India: Apex Court Clarifies Issues Of Jurisdiction

Last Updated: 10 July 2008
Article by Manisha Singh Nair

Continuous application and interpretation of the law, may seldom lead to diverse interpretation adopted by parties. Wherein, complicated facts and contracts find a place, careful analysis of law and the phrases used therein gains a more prominent place than ever. Clarifying the concept of arising "cause of action" and jurisdiction, is the latest Supreme Court judgment rendered in Laxman Prasad v. Prodigy Electronics Ltd. & Anr. [2008 (37) PTC 209 (SC)].

"Prodigy Electronics Ltd.", formed and incorporated under the laws of Hong Kong deals in electronic goods under the name and style "Prodigy Electronics, Hong Kong". Printed Circuit Boards being the key area of business, involves understanding clients' needs while offering goods and services at viable costs. Prodigy claims to have acquired repute and recognition In India, with particular reference to Printed Circuit Boards.

Laxman Prasad, joined Prodigy Electronics as a marketing representative for the companies' products in India. An employment contract was entered into, whereby Prasad was appointed on a full-time basis as an "International Business Development Manager". He was stationed at Hong Kong, with the responsibility of carrying out the business operations of the company in India. According personal reasons, he reallocated himself to India signing a fresh agreement with the company. However, on relocation, Prasad tendered his resignation via an email, stating that he would take further course of action at a later time. Prodigy persuaded him to stick on, promising that they would support him through his problems however Prasad did not withdraw his resignation. At a later date, he sent an e-mail in the text of which he promised that although he would continue to deal with the Printed Circuit sector, he would not indulge with the customers or suppliers of the company.

Prodigy alleged Laxman Prasad of having visited potential customers, on the pretext of representing 'Prodigy'. They also learnt that Multi Circuit Board (China) Ltd., Hong Kong suppliers of products to Prodigy, had participated in the Trade Fair, and that the company was represented by Prasad. Further, Prodigy realized that he operated under the name and style of "Prodigy Circuit Boards". On contacting Multi Circuit, they learnt that Prasad and the company had a subsisting contract. Further, Prodigy learnt of a deceptively similar website to be subsisting in the name of Prasad, even as his employment continued with Prodigy.

Prodigy in this light alleged a breach of employment contract while becoming convinced that Prasad's resignation was not due to personal problems, but to enable misuse of confidential information. They also learnt of "Canton Treasure Corporation Ltd." which had been incorporated while Prasad was in Hong Kong. In this pursuance a suit was instituted for damages and ordering an injunction to restrain the use of a similar or deceptively similar trademark or trade name.

The issue of jurisdiction was the main point of contention by the parties. While the High Court of Delhi had rendered that they possessed jurisdiction in the matter, Laxman Prasad averred that the High Court of Delhi had drawn an erroneous conclusion. The Supreme Court in the matter examined the clauses of the contract, and giving due regard to the arguments proposed by the parties, opined that "cause of action" and "applicability of law" were distinct, different and independent expressions and that the two could not be confused.

They noted that the term "cause of action" had not been defined in the Code, yet the existence of one was presumed in every suit. The judicial interpretations appended to the phrase were also taken note of. Deliberating on the issue of jurisdiction, the Supreme Court took note of the provisions of the Civil Procedure Code, 1908 alongside the clauses incorporated in the contract and opined that since the "cause of action" arose in Delhi, the law of the land could operate and hence affirmed the view of the Delhi High Court, dismissing the appeal.

This decision is an instance when the Apex Court of India has taken cognizance and reiterated issues that form the very basis of litigation. With scores of suits lining themselves up for consideration, the Apex Court's interest and inclination to elucidate the very ABCs of edicts is admirable.

© Lex Orbis 2008

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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