Category Archives: News & Updates

Tobacco Packaging Laws: An Effectual or an Ineffectual Effort?

There have been growing concerns associated with the ill effects of smoking. The Government has been trying to focus on the public heath measure side-lining the trademark related rights and commercial interest of the Tobacco companies, and 85% mandatory health warning display on the Tobacco boxes is a result of the same. Attempts have also been made to mandate plain packaging of tobacco products[1] and to prohibit sale of lose cigarettes and disallow indirect advertisements of tobacco products[2]. The central objective behind all these attempts remains dis-incentivising sale of tobacco products.

The Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 or COTPA, 2003 regulates trade, commerce, production, supply and distribution of cigarettes and other tobacco products in India. Rules[3] were framed there under in 2008 by the ministry of Health and Family Welfare which prescribe a framework for packaging and labelling of tobacco products.

The 85% Mandatory heath warning display notification

In 2014, the Government amended the Cigarettes and other Tobacco Products (Packaging and Labelling) Rules and increased the size of the health warning on the principle display area from 40% to 80%. The amendment was challenged in the Karnataka high court and the court declared it as unconstitutional.

The court held that there is no scientific approach adopted by the Health Ministry in framing the amended policy. The Government was unable to establish it’s rational or basis on the following considerations:

  • That the prior 40% pictorial display requirement in the rules did not satisfy the test of being legible, prominent and conspicuous;
  • That is why the 85% compulsory display area requirement is uniformly applicable to all the products, i.e., cigarettes, beedis, chewing tobacco, despite the fact that their packaging is inherently different;
  • That whether or not the 85% pictorial and textual warning would result in violating the rights of the petitioner under Section 28 of the Trade Marks Act, 1999.

Since there was nothing to indicate that enlarging the size of the warning from 40 to 85% of the package would serve any meaningful objective and the Government could not establish its rationale behind adopting the policy, the division bench unanimously declared the impugned amendment as unconstitutional.

However, on January 8, 2018, Supreme Court stayed the Karnataka high court judgement and reinstated the 85% mandatory warning display requirement. Emphasising on the importance of public health and its harmful effects of tobacco product, the court held that a policy based decision on the health risks posed to citizens cannot be struck down. The court asserted that the citizens must be aware of the affect the products can have on their health.

The reasoning stated by the court indirectly inclines on the belief that failure to reinstate the prescription and allowing a display warning of anything less than 85% will not safeguard their health. Instead of dealing with the question that whether there is a rationale for the Government to increase the size from 40% to 85%, the court stepped onto the notion of safeguarding health of citizens at all costs and thereby presumed that anything less 85% of the warning display will fail in safeguarding health of citizens.

The policy of enforcing Graphic warning labels has spread globally based on the Framework Convention on Tobacco Control. Article 11 of the Framework Convention on Tobacco Control (FCTC) also recommends the introduction of these labels for 50% of the packet cover. Perhaps the middle path suggested by Kapil Sibal, to allow 50% of the surface area to be covered by the warning as an ad hoc measure could have been a more balanced way out.

Plain Packaging Laws                           

In 2016, a PIL was filed in the Supreme Court of India for implementation of Plain Packaging Laws in India. The Supreme Court directed the Ministry of Health contending that delaying the implementation of plain packaging was in violation of the rights of the citizens under Articles 14 and 21 of the Constitution.  The response of the Ministry to this notice is awaited. Back in 2012, a private member bill was introduced in the LokSabha by Member of Parliament Baijayant Panda which stipulated for plain packaging of tobacco products. This move came days after Australia became the first country in the world to ban coloured packaging of tobacco products and mandating plain packaging for tobacco packs, removing any indicators to distinguish between brands except for the brand of the name itself.

The amendment bill proposed for plain packaging of cigarettes and other tobacco products wherein the brand and product names would be permitted in a standard colour, position, font and size in a predefined area on the packet and all tobacco products will be similar with 60% of the front and the back cover occupied by graphic health warnings.

The constitutionality of the Australian mandatory plain packaging law was challenged in Australian High Court by the tobacco companies alleging that the Government is trying to seize their intellectual property by banning the display of their trademark on the cigarette packets. The Court held that although the IP rights and other related rights of tobacco companies may be restricted as a result of the plain packaging laws, the restriction imposed by this law does not “involve the accrual of a benefit of a proprietary character to the Commonwealth which would constitute an acquisition.”

After Australia, several other nations including Ireland, the United Kingdom and France have also brought in legislations with plain packaging laws for tobacco products.

Remarks

Tobacco packaging and labelling policies have developed as a cost effective tobacco control measure. Graphic warning labels policies which have been deemed to be more effective than text warnings and thus have been adopted in over 70 countries. Similarly, the standardisation of colour and design of tobacco products, have been argued to have major benefits. Firstly, that it increases effectiveness of health warnings, secondly, that it reduces false health beliefs about cigarettes and lastly, that it reduces brand appeal especially among youth and young adults. However, the effectiveness of such laws in reducing the consumption of tobacco have been much contested and debated over the last decade. One of the major argument against such tobacco packaging laws has been that the harmful effects of consumption of tobacco, which is already widely known and that attachment of such huge sizes of graphic warning violates trademark rights and copyrights and incites the production of counterfeit tobacco[4]. According to Tobacco companies, plain packaging makes it harder to control the entry of counterfeits in the market. The production of counterfeit tobacco has been the foremost fear in bringing such packaging laws. The counterfeited tobaccos do not adhere to any standards and may be adulterated with Sulphur and Carbamide making them far more harmful to public health than ordinary tobacco. It has been pointed out by many that that nothing is easier to template and copy than standardized design, shape and colour of a product[5]. According to a 2014 KPMG report[6], the use of illegal tobacco in Australia reached record levels in 2013 and represented 14.5% of total consumption.

In Indian context, taking into consideration that nearly 75% of all cigarettes are sold loose and the buyer does not even come in direct contact with the packaging, it becomes even more important to examine whether or not there is a need of such packaging laws and policies. Apart from the effectiveness of such policies, the policy makers must also consider all the possibilities of the ill-outcomes that such can policies have. A few psychologists have also argued that the mandatory placement of graphical warnings and packaging requirements on the boxes can easily increase its ‘attractive value’, stemming from the appeal often associated with experimenting with the illicit and forbidden, – inducing the young adults to play daredevil and try their hand on that-which-must-not-be-touched. There also have predictions that standardized packaging would lead the brands to a brutal price war making the products cheaper than before and thus making them more affordable. Thus, all such concerns leads us to a need of analysing the pros, cons and effectiveness of such Tobacco packaging and labelling policies.

Author: Saumya Gupta, intern at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at swapnils@khuranaandkhurana.com.

References:

[1] Amendment to Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 (COTPA) introduced in LokSabha by M.P, Baijayant Panda in 2012.

[2]http://www.prsindia.org/uploads/media/draft/Tobacco%20Act.pdf

[3]https://www.tobaccocontrollaws.org/files/live/India/India%20-%20G.S.R.%20182%28E%29%20-%20national.pdf

[4] Vathesatogkit P, Charoenca N Indian J Public Health. 2011 Jul-Sep; 55(3):228-33.

[5] Snowden, C. (2012). Plain Packaging.Commercial expression, anti-smoking extremism and the risks of hyper-regulation. Adam Smith Research Trust, pp9.

[6]https://home.kpmg.com/content/dam/kpmg/pdf/2016/04/australia-illict-tobacco-2015.pdf

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Is Censorship a Necessary Evil?

With more than 1000 films being released every year, in India censorship of films has not only been a debate in the legal fraternity but also a topic of discussion at the family dinner table. The recent delay and cuts in the movie “Padmavati” is just one of the many examples of censorship in India. The current trend of CBFC of cutting scenes and banning of movies has raised various questions in people’s mind which need clarification.

What is the need for Censorship of a film?

In 1970, a Supreme Court judge in K. A. Abbas v. The Union of India & Anr, recognized the universal treatment of motion pictures different from that of other forms of art and expression. He further insisted that it has a deep impact on adolescent children more than that on mature women and men. The need of censorship thus arises from the prolonged effect that a motion picture has on an individual that doesn’t occur in a painting, book or play.

Who can censor a movie?

A motion film is certified by Central Board of Film Certification (CBFC), the regulatory authority in India, under Section 5A and B of the Cinematograph Act, 1952.

In addition, powers are given to the Central Government to suspend a granted certificate for such period as it thinks fit or it may revoke such certificate if it is satisfies the conditions under Section 5E of the aforementioned Act.

There are 4 types of censor certificates to be given:

  1. U certificate: Sanctioned for unrestricted public exhibition
  2. U/A certificate: Sanctioned for unrestricted public exhibition except any child below the age of twelve years may be allowed to see such a film after the consideration of child’s parents or guardian
  3. A certificate: Sanctioned the film for public exhibition restricted to adults
  4. S certificate: Sanctioned the film for public exhibition restricted to members of any profession or any class of persons, having regard to the nature, content and theme of the film, e.g.: doctors, farmers etc.

What are the grounds for Censorship?

Section 5(B) (1) lays the grounds for not certifying a film for public exhibition if, in the opinion of CBFC, the film or any part of it is against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality, or involves defamation or contempt of court or is likely to incite the commission of any offence. This is in accordance with the reasonable exceptions specified in Article 19 of the Indian Constitution.

To help CBFC facilitate the certification process, guidelines have been issued by Central Government time and again. A few out of the 20 guidelines that must be ensured by the CBFC are:

  1. Anti-social activities such as violence are not glorified or justified
  2. The modus operandi of criminals, other visuals or words likely to incite the commission of any offence are not depicted;
  3. Human sensibilities are not offended by vulgarity, obscenity or depravity;
  4. Scenes degrading or denigrating women in any manner are not presented;
  5. Visuals or words contemptuous of racial, religious or other groups are not presented.

Moreover, the Censor Board has also released a list of banned words which includes Hindi English curse words, abusive language and the mention of Mumbai not Bombay as per Government’s Official Notification dated 04/08/1996.

Appeal Procedure:

If the applicant is aggrieved by the order of the CBFC he may appeal to the Appellate Tribunal which is chaired by a retired High Court judge or any person so qualified to be a High Court Judge. Further, Revision powers are given to the Central Government to call for the record of any proceeding in relation to any film which is pending before, or has been decided by the Board and may make a decision as it deems fit, after giving the applicant an opportunity for representing his views in the matter.

Role of Judiciary

The Judiciary has frequently demarcated between the expression and abuse of freedom of speech. It has always tried to maintain a balance between rights of artists and the need of censorship wherever required. In S. Rangarajan v. P. Jagjivan Ram, the Court opined, censorship by prior restraint is not only desirable but also necessary in case of motion pictures as it has a strong impact on the minds of the viewers and can affect their emotions. In this case the ban on this movie was lifted. Similar cases in which Supreme Court passed an order in the favour of artists are Raj Kapoor v. Laxman, and Patwardhanv. Cent. Bd. of Film Certification, Life Insurance Corporation of India v. Prof. Manubhai D. Shah and the most recent was the lift of ban on Padmavati.

Analysis

As the title suggests, censorship is a necessary evil, but that doesn’t negate the freedom of speech and expression completely. The chief problem is that it seems that Censor Board doesn’t look into alternative options before banning a film and fails to take into account a lot of mitigating factors involved in the making of the film. While public interest needs to be protected, private interest of the parties involved cannot absolutely be forgotten. Right from the script to music, to production and advertising, a lot of effort and money has gone into films which when banned enormously impacts the economic status of people involved, which in turn comes under the ambit of their fundamental right of livelihood. This repeated pattern of Board or Government banning or halting the release of movies, thereby consequently an appeal being filed to High Courts and Supreme Court where the ban is lifted is getting quite tedious. Since the scope of grounds are quite wide it calls for some stringent measures to be taken by authorities, to clarify the objectivity with which a film must be granted a certificate. The struggle between the necessity of censorship and freedom of speech must be met with a right balance.

Author: Ms. Avadhi Jain, intern at Khurana & Khurana, Advocates and IP Attorneys. Can be reached at swapnils@khuranaandkhurana.com.

References: 

[1] https://www.cbfcindia.gov.in/main/guidelines.html

[2] https://blog.ipleaders.in/censorship-films-law/#_ftn7

[3]https://factly.in/how-is-a-film-certified-by-the-censor-board-cbfc-film-certification-process-in-india/

[4] http://mib.gov.in/acts/cinematograph-act-1952-and-rules

Half-Day Symposium on Software, Electronics, and Mechanical Patent Portfolios

After successfully conducting several symposiums over the years, IIPRD is coming up with half-day seminar on software, electronics, and mechanical patent portfolios with focus on preliminary preparation, prosecution, and litigation in India, US, and EP.  The symposiums are being organized in Bengaluru on 16’th April2018, and in Mumbaion 17’th April 2018.The seminar is being arranged by IIPRD along with Khurana and Khurana, Advocates and IP Attorneys (India), Sughrue Mion (US), and Keltie (EP).

With speakers like Chid Iyer-Partner of International Law Firm of Sughrue Mion, Robert McDougall-Chartered Attorney at Keltie, Vinod Khurana-Senior Partner at IIPRD and Khurana & Khurana, IP Attorneys, and Tarun Khurana – a Partner and Patent Attorney at Khurana & Khurana, each having over 15 years of experience in a broad range of IP subject matters, one cannot afford to miss same.

This event turns out to be great opportunity for IP Groups, R&D experts, In-House IP/Legal Counsels, Patent Agents & Attorneys in the field of Practice, Patent Litigators, and Professionals in Legal Domain related to Software,Information Technology, Instrumentation, Electronics, Electrical, Embedded, Mobile Technology, IoT, Telecom, and Mechanical Domains.

Fee per delegate is INR 4,000 for Indians and is USD 100 for foreign applicants.

For more details about profiles of partners, programme outline, speakers, why and how to apply, please click here.

The Take of Supreme Court over Abuses, Falsehoods on Social Media

With a view to express opinion, belief and thought, every citizen of India is bestowed with the right of freedom of speech and expression guaranteed under Article 19 of the Indian Constitution. This right has been most distinguished in the matters where citizens have been able to raise voice against the unjust, express ideas freely and expose the discriminatory and corrupt practices of the government which nothing but intends to deceive people with malice and fraudulent practices. Running parallel are also the reasonable restrictions which can be imposed upon the citizens to protect the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality or in relation to contempt of court, defamation or incitement to an offence.

Recently, there has been an expressed concern over abusive and derogatory comments on social media as uncharitable comments, trolls and aggressive reactions on almost every issue, including judges and judicial proceedings came under the scanner of the Supreme Court which expressed concern over it agreeing that regulating them was necessary and also opined that people doing so should face the consequences. In furtherance the apex court also disapproved and expressed anguish over a statement made by a senior advocate and former Supreme Court Bar Association President that most of the judges are pro-government. The issue mainly arose after Samajwadi Party leader Azam Khan termed the Bulandshahr gang rape act as “an outcome of political conspiracy”. Consequently a petition was filed against him in the apex court by the survivor’s family following his remarks. The court referred the matter to a constitution bench and said the larger bench would be at liberty to frame questions for adjudication, including the issue of social media. Emphasizing the need to regulate social media to restrain people from posting objectionable and abusive posts, senior advocates Fali Nariman and Harish Salve, who assisted the court as amicus curiae, narrated their own ugly experiences with trolls to a bench of Chief Justice Dipak Misra and Justices AM Khanwilkar and DY Chandrachud. The renowned counsels expressed the abusiveness faced on twitter handles and claimed that government functionaries so assorted to the mediums claimed that it was their personal view was in need of some urgent regulation. Justice Chandrachud, perhaps a follower of social media, expressed concern over the untamed online space stating that wrong information pertaining to even court proceedings were posted and circulated. The bench further added that one of the observations made during the hearing on the Rohingya matters was projected as if an order was delivered and it became a subject matter of debate.

Initially during the old times the right to privacy could be infringed by the state only, but in recent times it has emanated from private parties also. India, which is broadly a country of immigrants and many religions, castes, languages, ethnic groups, etc. needs to adopt essential measures for being united and ensuring prosperity along with tolerance and equal respect to all communities living in the nation. Majority population being illiterate and ignorant, the real question to the media is whether to lift up the intellectual level of our people by propagating rational and scientific ideas, or whether it should go down to that low level and seek to perpetuate it? A person’s reputation is linked to his fundamental right and that has to be respected by all is the universal principle that must be advocated by all.

Author: Mr. Diwadkar Sayali Manish, intern at Khurana & Khurana, Advocates and IP Attorneys. Can be reached at anirudh@khuranaandkhurana.com.

References:

[1]https://timesofindia.indiatimes.com/india/sc-concerned-over-abuses-falsehoods-on-social-media-agrees-there-should-be-curbs/articleshow/60959972.cms

[2]http://www.thehindubusinessline.com/info-tech/social-media/abuse-of-social-media-platforms-comes-under-supreme-court-lens/article9889190.ece

[3]http://www.worldnews.easybranches.com/regions/india/sc-concerned-over-abuses-falsehoods-on-social-media-agrees-there-should-be-curbs-338137

Know the Roster System

January 12th, 2017 is a date earmarked in judicial history, an event that witnessed four senior most sitting Judges of Supreme Court of India, publicly raising concerns about the structural flaws regarding the functioning of the administrative division of the Supreme Court. They put forth the complete responsibility upon the shoulders of Chief Justice of India regarding roster system of the Apex Court. In this article, we would make an attempt to gain better understanding and clarity regarding this roster system and about the controversy surrounding it.

The word ‘roster’ can trace its roots since early 18th century, where it was originally used in order to indicate the list of duties and leave for military personnel[1]. In the contemporary world, it is defined as a system to allocate different tasks to all the members in order to achieve higher efficiency.

Since this system allocates tasks to the group members, it has to be under control of some decision making authority. The issue starts when the decision making authority is also to be assigned tasks under that system. The issue is regarding the misuse of that authority of decision making for any reasons whatsoever.

After sufficiently discussing about the meaning of a roster system, let us link it back to the Supreme Court:

1. Firstly, the efficiency of the roster system. As on November 1st 2017, the Supreme Court still had 55,259 pending matters, 24.69% of which cannot be listed for ‘hearing’ before Honorable Although the situation has improved as compared with half a decade earlier, when on November 1st 2012, the Supreme Court had 64,931 pending matters, 62.10% of which could not be listed for ‘hearing before Honorable Court[2]. These reductions in pending cases signify that we need a more efficient procedure for allocation of cases in order to achieve higher utilization of workforce. Hence, better management roster system seems to be necessary.

2. Secondly, regarding the issue of the source that confers such power to a decision making According to the Supreme Court Rules, 2017[3]. Chapter V: Powers, Duties and Functions of the Registrar, Rule 29, expressly states that the Registrar shall prepare roster under the directions of the Chief Justice of India, andall such powers, duties and functions of the registrar are subjected to any further special or general orders of the Chief Justice of India. This power bestowed by the handbook upon the CJI has been reiterated in a separate chapter dedicated to Roster (Chapter VI). It has further been mentioned in Chapter XIII: Listing of Cases. Therefore, as per the rules, the Chief Justice of India has an absolute authority in this regard. Also, to strengthen the argument a step further, we can take into account the precedents that have been established by the Supreme Court Judgments and thereafter been considered as the ‘Law of the Land’. In the seminal judgment of State of Rajasthan v. Prakash Chand[4], paragraph 67 clearly defines that regarding the matters of the High Court, the Chief Justice is the master of the roster( point 2), and this precedent has been considered in the later judgment of Campaign for Judicial Authority and Reforms v. Union of India[5] where the court has reiterated it and extended the understanding of authority of Chief Justice of a High Court to be applicable to the Supreme Court and the Chief Justice of India as well.

3. Thirdly, the issue is regarding unrestricted use of roster system by the Chief Justice which is not accountable under Constitution or under Supreme Court rules. And the issue can be rectified only by the sitting Chief Justice of India as he has a direct authority over the formulation of the rules of the Supreme Court. And here there is conflict of interest as it does not make much sense for a person adorning the position of Chief Justice of India to take a step in order to formulate a rule that will restrict his/her own power in the end. Moreover, if any action by way of Constitutional Amendment is attempted by the Legislature, it is more likely to be taken as an interference of the legislature in the matters of the judiciary and is likely to be struck down as being against the basic structure doctrine[6].

Another viewpoint can also be formed that based on the existing system, before the event took place, one of the four sitting senior most Justices of the Supreme Court would most likely have become Chief justice of India after some time and can then also have played an instrumental role in bringing out the they desired. Other than public awareness, this event seemed to bring out something more that would be  constructive and tangible in nature.

Author: Mr. Madhur Tulsiani, Intern at Khurana & Khurana, Advocates and IP Attorneys. Can be reached at anirudh@khuranaandkhurana.com.

References:

[1] https://en.oxforddictionaries.com/definition/roster

[2] http://supremecourtofindia.nic.in/statistics

[3] http://supremecourtofindia.nic.in/pdf/LU/ppop2017.pdf

[4] http://sci.gov.in/jonew/judis/13613.pdf

[5] (2018)1SCC196

[6] http://sci.gov.in/jonew/judis/29981.pdf

M/s. Sunwhite Infrastructure Pvt Ltd. V. Kindle Developers Pvt Ltd, CP No. 40 (ND)/17 (decided on 23.08.2017)

Facts

The petition was filed by M/s Sunwhite Infrastructure Pvt Ltd (hereinafter referred to as “the petitioners”) against Kindle Developers Pvt Ltd (hereinafter referred to as “the respondents”) Sec 241[1] and Sec 242[2] of the Companies Act, 2013 alleging acts of mismanagement and oppression prejudicial to the interests of the company as well as the stakeholders. The respondent company, engaged in the business of real estate development was incorporated in March 2011 with a paid up capital of Rs. 1 Lakh of which the petitioner acquired a 40% shareholding from respondent No. 3. The petitioners alleged that upon the representation of the respondents that they had been allotted a plot by Greater Noida Authority for development of a group housing project and were in need of financial assistance, the petitioners extended a loan of Rs. 6 Lakh to the respondents upon the following conditions:

  1. The loan was to be repaid within the period of one year.
  2. The respondent undertakes not to borrow any further money from third parties without the petitioners consent.

However, due to the failure of the respondents to repay the loan within the time specified, the petitioners filed a suit for permanent and prohibitory injunction in Court of Civil Judge, Delhi to restrain the defendants from parting, selling or creating rights of third parties over the allotted land. An order of injunction was passed against the respondents by the said Judge. The present petition was filed subsequently against the acts of oppression and mismanagement by the respondents who failed to appear despite being served and were, thus, proceeded ex parte.

Contentions of the Petitioner

The petitioners in the present petition contend that:

  1. In complete disregard of the loan agreement entered into by the petitioners and the respondents, the respondents not only defaulted on the payment but also took further loans from various third parties.(Para 5)
  2. The defendants were defrauding investors by siphoning off the funds collected from prospective buyers without engaging in any significant construction work. The petitioners also entered into record the audited balance sheet of the defendants for 2015-2016 reflecting advances of Rs. 157 crores collected for booking of flats against which very little construction was completed.(Para 5)
  3. The petitioners further alleged that statutory compliances were not carried out on time, no Annual General Body meeting had been conducted since Sept, 2014 and books and accounts of the defendant company were not available for inspection to the petitioners.(Para 6)
  4. It is also contended by the petitioner that in complete contempt of the order of Civil Judge, Delhi, which restrained them from altering the management of the company, respondent no. 4 & 5 were appointed as Additional Directors by the respondent company. Such appointment is otherwise illegal as well due to it not being ratified by the remaining management. (Para 6)

Issues

  1. Whether there has been oppression and mismanagement by the respondent company?
  2. Whether the appointment of additional directors is in violation of the order of civil judge, Delhi?

Judgement

The NCLT held that there had been no oppression of the petitioners in their capacity as shareholders and that their grievance was misplaced as they were aggrieved in capacity of creditor whose entitlement under a loan agreement was violated  for which the appropriate remedy would lie in a civil forum. It observed that, “The non-payment of a creditor could not be held as oppressive to the shareholder. The order of Civil Court Judge restraining the respondent from alienating the said property was enough to secure the interest of the creditor” (Para 9d).

It was held that allegations of siphoning off of funds by the respondents were largely uncorroborated and unsubstantiated and on the basis of the material placed on record, it was not possible for the Tribunal to conclude whether the advances justified the quantum of work done (Para 9a). On absence of any cogent material, the Bench was unable to accept allegations of siphoning off of funds, duping of prospective buyers or direct an investigation into the affairs of the company.

Secondly, with regard to non-availability of books & accounts of the respondent company, it was observed that there was nothing to show that the petitioners ever made any effort to inspect the same which they, as shareholders of the company, had a right to do. (Para 9b)

The NCLT held that insofar as the appointment of the Additional Directors was concerned, the appropriate form to deal with such appointment was the Court of Civil Judge, Delhi who has passed the impugned order restraining the respondents from doing so. (Para 9c)

Lastly, in response to the allegations that no AGM had been held since Sept, 2014, and that statutory compliances have not been complied with, the Bench held that as shareholders with 40% equity in the respondent company, the petitioners were well within their rights to requisition the management to convene a meeting to discuss any agenda or matter they thought fit. (Para 9e)

Directions

The NCLT gave the following directions:

  1. The Bench directed the respondents to hold AGM for defaulting years as well as the Financial Year ending on 31.03.2017 in exercise of provisions of Sec97[3] of the Companies Act, 2013, holding, the allegation of non-compliance with statutory requirements would, in absence of any defence by respondents, be tantamount to mismanagement. (Para 13)
  2. The respondents were also directed to lay before members, all Financial Statements, Annual Returns, Directors Report etc followed by filing them with the Registrar of Companies as statutorily required as well as paying all taxes required by Government. (Para 14)
  3. Lastly, though observing that courts should not ordinarily interfere with the management, with due regard to the fact and circumstances of the present case, the Bench directed the appointment of an independent Observer/ Administrator to oversee proper convening of the AGM and ensuring that all statutory requirements are complied with. The Bench also remarked that failure to comply with any of the directions would invite penal consequences under the Act. (Para 15 & 16)

 

Author: Ms. Noyonika Mukherjee, Intern at Khurana & Khurana, Advocates and IP Attorneys. Can be reached at   anirudh@khuranaandkhurana.com.

References:

[1] Sec 241, Companies Act, 2013 provides that any member may apply to the Tribunal who complains that the affairs of the company are  being conducted in a manner prejudicial to public interest, interest of the company or is prejudicial/oppressive to him or any member of the company OR any material change has taken place in the management/ control of the company by reason of which it is likely that affairs of the company will be conducted in a manner prejudicial to interests of the company, any members or any class of member. The Central Government can also apply to the Tribunal for an order under this section.

[2] Sec 244, Companies Act, 2013 provides that an application may be made under Sec 241 by any member- (a) in case of a company having a share capital, not less than 100 members or not less than 1/10th of total members or any members(s) holding not less than 1/10th of issued share capital provided that have paid all calls/sums due on their share;(b) in case of company not having share capital, not less than 1/5th of total members. The Tribunal may, on an application, waive any of the requirements.

[3] Sec 97, Companies Act, 2013 provides that the Tribunal may, on the application of any member of the Company, call or direct calling of an AGM and give such ancillary/consequential directions as it thinks expedient, if any default is made in made in holding the AGM under Sec 96, provided that the directions may include a direction that one member of the company present in person or proxy shall be deemed to constitute a meeting. A general meeting held in pursuance of the above may be deemed to be an annual general meeting.

Online Disputes and Forum Jurisdiction

The Delhi high court on 3rd January, 2018 in Impresario Entertainment & Hospitality Pvt. Ltd. vs S&D Hospitality[1], took a different view with respect to the Internet jurisdiction[2].

In the above case, plaintiff sought permanent injunction against the defendants who was running a restaurant at Hyderabad, under  the impugned trademarks ‘SOCIAL’ and ‘STONE WATER’ and its services were available through Zomato. The court held that the plaintiff would have to produce material prima facie to show that some commercial transaction using the website was entered into by the Defendant through the app- ZOMATO, within the forum state and that the specific targeting of the forum state by the Defendant resulted in an injury or harm to the plaintiff within the forum state.

Defendants contended that this Court has no territorial jurisdiction to entertain the present suit  as the defendant neither has his registered office within the jurisdiction of the said Court nor carries on any business within the jurisdiction of this Court. Mere existence of a website without proof of ‘the effect’ does not clothe this Court with territorial jurisdiction to entertain the present suit. Returning the plaint, the court held that a mere hosting of a website that is  accessible by anyone within the jurisdiction of the court is not sufficient for this purpose[3].

Convinced with the Defendant’s contention, the Court Further relied on Banyan Tree Holding (P) Limited v. A. Murali Reddy and Anr[4] which held that a passive website, with no intention to specifically target audiences outside the State where the host of the website is located, cannot vest the forum court with jurisdiction. The Hon’ble Court also observed that for the purposes of a passing off or an infringement action (where the plaintiff is not located within the jurisdiction of the court), the injury on the plaintiffs business, goodwill or reputation within the forum state as a result of the Defendant’s website being accessed in the forum state would have to be shown.

Earlier, the stance of the court was a bit different  in the case of World Wrestling Entertainment v. M/S Reshma Collection & Ors[5]– The Delhi High court had held that the mere website of the party referring to various goods  is not an offer but an invitation to an offer, just as a menu in a restaurant. The invitation, only if accepted by a customer in Delhi, becomes an offer made by the customer in Delhi for purchasing the goods “advertised” on the website of the appellant/plaintiff. Further, it held that mere accessibility of website in a forum state which ‘solicits’ its business, through which Defendant’s goods and services are sold, is enough to raise cause of action and in determining the personal jurisdiction in Delhi.

Legal Provisions in Regard to Jurisdiction

The Code of Civil Procedure, 1908 contains the provisions under section 20 with respect to institution of the suits where defendant resides or cause of action arises . It reads as : Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction –

  • The defendant, or each of the defendants where there are more than one, at the time of the commencement of the Suit, actually and voluntarily resides, or carries on business, or personally works for gain; or
  • any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or 
  • the cause of action, wholly or in part, arises.”

[Explanation]: A corporation shall be deemed to carry on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place.

Section 62 [6] provides that every suit or other civil proceeding in respect of the infringement of copyright in any work or the infringement of any other right conferred by this Act shall be instituted in the district court having jurisdiction.

 Learned author Mulla in the Code of Civil Procedure, 18th Edn., has observed that under clauses (a) to (c) of section 20, plaintiff has a choice of forum to institute a suit. The intention behind Explanation to section 20 of the Code of Civil Procedure is that once the corporation has a subordinate office in the place where the cause of action arises wholly or in part, it cannot be heard to say that it cannot be sued there because it did not carry on business at that place. The linking of the place with the cause of 12 action in the Explanation where subordinate office of the corporation is situated is reflective of the intention of the Legislature and such a place has to be the place of the filing of the suit and not the principal place of business. Ordinarily the suit has to be filed at the place where there is principal place of business of the corporation.

The Indian Courts have always followed the parent legislation – Civil Procedure Code, 1908 and have  constantly tried to harmonize the technological advancement with the statute. Therefore, in the following caselaws, the courts have explained Section 20 of the CPC with reference to IPR and internet jurisdiction.

Indian Performing Rights Society Ltd. v. Sanjay Dalia & Anr The Supreme Court of India interpreted section 62 of the Copyright Act, 1957 and section 134(2) of the Trade Marks Act, 1999 with regard to the place where the plaintiff can institute a suit. Wherein it observed that “The very intendment of the insertion of provision in the Copyright Act and Trade Marks Act is the convenience of the plaintiff. The rule of convenience of the parties has been given a statutory expression in section 20 of the CPC as well. The interpretation of provisions has to be such which prevents the mischief of causing inconvenience to parties.”

Banyan Tree Holding (P) Limited vs A. Murali Krishna Reddy & Anr. on 23 November, 2009– The division bench of the Delhi High Court held that “Under clauses (a) to (c) of section 20 CPC, a plaintiff has a choice of forum and cannot be compelled to go to a place of business or residence of the defendant and can file a suit where the cause of action arises.”

In Icon Health And Fitness, Inc vs Sheriff Usman And Anr. – the Delhi High Court assumed jurisdiction under Clauses (a) and (b), stating that the defendants ‘carried on business’ in Delhi. The entirety of the Court’s reasoning for the above is contained in two sentences – “Though the defendants are not residing in Delhi, however, the defendants are offering their fitness apps and brands through App Store, Google Play Store and e-commerce portals like http://www.amazon.in which can be accessed and operated from all over the country, including from Delhi. Thus, it can be said that the defendants are carrying on business or working for gain at Delhi and this Court has territorial jurisdiction to try and decide the present suit as per section 20 of the CPC, 1908

Conclusion

At the outset, the Court does not subscribe to the view that mere accessibility of the Defendants website in Delhi would enable this Court to exercise jurisdiction. However, a passive website, with no intention to specifically target audiences in the forum State where the host of the website is located, cannot vest the forum court with jurisdiction.[7] The Court in Impresario Entertainment & Hospitality Pvt. Ltd. vs S & D Hospitality, took a very balanced stand and logically differentiated the concept of ‘mere presence of website’ and ‘targeting the forum state’. Thus, it is appreciated that the Court is not rigid and is flexible in providing a reasonable and tenable judgments by considering different facts and circumstances. Hence, it can be seen that the Indian Judiciary is swiftly moving towards a new jurisprudence on internet jurisdiction, in accordance to section 20 of CPC.

Author: Mr. Himanshu, Intern at Khurana & Khurana, Advocates and IP Attorneys. Can be reached at   anirudh@khuranaandkhurana.com.

References:

[1] Decided on: 3rd January, 2018 ; CS(COMM) 111/2017

[2] The Code of Civil Procedure, 1908, S-20 (c) – Other suits to be instituted where defendants reside or cause of action arises.

[3] Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414

[4] CS (OS) No. 894/2008

[5] https://indiankanoon.org/doc/71641182/

[6] The Copyright Act, 1957, Section-62-Jurisdiction of court over matters arising under this chapter.

[7] Banyan Tree Holding (P) Ltd

Patent (Amendment) Rules 2017

Department of Industrial Policy and Promotion (DIPP) has amended Patent Rules 2003 with effect from 1st December 2017 called as the Patent (Amendment) Rules, 2017. The definition of “startup” under rule 2(fb) has been substituted with a new definition. A more liberal definition of startup has been incorporated that can allow domestic as well as foreign entities to claim benefits such as fast-track mechanism and lower fee for filing patents.

According to the Patent (Amendment) Rules, 2017:

“Startup” means

(a) an entity in India recognized as a startup by the competent authority under Startup India Initiative.
(b) In case of a foreign entity, an entity fulfilling the criteria for turnover and period of incorporation/ registration as per Startup India Initiative and submitting declaration to that effect.

Explanation: In calculating the turnover, reference rates of foreign currency of Reserve Bank of India shall prevail.[1]

According to the Patents (Amendment) Rules, 2016 startups were defined as entities which are working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property where more than five years have not been lapsed from the date of incorporation/registration with a maximum turnover of INR 25 crore per year.[2] However, according to the Patent (Amendment) Rules, 2017, a startup can be any Indian entity recognized as a startup by the competent authority under the Startup India Initiative or a foreign entity that fulfils criteria for turnover and period of incorporation/registration as per Startup India Initiative.

Under Startup India Initiative an entity shall be considered as a Startup, if it fulfils following criteria:

1. incorporated as a private limited company or registered as a partnership firm or a limited liability partnership in India;
2. incorporated or registered in India not prior to seven years, however for Biotechnology Startups not prior to ten years;
3. turnover for any of the financial years since incorporation/ registration has not exceeded INR 25 crores;
4. has not been formed by splitting up or reconstruction of a business that was already in existence; and
5. working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.[3]

In view of the foregoing, it can be concluded that the period of incorporation/registration that was 5 years under 2016 rules has been extended to 7 years (10 years in case of biotechnology startups) by the 2017 rules. Also, foreign companies can now claim benefits if they fulfill above mentioned criteria for turnover and period of registration as per Startup India Initiative. Further, to claim benefits for filing patents, Indian entity should be recognized as a startup by a competent authority under Startup India Initiative, whereas foreign entity may provide equivalent documents as an evidence for fulfilling criteria for turnover and period of incorporation/registration as per Startup India Initiative along with a declaration to that effect.

[1] http://www.egazette.nic.in/WriteReadData/2017/180577.pdf

[2] http://www.ipindia.nic.in/writereaddata/Portal/IPORule/1_42_1_Patent__Amendment_Rules

[3] Notification Number G.S.R. 501 (E), https://startupindia.gov.in/notification.php#

A Reminder for Online Retailers

Here’s one case that involves an online retailing businesses that is having a link with Trade mark Law – Jadebay Ltd and others v Clarke-Coles Ltd (t/a Feel Good UK) [2017] EWHC 1400 (IPEC).

However, overlooking the customary practice of online retailing methods, the Intellectual Property Enterprise Court followed the theoretical root of the Trade mark laws and over-turned such practices by upholding that‘re-use of a third party’s Amazon listing without consent to sell the same goods may, on appropriate facts, amount to trade mark infringement or passing off.

The factual matrix of this case lies as below:

In this matter there were two claimant, the first one was the statutory and common law owner of the Trade mark ‘Design Elements’ for the purpose of  “flagpoles plastic storage box garden furniture”, while the second Claimant was the sole licensee since 2011 to sell the products of the first claimant.  These products were also sold through online shopping portal namely – www.amazon.co.uk, via three listings created by the second claimant.

Usually, the common practice while listing products for sale on Amazon or any such kind of online portals are that each new listing is given a Unique Amazon Identification Number (ASIN). It is pertinent to note that an Amazon listing created by one party can be used by multiple sellers selling common product. Amazon then tends to promote the cheapest of the offerings by selecting them as the default seller, allowing consumers to review each listing in more detail.

Thus, in this case, the issue arose when the defendant listed its product under the listing created by the claimants, with a low price due to which they appeared as the default seller, attracting majority of sales from the said listing.

Interesting fact about this case is, that the claimants sued the defendants for trade mark infringement and passing off and did not even involve Amazon, who encourages sellers to use pre-existing generic ASINs where possible.

Arguments

The claimant focussed on the basic concept of rights of trademark. Firstly, the owner of the trademark has the right to prevent the third party from commercially using any sign (without the permission of the TM owner) that is ‘identical to the trade mark in respect of goods or services which are identical to those for which the mark is registered (double identity) (section 10 (1), Trade Marks Act 1994) (TMA) (section 10(1))’ or ‘ by such use of trademark that causes a likelihood of confusion or association on the part of the public (section 10(2)(b), TMA) (section 10(2)(b)).”

Secondly, the law of passing off a trade mark, which is considered as an element of Tort, the essential feature that is considered to attract this tort is the goodwill attached to the trade mark, such misrepresentation leads to likelihood of confusion among consumers due to which the claimant suffer damage as mention in the case of Reckitt & Coleman Products Ltd v Borden Inc [1990] RPC 341.

However, the defendant relied on the generality of the Amazon listing number. They claimed that since the listing was generic and did not refer to a specific brand, it could list its product under the same listing and that the brands of the competing products were significantly different as the defendant’s brand was “Feel Good UK”.

However, the claimant argued that due to the use of the same listing number namely “20ft aluminium flagpole “by Design Elements”, any consumer can link the defendant’s product as that of the claimant’s product.The defendants should have sold their products through another Unique Identity ASIN number.

The question was not whether the Defendant attached the sign or trade mark to the product or packaging itself, but whether the use of the listing in this way infringed (and/or passed off) the Claimants’ rights.

Judgement

The Intellectual Property Enterprise Court  accepted the claimant’s argument and  further observed that by having the same listing number and linking one’s goods to a competitor’s branded product listing would undoubtedly cause a misrepresentation and confusion among the consumers leading to Trademark infringement and passing off.

Conclusion

The present case has shown the online businesses a reality that the presence of Trade mark law is every where. It is another reminder that these businesses should consider their online marketing very carefully. Attaching products to an existing Amazon listing when the products are clearly not the same could potentially be an infringing act.  Moreover, as per the Objective of Trade Mark law, that is to avoid confusion in the market place, the decision of the court was not strange and perhaps was very apt.

Author: Ms. Pratistha Sinha, Intern at Khurana and Khurana Advocates and IP Attorneys and can be reached at anirudh@khuranaandkhurana.com.

References:

[1] https://www.lexology.com/library/detail.aspx?g=55745fd6-0397-4222-9d31-a3b3a8447e19

[2] https://www.rpc.co.uk/perspectives/ip/flagging-the-risk-of-a-new-type-of-trade-mark-infringement

Mobilox Innovations Private limited vs. Kirusa Software Private Limited

The much debated question with respect to the interpretation of what amounts to “existence of a dispute” has been finally answered by the Supreme Court in the (Mobilox vs. Kirusa) judgment. The interpretation of “existence of dispute” was seen in the context of initiation of CIRP of corporate debtors under the Insolvency and Bankruptcy Code, 2016.

The Corporate Insolvency Resolution Process (CIRP) can be initiated by the operational creditor in cases of payment default, through an application filed in the NCLT. Prior to such application, a demand notice (demanding the payment of the amount) needs to served upon the corporate debtor under Section 8 (1) of the Insolvency and Bankruptcy Code, 2016.

FACTS

The appellant (Mobilox) was engaged in a Star TV program “NachBaliye” conducting telephonic voting mechanism. The appellant engaged the respondent company (Kirusa) for providing various services relating to the TV program, and the parties also executed a non-disclosure agreement. The NDA stipulated certain conditions such as confidentiality obligations towards Mobilox. During the time period Kirusa raised necessary monthly invoices for the rendered services. However, Mobilox informed Kirusa about the payments that were subsequently withheld due to breach of the NDA obligations.

Kirusa senta demand notice to Mobiloxunder Section 8 of the Insolvency and Bankruptcy Code, due to non- payment. Mobilox’s response to the demand notice stated that there was a bona fide and serious dispute between the parties, inclusive of the breach of obligations mentioned under the NDA.

NCLT

Kirusa subsequently filed an application before the NCLT, Mumbai under section 9 for the initiation of Corporate Insolvency Resolution process (CIRP) of Mobilox. NCLT rejected the application on the grounds that Mobilox had issued a notice of dispute to the operational creditor.

NCLAT

An appeal against the order of NCLT was subsequently filed by Kirusa stating that mere dispute to the demand notice by the operational creditor does not amount to a valid ground for rejection of application under Section 9 of the ‘I & B Code’. The question before the Appellate Tribunal was with respect to the clarification of meaning of “dispute” and “existence of dispute” for the purposes of application under Section 9 of the Insolvency and Bankruptcy Code.

Section 8 provides for the requirements which should be complied with prior to filing an application under Section 9 of ‘I & B Code’.

Under Section 8 (2) of the I & B Code, once the demand notice is served upon the corporate debtor by the operational creditor, the corporate debtor needs to inform the creditor about the payment of the debt or dispute if any, within 10 days of receiving the notice.

Section 9 enshrines the right to file an application for the initiation of corporate insolvency resolution process after the expiry of 10 days from the date of delivery of demand notice.

NCLAT allowed Kirusa’s appeal on the groundthat the reply to the Demand Notice by the Mobilox cannot be seen within the purview of Section 8(2) and Section 5(6) of the Insolvency and Bankruptcy Code. It stated that the defense raised by Mobilox was vague and motivated as the debt demanded was not in connection with the non-disclosure agreement. Further NCLAT stressed upon the interpretation of “dispute” stating the a dispute would not be limited to only arbitration proceedings or suits but shall include any proceedings initiated before any tribunal, consumer court, labour court etc.

SUPREME COURT

Mobilox went in appeal before the Hon’ble Supreme Court against the order passed by NCLAT.

OBSERVATIONS

1. The Hon’ble Supreme Court allowed the appeal by Mobilox, while interpreting the expression “existence of a dispute” under Section 8(2) (a) of the Insolvency and Bankruptcy Code. The Hon’bleSupreme Court was of the opinion that the breach of NDA was sufficient to construe the existence of a dispute to invalidate the CIRP application filed by the operational creditor.

2. Interpretation of Section 8 (2) (a): “The word “and” occurring in Section 8 (2) (a) must be read as “or”. According to the earlier interpretation,the Code provides that a dispute between operational creditor and corporate debtor would only be valid if a suit or an arbitration proceeding with respect to the dispute has been filed prior to the receipt of demand notice. The Supreme Court was of the opinion that such an understanding shall lead to “great hardship” as the corporate debtor would then be able to stave off the bankruptcy process provided a dispute is already pending in a suit or arbitration proceedings”. An important point was highlighted by the Hon’bleSupreme Court stating that, if the “and” mentioned under Section 8(2)(a) is not read as “or”, such persons shall be excluded from the ambit of Section 8 (2) and application of CIRP shall be easily obtained which was not the intent of the legislature.

3. Pre-existing Dispute: The Hon’bleSupreme Court held that the existence of the dispute and/or suit or arbitration proceeding necessarily be “pre-existing”, that is to say, it should exist prior to receipt of the Demand Notice.

4. Plausible Contention Test: The Hon’ble Supreme Court while deciding the matter scrutinized the background of IB Code. It observed that the Insolvency and Bankruptcy Bill 2015 defined “dispute” as “a bona fide suit or arbitration proceedings”. However, when the Bill was passed the term “dispute” under Section 5 (6) was dropped from the definition. The Supreme Court stressed upon the interpretation that the previous jurisprudence with respect to the definition “dispute” does not apply to the current IB code. Instead the Hon’bleSupreme Court provided a new test “plausible contention” to determine the “existence of dispute”.

5. Questions to be seen by the Adjudicating Authority while examining any application under Section 9 of the I &B Code
6. Whether there is an “operational debt” of more than One Lakh?
7. Whether the documentary evidence provided with the application shows the debt is due and payable and has not yet been paid?
8.Whether there is an existence of a dispute between the concerned parties or any record of pendency of suit or arbitration proceeding filed before the receipt of Demand Notice.?

If any one of the conditions is not satisfied, NCLT must reject the application.

CONCLUSION

There appears to be no doubt that the interpretation with respect to “dispute” and “existence of a dispute” has been quite in debate since the inception of IB Code. Conflicting interpretations have been provided by different benches of NCLT. However, a conclusive ruling by the Supreme Court has finally provided a settled position.

It would be interesting to note as to how various NCLT’s would interpret and apply this landmark ruling relating to “plausible contention” test. Moreover, the Supreme Court has been vigilant to highlight the strict adherence to the time lines provided under the Code. The Supreme Court has clarified the object of the code keeping in mind the legislative intent. The court through this judgment has provided a balance between the rights of the creditors and also the remedies to the debtor companies.

Author: Tarun Gaur, 5th year student at ILNU, Nirma University, intern at Khurana and Khurana, Advocates and IP Attorneys and can be reached at info@khuranaandkhurana.com.

References:

[1] Interpreting The Nature Of The Notice Under Section 8 Of The Insolvency And Bankruptcy Code, 2016

[2] http://www.livelaw.in/supreme-court-finally-interprets-existence-dispute-ibc-mobilox-v-kirusa

[3] http://www.livelaw.in/key-takeaways-nclat-judgment-kirusa-vs-mobilox

[4] http://ibbi.gov.in/webadmin/pdf/order/2017