13 September, 2019
INTRODUCTION
This newsletter covers key updates about developments related to Disputes practice during the month of August 2019. We have summarized the key judgments passed by the Supreme Court, the High Courts of various States in India and other key developments. Please see below for a summary of some landmark judgments and other developments during August 2019.
SUBJECT: A NON-SIGNATORY TO AN ARBITRATION AGREEMENT MAY BE MADE A PARTY TO THE ARBITRAL PROCEEDINGS BY INVOKING THE “GROUP OF COMPANIES” DOCTRINE.
Matter: Mahanagar Telephone Nigam Limited vs. Canara Bank (Supreme Court of India)
Coram: Justice Abhay Manohar Sapre and Justice Indu Malhotra
Date: 08 August 2019
Facts:
Mahanagar Telephone Nigam Limited (MTNL) placed non-cumulative secured redeemable bonds worth INR 200 billion with one Can Bank Financial Services Ltd. (CANFINA) under a Memorandum of Understanding. Thereafter, Canara Bank purchased bonds worth INR 800 million from CANFINA. Subsequently, disputes arose between MTNL and Canara Bank and the same were referred to arbitration before a sole arbitrator. The sole arbitrator issued notice to MTNL, Canara Bank and CANFINA.
Canara Bank objected to the joinder of CANFINA as a party to the arbitration. The sole arbitrator, after hearing the parties on the issue, held that CANFINA was not a party to the arbitration agreement and therefore could not be joined as a party to the proceedings. The order of the sole arbitrator was challenged by MTNL before Delhi High Court but to no avail. As a result, MTNL preferred a Special Leave Petition before the Supreme Court.
The Supreme Court held:
Invoking the “Group of Companies” doctrine, the Supreme Court allowed CANFINA’s joinder to the arbitration proceedings. It was held that a non-signatory may be made a party to an arbitration if there is a direct relation between the signatory and non-signatory to the arbitration agreement, a direct commonality of subject matter and composite nature of the transaction between parties. The Supreme Court observed that the doctrine may be invoked in cases where there is a tight group structure with strong organizational and financial links so as to constitute a single economic unit. It was held that the tripartite nature of the transaction necessitated the joinder of all three parties to the arbitration proceedings and therefore, remitted the matter to the sole arbitrator for adjudication.
SUBJECT: INITIATING A CRIMINAL COMPLAINT IS AN ABUSE OF PROCESS OF LAW FOR SETTLING A CIVIL DISPUTE
Matter: The Commissioner of Police and others vs. Devender Anand and others (Supreme Court of India)
Coram: Justice Arun Mishra, Justice Abdul Nazeer and Justice M.R Shah
Date: 08 August 2019
Facts:
The Respondent No 1 (R1) is the original complainant who entered into an agreement for sale of property with the sellers (R2 and R3) for a sum of INR 540 million. The agreement to sell was executed between the parties and thereafter R1 learnt that the property in question had been mortgaged to Andhra Bank. R1 settled the mortgage amount with Andhra Bank and also paid for the registration of the sale deed. Thereafter, R1 filed a complaint against R2 and R3 under Section 420 and Section 34 of the Indian Penal Code for cheating. By way of the first preliminary inquiry, a prima facie case was made out against R2 and R3. However, a second inquiry was conducted by the same police officers and it was concluded that the dispute was of a civil nature and therefore registration of FIR was not required. A private complaint was also filed by R1 before the learned Magistrate which remained pending. Subsequently, R1 filed a Writ Petition before the Delhi High Court praying that a direction be issued to the Commissioner of Police to take action against the concerned officers for not registering the first information report (FIR) against R2 and R3 and that the concerned officers be directed to register R1’s FIR. The Delhi High Court allowed the Petition. The concerned police officers filed an Appeal against the order of the Delhi High Court before the Supreme Court.
The Supreme Court held:
Allowed the Appeal filed by the Commissioner of Police and the concerned police officers and held that criminal proceedings had been initiated by R1 to settle a civil dispute.
The concerned police officers were justified in not registering the FIR against R2 and R3 as they came to a conclusion that a civil dispute did not require a criminal report
.The Hon’ble Court held that filing a criminal complaint is an abuse of the process of law for settling a civil dispute. The Hon’ble Court thus quashed the order of the Delhi High Court and also quashed the criminal proceedings pending before the learned Magistrate.
SUBJECT: RIGHTS AND LIMITATIONS VIS-À-VIS WITHDRAWAL OF RESIGNATION BY EMPLOYEE
Matter: Air India Express Limited vs. Capt. Gurdarshan Kaur Sandhu (Supreme Court of India)
Coram: Justice Uday Umesh Lalit and Justice Vineet Saran
Date: 22 August 2019
Facts:
The Respondent, who was working as a captain with the Petitioner submitted her resignation on 03 July 2017. However, within three months, the Respondent sought to withdraw the resignation letter. The Petitioner rejected the same and intimated to the Respondent that her resignation had become effective as on 03 July 2017 as the same had been accepted on 02 September 2017 and it was further intimated that the Respondent would be released from services of the Petitioner after completion of six months from the notice period. The Respondent challenged the Petitioner’s actions before the High Court and the same was allowed on the ground that an employee is within his / her rights to withdraw the resignation before the expiry of notice period.
The Supreme Court held:
The underlying principle behind stipulation of mandatory notice period under the Civil Aviation Requirement (CAR) is to safeguard public interest and not the interests of the employee. In order to ensure that there are no last-minute cancellations on account of lack of availability of pilots, a pilot must serve a notice period of six months before discharge. Further, the nature of the employment is such that the Petitioner must undertake considerable expenses and efforts to train a pilot who replaces the outgoing employee. The notice period enables the employer to find such a suitable person and to provide adequate training on receipt of the letter of resignation. Thus, the accepted principle that an employee can withdraw his resignation before the resignation becomes effective is subject to the core principles of CAR. Thus, the Respondent could not have withdrawn the letter of resignation dated 03 July 2017.
SUBJECT: HIGH COURT DECLARES VISTARA AS A “WELL KNOWN MARK”
Matter: TATA SIA Airlines Limited vs. M/S Pilot 18 Aviation Book Store and another (Delhi High Court)
Coram: Justice Prathiba. M. Singh
Date: 05 August 2019
Facts:
The Plaintiff filed a suit seeking permanent injunction for restraining infringement of its registered trademark, “VISTARA”. VISTARA is a joint venture of TATA Sons and Singapore Airlines Limited. VISTARA has been used by TATA since 2014 and is registered in India and Singapore and in various other jurisdictions. TATA acquired knowledge in 2019 that the Defendant was selling products with the name VISTARA on its website and on other e-commerce portals such as Amazon and Snapdeal. Pilot 18, the Defendant, denied that it had used trademark VISTARA. However, the Local Commissioner, appointed by the Hon’ble Court found several products bearing the mark VISTARA in the Defendant’s inventory.
The Delhi High Court held:
VISTARA has enormous goodwill and reputation in the airline industry. It has a distinctive mark and a unique status. The use of the trademark VISTARA even in unrelated services would cause confusion and deception and therefore it deserves to be declared as a “well known mark”. The Hon’ble Court held that the Defendant be permanently injuncted from using the trademark VISTARA and further imposed a cost of INR. 200,000 on Defendant which is to be paid to TATA within one month from the date of order.
SUBJECT: HIGH COURT RESTRICTS ILLEGAL STREAMING OF WARNER BROS ENTERTAINMENT CONTENT
Matter: Warner Bros Entertainment Inc. V/s HTTP://WWW2.SERIES9 and others (Delhi High Court)
Coram: Justice Sanjeev Narula
Date: 05 August 2019
Facts:
By way of the subject Suit, the Plaintiff sought permanent injunction, rendition of accounts and damages against Defendant No 1 i.e. WWW.2.Series.9.to and WWW.2.Series.9.io (collectively referred to as Defendants’ websites).The Defendants’ websites are online portals which enable users of the Defendants’ websites to view films, TV programmes or other audio visuals content on devices connected with the internet. The websites also allowed the user to download the aforesaid contents to be watched later. These websites enabled the public at large to view the plaintiff’s original content without due authorization. Upon investigation and enquiry, the Plaintiff learnt that the websites were providing illegal downloading and streaming services of the Plaintiff’s original content. Despite notice being sent to the Defendants to cease all infringement, they continued to infringe the rights in the Plaintiff’s original content resulting in willful copyright infringement. The Plaintiff has also prayed that various internet service providers (ISP) made party in the Suit should ensure effective implementation of relief that the Court may grant.
The Delhi High Court held:
That a prima facia case is made out against the Defendants and issued notice to them. It further restrained the Defendant and (all other domain owners, websites, website owners which are discovered during the course of proceeding who are infringing the exclusive right of the Plaintiff) from hosting, streaming, reproducing or distributing the cinematograph work of the Plaintiff in any manner. The Court further directed that when the Plaintiff files an application for impleadment of such websites, the Plaintiff shall also file an affidavit confirming that the newly impleaded website is a mirror/redirect/alphanumeric website with sufficient supporting evidence before the Joint Registrar .The Joint Registrar after being satisfied of the contentions of the Plaintiff, will issue directions to the ISP’s to disable access in India to such websites.
SUBJECT: LAWS SHOULD BE FRAMED ON SUBSTANTIAL PLEAS OF LAW AND FACTS AND NOT ON EACH PLEA OF LAW AND FACT
Matter: Tullio Guise SPA vs. House of Trims (Delhi High Court)
Coram: Justice Rajiv Sahai Endlaw
Date: 07 August 2019
Facts:
After framing of issues and after partly cross examining the witness of the Plaintiff, the Defendant filed an application seeking amendment of issues by framing of an additional issue. According to the Defendant, though this issue was a part in the proposed issues which was handed over, however the question remained to be framed. The Defendant did not give any explanation as to why the counsel for the Defendant had not noticed that the question remained to be framed till the filling of the subject application. The Court noted that the Defendants counsel allowed proceedings to move further even though he was present when the order framing the issues had been passed in open Court.
The Delhi High Court held:
The Court rejected the claim of the Defendant and stated that laws should be framed on substantial pleas of law and facts and not on each plea of law and fact. The endeavor of the Commercial Court Act 2015 is to expedite the disposal of suits and this would not be possible if every denial were to invite framing of an issue.
SUBJECT: CARTELISATION AMONGST NSK LIMITED, JAPAN, JTEKT CORPORATION, JAPAN AND THEIR INDIAN SUBSIDIARIES RANE NSK STEERING SYSTEMS LTD. AND JTEKT SONA AUTOMOTIVE INDIA LIMITED
Matter: NSK Limited, Japan, JTEKT Corporation, Japan, RANE NSK Steering Systems Ltd. and JTEKT Sona Automotive India Limited (Competition Commission of India)
Coram: Ashok Kumar Gupta (Chairperson), U. C. Nahta (Member) and Sangeeta Verma (Member)
Date: 09 August 2019
Facts:
The CCI enquired into allegations of cartelisation amongst NSK Limited, Japan (NSK) and JTEKT Corporation, Japan (JTEKT) from 2005 to 25 July 2011, in relation to the supply of Electric Power Steering Systems to various automotive Original Equipment Manufacturers, having Appreciable Adverse Effect in India. NSK and JTEKT are manufacturing and selling EPS Systems in India through their Indian subsidiaries namely RANE NSK Steering Systems Ltd. (RNSS) and JTEKT Sona Automotive India Limited (JSAI). The period of enquiry was limited to 25 July 2011.This was done due to the fact that another competition authority i.e. Japanese Fair-Trade Commission had conducted an onsite inspection of four Japanese companies including NSK and JTEKT, in connection with alleged cartelisation in another product.
An application was received by CCI under the provisions of Lesser Penalty Regulations under the Competition Act, 2002 from NSK. The CCI directed the Director General (DG) to investigate into the matter. During the pendency of investigation before the DG, JTEKT filed an application before the Commission under the provisions of Lesser Penalty Regulations.
CCI held:
That NSK and JTEKT and their Indian subsidiaries, RNSS and JSAI respectively, indulged in anti-competitive conduct and caused an adverse effect on competition in India.
The CCI imposed a penalty amounting to 4% of its turnover on RNSS and the amount equivalent to the relevant profit of JSAI. Penalty was also imposed on certain individuals from NSK and JTEKT and computed the same at 10% of their income for the preceding three years. However, since NSK/RNSSS approached CCI as an applicant with complete disclosures, the penalty imposed was reduced by 100% and that of the individuals was reduced by 50%. Further, since JTEKT/JSAI was second to approach the CCI as an applicant and its disclosures had provided significant value addition in the matter, the penalty imposed on the company and its individuals was reduced by 50%.
SUBJECT: CCI INITIATES INVESTIGATION AGAINST INTEL FOR ALLEGED ABUSE OF DOMINANCE
Matter: Matrix Info Systems Private Limited vs. Intel Corporation and Intel Technology India Private Limited (Competition Commission of India)
Coram: Ashok Kumar Gupta (Chairperson), U. C. Nahta (Member) and Sangeeta Verma (Member)
Date: 09 August 2019
Facts:
Matrix Info Systems Private Limited (Informant) is a Delhi based Information Technology (IT) trading company which is engaged in the business of importing, wholesaling, distributing and supplying a wide range of IT products. Intel Corporation (Intel) is a leading multinational corporation and technology company incorporated in USA which is engaged in designing and manufacturing of a wide range of IT components, peripherals, computer systems, etc. as well as manufacturing and distribution of electronic devices relating to communications and computing including micro-processors etc. Intel Technology India Private Limited (ITIPL) is an Indian subsidiary of Intel.
As per the Informant, prior to 2016, Intel used to provide manufacturer’s warranty within India on its Boxed Micro-Processors that may have been purchased from any country in the world. However, with effect from 25 April 2016, Intel amended its warranty policy for India. As per this new policy, Intel would entertain warranty requests for Intel Boxed Micro-processors in India only when the same is purchased from an authorized Indian distributor of Intel within the country. As per the Informant, such separate warranty terms of Intel for India vis à-vis the rest of the world, is arbitrary and unfair towards the Indian market and consumers. The Informant averred that by adopting this new Indian specific warranty policy, Intel intends to protect the market share of its own authorized distributors in India. As a result, as per the Informant Indian customers would be forced to purchase Intel’s Boxed Micro-Processors only from the authorized distributors of Intel in India in order to avail the after-sales warranty within the country.
CCI held:
The CCI prima facie formed an opinion that such differentiated warranty policy of Intel in India limits the choice for the Indian consumers. It observed that the rates offered in India for the same product by Intel’s authorized distributors is almost twice the rates offered by Intel’s authorized distributors outside India. In fact, the Informant’s submission during the preliminary conference that the rates at which it imports Intel’s Boxed Micro-processors from Intel’s authorized distributors outside India even when increased by the Informant’s own profit margin, still offer price competition to the Boxed Microprocessors sold by the Indian authorized distributors of Intel was also observed by CCI. As a result, the CCI prima facie formed an opinion that the distinction made by Intel by means of its new India specific warranty policy between the products purchased in India from Intel’s domestic authorized distributors and those purchased from Intel’s foreign authorized distributors, is prima facie unfair and discriminatory, especially when seen in the light of the fact that such differential treatment is not meted out by Intel in other jurisdictions. The CCI has directed the Director General to investigate the matter and submit an investigation report within a period of 150 days from the date of the order.
SUBJECT: CCI IMPOSES A PENALTY OF INR 390 MILLION ON LPG CYLINDER MANUFACTURERS FOR BID RIGGING THE TENDERS FLOATED BY HINDUSTAN PETROLEUM CORPORATION LIMITED
Matter: In Re: Alleged Cartelization in supply of LPG Cylinders procured through tenders by Hindustan Petroleum Corporation Limited
Coram: Ashok Kumar Gupta (Chairperson), U. C. Nahta (Member) and Sangeeta Verma (Member)
Date: 09 August 2019
Facts:
CCI received an anonymous letter in April 2013 wherein it was alleged that there was a cartel operating in tenders floated by Hindustan Petroleum Corporation Limited (HPCL) in contravention of the Competition Act, 2002 (Act). Based on this letter the Commission registered a suo-moto case.
The CCI prima facie observed that with regards to tender No.1, a comparison of price bids submitted by vendors showed a similarity of pattern in the price bids amongst 53 vendors. Further, many vendors had submitted the same or similar bids in most of the 18 States, which indicated a possible collusion and concerted action amongst the bidders. The CCI further observed that 45 out of total 78 bidders of Tender No.1 were found to have infringed the provisions relating to bid rigging or collusive bidding.
Furthermore, 51 bidders withdrew their bids without any plausible reason and the collective withdrawal of their bids lend credence to the allegation of existence of an understanding or arrangement amongst them.
As a result, the CCI passed an order, directing the Director General (DG) to cause an investigation into the matter. The DG was also directed to investigate the role (if any) of the persons who were in-charge of and responsible to the companies for the conduct of their business. DG submitted its Investigation Report in respect of both Tender No.1 and Tender No.2 to the Commission.
CCI held:
That 51 bidders collectively withdrew their bids from the second tender, and that the letters submitted to HPCL for withdrawal (on the same day) had identical language. The CCI asserted that, “This cannot be a sheer coincidence considering the fact that OPs are in constant touch with each other or through their agent.”, and therefore found them to be in contravention of the Act. On a detailed examination of bidders conduct, the CCI elucidated that “Any collusion in rigging tenders in public procurement costs exchequer on account of anti-competitive bids besides resulting in higher cost to end-consumers for whom a cylinder is a necessary input for their daily requirements”. The CCI concluded that it is a fit case, not only for imposition of penalty, but also for viewing the contravention seriously. On analyzing the conduct of /office bearers of the bidders, CCI directed them and the bidders to cease and desist from indulging in anti-competitive practices in future.
For further information, please contact:
Souvik Ganguly, Partner, Acuity Law
al@acuitylaw.co.in
