encourages any criminal and, as a result of the same, the society suffers.
This Article aims to provide an overview of economic crimes in India, as well as legislative efforts to address them, with a focus on the sentencing policy used by Indian Courts. The Article is divided into four sections. The first section gives an overview of economic offences. The second section deals with the types of economic offences and relevant legislations addressing these offences. The third section delves into the jurisprudence of sentencing and the fourth section focuses on the sentencing policy adopted by the Courts in cases of economic offences.
I. ECONOMIC OFFENCES: OVERVIEW
Economic offences are often referred to as White/Blue Collar crimes. Usually people of influence or people who come from wealthy backgrounds are found involved in such crimes with the help of some unscrupulous and corrupt government functionaries and advanced technology.
Although in some parts of the world, like the United States, the term “economic offence” has been defined, a rigorous definition of the same is still lacking in India.
The Law Commission in its 47th Report has attempted to define economic offences as under [http://lawcommissionofindia.nic.in/1-50/report47.pdf]:-
““Economic offences” are those that affect the country’s economy, and not merely the wealth of an individual victim. In this category fall white collar crimes i.e. crimes committed in the course of their occupation by members of the upper class of society, offences calculated to prevent or obstruct the economic development of the country and endanger its economic health, evasion of taxes, misuse of position by public servants, offences in the nature of breaches of contracts resulting in the delivery of goods not according to specifications, hoarding and black marketing, adulteration of food and drugs, theft and misappropriation of public property and funds, and trafficking in the licences, permits etc.”
Considerations that often distinguish economic offences from other types of crime are summarised as follows:
-
- The motive of the criminal is avarice or rapaciousness (not lust or hate).
- Background of the crime is non-emotional (unlike murder, rape, defamation etc.). There is no emotional reaction as between the victim and the offender.
- The victim is usually the State or a section of the public, particularly the consuming public (i.e. that portion which consumes goods or services, buys shares or securities or other intangibles). Even where there is an individual victim, the more important element of the offence is harm to the society.
- Mode of operation of the offender is fraud, not force.
- Usually, the act is deliberate and wilful.
- Interest aimed to be protected through criminal legislations against these offences is two-fold-
A. Societal interest in the preservation of-
(i) the property or wealth or health of its individual members, and national resources, and
(ii) the general economic system as a whole, from exploitation, or waste by individuals or groups;
B. Social interest in the augmentation of the wealth of the country by enforcing the laws relating to
taxes and duties, foreign exchange, foreign commerce, industries and the like.
These unique features of economic offences have resulted in a fluid and unsettled jurisprudence in the sentencing of such offenders.
II. LAWS TO DEAL WITH ECONOMIC OFFENCES IN INDIA AND THE PUNISHMENT PRESCRIBED THEREIN
Several laws dealing with economic offences were established to punish offenders. Furthermore, these Acts were legislated to preserve the normal operations of commerce, contracts, and so on, and to allow them to take place with or without the least amount of malpractices.
But, have these legislations been remarkable in dealing expressly with this criminological subset? More so, are the punishments provided under these legislations proportionate to the damage and danger caused by these offences?
Before delving into the issue of proportionality, we need to examine the quantum of punishment prescribed under these special statues.
Prevention of Corruption Act, 1988.
| Section | Description Title | Minimum Punishment | Maximum Punishment |
|
7 |
Public servant taking gratification other than legal remuneration in respect of an official act. | Three years | Seven years + Fine. |
|
8 |
Taking gratification, in order, by corrupt or illegal means, to influence public servant. | Three years | Seven years + Fine. |
|
9 |
Taking gratification, for exercise of personal influence with public servant. | Three years | Seven years + Fine. |
|
10 |
Punishment for abetment by public servant of offences defined in section 8 or 9. | Six months | Five years + Fine. |
|
11 |
Public servant obtaining valuable thing, without consideration from person concerned in proceeding or business transacted by such public servant. | Six months | Five years + Fine. |
|
12 |
Punishment for abetment of offences defined in section 7 or 11. | Three years | Seven years + Fine. |
|
13 |
Criminal misconduct by a public servant. | Four years | Ten years + Fine. |
|
14 |
Habitual committing of offence under sections 8, 9 and 12. | Five years | Ten years + Fine. |
|
15 |
Punishment for attempt. | Two years | Five years + Fine. |
Prevention Of Money Laundering Act, 2002.
| Section | Description Title | Minimum Punishment | Maximum Punishment |
|
4 |
Punishment for money-laundering | Three years | Seven years + Fine up to Rs. 5 Lakhs.
(Ten Years in case where the proceeds of crime involved relate to any offence specified under paragraph 2 of Part A of the Schedule.) |
Economic Offences Under Indian Penal Code, 1860.
| Section | Description Title | Minimum Punishment | Maximum Punishment |
| 406 | Punishment for criminal breach of trust | – | Three years + Fine |
| 408 | Criminal breach of trust by clerk or servant | – | Seven years + Fine |
| 409 | Criminal breach of trust by public servant, or by banker, merchant or agent. | – | Imprisonment for life or Seven years + Fine. |
| 420 | Cheating and dishonestly inducing delivery of property. | – | Seven years + Fine. |
| 466 | Forgery of record or Court or of public register etc. | – | Seven years + Fine. |
| 467 | Forgery of valuable security, will, etc. | – | Imprisonment for life or Ten years + Fine. |
| 468 | Forgery for purpose of cheating | – | Seven years + Fine. |
| 471 | Using as genuine a forged document or electronic record. | – | Shall be punished in the same manner as if he had forged such document or electronic record. |
| 477A | Falsification of accounts. | – | Seven years or Fine or both. |
| 120B | Punishment for Criminal Conspiracy. | – | Six months or Fine or both. |
An analysis of the above tabular representation depicts that the maximum punishment provided for most of these offences is ‘seven to ten years.’ Only in respect to few offences, illustratively, offences under the Indian Penal Code, i.e., Forgery for valuable security, will etc. [Section 467] or Criminal breach of trust by public servant, or by banker, merchant or agent [Section 409, IPC], the maximum punishment prescribed is imprisonment for life.
The problem that persists with these legislations is that the maximum punishment which are prescribed for such offences is not punitive enough to deal with the situation effectively. In fact, the maximum punishment should reflect that there is widespread social disapproval of these types of offences, but unfortunately, that cannot be seen on examining the sentencing provisions of these legislations which have been legislated to curb such economic offences.
Furthermore, the present trend of legislation as also the judicial approach to such offences appears to be that these offences are treated lightly and the punishment is neither adequate nor proportionate to the gravity of the offence.
For example, if someone were to break into your house and steal 5 lakhs, it is less of a penalty than if someone accosts you in the street at gunpoint and takes 5 lakhs , because they have put you in fear and we value our right to be free of fear. So, we have a higher penalty for robbery than we do for burglary.
However, the said principle becomes inapplicable when it comes to economic crimes wherein the offenders cause grave harm, not only to the victim who has directly suffered, but to the overall economy of the country. These offenders are allowed to play around and perform their financial shenanigans at the cost of the law abiding citizens who are the ultimate victims of such crimes. The punishment that is prescribed for such offences is far less as compared to the actual loss and harm that is caused. Given the stakes, it is surprising that even though the impact of white collar criminals is much worse than that of traditional criminals, however, the “white collar” helps the offender stay clear of the “blacks” of long imprisonment periods.
Recently, Mr. Lalu Prasad, the former Chief Minister of Bihar, yet again made headlines for the fifth episode in the series of his infamous “Fodder Scams”. A special CBI Court in Ranchi sentenced him to five years imprisonments for the illegal withdrawal and misappropriation of Rs. 139.5 crores from Doranda Treasury. That’s correct – five years’ imprisonment for Rs. 139.5 crores scam! This is where the punishment part raises questions – whether a five-year sentence is sufficient to deter economic scams (going by the deterrence theory) and whether five-year sentence is proportional to the gravity of offence (going by the theory of proportionality). Clearly, the answer to both the above mentioned propositions would be a loud “no”. When the prescribed punishment fails the basic theories of punishment, the idea of punishment gets blurry. The aim and purpose of the punishment and the quantum thereof will lose its importance and resultantly, such offences will continue to rise.
When lead scams like Fodder scam, 2G scam, PNB scam, etc. have a maximum punishment which is same as some minor scams involving comparatively minute amounts, it cripples the basic foundation of the idea of punishment and justice. Severity of punishment should be commensurate with the seriousness of the wrong. But clearly, the maximum punishments provided under the statutes mentioned above, do not meet the threshold of proportionality principle.
In the case titled, AP Suryakrasam vs. State of Tamil Nadu & Ors., (W.P [MD] No. 14481 of 2020), the Bench of Justices N. Kirubakaran and B. Pugalendhi of Madras High Court orally suggested that the country needs stringent penalties to curb the menace of corruption in the country. The Bench, in its order, observed:
“The Central Government may consider imposing punishment, such as, “hanging” or “death penalty”, for corrupt practices or for demanding and accepting bribes, like in China, North Korea, Indonesia, Thailand and Morocco.”
The Bench further observed:
“People are compelled to accept corruption as normal one. Corruption has become deep rooted and has spread like Cancer. Every day, it is reported in the media that many officials are caught red handed, while taking bribes. Hence, the punishment needs to be enhanced.”
Therefore, there is an urgent need to enhance the maximum punishment for such offences so that these cases are properly and effectively dealt with and the offenders are adequately punished thereby leading to an adequate deterring effect on the society at large.
III. JURISPRUDENCE OF SENTENCING IN INDIA
Coming to the sentencing policy of the Indian legal system, it is seen that there are no overarching (and few settled) principles governing the sentencing of the economic offender. To the extent that there is general convergence in the approach to sentencing economic offenders, the approach is often not sound.
For instance, in deciding on the question of sentence the judge is expected to take into consideration, all relevant facts and circumstances of the case. All care should be taken to ensure that sentence imposed is in proportion to the nature and gravity of the time.
In the case of Dhananjoy Chatterjee vs. State of W.B., (1994) 2 SCC 220, the Hon’ble Supreme Court while considering the imposition of appropriate punishment has held in para 15 as under:
“…Imposition of appropriate punishment is the manner in which the Courts respond to the society’s cry for justice against the criminals. Justice demands that courts should impose punishment befitting the crime so that the Courts reflect public abhorrence of the crime.”
A three-Judge Bench of the Supreme Court in Ahmed Hussein Vali Mohammed Saiyed vs. State of Gujarat, (2009) 7 SCC 254, observed as follows:
“99. … The object of awarding appropriate sentence should be to protect the society and to deter the criminal from achieving the avowed object to (sic break the) law by imposing appropriate sentence. It is expected that the courts would operate the sentencing system so as to impose such sentence which reflects the conscience of the society and the sentencing process has to be stern where it should be. Any liberal attitude by imposing meagre sentences or taking too sympathetic view merely on account of lapse of time in respect of such offences will be result wise counterproductive in the long run and against the interest of society which needs to be cared for and strengthened by string of deterrence inbuilt in the sentencing system.
-
-
- Justice demands that courts should impose punishment befitting the crime so that the courts reflect public abhorrence of the crime. The court must not only keep in view the rights of the victim of the crime but the society at large while considering the imposition of appropriate punishment. The court will be failing in its duty if appropriate punishment is not awarded for a crime which has been committed not only against the individual victim but also against the society to which both the criminal and the victim belong.”
-
After extensively referring to the objects of punishment in State of Punjab vs. Bawa Singh, (2015) 3 SCC 441, the Court held that
“16. …undue sympathy to impose inadequate sentence would do more harm to the justice system to undermine the public confidence in the efficacy of law. It is the duty of every court to award proper sentence….”
Further, in the case of State of Uttar Pradesh vs. Sanjay Kumar, (2012) 6 SCC 107, the Supreme Court highlighted the general principles of sentencing. The relevant portion of this judgment is reproduced hereunder:-
“Sentencing policy is a way to guide judicial discretion in accomplishing particular sentencing. Generally, two criteria, that is, the seriousness of the crime and the criminal history of the accused, are used to prescribe punishment. By introducing more uniformity and consistency into the sentencing process, the objective of the policy, is to make it easier to predict sentencing outcomes. Sentencing policies are needed to address concerns in relation to unfettered judicial discretion and lack of uniform and equal treatment of similarly situated convicts. The principle of proportionality, as followed in various judgments of this Court, prescribes that, the punishments should reflect the gravity of the offence and also the criminal background of the convict. Thus, the graver the offence and the longer the criminal record, the more severe is the punishment to be awarded.”
In view of the above it can be inferred/deducted that the Court has to make a balance between 2 different principles i.e. the “aggravating circumstances” and the “mitigating circumstances”.
Following are some of the extenuating/mitigating and aggravating circumstances:
Extenuating/mitigating circumstances:
-
-
- antecedents of offender;
- nature of the offence;
- circumstances of the offence;
- prior criminal record of the offender;
- age-tender or old;
- background with reference to education, home life, sobriety, social background and economic condition;
- emotional and mental condition;
- prospect of rehabilitation;
- provocation-sudden fight;
- absence of mens rea;
- influence or instigation of some other person;
- self-preservation;
- exceeding self defense;
- state of health;
- delay in disposal of case;
- drunkenness.
-
Aggravating circumstances:
-
-
- gravity of offence;
- deliberate and well planned crime;
- habitual offender;
- causing hurt for extortion;
- securing aid of accomplices;
- breach of trust and misappropriation especially public money;
- perjury and fabricating false evidence (Sec.193);
- offence perpetrated by fraudulent means;
- socio-economic offences with planned profit making;
- menace to public health, eg. Adulteration of food articles;
- degradation of conduct, eg. Infanticide, daring assault on women;
- personal gain at the expense of innocent;
-
Proportionality and Aggravating and Mitigating Circumstances:
The Courts in gauging the seriousness of an offence, have permitted a wide range of variables other than the harm caused and the offender’s culpability. However, there are several problems with allowing factors not directly related to the offence to have a role in evaluating offence seriousness.
Firstly, many of the sentencing variables which are currently regarded as key considerations in the sentencing calculus, such as the offender’s prospects of rehabilitation and the need for specific deterrence are, in fact, misguided.
Secondly, it is contradictory to claim that the principle of proportionality means the punishment should be commensurate with the seriousness of the offence, and then allow considerations external to the offence to have a role in determining how much punishment is appropriate.
Finally, by allowing such considerations a look in, much of the splendour of the principle of proportionality dissipates. Should the Courts when elaborating on the matters that are relevant in gauging the seriousness of the offence, give much adherence to the aggravating and mitigating circumstances?
The criminal law adheres in general to the principle of proportionality in prescribing liability according to the culpability of each kind of criminal conduct. It ordinarily allows some significant discretion to the Judge in arriving at a sentence in each case, presumably to permit sentences that special facts of each case warrants. Judges in essences affirm that punishment ought always to fit the crime; yet in practice, sentences are determined largely by other considerations. Sometimes it is the correctional needs of the perpetrator that are offered to justify a sentence. Sometimes the desirability of keeping him out of circulation, and sometimes even the tragic result of his crime. Inevitably these considerations cause a departure from ‘just deserts’ as the basis of punishment and create cases of apparent injustice that are serious and widespread.
Giving the offender a lighter sentence would make the country’s justice system questionable. The common man will lose faith in the judicial system. In such cases, he understands and appreciates the language of deterrence more than the reformative jargon.
Therefore, undue sympathy to impose inadequate sentence would do more harm to the justice system to undermine the public confidence in the efficacy of law, and society could no longer endure under such serious threats. It is , therefore, the duty of every Court to award proper sentence having regard to the nature of the offence and manner in which it was executed or committed, etc. This position was illuminatingly stated by this Court in Sevaka Perumal v. State of T.N., AIR 1991 SC 1463.
IV. APPROACH ADOPTED BY THE COURTS IN SETENCING ECONOMIC OFFENDERS
Economic offences are generally regarded as being committed principally for greed. Thus, the paramount consideration in sentencing should be the amount of money involved. Other important considerations are the level of sophistication and planning of the offence and whether or not a breach of trust occurred.
According to Bentham the seriousness of crime should be measured by their respective social harm rather than by the sinfulness of the other transcendental qualities and when crimes are caused by rational efforts of man to augment their pleasure, as the case with economic crimes, those deserve to be punished strictly and adequately so that the retributive and deterrent purpose of punishment is properly secured.
The cardinal role of general deterrence in relation to such crimes has been confirmed by numerous authorities. For example in State of Gujarat v. Mohanlal Jitamalji Porwal and Anr.,(1987) 2 SCC 364, the Supreme Court, observed as under:-
“The entire Community is aggrieved if the socio-economic offenders who ruin the economy of the State are not brought to books. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the Community. A disregard for the interest of the Community can be manifested only at the cost of forfeiting the trust and faith of the Community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the National Economy and National Interest.”
In Prem Kumar Parmar v. State, 1989 RLR 131, the Court observed that such offences are even worse than murders. It was observed
“The economic offences having deep rooted conspiracies and involving huge loss of public funds whether of nationalized banks or of the State and its instrumentalities need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of our country. Therefore, the persons involved in such offences, particularly those who continue to reap the benefit of the crime committed by them, do not deserve any indulgence and any sympathy to them would not only be entirely misplaced but also against the larger interest of the society. The Court cannot be oblivious to the fact that such offences are preceded by cool, calculated and deliberate design, with an eye on personal gains, and in fact, not all such offences come to the surface. If a person knows that even after misappropriating huge public funds, he can come out on bail after spending a few months in jail, and thereafter, he can continue to enjoy the ill-gotten wealth, obtained by illegal means, that would only encourage many others to commit similar crimes in the belief that even if they have to spend a few months in jail, they can lead a lavish and comfortable life thereafter, utilizing the public funds acquired by them.”
In Central Bureau of Investigation vs. Jagjit Singh, (2013) 10 SCC 686, the Supreme Court observed that such offences are great social wrongs and they have immense societal impact, the ultimate victim being the society as collective. It was said such offences not only creates a hazard in the financial interest of the society and but also creates a deep dent in the economic spine of the nation.
In Madhav Hayawadanrao Hoskot vs. State Of Maharashtra, (1978) 2 SCC (Cri) 469, full Bench of Hon’ble Supreme Court had severely castigated the lenient view taken by the Sessions Court in sentencing a convict in offences and observed as under:
“The soft justice syndrome vis-a-vis white collar offenders scandalizes the Court. It stultifies social justice and camouflages needed severity with naive leniency”.
“7. Social defence is the criminological foundation of punishment. The trial judge has confused between correctional approach to prison treatment and nominal punishment verging on decriminalisation of serious social offences. The first is basic and the second pathetic. That Court which ignores the grave injury to society implicit in economic crimes by the upperberth ‘mafia’ ill serves social justice. Soft sentencing justice is gross injustice where many innocents are the potential victims. It is altogether a different thing to insist on therapeutic treatment, hospital setting and correctional goals inside the prison (even punctuated by parole, opportunities for welfare work meditational normalisation and healthy self-expression) so that the convict may be humanised and, on release, rehabilitated as a safe citizen. This Court has explained the correctional strategy of punishment in Giasuddin’s Case (1978) 1 SCR 153 : (AIR 1977 SC 1926). Coddling is not correctional any more than torture is deterrent. While iatrogenic prison terms are bad because they dehumanize, it is functional failure and judicial pathology to hold out a benignly self-defeating non-sentence to deviants who endanger the morals and morale, the health and wealth of society.
CONCLUSION
The imposition of penalty levels that are proportionate to the severity of the offence, and are not corrupted by considerations related to other (misguided) penal objectives, would lead to significant improvements in the consistency and fairness of the sentencing process when punishing economic offences.
Unless the Courts award appropriately deterrent punishment taking note of the nature of the offence and the status of the offenders involved at the relevant time, people will lose faith in the justice delivery system and the very object of the special legislation on prevention of these crimes will be defeated. As of now, the appropriate sessions/special courts do not have the discretion to impose sentence more than 7 – 10 years in cases where the public exchequer has lost millions of rupees. This is because the legislations in their present form have simply capped the maximum limit to around 7 – 10 years.
The Court is the statute’s conscience, its decisions must reflect and promote the policy goals of punishment, lest the public’s faith in the Courts is shaken. The common citizen will not be surprised by the sentence decision. It should represent the general public’s disgust with the crime. As a result, the Court has a responsibility to safeguard and promote the public interest while also fostering public faith in the rule of law’s efficacy. Misplaced sympathy or unwarranted leniency will send a wrong signal to the public giving room to suspect the institutional integrity, affecting the credibility of its verdict.
The Parliament of country may need to revisit the existing legislations surrounding this framework and if required make suitable amendments. Best practises from around the World needs to be carefully studied on the basis of which some of these amendments can be made. In part II of this article, we shall be discussing and quoting from some of the best practises across the globe thereby highlighting the sentencing guidelines/provisions applicable against economic offences in those respective jurisdictions.
Author
Introduction
In today’s marketplace, where every single person/ juristic entity is striving to build a brand for themselves, a tag of a well-known trademark attached to its brand is considered to be a holy grail for trademark owners. Not only does well-known trademark bring a substantial commercial value for trademark owners but it also provides a sturdy protective shell for them to seek refuge in. Trademarks are signs which distinguish the goods and services of one enterprise from another. Trademarks provide a self-attraction feature, which contributes to the monetary arena of an enterprise. In extension to this well-known trademark, play a much more important role here. The limiting feature for a trademark protection is that it is confined to a prescribed territory where the protection is obtained. However, in times like these where consumers transcend the borders and social media blurs the distance between countries, well-known trademark offers a global recognition and protection to an enterprise. This article would dive into the various nuances of well-known trademarks and seek to understand the benefits and protection it offers in today’s constantly developing marketplace.
International framework for well-known trademark protection
The importance of well-known trademarks and the need to protect them was first addressed in the Paris convention in 1920s whereby the provision of Article 6bis was first incorporated. The content of the provision can be summarized as under:
- Under this provision there is no requirement for registration with respect to well-known trademarks in the country where protection is given under Article 6bis, as long as a trademark is recognized as well-known in that particular country.
- Protection shall be granted against those goods where a trademark used is identical or similar to a well-known trademark.
- The protection has been provided to similar marks that derive their essential parts from a well-known trademark or are ‘an imitation liable to create confusion’. Any such trademark shall be refused, have its registration cancelled or its use by unauthorized third parties can be prohibited.
- Under this provision, the concept of well known trademarks was related to trademark protection of products only and not services.
The limited scope of protection provided by the Paris convention was supplemented with Article 16(2) and 16(3) of the TRIPS agreement. The incorporation of Article 16 enhanced the scope of protection for well – known trademarks in three ways:
- By extending the scope of well-known trademark protection to services.
- Making the determination of well-known trademarks more flexible by taking the relevant sectors of the public and real-life market conditions into consideration.
- Expanding the scope of protection by considering cases of dissimilar goods or services where the trademark has a connection between the product and the owner of the infringing trademark and use by the third party would cause damage to the owner of well-known trademark.
Post the incorporation of Article 16, WIPO came under an obligation to protect all well-known trademarks. This led to joint recommendations from WIPO and Paris Convention Union. The guidelines provided in this join recommendations sets a non-exhaustive list of factors that an authority must take into consideration when deciding whether a mark is to be considered well-known or not. The joint recommendations enlarge the scope of protection of well-known trademarks by incorporating Article 2. Article 2 of the joint recommendation clearly states that a well-known mark in a Member State can be protected as a well-known mark if it is well-known in another Member State and the fact is known to the relevant Member State even if the relevant well-known mark has not been used or registered or an application for registration of the mark has not been filed in the Member State concerned.
Well-known trademarks in Indian jurisprudence
India has been protecting well-known trademarks for quite some time. The statutory provisions dealing with protection of trademarks date back to 1860s. During that time, trademarks were protected under the Indian Penal Code, 1860. Subsequently, the Indian Merchandise Marks Act, 1889 defined ‘trademarks’ with reference to the Indian Penal Code. It was in the Trademarks Act, 1940 where the term ‘trademark’ was specifically defined. Even when the 1940 Act does not specifically define well – known marks, it contained provisions which accord special protection to well-known marks if they satisfy the criteria laid down in Section 38 (1). Since India is a signatory to the Paris convention, TRIPS and GATT, it was in compliance with the agreement in TRIPS and the Paris convention that the Trademarks Act, 1999 and Trademarks Rules, 2002 were promulgated repealing the earlier laws on trademarks. It was in the 1999 Act that a statutory definition governing ‘well – known’ marks was laid down.
The Trademarks Act, 1999 defines well-known trademarks in Section 2(1) (zg) as “in relation to any goods or services, a mark which has become so to the substantial segment of the public which uses such goods or receives such services that the use of such mark in relation to other goods or services would be likely to be taken as indicating a connection in the course of trade or rendering of services between those goods or services and a person using the mark in relation to the first-mentioned goods or services”. The act also detail the factors in Sections 11(6), 11(7) and 11(9), which should be considered while deciding which trademark should be given the status of well-known trademark. The wording of the text suggest that the Registry has a final say on which trademark should fall within the ambit of well-known trademark, however, the Courts have also from time to time declared a trademark a well-known trademark when suit for passing off or infringement is presented before them. Section 11(6) lays down five factors that may be considered while determining a well-known mark. The section is reproduced as under:
(6) The Registrar shall, while determining whether a trade mark is a well-known trade mark, take into account any fact which he considers relevant for determining a trade mark as a well-known trade mark including—
(i) the knowledge or recognition of that trade mark in the relevant section of the public including knowledge in India obtained as a result of promotion of the trade mark;
(ii) the duration, extent and geographical area of any use of that trade mark;
(iii) the duration, extent and geographical area of any promotion of the trade mark, including advertising or publicity and presentation, at fairs or exhibition of the goods or services to which the trade mark applies;
(iv) the duration and geographical area of any registration of or any application for registration of that trade mark under this Act to the extent they reflect the use or recognition of the trade mark;
(v) the record of successful enforcement of the rights in that trade mark; in particular, the extent to which the trade mark has been recognised as a well-known trade mark by any court or Registrar under that record.
Section 11(7) of the Act then further elaborates on the meaning behind ‘relevant section’ of the public by providing three factors. The section is reproduced for ready reference as under:
(7) The Registrar shall, while determining as to whether a trade mark is known or recognised in a relevant section of the public for the purposes of sub-section (6), take into account—
(i) the number of actual or potential consumers of the goods or services;
(ii) the number of persons involved in the channels of distribution of the goods or services;
(iii) the business circles dealing with the goods or services, to which that trade mark applies.
As mentioned above, market places now a days transcend the borders and trademarks spill over into the markets of other countries. This is known as doctrine of transborder reputation. The Trademark Act, 1999 recognizes this via Section 11(9). Section 11 (9) of the Act, in line with Article 2 (3) (a) of the Joint Recommendations, provide for certain instances which need not be considered as pre – requisites while determining a well-known mark, which have been reproduced as under:
(9) The Registrar shall not require as a condition, for determining whether a trade mark is a well-known trade mark, any of the following, namely:—
(i) that the trade mark has been used in India;
(ii) that the trade mark has been registered;
(iii) that the application for registration of the trade mark has been filed in India;
(iv) that the trade mark—
(a) is well known in; or
(b) has been registered in; or
(c) in respect of which an application for registration has been filed in, any jurisdiction other than India; or
(v) that the trade mark is well-known to the public at large in India.
New Trademark Rules, 2017 and the registration process of well-known trademarks in India.
Before the new trademark rules came into place, the Registry made a list of well-known trademarks and uploaded it on the website. However, with the new rules, a trademark owner can directly file an application for a well-known trademark to the registrar. The steps to be followed for filing for an application for a well-known trademark are as under:
Form TM – M- : For getting mark registered as well- known trademark one needs to file an application on the form TM-M. The prescribed fee as per the first schedule of the rules in Form TM- M is Rs. 1,00,000/-. The Application need to be filed online through the e-filing services of the trademark made available at official website i.e. www.ipindia.nic.in.
There are certain documents which need to be filed along with the form. The documents are listed below:
- Statement of case describing the applicant’s rights in the trademark and describing the applicant’s claim that the trademark is a well-known trademark,
- Evidence in support of the applicant’srights and claim viz. evidence as to use of trademark, any application for registration made or registration obtained, annual sales turnover of the applicant’s business based on the subject trademark duly corroborated, evidence as to the number of actual or potential customers of goods or services under the said trademark, evidence regarding publicity and advertisement of the said trademark and the expenses incurred therefore, evidence as to knowledge or recognition of the trademark in the relevant section of the public in India and abroad.
- Details of successful enforcement of rights, if any, relating to the said trademark in particular extent to which trademark is recognized as well-known trademark by any Court in India or Registrar of Trademarks,
- Copy of the Judgment of any court in India or Registrar of Trademarks, if any, wherein the trademark is determined as well-known trademark.
The size of the document submitted along with statement of case as evidence / supporting document should be in PDF format with resolution of 200 X 100 dpi on A4 size papers and total file size shall not exceed the limit of 10 MB.
After the submission of the form, the office will consider whether to grant the status of well-known trademark or not on the basis of the documents submitted. It may or may not be considered by the Registry. If accepted, then the said mark will be added in the list of Well- Known Trademarks.
If one objects for inclusion of a particular Trademark in the list of Well- Known Trademarks then the applicant can file objection to the Registry of Trademark by stating its reasons for objection.
Copy of such objection will be given to the Applicant and they can file counter statement for such objections within stipulated time. After seeing both the side of the parties the final decisions will be given. If the Applicant’s mark is included in the list of well- known trademark the same shall be informed to the Applicant. This fact shall also be informed to the Trade mark Journal and the mark shall be included in the list of well- known Trademark which would also be available on the website.
Judicial trends of Well-known trademarks in India
The protection and safeguards regarding well-known trademark instilled in the Indian statute i.e. the Trademarks Act, 1999 can be seen via various pronouncements by the Indian Courts. Some of the important judicial pronouncements have been mentioned henceforth. First and foremost is the famous case of Rolex SA v. Alex Jewellery Pvt. Ltd. Ors, 2009 (6) Raj 489 (Del.), where the Plaintiff had approached the Hon’ble Delhi High Court seeking interim relief to restrain the Defendants from dealing in artificial jewellery or in any other product bearing the trademark/ tradename ROLEX or any deception variation thereof. The Hon’ble Court was of the view that bearing in mind the factors laid out in Section 11(6) of the Trademarks Act, 1999, the duration, extent and geographical area of trademark was in the favour of the Plaintiff. The Court further observed that
“The test of a well-known trademark in Section 2(zg) is qua the segment of the public which uses such goods. In my view any one in India, into buying expensive watches, knows of ROLEX watches and ROLEX has a reputation in India. Not only so, to satisfy the needs/demands of consumers in different countries, the well-known international brands which were earlier available at prices equivalent to prices in country of origin and which owing to the exchange rate conversion were very high, have adapted to the Indian situation and lowered prices. A large number have set up manufacturing facilities here and taken out several variants. Thus, merely because today the price of a ROLEX watch may be much higher than the price of items of jewellery of the defendants as argued, cannot come in the way of the consumer still believing that the jewellery is from the house of the plaintiff.”
In the matter of Kamal Trading Co. v. Gillette UK Limited, 1998 IPLR 135, the Plaintiff sought an injunction against the Defendant for the use of the mark ‘7’O Clock’ on their tooth brushes. The Court was of the opinion that the use of the mark ‘7 O’CLOCK’ by the Defendants would clearly result in deceiving the customers with the impression that the toothbrushes come from the house of Gillette, who use the mark on their razors and shaving cream across the world.
In the celebrated case of Whirlpool co. & Anr. V. NR Dongre, (1996) 5 SCC 714, the Plaintiff’s trademark ‘WHIRLPOOL’ expired in 1977 on account of failure to apply for renewal. Later in the year 1988, the Defendant no. 5, Usha International Ltd ,who was trying to ride on the goodwill of WHIRLPOOL, applied with the Registrar of Trademarks for registration of the trademark ‘WHIRLPOOL’ for certain goods including washing machines. Subsequently, the Plaintiff filed an objection which was dismissed by the Registrar on the basis of lack of reputation and non-usage of the trademark ‘WHIRLPOOL’ in India. It was further said that the usage of the trademark ‘WHIRLPOOL’ by N.R Dongre for selling his goods via Usha International Ltd would not create any confusion in the market. Thereafter, the Plaintiff herein filed an action for passing off and grant of an interlocutory injunction. While granting an injunction to Whirlpool corporation the Hon’ble Court observed that Whirlpool Corporation was the prior user of the trademark since 1937 and is registered in 65 countries where they have continuously been in business. Their brand is frequently advertised in international magazines and therefore has acquired transborder reputation and goodwill throughout the world. People across the world associate washing machines and other electronic goods with the brand. Therefore, if the Defendant is allowed to use this brand to sell their products, the customers might get deceived or confused as to the origin of the goods. This would lead to the Plaintiff to suffer an irreparable injury as the products of the Defendant and the Plaintiff differed in their make and quality of performance.
Similar observation were also made in the case of Aktiebolaget Volvo v. Volvo Steels Limited, 1998 (18) PTC 47 (Bom) where the Court ruled in the favour of the Plaintiff and held that the brand VOLVO has an established reputation in India and thus observed that:
“The Defendants…are hereby restrained from using the Plaintiffs’ name/trademark ‘VOLVO and/or any name/mark confusingly or deceptively similar thereto, in relation to online booking of bus tickets, live tracking of buses, telephonic booking of bus tickets or in relation to any other goods or services, in any manner, including…domain name…meta- tags associated with the impugned domain name, as a part of the email id…third party listings, references in social media and/or any representation made by the Defendants…amounting to infringement…and passing off…”
Dilution of Trademarks
Before the provision regarding well-known trademark was incorporated in the Trademarks Act, 1999, there was no concept of dilution of trademarks. With the incorporation of these provisions, a well-known trademark holder can restrict others from using his mark in a way that would harm the reputation of its brand by reducing his individuality. A trademark is diluted when the use of similar or identical trademarks in other non-competing markets blurs the distinction between the two trademarks. Protection against such dilution essentially means to protect the well-known trademark from losing its singular association in the public mind with a particular product. For instance, the word PEPSI is associated with a globally recognized soda beverage. Hence, any product which is then sold under the name PEPSI would deceive or confuse the customers as they would assume that the said product is by the company PEPSI itself, which might harm the reputation of the brand. To avoid such dilution to take place, the Trademarks Act, 1999 incorporated Section 29(4) which is reproduced as under:
“29 (4) A registered trade mark is infringed by a person who, not being a registered proprietor or a person using by way of permitted use, uses in the course of trade, a mark which—
(a) is identical with or similar to the registered trade mark; and
(b) is used in relation to goods or services which are not similar to those for which the trade mark is registered; and
(c) the registered trade mark has a reputation in India and the use of the mark without due cause takes unfair advantage of or is detrimental to, the distinctive character or repute of the registered trade mark.”
So effectively, this means that a well known trademark will transcend the classes of goods/services as provided in Schedule Four appended to the Trademarks Act, 1999. Eg. X`s logo and wordmark brand is registered under class 10 has become a well-known trademark. Y brand after getting itself registered under class 21 uses an identical logo and wordmark as that of X but for products under class 10. In this case, the courts will pass orders in favour of X and injunct Y from infringing the brand of X even though both X and Y operate in complete different spheres of business.
The dilution of trademarks principle was applied in the landmark case of Daimler Benz Aktiegesellschaft v. Hybo Hindustans, AIR 96 Del 239 where the use of the Plaintiff brand name BENZ was being used by the Defendant on undergarments. Applying the rationale of doctrine of dilution of trademark the Court in deciding the case acknowledged the logo of the Plaintiff as a well-known trademark and hence restrained the Defendant from using the impugned mark by stating that there was no valid reason as to why the Defendant would adopt the name “BENZ”, which is associated with one of the finest engineered cars in the world and has a trans-border reputation and goodwill for sale of undergarments.
To strike a balance between genuine claims and frivolous litigations, the Courts have laid down exceptions to the dilution of trademark principle , which are as follows.
- Any Rightful use, including a nominative or descriptive fair use, or facilitation of such fair use, of a famed mark by another individual other than as a designation of course for the person’s own goods and services.
- Promotion or advertisement that allows consumers to compare goods and services.
- All forms of news reporting and news commentary.
- Any mark which includes parodies, criticism or comments.
The parodies principle was used in the case of Louis Vuitton Malletier S.A. v. Haute Diggity Dog LLC, where the Defendant, who was the manufacturer of apparels for dogs, sold his product under the mark ‘Chewy Vuitton’. The Courts in the case held that this mark was clearly a parody of the famous brand ‘Louis Vuitton’ and did not dilute the trademark in any way. The consumers would not be deceived or confused between the two brand names.
Conclusion
At present there are 81 registered well-known trademarks in India. With the amendment in Trademark Rules, 2017, and the increased awareness in the marketplace regarding the benefits of well-known trademarks, this article sought to shed light on the nuances of the well-known trademarks. Dipping into the waters of well-known trademarks, one enters into a very niche arena of trademark litigation, therefore understanding the various provisions laid down by the legislature is of utmost necessity. In today’s evolving and developing marketplace it will be a boon to the trademark owners in India to follow the detailed procedure laid down in Trademark Rules, 2017 and get their marks registered as well-known trademarks. This would undoubtably provide security from being infringed or passed off by any unauthorized person. That being said, the Registry would have a heavier burden and would have to be cautious in granting the status of well-known trademark as frivolously granting such status might lead to monopoly in the marketplace and might preclude other parties from using even a similar trademark in respect of other goods and services.
Author
INTRODUCTION
The concept of bail has been the citadel of attention for criminal law practitioners and scholars. It is one of those law topics that has succeeded in becoming the center of attention for lawyers as well as theorists (jurists). And righty so! The dichotomy of jail and bail touches upon the most cherished and celebrated right of personal liberty of an individual. Also, the impact of arrest on the reputation and self-esteem of an individual is an important consideration [Joginder Kumar v. State of U.P, 1994 AIR 1349: 1994 SCC (4) 260], thus making “bail jurisprudence” a vital component of the overall criminal law jurisprudence.
The quality of a nation’s civilisation can be largely measured by the methods it uses in the enforcement of criminal law [Joginder Kumar (supra)]. While the criminal law proceeds on the basic presumption of innocence of an accused until proven guilty, arrest during investigation is considered to be a crucial tool in the hands of the investigating agency for securing ends of justice by ensuring a fair and uninfluenced investigation. However, it is this presumption of innocence, coupled with the importance attributed to liberty of an individual, that forms the building block of the established principle around which the whole bail jurisprudence has been knitted so far – bail is the rule, jail is the exception.
On this point, the observations of the Hon’ble Supreme Court in Sanjay Chandra v. CBI, (2012) 1 SCC 40 may be reverted to:
“In bail applications, generally, it has been laid down from the earliest times that the object of bail is to secure the appearance of the accused person at his trial by reasonable amount of bail. The object of bail is neither punitive nor preventative. Deprivation of liberty must be considered a punishment, unless it can be required to ensure that an accused person will stand his trial when called upon. The courts owe more than verbal respect to the principle that punishment begins after conviction, and that every man is deemed to be innocent until duly tried and duly found guilty.
From the earliest times, it was appreciated that detention in custody pending completion of trial could be a cause of great hardship. From time to time, necessity demands that some un-convicted persons should be held in custody pending trial to secure their attendance at the trial but in such cases, ‘necessity’ is the operative test. In this country, it would be quite contrary to the concept of personal liberty enshrined in the Constitution that any person should be punished in respect of any matter, upon which, he has not been convicted or that in any circumstances, he should be deprived of his liberty upon only the belief that he will tamper with the witnesses if left at liberty, save in the most extraordinary circumstances. Apart from the question of prevention being the object of a refusal of bail, one must not lose sight of the fact that any imprisonment before conviction has a substantial punitive content and it would be improper for any Court to refuse bail as a mark of disapproval of former conduct whether the accused has been convicted for it or not or to refuse bail to an un-convicted person for the purpose of giving him a taste of imprisonment as a lesson.”
As vast as the subject of bail is, the present article is confined to a particular aspect i.e. “cancellation of bail” – a mere drop in the ocean. The present article proceeds with the assumption that the reader is familiar with the basic concept and principles surrounding bail. To put very succinctly, Chapter XXXIII of the Code of Criminal Procedure, 1973 (Sections 436 to 450) deals with the provisions concerning bail and bonds. The most important sections of the said Chapter are referred hereinunder:
- Sections 437 provides for the granting of regular bail by the Magistrate;
- Section 439 provides for granting of regular bail by the Sessions and the High Court. Clause (2) confers upon the said Courts (i.e. the Sessions and the High Court) with the power of cancellation of bail;
- Section 438 deals with provisions relating to the granting of anticipatory bail by the Sessions Court and the High Court.
The present article is particularly aimed at discussing the aspect of “cancellation of bail”. The present discussion becomes relevant once bail has been granted to the accused by the Court.
BAIL : REJECTION v. CANCELLATION
At the very outset, it needs to be noted that rejection of bail, and, cancellation of bail already granted to an accused, are two separate issues governed by distinct principles. While the former is governed by the principles concerning grant of bail, the latter stands on a different footing altogether. The Hon’ble Supreme Court in State (Delhi Administration) v. Sanjay Gandhi, 1978 (2) SCC 411 has made the following elemental distinction in defining the nature of exercise while cancelling bail:
“Rejection of bail when bail is applied for is one thing; cancellation of bail already granted is quite another. It is easier to reject a bail application in a non-bailable case than to cancel a bail already granted in such a case. Cancellation of bail necessarily involves the review of a decision already made and can by and large be permitted only if, by reason of supervening circumstances, it would be no longer conducive to a fair trial to allow the accused to retain his freedom during the trial.”
The burden of fair and judicial exercise of discretion is comparatively higher in cases where the Courts are called upon to cancel bail already granted as compared to cases where the Courts are called upon to grant or reject the bail. In the landmark case of Dolat Ram v. State of Haryana, (1995) 1 SCC 349 Hon’ble Supreme Court on the question of cancellation of bail already granted observed:
“Rejection of bail in a non-bailable case at the initial stage and the cancellation of bail so granted, have to be considered and dealt with on different basis. Very cogent and overwhelming circumstances are necessary for an order directing the cancellation of the bail, already granted. Generally speaking, the grounds for cancellation of bail, broadly (illustrative and not exhaustive) are: interference or attempt to interfere with the due course of administration of justice or evasion or attempt to evade the due course of justice or abuse of the concession granted to the accused in any manner… However, bail once granted should not be cancelled in a mechanical manner without considering whether any supervening circumstances have rendered it no longer conducive to a fair trial to allow the accused to retain his freedom by enjoying the concession of bail during the trial. These principles, it appears, were lost sight of by the High Court when it decided to cancel the bail, already granted. The High Court it appears to us overlooked the distinction of the factors relevant for rejecting bail in a non bailable case in the first instance and the cancellation of bail already granted.”
The observations of the Court in Bhagirathsinh v. State of Gujarat, (1984) 1 SCC 284 : 1984 SCC (Cri) 63 may also be noted in this regard:
“In our opinion, the learned Judge appears to have misdirected himself while examining the question of directing cancellation of bail by interfering with a discretionary order made by the learned Sessions Judge. One could have appreciated the anxiety of the learned Judge of the High Court that in the circumstances found by him that the victim attacked was a social and political worker and therefore the accused should not be granted bail but we fail to appreciate how that circumstance should be considered so overriding as to permit interference with a discretionary order of the learned Sessions Judge granting bail. The High Court completely overlooked the fact that it was not for it to decide whether the bail should be granted but the application before it was for cancellation of the bail. Very cogent and overwhelming circumstances are necessary for an order seeking cancellation of the bail and the trend today is towards granting bail because it is now well-settled by a catena of decisions of this Court that the power to grant bail is not to be exercised as if the punishment before trial is being imposed. The only material considerations in such a situation are whether the accused would be readily available for his trial and whether he is likely to abuse the discretion granted in his favour by tampering with evidence. The order made by the High Court is conspicuous by its silence on these two relevant considerations. It is for these reasons that we consider in the interest of justice a compelling necessity to interfere with the order made by the High Court.”
Similar observations were made by the Court in X v. State of Telangana, (2018) 16 SCC 511:
“…Above all, the Court must bear in mind that it is a settled principle of law that bail once granted should not be cancelled unless a cogent case, based on a supervening event has been made out. We find that to be absent in the present case.”
The issue of cancellation of bail once granted requires considerations that go beyond the grounds for grant of bail on account of the fact that the said exercise concerns appreciation of either of the two issues:
- Supervening circumstances including breach of conditions imposed at the time of grant of bail;
- Illegality or perversity in the Order granting bail.
While ground (a) has been the governing criteria for cancellation of bail under section 439(2) of the CrPC for a long time now, the second ground i.e. ground (b) has recently been at the heart of several Special Leave Petitions preferred by the State or the Complainant/Victim against the orders of the High Courts enlarging an accused on bail.
CANCELLATION OF BAIL
SUPERVENING CIRCUMSTANCES:
Given the established bail jurisprudence, the Courts are required to consider inter alia the following factors while granting bail:
- Nature and gravity of the charge;
- Severity of punishment in case of conviction;
- Nature of supporting evidence;
- Prima facie satisfaction of the Court in support of the charge;
- Reasonable ground for believing that the applicant has committed the offence alleged against him;
- Reasonable apprehension of tampering of the witness or apprehension of threat to the complainant;
- Reasonable apprehension of tampering of the evidence or interference in the ongoing investigation;
- Likelihood of the applicant absconding, if released on bail (flight risk);
- Standing and status of the applicant including past conduct and prior convictions;
- Likelihood of the offence being continued or repeated;
- Opportunity to the applicant for preparing his defense on merits;
- Period of detention;
- Health, age and sex of the accused;
- Undue delay in the trial of the case;
- Objection of the prosecuting authorities; etc.
[State of Maharashtra v. Sitaram Popat Vital, AIR 2004 SC 4258; Ram Govind Upadhyay v. Sudarshan Singh, AIR 2002 SC1475; Prahlad Singh Bhati v. N.C.T. Delhi, AIR 2001 SC 1444]
Given the fact that at the time of granting bail, the Courts are primarily indulged in prima facie “risk evaluation” and weighing of the possibilities of abuse of liberty if granted, it is only logical that any circumstances subsequent to the grant of bail that alters/modifies the considerations forming the basis of the order granting bail, be considered for its cancellation. To put it simply, if an accused has been enlarged on bail on account of the consideration that there is no likelihood of him tampering the witnesses/evidence and subsequently, upon grant of bail, it is brought to the notice of the Court that the accused threatened any witness/tampered any evidence, the said circumstance would warrant the cancellation of bail granted to the accused.
There might be a situation wherein some new facts are uncovered during the course of the investigation post the grant of bail to the accused, say, new evidence is uncovered/brought on record to strengthen a prima facie case of commission of an offence of greater severity by the accused, in such circumstances, cancellation of bail becomes imperative. The Courts in Puran v. Rambilas, 2001 (6) SCC 338 relied and reiterated the observations made by the Court in Gurcharan Singh v. State (Delhi Admn.), 1978 AIR 179 and observed:
“Further, it is to be kept in mind that the concept of setting aside the unjustified, illegal or perverse order is totally different from the concept of cancelling the ball on the ground that the accused has misconducted himself or because of some new facts requiring such cancellation. This position is made clear by this Court in Gurcharan Singh v. State (Delhi Admn.). In that case the Court observed as under
“If, however, a Court of Session had admitted an accused person to bail, the State has two options. It may move the Sessions Judge if certain new circumstances have arisen which were not earlier known to the State and necessarily, therefore, to that court. The State may as well approach the High Court being the superior court under Section 439(2) to commit the accused to custody.”
Another scenario where cancellation of bail may be sought is where the Court granting bail to the accused had imposed certain conditions on the accused and he had breached the same. For example, the Court granting bail directs the accused to appear before the Investigating agency every week and co-operate in the investigation, however, the accused does not appear before the Investigating agency and attempts to leave the State. This would be a case of breach of the conditions of bail warranting cancellation.
ILLEGALITY OR PERVERSITY IN THE ORDER GRANTING BAIL
The second, and comparatively more intriguing (forgive the author’s bias towards the degree of interest reflected under this head) is the one of “perversity”. Under this head, the attack is on the Order granting bail to the accused. The contention of the challenger (usually the Complainant or State) herein would be the illegality and perversity of the order vide which the accused was enlarged on bail rather than the subsequent developments. Essentially, the Applicant/Petitioner under this head makes a case that the Court that enlarged the accused on bail overlooked material considerations and passed a perverse, unreasonable, and arbitrary order. It may be loosely considered as an Application/Petition challenging the Order granting bail. Indicative heads for cancellation of bail under the said head primarily center around the improper exercise of discretion inter alia includes cases of:
- Non-application of mind by the Court granting bail;
- Overlooking of material considerations or taking into account irrelevant considerations;
- Arbitrary or unreasoned order; etc.
Herein, there may not be any supervening circumstances warranting cancellation, but the illegality of the order granting bail is sufficient for warranting cancellation. Hence, thanks to the recent judgments of the Hon`ble Supreme Court (as mentioned below), bail granted illegally and/or improperly by wrong and arbitrary exercise of judicial discretion can be cancelled by the High Court under Section 439(2) of the Code, even if there is no supervening circumstance against an accused (like tampering of witnesses of going incognito) appearing in the record after grant of bail [State of Orissa v. Jagannath Patel, 1992 Cri. LJ 1818].
The Hon’ble Supreme Court in Padmakar Tukaram Bhavnagare v. State of Maharashtra, (2012) 13 SCC 720 observed and held “perversity” as a ground for cancellation of bail:
“It is true that this Court has held that generally speaking the grounds for cancellation of bail broadly are interference or attempt to interfere with the due course of justice or abuse of the concession granted to the accused in any manner. This Court has clarified that these instances are illustrative and bail can be cancelled where the order of bail is perverse because it is passed ignoring evidence on record or taking into consideration irrelevant material. Such vulnerable bail order must be quashed in the interest of justice. [See Dolat Ram v. State of Haryana, (1995) 1 SCC 349 : 1995 SCC (Cri) 237 and Dinesh M.N. (S.P.) v. State of Gujarat [(2008) 5 SCC 66].”
The Hon’ble Supreme Court in Omar Usman Chamadia v. Abdul (JT 2004 (2) SC 176) desisted the practice of High Courts in passing unreasoned orders in criminal matters thus directing the High Courts to indicate reasons especially in cases where the Order of the lower Court is overturned:
“However, before concluding, we must advert to another aspect of this case which has caused some concern to us. In the recent past, we had several occasions to notice that the High Courts by recording the concessions shown by the counsel in the criminal proceedings refrain from assigning any reason even in orders by which it reverses the orders of the lower courts. In our opinion, this is not proper if such orders are appealable, be it on the ground of concession shown by the learned counsel appearing for the parties or on the ground that assigning of elaborate reasons might prejudice the future trial before the lower courts. The High Court should not, unless for very good reasons desist from indicating the grounds on which their orders are based because when the matters are brought up in appeal, the court of appeal has every reason to know the basis on which the impugned order has been made. It may be that while concurring with the lower courts’ order, it may not be necessary for the said appellate court to assign reasons but that is not so while reversing such orders of the lower courts. It may be convenient for the said court to pass orders without indicating the grounds or basis but it certainly is not convenient for the court of appeal while considering the correctness of such impugned orders. The reasons need not be very detailed or elaborate, lest it may cause prejudice to the case of the parties, but must be sufficiently indicative of the process of reasoning leading to the passing of the impugned order…
…Whereas in the instant case it is a final order reversing the order of the learned Sessions Judge wherein the High Court thought it not necessary to give the reasons on the ground that the counsel appearing for the parties did not press for a reasoned order. Consequently, when the matter was taken up for hearing, we had no benefit of the reasons which persuaded the High Court to pass the impugned order…..
…But we do record our disapproval of the practice followed by the High Court reflected in the impugned order and hope the same will not be repeated…”
The principle applies to bail matters as well. The High Court cannot, in a mechanical manner, grant or reject the bail of the accused nor can the same be cancelled without assigning any reasons. In cases where no reasons are assigned for granting bail to an accused, the same is cancelled on account of the arbitrary and perverse nature of the Order.
The Hon’ble Supreme Court in Ram Govind Upadhyay v. Sudarshan Singh, 2002 Cri LJ 1849 at 1852 : AIR 2002 SC 1475 was dealing with an Order wherein the High Court had granted bail to the accused by overturning the Order of the Sessions Court. The Hon’ble Supreme Court observed that the basic criteria for cancellation of bail is interference or attempt to interfere with the administration of justice and/or abuse of privilege granted to the accused. The Court noted that undoubtedly, the considerations applicable to the grant of bail vis-à-vis considerations for cancellation of an order granting bail are independent and do not overlap each other. However, in the event of non-consideration of relevant considerations for the purpose of grant of bail, especially when an earlier order of rejection is available on the records, it is a duty incumbent on the High Court to explicitly state the reasons as to why there was a sudden departure in the order of grant as against the earlier rejection.
In Mahipal v. Rajesh Kumar, (2020) 2 SCC 118, the Hon’ble Supreme Court discussed the issue of the perversity of the order passed by the High Court granting bail to the accused and held:
“The provision for an accused to be released on bail touches upon the liberty of an individual. It is for this reason that this Court does not ordinarily interfere with an order of the High Court granting bail. However, where the discretion of the High Court to grant bail has been exercised without the due application of mind or in contravention of the directions of this Court, such an order granting bail is liable to be set aside. The Court is required to factor, amongst other things, a prima facie view that the accused had committed the offence, the nature and gravity of the offence and the likelihood of the accused obstructing the proceedings of the trial in any manner or evading the course of justice. The provision for being released on bail draws an appropriate balance between public interest in the administration of justice and the protection of individual liberty pending adjudication of the case. However, the grant of bail is to be secured within the bounds of the law and in compliance with the conditions laid down by this Court. It is for this reason that a court must balance numerous factors that guide the exercise of the discretionary power to grant bail on a case-by-case basis. Inherent in this determination is whether, on an analysis of the record, it appears that there is a prima facie or reasonable cause to believe that the accused had committed the crime…”
CONCLUSION
While the considerations for rejection of bail and cancellation of bail once granted have been held to be separate and distinct, cancellation of bail on the ground of perversity and illegality of the order granting bail does require a variety of factors to be considered for cancellation of bail. It is in cases where these factors are improperly weighed that a higher Court may cancel the bail thus, essentially, treating an application for cancellation of bail as an appeal simpliciter against the order granting bail. The procedural distinction being that an application for cancellation of bail may be moved before the same Court in a case concerning supervening circumstances, while in case of “perversity” it is always for the higher Court to determine the legality of the order. The issue of bail is one where the Courts are required to balance the individual right of the accused against the right of the society. In the end, the balance needs to be maintained by way of judicious exercise of judicial discretion conferred upon the Courts.
Such exercise of jurisdiction might become redundant in light of subsequent circumstances, or in cases where the Courts fail to exercise the discretion in a prudent manner by granting bail to undeserving accused persons in a mechanical manner, thus necessitating the provisions for cancellation of bail. Taking into consideration the jurisprudence and the scheme of bail in the criminal justice administration system, grant/rejection as well as cancellation of bail forms the bedrock for securing a fair and proper investigation enabling the Courts to secure the ends of justice by way of a judicious exercise of judicial discretion.
Author
“What makes the joint action of a group of ‘n’ persons more fearsome than the individual actions of those ‘n’ persons is the division of labour and the mutual psychological support that collaboration affords.”
-Bad Acts and Guilty Minds: Conundrums of the Criminal Law
Conspiracy is an ‘inchoate’ offence. It is an independent offence and can be charged even if the intended offence is not committed or attempted. If two people, for example, plan the joint robbery of a store, they can be liable for conspiracy despite not carrying out the robbery. While the substantive crime is robbery, the conspiracy to commit robbery is inchoate as it has not been accomplished.
In India, conspiracy was initially considered as only a civil wrong, but later on it was brought under the ambit of Indian Criminal Law. Conspiracy was not an offence under the Indian Penal Code, 1860 (hereinafter referred to as the IPC) until the Criminal Law Amendment Act of 1913 was passed which incorporated, Sections 120A and 120B in the IPC.
Section 120A IPC as contained in Chapter V-A defines the offence of criminal conspiracy. It states that when two or more persons agree to do or cause to be done an illegal act, or, an act, which is legal by illegal means, such an agreement is designated as “criminal conspiracy”. It then provides an exception to the effect that no agreement except an agreement to commit an offence shall amount to a criminal conspiracy unless some act besides the agreement is committed by one or more parties to such agreement in pursuance thereof. The explanation appended to the Section clarifies that it is immaterial whether the illegal act is the ultimate object of such agreement or is merely incidental to that object.
Section 120-B, IPC provides punishment for committing the offence of criminal conspiracy. It provides that whoever is a party to a criminal conspiracy to commit an offence punishable with death, imprisonment for life, or rigorous imprisonment for a term of two years or upwards shall be punished in the same manner as if he had abetted such offence provided there is no express provision made in the Code for punishment of such conspiracy. Sub-section (2) of Section 120-B, IPC, however, provides that a person who is a party to a criminal conspiracy other than a criminal conspiracy to commit an offence punishable as aforesaid shall be punished with an imprisonment of either for a term not exceeding six months or with fine or both.
Reading of Section 120-A and Section 120-B, IPC conjointly elucidates that an offence of “criminal conspiracy” is a separate and distinct offence. Therefore, in order to constitute a criminal conspiracy and to attract its rigour, two factors must be present in the case on facts:
Firstly, an agreement between two or more persons, and
Secondly, agreement must relate to doing or causing to be done either (a) an illegal act; or (b) an act which is legal in itself but is done by illegal means.
However, if the agreement is not an agreement to commit an offence, it does not amount to criminal conspiracy unless it is followed up by an overt act done by one or more persons in furtherance of such agreement. The offence is complete as soon as there is meeting of minds and unity of purpose between the conspirators to do that illegal act, or legal act by illegal means. It is undoubted that the general conspiracy is distinct from number of separate offences committed while executing the offence of conspiracy. Each act constitutes separate offence punishable, independent of the conspiracy.
“A conspiracy is seldom born of ‘open covenants openly arrived at.” It may therefore be difficult to adduce direct evidence of the same. Keeping that in mind, the Courts in India have given the prosecution a broad discretion in offering its case.
For an offence under Section 120B, the prosecution need not necessarily prove that the perpetrators expressly agreed to do or cause to be done the illegal act; the agreement may be proved by necessary implication. The offence can be only proved largely from the inference drawn from acts or illegal omissions committed by the conspirators in pursuance of a common design. The prosecution will also more often rely upon circumstantial evidence. It is not necessary to prove actual meeting of conspirators. Nor it is necessary to prove the actual words of communication. The evidence as to transmission of thoughts sharing the unlawful design is sufficient. Surrounding circumstances and antecedent and subsequent conduct of accused persons constitute relevant material to prove charge of conspiracy [See Shivnarayan Laxminarayan Joshi v. State of Maharashtra, AIR 1980 SC 439; Mohammad Usman Mohammad Hussain Maniyar v. State of Maharashtra, AIR 1981 SC 1062; and Kehar Singh v. State, AIR 1988 SC 1883].
In Yogesh @ Sachin Jagdish Joshi v. State of Maharashtra [(2008) 6 SCALE 469], the Hon’ble Apex Court held that:
“The existence of the conspiracy and its objective can be inferred from the surrounding circumstances and the conduct of the accused. But the incriminating circumstances must form a chain of events from which a conclusion about the guilt of the accused could be drawn. It is well settled that an offence of conspiracy is a substantive offence and renders the mere agreement to commit an offence punishable even if an offence does not take place pursuant to the illegal agreement.”
In the case of Hanumant Govind Nargundkar v. State of M.P [1953 CRI.L.J. 129], the Apex Court has held that while appreciating the circumstantial evidence the following needs to be ascertained by the Court:
(1) whether the circumstances are fully established;
(2) the circumstances should be conclusive in nature and it should exclude every other hypothesis than the hypothesis which is to be proved; and
(3) the chain of circumstances should be so complete that it does not leave reasonable ground for conclusion consistent with innocence of the accused.
Thus, an agreement may be shown by wholly circumstantial evidence, and the individual’s intent to join the agreement can be demonstrated by “circumstances altogether inconclusive which may, by their number and joint operation be sufficient to constitute conclusive proof.”
The traditional view of conspiracy law has always been that the added group danger justifying this crime was based upon an agreement linking two or more willing criminal partners together. In many situations, however, only one party may be a willing participant while the other is simply one who feigns agreement. In such a situation, the question arises as to whether only the “true” conspirator should be guilty for the offence of conspiracy.
To address the said question, Section 10 of Indian Evidence Act, 1872 may be examined, which states that:
“Things said or done by conspirator in reference to common design where there is reasonable ground to believe that two or more persons have conspired together to commit an offence or an actionable wrong, anything said, done or written by any one of such persons in reference to their common intention, after the time when such intention was first entertained by any one of them, is a relevant fact as against each of the persons believed to be so conspiring, as well for the purpose of proving the existence of the conspiracy as for the purpose of showing that any such person was a party to it.”
In other words, anything said/done/written by a conspirator related to the “common intention” of all conspirators, after such ‘intention’ (to commit the conspiracy) was first entertained by them, is a relevant fact against each of the co-conspirators. This principle is based on to the ‘principle of agency’ where each conspirator is held liable for anything said/done/or written by his fellow co-conspirators in furtherance of their common intention to commit the conspiracy.
Section 120B and conviction of a single accused: “A person cannot conspire with himself”
As per the definition of Criminal Conspiracy as provided in Section 120-A of IPC, one person cannot be held guilty for criminal conspiracy and there must exist an involvement of at least two or more person.
The said principle was laid down in the landmark case of Topan Das v. State of Bombay, [AIR 1956 SC 33], wherein it was held that under section 120B IPC for criminal conspiracy when all except one of the accused are acquitted, conviction of remaining accused is illegal. Herein, the Appellant along with the other three named accused (acquitted) were charged under section 120B read with sections 471 and 420, IPC, 1860 for conspiring to use forged documents and thereby induced the Controller of Imports to grant import licenses. The magistrate acquitted all the accused. But the High Court, on State appeal, reversed the order of acquittal of the appellant and convicted him for the substantive offence as well as conspiracy to commit such offences under section 120B, IPC but maintained acquittal of others. The Hon’ble Supreme Court concluded that, the Appellant could not be convicted of the offence under section 120B, IPC when his alleged co-conspirators were acquitted of the offence. When all the accused, except one, are acquitted of the charge, the remaining one cannot be convicted, unless the charge against him has been that he conspired to commit an offence not only with the acquitted co-accused but also with some other persons who have not been tried because the offender happens to be absconding or is insane or is a minor below seven years of age, or because of any other reason and such a charge is proved. The appeal was allowed and the conviction was set aside.
In Bimbadhar Pradhan v. State of Orissa [MANU/SC/0024/1956], the Court distinguished the case from Topandas (supra) and other similar rulings observing that in those cases the only persons alleged to have been guilty of the offence of criminal conspiracy were the persons placed on trial. However, in the instant case, besides the other accused persons who were acquitted, there was one Approver who led the evidence for establishing the case u/s 120B against the Appellant. Thus, despite the acquittal of the other accused persons, the Appellant’s conviction was not set aside.
In Vinayak v. State of Maharashtra [MANU/SC/0136/1984], argument on lines of Bimbadhar (supra) judgment was not raised by the State and hence Topandas was followed.
In Brathi v. State of Punjab [MANU/SC/0071/1991], the Court discussed the principles governing conviction of a single accused in cases concerning offences under section 34, 149 and 120-B of the IPC. The Court reiterated that the essence of these offences is not in conviction of a requisite number of persons, but in proof of fact beyond reasonable doubt that the requisite number of persons were involved.
Hence, for setting aside a conviction under section 120-B on the ground that all other co-accused persons have been acquitted, it needs to be shown that the offence of conspiracy was not committed by the Appellant/Petitioner/accused before the Court, in agreement with others like Approver, unknown accused/suspects, etc. Once it is shown that the charge of conspiracy against such accused is based on the same evidences as the other co-accused who have been acquitted and that the facts do not disclose commission of conspiracy (with others), the conviction under section 120-B is liable to be set aside as a person cannot conspire with himself.
Participation and Punishment: Acts/Omissions of the Co-conspirators
Coming to the principle of agency in criminal conspiracy, it is well established that the co-conspirators can be punished for the actions/omissions of one or more of them despite the fact that the said act/omission was not committed by all of them personally. In the State of H.P. v. Krishna Lal Pradhan [1987 AIR (SC) 773], it was observed that if pursuant to the criminal conspiracy the conspirators commit several offences, then all of them will be liable for the offences, even if some of them had not actively participated in the commission of the offences. It can be understood that principle of agency as introduced by Indian Evidence Act, 1872 makes it evident that the act done by one conspirator is admissible against the co-conspirators.
In Ram Narayan Popli v. CBI [(2003) 3 SCC 641], while dealing with the conspiracy the majority opinion laid down that:
“The encouragement and support which co-conspirators give to one another rendering enterprises possible which, if left to individual effort, would have been impossible, furnish the ground for visiting conspirators and abettors with condign punishment. Thus, the conspiracy is held to be continued and renewed as to all its members wherever and whenever any member of the conspiracy acts in furtherance of the common design.”
Further in the case of State v. Nalini [1999 (5) SCC 253], Hon’ble Justice S.S.M. Quardri, after a survey of existing case laws, made the following pertinent observation:
“It is not necessary that all the conspirators should participate from the inception to the end of the conspiracy; some may join the conspiracy after the time when such intention was first entertained by any one of them and some others may quit from the conspiracy. All of them cannot but be treated as conspirators. Where in pursuance of the agreement the conspirators commit offences individually or adopt illegal means to do a legal act which has a nexus to the object of conspiracy, all of them will be liable for such offences even if some of them have not actively participated in the commission of those offences.”
Let us understand this principle through an illustration. Let’s assume that a criminal conspiracy was hatched between A, B and C to eliminate X and to give effect to the plan, B employed D a contract killer to execute the murder of X. Pursuant to the above plan, A, B and C drove D to X’s house where D caused the murder of X by shooting him at point blank range. Even though A, B and C have not committed the overt act of murder the following charges would be framed against:
A – 1st Charge under Section 302 read with Section 120B of IPC
B – 1st Charge under Section 302 read with Section 120B of IPC
C – 1st Charge under Section 302 read with Section 120B of IPC
D – 1st Charge under Section 302 + 2nd Charge under Section 302 read with Section 120B of IPC
In a scenario if the murder does not occur, they may still be guilty of conspiracy to commit murder and be charged under Section 120B, IPC as conspiracy in itself is a substantive offence, if the evidence shows that they deliberated and committed an overt act in furtherance of their agreement. Herein the charges will be framed as under:
A – 1st Charge under Section 307 read with Section 120B of IPC
B – 1st Charge under Section 307 read with Section 120B of IPC
C – 1st Charge under Section 307 read with Section 120B of IPC
D – 1st Charge under Section 307 + 2nd Charge under Section 307 read with Section 120B of IPC
Conversely, if their attempt was a spur-of-the-moment decision and not a product of prior deliberation, and if X survives the assault, they would be guilty of attempted murder but not conspiracy to commit murder. If their attempt succeeds in the latter scenario, they would be guilty of murder and charged under Section 302, IPC alone.
According to the Principle of agency, pursuant to the criminal conspiracy if the conspirators commit several offences, then all of them will be liable for the offences even if some of them had not actively participated in the commission of the offences. The essence of this principle is that it deters crime by increasing penalties for those who join conspiracies. If potential criminals have adequate advance knowledge of the penal provisions, they assume the risk that they will be held criminally liable for the actions of their co-conspirators, even when those actions fall outside the scope of the criminal agreement. Thus, this extended liability serves a cautionary role meant to deter criminal behaviour.
Advocate Puja Jakhar and Advocate Suruchi Jaiswal are Junior Counsels at BlackRobe Chambers.
Authors
Imagine that you own a trademark in India that you have diligently registered with the Indian Patent and Trademark Office. As your domestic sales increase, you recognize that international markets offer unique prospects that your brand is eager to pursue. You take the first step towards an international presence after a thorough study and investigation. However, to your utter shock, you discover that someone else has already registered your trademark in the international market.
How is it possible? Isn’t your registered trademark supposed to protect you against these “trademark squatters”? Unfortunately, trademark registrations only provide territorial protection, meaning that they only apply to the nation in which the brand was registered. Your Indian brand trademark is only protected in India, giving trademark squatters plenty of opportunities to utilise your mark elsewhere.
Through this article, we’ll be delving into the issue of trademark squatting, its consequences, and the safeguards available to the brand owners against the squatters.
Meaning of Trademark Squatting:
The World Intellectual Property Organisation (“WIPO”) defines Trademark Piracy (Squatting) as “the registration or use of a generally well-known foreign trademark that is not registered in the country or is invalid as a result of non-use.” [See World Intellectual Property Organization, WIPO Intellectual Property Handbook, 90 (2008)]. It occurs when a person (squatter) in a foreign country registers a trademark that has already been registered by its true owner in its original country.
Squatters try to register trademarks with the goal of extorting rents from brand owners or other companies that rely on the brand, such as importers in the case of international brands. A typical scenario is for a squatter to register the trademark of a foreign brand and wait until the foreign brand owner enters the local market.
A case in point is the U.S. coffee shop chain Starbucks. When entering the Russian market in 2005, Starbucks faced the fact that its trademark was owned in Russia by an individual, Sergei Zuykov, who offered to reassign the trademark for US$ 600,000. Instead, Starbucks opted to invalidate Zuykov’s trademark before court, which resulted in a protracted legal dispute substantially delaying Starbucks’s entry into the Russian market. In China, Apple ended up paying 60 million dollars to the local owner of the mark “iPad.”
A textbook case of trademark squatting in India was the PS5 conflict. Sony’s launch of its latest edition of gaming console Playstation 5 or PS5 in India was halted when it discovered that a trademark squatter named Hitesh Aswani had surreptitiously filed a trademark application for “PS5”, for the identical specification of goods that were covered under Sony’s PS4 trademark registration. Sony then filed an opposition against the said trademark, and the Applicant withdrew his application.
Safeguards against Trademark Squatting:
A. Application for cancellation of the trademark by proving Abandonment and Non-Use.
An important aspect that must be kept in mind is that there are two kinds of systems where a trademark can be obtained, namely, “first to file” and “first to use”. In the former system, the individual or business that first files for the protection of mark shall be granted the protection, whereas in the latter the individual or business that first uses the mark shall be granted protection for use of such mark. India follows the ‘first to use’ system.
Chapter VI of the Trademarks Act, 1999 deals with the use of trademark and registered users and Section 47 permits the removal of the trademark upon non-use. Section 47 lays down two situations in which a registered trademark is liable to be removed:
- When it is proved that the trademark was registered in the absence of a bona fide intention by the applicant. This bona fide intention is in the context of the use of the trademark. For example, when a trademark is registered in 40 classes but is used only in 2 classes, it is a defensive registration. This rule applies to Companies and registered users where no bona fide use is observed in relation to the goods and services for a period of 3 months before the date of application.
- When it is proved that there has been no bona fide use of the trademark for a continuous period of 5 years or more from the date of registration of the mark and three months prior to the filing of the application for removal of trademark from the register. This means that when the trademark has not been used with a bona fide intention for a continuous period of at least 5 years and 3 months, it is liable to be removed.
However, the registered trademark may not be removed if the case fulfills the requirements mentioned under clause 3 of Section 47, which are:
- A company is about to be registered under the Companies Act and the registered proprietor intends to assign the trademark to the company in the near future.
- The Registered proprietor intends the trademark to be used by a registered user upon its registration.
- The alleged non-use of the trademark is under special circumstances, such as restricted use by law, which does not relate to the intention of the proprietor.
- Judicial Interpretation of what constitutes abandonment/non-use of the trademark:
With regard to Section 47 of the Act, a non-use of a registered trademark occurs when it is not used for more than a period of 5 years and 3 months, which will make him lose the trademark in rectification proceedings. ‘Use’ of a trademark means that when there is a bona fide intention for the use of the mark in the ordinary course of trade and not only to reserve the right to use the mark. In J. N. Nicholas Ltd. v. Rose and Thistle [1990 SCC OnLine Cal 157], it was held that use of a trademark does not necessarily mean a physical sale. Even if the mark has been used for the purpose of advertisement in the said period of 5 years and 3 months, without existing on the goods, such use is valid in the eyes of law.
In National Bell Co. v. Gupta Goods Manufacturing Co. (P) Ltd. [AIR 1971 SC 898], the Supreme Court held that “if a registered proprietor of a mark ignores repeated infringements of its mark, then it can even be considered as an abandonment of its mark.”
Further the Delhi High Court in Radico Khaitan Limited v. Brima Sagar Maharashtra Distilleries Ltd. [(2014) 60 PTC 405], held that “mere introduction/mention of additional material would not lead to the conclusion that the registered mark has not been used and consequently must not be deemed to have been abandoned by the proprietor thereof. So long as the registered mark is used in substantially the same manner in which it is registered it must be deemed/considered to constitute the use of the registered mark itself. Where the use of a mark, registered or unregistered is apparent, the mere addition of material on the label or other material on which it appears would not lead to the conclusion that the mark has not thereby been used.”
The Supreme Court in Meghraj Biscuits Industries Ltd. v. Commissioner of Central Excise, U.P. [(2007) 3 SCC 780], held that “Discontinuation of business in respect of a product does not necessarily amount to abandonment.”
In Parker Hannifin France Sas v. Kanwar Sachdeva [2020 SCC OnLine IPAB 163 (IPAB Chennai)], it was held that if a wordmark or logo mark has been in use by a prior user and the same has been extensively used by that entity – but some third party (squatter) or blackmailer gets the trademark registered in his or her name then the prior user can very well move a petition for cancellation under section 47 and 57 before the IPAB stating petition for removal on the grounds of non-use and cancellation of the trademark.
In the case of Vishnudas Trading as Vishnadas Kishendas v. Vazir Sultan Tobacco Co. Limited [JT 1996 (6)], the applicant filed for limiting the use of the trademark of ‘Charminar’ used for the manufacture of cigarettes. This trademark was also registered in other classes of zarda and quiwam, which were intended to be used by the proprietor, but was never actually used. The Court applied the provision of non-use and held that if a person is trading or manufacturing only one or some goods and have no bona fide intention to actually trade or manufacture some of the goods, but have it registered as a trademark which covers several goods, then such registration is liable to be rectified or removed and only those classes that are actually used by the proprietor shall be valid.
The Hon’ble Supreme Court in the Kabushiki Kaisha Toshiba v. TOSIBA Appliances [(2008) 10 SCC 766] held that “The intention to use a trade mark sought to be registered must be genuine and real.” The division bench further explained that “when a trade mark is registered, it confers a valuable right. It seeks to distinguish the goods made by one person from those made by another. The person, therefore, who does not have any bona fide intention to use the trade mark, is not expected to get his product registered so as to prevent any other person from using the same.”
In Cluett Peabody & Co. Inc. v. Arrow Apparals [1997 SCC OnLine Bom 574] the court propounded that “A trade mark has no meaning even if it is registered unless it is used in relation to goods. Otherwise, its non-use may lead to its death. A trademark which drops out of use dies. Where there are no goods offered for sale, there is no use of trademark.”
- Who can file for Removal of Trademark on the Basis of Non-Use:
Any person who is aggrieved within the meaning of Section 47 can file an application for removal of the trademark from the register on the grounds that the trademark has not been put to use.
In Infosys Technologies Ltd v. Jupiter Infosys Ltd. [(2011) 1 SCC 125], the Hon’ble Supreme Court observed that to be an aggrieved person under Section 46 (of the Trade and Merchandise Marks Act, 1958 – corresponding to Section 47 of the Trade Marks Act. 1999), he must be one whose interest is affected in some possible way.
In Kerly’s Law of Trade Marks and Trade Names (11th edition) at page 166, the legal position with regard to ‘person aggrieved’ has been summarized thus:
“The persons who are aggrieved are all persons who are in some way or the other substantially interested in having the mark removed – where it is a question of removal – from the register; including all persons who would be substantially damaged if the mark remained, and all trade rivals over whom an advantage was gained by a trader who was getting the benefit of a registered trade mark to which he was not entitled. (emphasis added).”
Further, in Aktiebolaget Jonkoping Vulcan v. V.S.V. Palanichamy Nadar [AIR 1969 Cal 43], the Court held that an applicant whose trade mark registration has been refused by reason of prior registration by the respondent of the same or similar or identical mark for the same goods or description of the goods or whose application for registration is opposed on the basis of prior registration of the same or similar mark by the respondent, can be regarded as a ‘person aggrieved’.
- Burden of proof of non-use/abandonment:
According to Section 47, the burden of proof of non-use lies on the applicants for rectification of the register, and they have to show that there was no bona fide intention to use the mark or any bona fide use of the trademark.
In the case of American Home Products v. Mac Laboratories Private Limited [1986 AIR 137], also known as the Dristan case, the court held that the burden of proof under Section 47 exists on the person who seeks to have the trade mark removed from the Register. Thus, where there has been a non-use of the trade mark for a continuous period of five years and the application for taking off the trade mark from the Register has been filed one month after the expiry of such period, the person seeking to have the trade mark removed from the Register has only to prove such continuous non-use and has not to prove the lack of a bona fide intention on the part of the registered proprietor to use the trade mark on the date of the application for registration. Where, however, the non-use is for a period of less than five years, the person seeking to remove the trade mark from the Register has not only to prove non-use for the requisite period but has also to prove that the applicant having prior registration of the trade mark (or the “squatter”) had no bona fide intention to use the trade mark when the application for registration was made. The object underlying section 47 is to prevent trafficking in trade marks.
The above cases illustrate that a prima facie case of abandonment is easily established upon showing that a mark was not in use in commerce for at least five years. If such evidence of consecutive non-use is unavailable, it becomes much more difficult to prove abandonment. To carry its burden, a challenger must show not only that the trademark owner discontinued use of the mark, but also that the respondent intends not to resume use of the mark.
- Application for Rectification of the trademark
Section 57 of the Indian Trademarks Act,1999 provides for the removal/rectification of a registered Trade mark or rectification of the Register of Trademarks on an application made by ‘any aggrieved person’ on the following grounds:
- Any contravention or failure to observe a condition of the Trade mark entered in the Register.
- Any absence or omission of an entry in the Register, e.g., a disclaimer, a condition or a limitation on the registered Trademark.
- Any entry made without any sufficient cause in the Register, e.g., registration was obtained by fraud or misrepresentation of facts or the Trade mark registered was similar to an already registered Trade mark.
- Any error or defect in any entry in the Register.
- Any entry wrongly remaining in the Register, e.g., it is contrary to some of the provisions of the Act or is likely to cause confusion amongst the public and trade
Thus, an aggrieved person can also file an application under Section 57 for the removal or rectification of a registered trademark on the abovementioned grounds.
- “Well-Known Brands” and the doctrine of “Trans-border Reputation”
One of the most relevant legal barriers to squatting is the protection of well-known trademarks established by Article 6bis of the Paris Convention and Article 16.2 of TRIPS, incorporated under Section 11 of the Trademarks Act.
The doctrine of trans-border reputation is a phenomenon evolved through precedents. The doctrine holds that digitalization and the internet have blurred the international geographical borders and the trademarks, with their incredibly high reputation and extensive advertising have transcended these geographical barriers and spilled over into the markets of other countries, though they do not hold any actual business there.
The Trademark Act, 1999 also recognizes this doctrine through Section 11 (9) which maintains that the trademark being used in India or registered in India is not a pre-requisite for being recognized as a well-known mark.
- The following judicial precedents established the protection that is extended to well-known brands:
In Daimler Benz v. Hybo Hindustan [1993 SCC OnLine Del 605] before the Delhi High Court, the plaintiff had filed a case against the defendant seeking an injunction for the usage of the plaintiff’s logo as well as the word “Benz”. The court here acknowledged the reputation of the plaintiff’s logo, as a well-known mark on the grounds of its international reputation, as well as goodwill generated and granted the plea of injunction.
Another case in which the Court granted relief of injunction is the case of Whirlpool Co v. N R Dongre [(1996) 5 SCC 714]. In this case the Plaintiff i.e., Whirlpool had not subsequently registered their trademark in India. However, the Plaintiff by virtue of use and advertisements in international magazines had a worldwide reputation and used to sell their machines in the US embassy in India. Meanwhile, the Defendant started using the impugned mark on its washing machines. Thereafter the Plaintiff brought an action against the Defendant and the Court held that the plaintiff had an established ‘transborder reputation’ in India and hence the Defendants were injuncted from using the same for their products.
Additionally, in Rolex Sa v. Alex Jewellery Pvt. Ltd [2014 SCC OnLine Del 807], a suit was filed against the defendants for selling jewellery using the trade name “Rolex” which was associated with the plaintiff. The Delhi High Court held that the trademark of the plaintiff was well-known and that the portion of the public that used watches under the trade name “Rolex,” may associate the defendant’s jewellery with that of the plaintiff. This may end up creating confusion among the public. Therefore, an injunction was granted by the court against the use of the trade name “Rolex” by the defendants.
Conclusion:
The purpose and intention behind this piece is to throw some light on the issue of trademark squatting and as to how brand owners can avoid themselves from falling prey to any such tactics of trademark squatting. It is advisable that after the brands initial success, it is ideal for the brands to get their mark registered in other territorial jurisdictions where they plan on expanding their business. Further, brands can internally make an analysis/report as to their new and upcoming projects and get the same registered beforehand in order to avoid a situation like the Sony PS5 debacle. As trademark squatting has become a niche area in trademark disputes, it is important to take proactive measures to ensure that your mark is adequately protected from trademark squatters and discourage bad-faith or malicious registration.
[Law Research Credits: Lehar Chamaria]
Author
By Karan Ahluwalia (4th Year Student, GNLU Gandhinagar)
INTRODUCTION
One of the most important classifications of offences in India under the Code of Criminal Procedure, 1973 (“the Code”), is of them being either Cognizable or Non-Cognizable. Cognizable offences are those which are indicated as such under the First Schedule of the Code and in relation to which, the Police are empowered to arrest a person without a warrant. Non-Cognizable offences on the other hand, are of a smaller degree of severity. Their prevention and detection, while important, does not warrant the conferment of sweeping investigative powers upon investigative agencies.
There are two important reasons for this distinction, both of which are rooted in reality:
a. All crimes cannot be prevented, neither can all criminals be apprehended. Therefore, a greater social purpose is served by prosecuting on priority, serious crimes that threaten the very social fabric of society. Crimes such as Sexual offences, Murder, Kidnapping, Sedition etc., all of which are Cognizable.
b. Corruption is endemic amongst ground-level functionaries of the government, an ill to which even investigating agencies are not immune. To prevent vexation of citizens at the hands of these functionaries, conferment of investigative powers in relation to Non-Cognizable offences is made conditional upon fulfilment of certain procedural safeguards that attempt to balance the competing interests of maximization of individual liberty and minimization of crime.
STATUTORY POWERS OF INVESTIGATION
Chapter XII of the Code delineates powers of the Police with respect to investigation of offences. At the outset, §154 of the Code requires Police officers to reduce into writing, all information received by them which discloses the possible commission of a Cognizable offence.
Section 154. Information in cognizable cases.
(1) Every information relating to the commission of a cognizable offence, if given orally to an officer in charge of a police station, shall be reduced to writing by him or under his direction, and be read over to the informant; and every such information, whether given in writing or reduced to writing as aforesaid, shall be signed by the person giving it, and the substance thereof shall be entered in a book to be kept by such officer in such form as the State Government may prescribe in this behalf:
Provided that if the information is given by the woman against whom an offence under section 326A, section 326B, section 354, section 354A, section 354B, section 354C, section 354D, section 376, section 376A, section 376B, section 376C, section 376D, section 376E or section 509 of the Indian Penal Code (45 of 1860) is alleged to have been committed or attempted, then such information shall be recorded, by a woman police officer or any woman officer:
Provided further that-
(a) in the event that the person against whom an offence under section 354, section 354A, section 354B, section 354C, section 354D, section 376, section 376A, section 376B, section 376C, section 376D, section 376E or section 509 of the Indian Penal Code (45 of 1860) is alleged to have been committed or attempted, is temporarily or permanently mentally or physically disabled, then such information shall be recorded by a police officer, at the residence of the person seeking to report such offence or at a convenient place of such persons choice, in the presence of an interpreter or a special educator, as the case may be;
(b) the recording of such information shall be videographed;
(c) the police officer shall get the statement of the person recorded by a Judicial Magistrate under clause (a) of sub-section (5A) of section 164 as soon as possible.
(2) A copy of the information as recorded under sub-section (1)shall be given forthwith, free of cost, to the informant.
(3) Any person aggrieved by a refusal on the part of an officer in charge of a police station to record the information referred to in sub-section (1) may send the substance of such information, in writing and by post, to the Superintendent of Police concerned who, if satisfied that such information discloses the commission of a cognizable offence, shall either investigate the case himself or direct an investigation to be made by any police officer subordinate to him, in the manner provided by this Code, and such officer shall have all the powers of an officer in charge of the police station in relation to that offence.
This provision is mandatory- not only does it prevent the Police from conducting any preliminary investigation into the alleged offence before registering a First Information Report (“FIR”), but it also does not require them to be satisfied with the reasonableness and credibility of the information received therein [Lalita Kumari v. Government of Uttar Pradesh, AIR 2014 SC 187]. Once such an FIR is registered, the criminal justice machinery is set into motion and the Police investigate the alleged offence under §156 of the Code. “Investigation” under the Code involves proceeding to the spot of the crime, ascertaining the facts and circumstances of the case, collection of physical evidence, examination of various persons including the accused, discovery and arrest of suspects and formation of an opinion with regard to guilt of the person accused [H.N. Rishbad v. State of Delhi, AIR 1955 SC 196].
On the other hand, when the contents of the information supplied to the Police officer disclose the possible commission of a non-Cognizable offence, §155 of the Code becomes applicable.
Section 155. Information as to non-cognizable cases and investigation of such cases.
(1) When information is given to an officer in charge of a police station of the commission within the limits of such station of a non-cognizable offence, he shall enter or cause to be entered the substance of the information in a book to be kept by such officer in such form as the State Government may prescribe in this behalf, and refer the informant to the Magistrate.
(2) No police officer shall investigate a non-cognizable case without the order of a Magistrate having power to try such case or commit the case for trial.
(3) Any police officer receiving such order may exercise the same powers in respect of the investigation (except the power to arrest without warrant) as an officer in charge of a police station may exercise in a cognizable case.
(4) Where a case relates to two or more offences of which at least one is cognizable, the case shall be deemed to be a cognizable case, notwithstanding that the other offences are non-cognizable.
It requires the Police officer to note down such information in format as specified for that purpose and present it before a Magistrate who is empowered to try such case or commit it to trial. Investigation into the alleged offence can only be started by the Police once the aforementioned Magistrate has made an order to that effect. It is imperative to note that prior to the making of such order, the Police officer has no power to investigate the offence as has been reiterated by courts on multiple occasions [Rupan Deol Bajaj v. Kanwar Pal Singh Gill, MANU/SC/0080/1996; Sudarshan Manchanda v. State of Karnataka, 1979 SCC OnLine Kar 192; Siddanagouda v. State of Karnataka, MANU/KA/0139/1997]. If the Police officer proceeds to investigate the offence despite this express bar and without an order of the Magistrate to that effect, the investigation conducted would be devoid of legal sanctity for lack of jurisdiction- any charges framed as a result would be liable to be quashed by the concerned High Court [Jugal Kishore v. State, 1972 Cr. L.J. 371]. However, any evidence collected in this ill-advised exercise may still be accepted by a Court if it is shown to be relevant and substantial despite the fact that it was obtained illegally [Umesh Kumar v. State of Andhra Pradesh, (2013) 10 SCC 591].
Once an order to investigate the alleged offence has been made by the concerned Magistrate, the Police officer is vested with the same powers of investigation as he/she is in respect to Cognizable offences, save for the power to arrest a person without an order from a Magistrate and without a warrant as provided under §41 of the Code. Such an investigation will proceed as per §156 of the Code, which is also the provision under which investigations are carried out by Police officers suo motu in the case of Cognizable offences. It is also important to note that when the information provided to the Police officer discloses the commission of Cognizable as well as Non-Cognizable offences arising out of the same factual matrix, they are entitled to treat all the Non-Cognizable offences as if they had been Cognizable offences and shall proceed to investigate them forthwith without waiting for an order of the Magistrate in that regard as per sub-section 4 of §155 of the Code.
CASE LAWS
Fundamental jurisprudence on FIRs was laid down by the Hon’ble Apex Court in the landmark case of Lalita Kumari v. Government of Uttar Pradesh (supra). In this case, the Petitioner attempted to lodge an FIR concerning the kidnapping of her daughter which was refused by the local police station. On such refusal she approached the Superintendent of Police, after which an FIR was lodged but no action was taken thereafter. Aggrieved by this situation, the Petitioner filed a Writ Petition under Article 32 of the Constitution of India seeking a Writ of Habeas Corpus or any like relief to secure her daughter. The Hon’ble Court said that principles of democracy and freedom require timely filing of FIRs so that instances of commission of Cognizable as well as non-Cognizable offences come to the notice of the Subordinate Judiciary. If the information provided to the Police officer clearly points towards the commission of a Cognizable offence, the officer has no choice but to register the FIR and proceed with the investigation. However, if on the basis of the information so supplied, it is not clear whether or not the offence complained of is Cognizable or not, then the Police is empowered to conduct a preliminary investigation only for the purpose of ascertaining whether or not the offence is Cognizable. It also re-iterated that if the information received clearly points towards the commission of a cognizable offence, the Police are not required to inquire into the intention of the complainant or the existence of any mala fides since it would be open to the Police to prosecute the complainant in case the information is found to be false.
In H.N. Rishbad v. State of Delhi (supra), proceedings under the Prevention of Corruption Act, 1947 had been instituted against two government employees- these proceedings were quashed by a Special Judge and this quashing was set aside by the Hon’ble Punjab High Court (as it then was). Thereafter this case came before the Hon’ble Apex Court via a Special Leave Petition. The Court laid down the law with regard to investigations into non-Cognizable offences and non-compliance with the mandatory provisions discussed previously. It said that while investigations carried out in breach of a mandatory statutory provisions (such as the requirement of Magisterial orders to investigate Non-Cognizable Offences) would ordinarily be illegal, however- such illegality cannot be allowed to vitiate the validity of the resulting trial unless it can be shown that the defects of the investigation caused a miscarriage of justice. Therefore, if this defect is brought to the notice of the court at a sufficiently-early stage- steps can be taken to rectify the same.
In Sudarshan Manchanda v. State of Karnataka (supra), the transportation godown of the Petitioner caught fire and was attended to by the Karnataka Fire Force as well as the local Police force as per protocol. On reaching the scene of the fire, the Police officer-in-charge was informed by the firefighting staff that the goods stored in the godown were done so in violation of §13 of the Karnataka Fire Force Act, 1964 which made the act a non-cognizable offence. The details of the offence were duly noted and sent to a Magistrate so that investigation could be started into the offence. However, before the requisite permission could be obtained, Police officers from the local Police station arrived at the godown and began their preliminary investigation. An order for the investigation was received by them from the Magistrate only on the following day. The Petitioners in this case assailed the very jurisdiction of the Police to investigate the matter before such permission was obtained and therefore sough non-reliance on the evidence collected as a result. On the other hand, the state contended that since permission was granted for the investigation shortly thereafter, the defect, if any, stood cured. The Hon’ble Karnataka High Court held that an investigation carried out in violation of a mandatory provision of the Code, would be one that was carried out without jurisdiction and subsequent grant of permission by the Magistrate in that regard would not cure the defective investigation.
CONCLUSION
In light of the provisions and jurisprudence discussed previously, we must now revisit an idea expressed in the introduction. The Criminal Justice system in any state is concerned inter alia with the maintenance of a very fine balance between maximization of individual liberty and minimization of crime. In doing so, the same body of criminal law must act both as a shield and as a sword. As a shield it must protect innocent citizens from the excessiveness and potential arbitrariness of state machinery. As a sword it must guide instrumentalities of the state in their pursuit to create social harmony and maintain law and order so that higher goals of collective and individual existence can be realised. §s 154 and 155 of the Code are perfect examples of the same.
Let us first consider the consequences of bestowing untrammelled investigative powers upon investigating agencies. Doing so creates fertile grounds for corruption and consequent vexation of innocent citizens at the hands of anti-social elements both- in the government as well as outside it. Filing poorly-substantiated cases against business competitors, political rivals, contesting family members etc. would become daily occurrence. The law cannot be used to perpetuate injustice, nor can its provisions be perverted to serve narrow, malevolent interests.
It may be argued that since it is open to the Police to prosecute persons who knowingly supply false information to them under §182 of the Indian Penal Code,186- this possible-menace of false-complaints could be curtailed to a large extent. However, ground realities of our criminal justice system would impede any attempts to bring transparency to an otherwise opaque machinery.
This perhaps justifies the differential treatment given Cognizable and Non-Cognizable under the Code. While this results in some measure of the delay in dealing with cases of Non-Cognizable offences, such is the price of our liberty.
Author
This article discusses various judgments on the issue whether an offence whose punishment “may extend to three years” is a bailable / non-cognizable offence or a non-bailable / cognizable offence, with special emphasis on such offence(s) provided under the Copyright Act, 1957 [“Copyright Act”] and the Trade Marks Act, 1999 [“Trade Marks Act”]. Although the discussion herein largely focuses on the judgments delivered in the context of Section 63 of the Copyright Act, the same is (needless to clarify) extendable to other such offences provided under the Copyright Act, the Trade Marks Act, and other statutes.
Bailable & Cognizable: A conceptual understanding
The Code of Criminal Procedure, 1973 [“Code”] is the primary statute which helps us determine if a particular offence is bailable or not and cognizable or not; unless a statute stipulating an offence specifically provides for its cognizable and bailable nature. Essentially, a cognizable offence is the one for which a police officer “may arrest without warrant” [Section 2 (c) of the Code]; and a non-cognizable offence is the one for which “a police officer has no authority to arrest without warrant” [Section 2 (l) of the Code]. The definition of “bailable offence” and “non-bailable offence” as provided in Section 2 (a) of the Code does not give us much guidance as to the meaning thereof. For that, one has to inter alia refer to Chapter XXXIII of the Code, a perusal whereof suggests that: a bailable offence is the one for which the accused can seek bail as a matter of right [Section 436 of the Code]; while in case of a non-bailable offence, the discretion to grant bail lies with the Court [Sections 437-439 of the Code].
Given the grave restriction of personal liberty (or at least a reasonable apprehension whereof) that ensues as a result of characterizing a particular offence as cognizable and non-bailable, the issue which is discussed herein becomes significant, and perhaps for that reason has been re-agitated several times. The sole guide in this regard is the First Schedule to the Code [“Schedule”] which inter alia classifies offences as cognizable / non-cognizable & bailable / non-bailable.
The Issue
The Copyright Act and the Trade Marks Act (and various other statutes for that matter) provide for certain offences but fail to classify those offences specifically as cognizable / non-cognizable & bailable / non-bailable. Therefore, to determine the appropriate classification, one has to make reference to Part II of the Schedule, which provides for “classification of offences against other laws”. The classification provided therein is to the following effect [“concerned classification table”]:
| Offence | Cognizable or Non-cognizable | Bailable or Non-bailable |
| If punishable with death, imprisonment for life, or imprisonment for more than 7 years. | Cognizable | Non-bailable |
| If punishable with imprisonment for 3 years and upwards but not more than 7 years, | Cognizable | Non-bailable |
| If punishable with imprisonment for less than 3 years or with fine only. | Non-cognizable | Bailable |
In the Copyright Act, there are various provisions [being Sections 63 (Offence of infringement of copyright or other rights conferred by the Copyright Act), 63A (Enhanced penalty on second and subsequent convictions), 63B (Knowing use of infringing copy of computer programme to be an offence) & 68A (Penalty for contravention of section 52A)] which provide for offences whose punishment is imprisonment which “may extend to three years”. Even the Trade Marks Act contains provisions [being Sections 103 (Penalty for applying false trade marks, trade descriptions, etc.), 104 (Penalty for selling goods or providing services to which false trade mark or false trade description is applied), 105 (Enhanced penalty on second or subsequent conviction) & 107 (Penalty for falsely representing a trade mark as registered)] which provide for offences with the aforementioned punishment. To determine if the aforementioned offences are cognizable and non-bailable or non-cognizable and bailable, one needs to analyze the entries of the concerned classification table and see under which entry the aforementioned offences fall – the second entry or the third entry.
Case Law
Now, let us turn to the case law on the issue; an analysis whereof reveals that there are various conflicting judgments of the High Courts. Although there is an order of the Supreme Court viz. Avinash Bhosale v. Union of India [(2007) 14 SCC 325] which has been considered by some High Courts to be a conclusive dictum on the issue, however, it can be argued that this order does not amount to declaration of law under Article 141 of the Constitution by invoking the doctrine of sub silentio. In Avinash Bhosale, the issue pertained to Section 135 (1) (ii) of the Customs Act, 1962, which provides for an offence for “evasion of duty or prohibitions” and makes it punishable with imprisonment “which may extend to three years” in certain cases. Avinash Bhosale is a one-page order wherein all the Supreme Court had to say was, “it appears to us that the offence which is alleged to have been committed is a bailable offence”. There was no analysis of the concerned offence or the entries in the concerned classification table. There was no justification (whatsoever) as to why the concerned offence fell under the third entry of the concerned classification table. In fact, there was no reference to the third entry of the concerned classification table. There was no reasoning or justification as is highly warranted on this issue. It can only be termed as a purely ‘silent’ and ‘non-reasoned’ order.
It is now apposite to understand the doctrine of sub silentio, in brief. In MCD v. Gurnam Kaur [(1989) 1 SCC 101], the Supreme Court explained the doctrine in the following words:
“Professor P.J. Fitzgerald, editor of the Salmond on Jurisprudence, 12th edn. explains the concept of sub silentio at p. 153 in these words:
A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The Court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his favour; but point B was not argued or considered by the court. In such circumstances, although point B was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silentio.
…in Lancaster Motor Co. (London) Ltd. v. Bremith, Ltd. [1941] 1 KB 675, the Court held itself not bound by its previous decision. Sir Wilfrid Greene, M.R., said that he could not help thinking that the point now raised had been deliberately passed sub silentio by counsel in order that the point of substance might be decided. We went on to say that the point had to be decided by the earlier court before it could make the order which it did; nevertheless, since it was decided “without argument, without reference to the crucial words of the rule, and without any citation of authority”, it was not binding and would not be followed. Precedents sub silentio and without argument are of no moment. This rule has ever since been followed.”
Gurnam Kaur was followed in State of U.P. v. Synthetics and Chemicals Ltd. [(1991) 4 SCC 139] wherein the Supreme Court held as follows:
“But the problem has arisen due to the conclusion in the case of Synthetic and Chemicals (supra). The question was if the State legislature could levy vend fee or excise duty on industrial alcohol. The Bench answered the question in the negative as industrial alcohol being unfit for human consumption the State legislation was incompetent to levy any duty of excise either under Entry 51 or Entry 8 of List II of the VIIth Schedule. While doing so the Bench recorded the conclusion extracted earlier. It was not preceded by any discussion. No reason or rationale could be found in the order. This gives rise to an important question if the conclusion is law declared under Article 141 of the Constitution or it is per in curium and is liable to be ignored… In Lancaster Motor Company (London) Ltd. v. Bremith Ltd. 1941 1KB 675, the Court did not feel bound by earlier decision as it was rendered ‘without any argument, without reference to the crucial words of the rule and without any citation of the authority’. It was approved by this Court in Municipal Corporation of Delhi v. Gurnam Kaur AIR 1989 SC 38. The Bench held that, ‘precedents sub-silentio and without argument are of no moment’. The Courts thus have taken recourse to this principle for relieving from injustice perpetrated by unjust precedents. A decision which is not express and is not founded on reasons nor it proceeds on consideration of issue cannot be deemed to be a law declared to have a binding effect as is contemplated by Article 141 Uniformity and consistency are core of judicial discipline. But that which escapes in the judgment without any occasion is not ratio decidendi. In Shama Rao v. State of Pondicherry AIR 1967 SC 1680 it was observed, ‘it is trite to say that a decision is binding not because of its conclusions but in regard to its ratio and the principles, laid down there-in’. Any declaration or conclusion arrived without application of mind or preceded without any reason cannot be deemed to be declaration of law or authority of a general nature binding as a precedent.”
Gurnam Kaur and Synthetics and Chemicals Ltd. were followed in A-One Granites v. State of U.P. [(2001) 3 SCC 537]. In light of the aforementioned judgments on the doctrine of sub silentio, it cannot be said that Avinash Bhosale amounts to declaration of law under Article 141, and hence, has a binding effect. Now, as we have dodged Avinash Bhosale, we must refer to the judgments of the High Courts.
i. Gauhati High Court
In Jitendra Prasad Singh v. State of Assam [(2004) 2 GLR 271], the High Court was considering if the offence stipulated in Section 63 of the Copyright Act is a bailable one or not. On a plain reading of the text of Section 63 and that of the third entry in the concerned classification table, it was held that the offence was a non-bailable one. The reasoning was: the expression “punishable with imprisonment which may extend to three years” cannot be equated with the expression “punishable with imprisonment for less than 3 years” since the accused can be punished with imprisonment for three years, and hence, the third entry will not apply. Therefore, the offence cannot be considered as a bailable one. In essence, the test laid down was that one has to look at the maximum punishment provided for an offence, and then determine which entry of the concerned classification table it falls under.
ii. Andhra Pradesh High Court
In Amarnath Vyas v. State of A.P. [MANU/AP/1214/2006], the High Court did not agree with Jitendra Prasad Singh and held that the offence stipulated in Section 63 was a bailable one. However, the reasoning provided therein was completely convoluted. It was unequivocally held that the third entry of the concerned classification table did not apply since the maximum punishment provided in Section 63 was imprisonment for three years. However, it was (strangely) held that even the second entry did not apply:
“Whether the second category of the classification will attract or not is the only point germane for consideration in the instant case. A close scrutiny of the excerpt extracted hereinabove would clearly show that the punishment prescribed under the provisions of the Act is for a term which may extend upto three years. If the punishment prescribed under any special Act is for a term of three years and upwards, it would become ‘non-bailable’. The language used in both the provisions, if read keeping them in juxtaposition, would help us in comparing them so as to have a clear idea… The expression “punishment for a term which may extend to three years” is certainly not similar to the expression “punishment for three years and upwards”… True there may be certain other class of offences which may fall in between classification II and classification III of Second Part of Schedule-I. Merely because they are not coming squarely within the domain of classification-III, they, cannot automatically be treated as included in the classification-II. By default, they cannot be considered as coming within the purview of the classification-II… Therefore, the expression ‘imprisonment for a term which may extend upto three years’, in my considered view, would not come squarely within the expression ‘imprisonment for three years and upwards’. Therefore, the offence punishable under Section 63 of the Act cannot be considered as ‘non-bailable’ one.”
The aforementioned observation shows that the Court was apparently of the view that there are certain crevices and interstices in the concerned classification table within which one could fit the offences like the ones we are concerned with. However, there was no guidance as to how one should locate those crevices and interstices in the concerned classification table or the scheme of the Code. In any case, even if it is assumed that the interpretational analysis in the aforementioned judgment is correct, there is no justification as to how the Court came to the conclusion that the concerned offence was a non-bailable one. Because, even if one accepts that not a single entry of the concerned classification table is applicable in such a case, how does one, then, determine if the offence is a bailable one or not?
Furthermore, the Court made reference to a Supreme Court judgment viz. Rajeev Chaudhary v. State (N.C.T.) of Delhi [MANU/SC/0330/2001] to bolster its justification. Rajeev Chaudhary provided clarity on the interpretation of Proviso (a) to Section 167 (2) of the Code, which is as follows:
“the Magistrate may authorise the detention of the accused person, otherwise than in custody of the police, beyond the period of fifteen days, if he is satisfied that adequate grounds exist for doing so, but no Magistrate shall authorise the detention of the accused person in custody under this paragraph for a total period exceeding—
(i) ninety days, where the investigation relates to an offence punishable with death, imprisonment for life or imprisonment for a term of not less than ten years;
(ii) sixty days, where the investigation relates to any other offence,
and, on the expiry of the said period of ninety days, or sixty days, as the case may be, the accused person shall be released on bail if he is prepared to and does furnish bail…”
In Rajeev Chaudhary, the Supreme Court was enjoined to decide if the offence stipulated in Section 386 of the Indian Penal Code, 1860, wherein the maximum punishment is imprisonment “which may extend to ten years”, fell under clause (i) or (ii) of the aforementioned Proviso. In the context of the aforementioned Proviso, the Court held that imprisonment “which may extend to ten years” cannot be equated with “imprisonment for a term of not less than ten years”. However, this ruling has no relevance to the issue which the Amarnath Vyas Court was deciding. One needs to understand that given the text of the aforementioned Proviso, one has to undergo a process of elimination since clause (i) deals with certain kinds of offences while clause (ii) is the residuary clause. So, one just needs to see if the concerned offence falls under clause (i), otherwise, clause (ii) applies. But, that is not the case with the concerned classification table. It provides a continuum, and every offence has to be classified under either of the three entries. Rajeev Chaudhary provided no guidance with respect to that. Therefore, it is not relevant.
iii. Kerala High Court
In Abdul Sathar v. Nodal Officer, Anti-Privacy Cell [AIR 2007 Ker 212], the Court held that the offence stipulated in Section 63 of the Copyright Act falls under the second entry of the concerned classification table, and hence, is a non-bailable and cognizable one. The logic of Jitendra Prasad Singh was followed (although no reference was made) – that one should look at the maximum punishment provided, and since maximum punishment provided in Section 63 is three years, it falls under the second entry. Pertinently, it distinguished Rajeev Chaudhary reasoning that the language used in Proviso (a) to Section 167 (2) of the Code is different from that used in the concerned classification table.
iv. Delhi High Court
In State v. Naresh Kumar Garg [2013 (56) PTC 282 (Del)], the Court held that the ruling in Avinash Bhosale would apply, and therefore, Section 63 of the Copyright Act was held to be bailable and non-cognizable. Thereafter, in Anuragh Sanghi v. State [2019 SCC OnLine Del 11382], the Court manifested a volte-face. The Court mad certain pertinent (and correct) observations in relation to interpretation of the concerned classification table, which are as follows:
“It is, at once, clear that there is no hiatus between the three categories. The spectrum of punishment by imprisonment from nil to life, is divided into three categories in the descending order. Therefore, this Court is of the view that the said three categories are exhaustive. Obviously, it follows that if an offence is punishable by a term of imprisonment which is not specifically mentioned in Part II of the First Schedule of the Cr.P.C., the same would be covered within the spectrum of the three categories… Almost all enactments stipulate a range of punishment that can be imposed in respect of any offence. Most of the enactments provide for a maximum punishment that can be imposed and some of the enactments also provide for a minimum sentence that can be awarded for an offence. It is not necessary that the range of punishment, as provided for any offence under any enactment, be in identical terms with the language of any of the categories under Part II of the First Schedule of the Cr.P.C. However, that does not mean that the punishment provided for the said offence falls outside the scope of Part II of the First Schedule of the Cr.P.C. As stated above, the three categories of Part II of the First Schedule of the Cr.P.C. cover the entire spectrum of offences that are punishable by imprisonment – from a term of nil (only with a fine) to a term of life.”
It is in the aforementioned manner that the Court refuted the logic of Amarnath Vyas. In pursuance of the aforementioned analysis and going by the logic of ‘maximum punishment’, the Court was convinced that Section 63 of the Copyright Act provides for a non-bailable and cognizable offence. However, the Court considered itself bound by the rulings in Avinash Bhosale and Naresh Kumar Garg. This is where, I feel, the Court could have done more. As already argued hereinbefore, Avinash Bhosale cannot be considered as binding. In so far as Naresh Kumar Garg is concerned, it was a judgment delivered by Single Judge and could have been referred to a Division Bench.
v. Gujarat High Court
In Gurukrupa Mech Tech v. State of Gujarat [(2018) 4 GLR 3324], the Court merely relied on Naresh Kumar Garg and held that Section 63 of the Copyright Act provided for a bailable and non-cognizable offence.
vi. Rajasthan High Court
In Pintu Dey v. State [MANU/RH/873/2015], the Court (Single Judge) relied on Amarnath Vyas and Rajeev Chaudhary and held that Sections 63 & 68A of the Copyright Act provided for bailable and non-cognizable offences. Thereafter, in Deshraj v. State of Rajasthan, the Court (Single Judge) gave a similar ruling without referring to Pintu Dey but by relying on Amarnath Vyas and Rajeev Chaudhary, and held that Section 63 & 63B of the Copyright Act provided for bailable and non-cognizable offences. However, in Nathu Ram v. State of Rajasthan [MANU/RH/39/2021], the Court (Division Bench) overruled Pintu Dey by distinguishing Rajeev Chaudhary and disagreeing with Amarnath Vyas. Deshraj was not referred to but the same stands impliedly overruled. Nathu Ram followed the logic of ‘maximum punishment’ as discussed hereinbefore.
vii. Bombay High Court
The last in our analysis comes the judgment in Piyush Subhashbhai Ranipa v. State of Mahrashtra [2021 (86) PTC 72 (Bom)], wherein the Court held that Section 63 of the Copyright Act and Section 103 of the Trade Marks Act provide for non-bailable and cognizable offences since the maximum punishment provided therein is imprisonment for three years, and hence, the second entry of the concerned classification table becomes applicable.
Conclusion
As is evident in my discussion of the judgments herein, I support the logic of ‘maximum punishment’. It might lead to harsh consequences, but that is the only way one can read the text employed in the concerned classification table. It is a continuum which is exhaustive and does not leave scope for crevices and interstices as was envisaged in Amarnath Vyas. Undoubtedly, Avinash Bhosale needs to be reconsidered. In any case, as I have argued, the same is not binding. In my opinion, all the aforementioned judgments, which hold that Section 63 of the Copyright Act and the like provisions provide for bailable and non-cognizable offences, do not lay down the correct position of law.
