India: Delhi High Court Clarifies Transfer Status Of IPR Suits Vis-à-Vis Commercial Courts Act, 2015

The Delhi High Court, vide its judgment dated February 15, 2016, brought clarity to a few key issues regarding the status of transfer of pending and filed Intellectual Property Rights (IPR) cases vis-à-vis the Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Act, 2015 (hereinafter referred to as the "Commercial Courts Act"). Hon'ble Mr. Justice Valmiki J. Mehta came to the conclusion by clubbing numerous suits, transfer petitions and amendment applications before the Delhi High Court seeking enhancement of pecuniary jurisdiction, interpreting the Act with respect to the expression 'filed or pending' in the first proviso of Section 7. This expression came into controversy while deciding whether it means that the High Court would entertain all pending matters even if it does not have pecuniary jurisdiction to entertain the matters or not.

The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Ordinance was intended to ensure that the commercial cases are disposed of expeditiously, fairly and at reasonable cost to the litigant. Along with improving the international image of the Indian justice delivery system but the same was in the middle of a controversy regarding the interpretation of certain provisions.

The Ordinance came into effect on October 23, 2015, and stated that the State Governments, in consultation with the respective High Courts, will constitute Commercial Courts at the District level, that is, where the District Courts have original civil jurisdiction. No Commercial Court will be constituted where the respective High Court has the original civil jurisdiction. The Chief Justices of the High Courts will constitute Commercial Divisions where the High Courts have original civil jurisdiction. The Chief Justices of the concerned High Courts will constitute Commercial Appellate Divisions where the High Courts have appellate jurisdiction. Thus, the High Courts at Delhi, Calcutta, Bombay, Madras and Himachal Pradesh will have Commercial Divisions and Commercial Appellate Divisions as they have original and appellate jurisdictions. In all other states, the District Courts will have Commercial Courts as they have original jurisdiction and the High Courts will have Commercial Appellate Divisions as they have appellate jurisdiction.

It also laid down that all commercial disputes, that is, disputes related to mercantile issues, partnership agreements, intellectual property rights, insurance, etc. with a specified value of INR 2 crores and above lie with the Commercial Division of the respective High Court as the High Court has the original civil jurisdiction. All commercial disputes with a specified value of INR 1-2 crores lie with the Commercial Court of the respective District Court and all commercial disputes with a specified value of INR 1 crore and below lie with the District Court with original civil jurisdiction.

Section 7 and its proviso of the Ordinance was what created the confusion. It stated that all suits relating to commercial disputes with a specified value filed in the High Court having original jurisdiction shall be heard and disposed of by the Commercial Division of the High Court provided that such suits are filed on the original side of the High Court.

The words 'and filed' can be interpreted to mean that if a suit was originally filed in the High Court, High Court through its Commercial Division will hear the suit, even if specified value of the pending suit does not lie in the pecuniary jurisdiction of the Court. Another interpretation of the word can be that if a suit is filed in the High Court, High Court will hear the suit only if it continues to have pecuniary jurisdiction of the suit. Justice Mehta contemplated that something was left unsaid by the legislature in the expression.

To remove the possibility of having different interpretations to the words 'and filed', the Government of India and the Press Information Bureau issued a Press Note on December 16, 2015, saying an amendment was required to the proviso to clear out that the proviso will also apply to 'pending cases' so that 'and filed' could be construed to include pending cases. Subsequently, an amendment was made in the Act to change the said expression to 'filed and pending'. The 78th Report by the Department Related Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice contained the reason for changing the expression in the Act. It stated recommendations of the Standing Committee saying that the transfer of all pending commercial disputes to Commercial Courts and Divisions will overburden the Courts and defeat the purpose of establishing them, that is, swift disposal of cases. The committee suggested that instead of transferring pending cases to Commercial Courts, a sunset clause should be inserted so that only fresh cases in the pecuniary jurisdiction may be transferred.

Justice Mehta reiterated that the Report said that there was to be a sunset clause whereby only fresh cases with the pecuniary jurisdiction are to be filed in the Commercial Divisions of the High Courts and the pending cases would not be transferred and will be taken up by the Commercial Courts. Thus, the legislature has widened the expression 'and filed' to mean 'filed and pending', meaning thereby that any pending case will be continued to be tried by the Commercial Divisions of the High Courts even if it is below the specified value of INR 1 crore. This is the only interpretation possible.

Justice Mehta felt that the language of the proviso would have been better if the expression 'irrespective of pecuniary jurisdiction' was added even though the meaning of the legislature can be understood by the existing words. He also reiterated that Section 7 deals generally with IPR matters where such suits cannot be entertained by courts below the level of a District Court, meaning thereby that such suits can only be instituted in District Courts and High Courts. When it comes to IPR related suits, whether trademarks, copyrights, designs, patents or geographical indications, pending in the High Courts as on the date of introducing the Act, such suits will be entertained by the Commercial Divisions of the High Courts even if the specific value of the suits is above INR 20 lacs but below INR1crore, that is, not falling in the pecuniary jurisdiction. Justice Mehta has, thus, answered the issue regarding the first proviso to Section 7 of the Act of 2015 and cleared all doubts regarding the same.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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