Common Commercial Disputes Queries – August, 2023

By Gunjan Chhabra

Questions Answered in this month’s CCDQ:

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RxPrism Inc. v. Canva (Delhi High Court, 18.07.2023), was a #Patent infringement suit with an urgent application, filed by the Plaintiff (“P”) alleging infringement of its Patented Product, “My show and tell”.

It was a system which would enable a seller on an e-commerce website to describe a product by uploading slides & integrating the same with simultaneous video description in an interactive manner, amongst other things.

P had filed Patent Application in India in 2018 & was already granted patents in various jurisdictions.

The bone of contention was Canva’s new feature ‘Present and Record’ launched in August 2020, claimed to be identical to P’s product.

The Court observed as under:

1. The broad settled principles in a patent infringement suit are:

a. Claims have to be construed in a purposive manner.

b. Trivial variations do not matter & the court has to assess if impugned product is producing the same effect or is ‘equivalent’ to the invention claimed & disclosed in the Patent.

c. It is the Granted Claims v. Product comparison that is determinative of patent infringement & not the Product vs. Product comparison.

(Raj Parkash v. Mangat Ram AIR1978Delhi1, F. Hoffman La Roche v. Cipla 2016(65)PTC 1(Del), Sotefin SA v. Indraprastha Cancer Society & Research Centre (2022:DHC:595)

2. The several distinctions sought to be drawn by Canva were non-essential. For instance, It was irrelevant that P’s product had a PIP feature (explained as note below) in the form of moveable windows as this in itself was non-essential. What was essential was that both media in PIP mode synced the audio with the video & the image. This feature was present in both products.

3. The plea of ‘prior art’ raised by Canva was also rejected, as Microsoft PPT-2016, Auto-Auditorium & Loom were very different from P’s product.

4. Court observed that clear case for infringement was made out by P, by mapping of claim charts whereas Canva has failed to bring any credible challenge.

5. Balance of convenience also lies in favour P, a small player whose market opportunities for licensing & revenue generation would be completely eroded, in case interim injunction was not granted. (Reliance placed on Merck Sharp vs. Glenmark Pharmaceuticals, 2015 SCC OnLine Del 8227).

6. Canva being an Australian company, also had no assets/physical business in India, owing to which they were required to provide security for the P’s claims.

In view of the above, Canva was thus restrained from making available ‘Present and Record’ Feature infringing P’s patented product. Canva was also directed to deposit sum of INR 50 lakhs with the Registrar General of Court in form of FDR, as security for the P’s claims for past use of infringing features in India.

 

Note: PIP Explanation: 

Picture-in-Picture (PiP) is a multimedia feature that lets users view content in a smaller window while interacting with other applications or content. (Think, smaller window in YouTube when you browse other content). It enhances multitasking and user experience, commonly used in video players, video conferencing, web browsers, and mobile devices. PiP allows users to watch videos while browsing or using other apps, maintaining eye contact during video calls, and performing tasks on mobile devices without interruptions. This feature improves productivity and user satisfaction across digital platforms.

 

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RxPrism Inc. v. Canva (Delhi High Court, 18.07.2023), was a #Patent infringement suit with an urgent application, filed by the Plaintiff (“P”) alleging infringement of its Patented Product, “My show and tell”.

Apart from the aspects on patent law discussed, restraining the Defendant from using its product and deposit of security to secure the Plaintiff’s case, the Court had also directed Canva to pay heavy costs.

Regarding the reasons for the same the Court observed as below:

 

1. The Plaintiff was a start-up incorporated in 2013 who applied for the patent of its product in 2018, and has been granted patent in various foreign jurisdictions.
2. Upon coming across Canvas ‘Present & Record’ feature, the Plaintiff reached out to the Defendant. The defendant then reverted & asked for documents relating to patent & claim mapping charts etc.
3. Mediation was also explored during the suit, but was not fruitful.
4. In the Written Statement, the Defendant had used various expressions, making wild allegations against the Plaintiff, such as “coerce” “sham paper trail” “kind of hunt for low-lying fruit” “first scapegoat” “arms twisted”, “unscrupulous” “evasive”.
5. The language was found contrary to the permissible language in pleadings in accordance with Order VII Rules 3,4 and 5 of the Code of Civil Procedure.
6. Such pleadings when read together appear to be libellous and slanderous, and an attempt to ensure that the Plaintiff is stopped from enforcement of its patent rights against not only the Defendant but other infringers if any.
7. The sequence of events & correspondence on records demonstrate that Canva was initially willing to engage with the Plaintiff, but thereafter had a change of mind with the Written Statement being an attempt to create prejudice by smearing the Plaintiff.
8. The Plaintiff’s initial contact, at best, was a start-up trying to approach an Australian company merely to amicably resolve disputes prior to commencing litigation.

 

Bearing the facts of the case, and the language used in the written statement by the Defendant against the Plaintiff, costs of Rs. 5 lakhs was awarded in favour of the Plaintiff.

 

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M/s. Noumla Brothers Vs. M/s. Ruchi World Wide Ltd. (Madhya Pradesh High Court, decided on 06.07.2023), was an arbitration appeal against an Order dismissing the Appellant’s section 34 Petition as being time barred.

In this case, the #arbitration was to be conduced by the Cotton Association of India. When disputes arose, the Appellant did not participate in the proceedings & an ex-parte award was passed.

The Appellant came to know of the award only once it received notice of execution having been filed, after which the Appellant filed a Section 34 Petition challenging the award, which was dismissed on ground of lack of territorial jurisdiction.

Thereafter an SLP was filed against this order, which came to be dismissed on 04.10.2017. However, the Appellant claimed that the SLP dismissal came to its knowledge only on 28.11.2017 when it again received notice of execution. Then the Appellant preferred Section 34 Petition before the correct court, along with an application under Section 14 of the #Limitation Act.

This came to be dismissed by Indore District Court as being beyond 120 days, stating that the period of limitation began on 04.10.2017 & not from date of Appellant’s knowledge.

This was the order against which the Appellant had filed the present Appeal.

The Court observed as follows:

1. As per proviso of Section 34, if the Court is satisfied that the Applicant was prevented by sufficient cause from making the application within a period of 3 months, it may entertain the application within a further period of 30 days but not thereafter.
2. In the present case, the Appellant was required to file two applications, first under Section 14 of the Limitation Act for exclusion of time spent in proceedings bona fide in Court without jurisdiction, and another under Section 34(3) of the Arbitration& Conciliation Act for further extension of one month.
3. The Secretary of Cotton Association of India has sent a certified copy of the award by speed post along with a letter in January 2018 which also doesn’t disclose as to whether the award was sent earlier to the Appellant.
4. These issues also need to be considered by the District Judge while deciding the issue of limitation.

In view of the above, the impugned Order of District Judge was Quashed, and the matter was remitted back for fresh adjudication on issue of limitation after recording evidence.

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KC Aggarwal Vs. National Stock Exchange of India Ltd. (Delhi High Court, decided on 19.07.2023) was a revision petition filed under S. 115 of the Code of Civil Procedure.

The Petitioner executed a Futures Contract with IOCL shares. Instead of a credit to the demat account of the Petitioner a debit reflected.

Against the said, the Petitioner’s complaints & notices went unheard whereafter the Petitioner filed a civil suit.

In the said suit, the second respondent, ICICI Bank filed an application under Section 8 of the #Arbitration & Conciliation Act (for reference of disputes to arbitration), on account of existence of arbitration clause in the account opening form. This application came to be allowed.

The present revision petition was filed against the above order.

The Petitioner’s main contention was that the disputes were against NSE as well & NSE was not a party to the arbitration agreement, so disputes could not be referred to arbitration. The Respondents on the other hand contended that no revision was maintainable against such an order.

The Court observed as under:

1. Section 8 is in the form of a legislative command to the Court & once the prerequisite conditions are satisfied, the court must refer parties to arbitration. (Reliance placed on Magma Leasing & Finance Ltd. v. Potluri Madhavilata, (2009) 10 SCC 103).
2. On a bare perusal of reliefs sought by the Petitioner in the suit, it was apparent that the primary concern was against ICICI Bank, Respondent no. 2.
3. The Petitioner’s contention that the current dispute was a tripartite dispute was found to be unsustainable. The Petitioner had not shown how his grievances could be resolved by the NSE.
4. Further, the Petitioner’s grievances were arising out of the Account Opening Form which contained the arbitration clause & to which the Petitioner & the Respondent no. 2 were parties.
5. Therefore, the trial court was right in referring the matter to arbitration.
6. It is only in cases where the subordinate court has exercised a jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so vested, or has acted in the exercise of its jurisdiction illegally or with material irregularity that the revisional jurisdiction of the High Court can be properly invoked. The mere fact that the decision of the Trial Court is erroneous due to a question of fact or of law does not amount to illegality or material irregularity. (Reliance placed on Pandurang Dhondi Chougule v. Maruti Hari Jadhav, (1966) 1 SCR 102, D.L.F. Housing & Construction Co. (P) Ltd. v. Sarup Singh, (1969) 3 SCC 807)

 

In view of the above, the Court concluded that no case of revision had been made out as no cause existed wherein the Trial Court failed to exercise jurisdiction as per law.

 

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Hindustan Construction Company Ltd.(“HCC”) v. NHAI (#SupremeCourtofIndia Decided on 24.08.2023), was an SLP filed against a Section 37 Appeal.

Arbitration proceedings were regarding disputes which arose out of construction of contract of a bypass in Allahabad which was awarded by NHAI to HCC.

The award passed in the proceedings was unanimous on most questions, while on some there was a dissenting view of one #Arbitrator out of the tribunal of three. One such issue was regarding the methodology of measurement of embankment works (one with soil alone and one with combination of soil pond ash.) Here the majority view was that measurement was to be done in a composite manner, and the minority view was that it was to be done separately for both.

When HCC preferred objection petition under Section 34 of the #Arbitration & Conciliation Act, 1996 challenging the award, the single judge rejected the petition.

In Appeal to the Division Bench, the division bench held that the majority view was based on an implausible interpretation of the contract. Against this decision, an appeal was filed before the Supreme Court.

The Court observed as follows:

1. The view adopted in the majority award (composite measurement) was adopted in several other awards. It was also similar to the view of DRB/DRP in other contracts. (Reliance placed on Oriental Structural Engineers (P) Ltd. v. NHAI CA No. 4662/2023).
2. Awards passed by technical arbitrators (engineers) are not meant to be scrutinised in the same manner as awards prepared by legally trained minds. (Reliance placed on Voestalpine Schienen GmbH v DMRC 2017 (1) SCR 798 and Delhi Airport Metro Express (P) Ltd v DMRC 2021 (5) SCR 984).
3. The Division Bench’s approach (of appellate review twice removed so to say u/s 37), resulted in displacing the majority view and substitution of the minority view.
4. As long as the view adopted by the majority was plausible , such a substitution was impermissible (Reliance placed on State of UP v Allied Constructions 2003 Supp (2) SCR 55).
5. The dissenting opinion is not per se an award but is for the parties information only. (Reliance placed on Russel and Gary Born who was quoted as stating “This (Dissenting opinion) is an essential aspect of the process by which the parties have an opportunity to both, present their case, and hear the reasons for the Tribunal’s decision; not hearing the dissent deprives the parties of an important aspect of this process.” )

In view of the above, the awards were upheld and restored and the order of the Division Bench was set aside.

 

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In National Highways Authority of India v. Trichy Thanjavur Expressway Ltd. (Delhi High Court, decided on 21.08.2023), the High Court took on the herculean task of reviewing whether part of an award could be set aside, or an award could be modified under S. 34 of the #Arbitration & Conciliation Act, 1996.

The Court analysed various provisions, global judgments & suggestions of stakeholders in detail. A Summary of conclusions reached is as follows:

1. Courts are obliged to bear in mind the principle of minimalistic intervention in awards keeping in mind party autonomy.
2. 34 is nothing but the Legislature’s intent to balance minimalistic intervention with the need to interfere with an award on grounds of serious irregularity or patent illegality.
3. 34(2)(a)(iii) speaks of part of an award being exorcised from the rest. No report or material suggest a deletion of such a power of the Court.
4. The grounds for setting aside an award under S. 34(2)(a) of an Arbitral Award strike at the very heart/foundation of an arbitral proceedings, rendering an arbitration void ab initial.
5. However, S. 34(2)(a)(iv) deals with situations where while some parts of the award are invalid, other parts could be valid. Thus the Proviso rescues valid parts of the award & saves parties from commencing arbitral proceedings all over from scratch.
6. 34(2)(b) on the other hand does not deal with grounds of fundamental invalidity.
7. Each claim, although may arise from the same contract, may be based on a particular covenant & stand independently without drawing sustenance on the decision rendered on another claim. If such is the scenario, where the claim is not intertwined or subordinate with another, then a decision on such a claim would be an award in itself.
8. In other words, one would view them as binding decisions rendered by AT on separate & distinct claims.
9. Once the components of an award are acknowledged as standing separately & independently, there is no hurdle in the way of courts adopting the doctrine of severability & partly setting aside an award.
10. This setting aside, is different “modification” of award, meaning variation or modulation of the relief. Partial setting aside of an award could clearly not amount to modification/variation of the award. Power of modification is not available to Courts under S. 34. (Relied on NHAI vs. M. Hakeem (2021) 9 SCC 1).
11. Further, modification can also not be permitted by way of a side wind of S. 34(4). This can be used only for curative measures contained in S. 33 & would be confined to measures adopted by AT without influencing or modifying the basic structure or edifice of the award. (Relied on Dyna Technologies Pvt. Ltd. v Crompton Greaves (2019) 20 SCC 1 & I-Pay Clearing Services v. ICICI Bank (2022) 3 SCC 121).
12. S/ 34(4) may also be used where AT is being invited to render its award on a claim previously laid before it, but omitted from the award (S. 33(4)). However, even this can be done only when the claim is independent & unconnected with other parts of the award. In such scenario it would be better for the Court to take recourse to S. 34(4) rather that setting aside the entire award merely on the ground of AT having failed to rule on one of the various claims laid before it.
13. 34(4) can also be used where AT is required to provide additional reasons merely to fill gaps. (Keeping in mind cautions laid down in I-Pay).
14. Such an interpretation of S. 34(4) would balance out different concerns & would be prudent keeping in mind the prejudice caused if proceedings would need to be initiated afresh.
15. 34(4) cannot be used to review findings by the AT, no matter if it is even an apparent error or fallacies, as such an interpretation would lead courts down a perilous path of disputes & contested position of parties regarding the nature of the “error”.

With the above observations the petitions were disposed off.

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Splendor Landbase Ltd. Vs. Aparna Ashram Society & Anr. (Delhi High Court, decided on 22.08.2023), were a batch of Petitions under Section 11 of the #Arbitration & Conciliation Act, 1996 for appointment of #arbitrator under admittedly unstamped instruments.

Certain issues arose which called for the court to lay down guidelines as there was a need to balance the timeline of 60 days (S. 11(13)) for disposal of s. 11 Petition, with the mandate of #supremecourt in the case of NN Global Mercantile v. Indo Unique Flame(2023)7SCC 1 (“NN Global”) to act in tune with the Indian Stamp Act, 1899 for unstamped instruments.

The Court laid down the following guidelines on issues:

1. Regarding Requirement of filing Original Agreement:

a. It is incumbent for a Petitioner who files a S. 11 Petition on basis of unstamped/insufficiently stamped arbitration agreement, to file the original instrument as executed.

b. In other scenarios, where the arbitration agreement is duly stamped, filing the original is not required. The certified copy has to clearly indicate that it has been duly & properly stamped.

c. A statement to this effect also has to be contained in the S. 11 Petition.

2. Unstamped/insufficiently stamped Arbitration Agreements are to be mandatorily impounded under S. 11. Under S. 33 of the Indian Stamp Act, it is permissible for the Court to delegate the task of examining & impounding such an instrument to an officer as may be appointed by Court. (Reliance placed on NN Global & Black Pearl Hotels v. Planet M. 2017 SCC OnLine SC 185).
3. As regards what is the procedure to be followed after impounding, the Court has two options:

a. Send the impounded instrument to concerned collector of stamps. Once such duty has been levied, endorsement made under s. 42 of Indian stamp Act, then such instrument becomes admissible, & Court can act on such instrument under S. 11 of the A&C Act; OR

b. Take recourse to S. 35 of Stamp Act & enable deposit of duty & penalty with itself, after which court can admit the instrument for section 11 purposes. This route is more suitable where the quantum of duty payable is not disputed.

Recourse of option (b) will effectuate the mandate of timelines envisaged for disposal of appointment petitions avoiding inordinate delays of adjudication by collector of stamps.

4. Tasks including examining & impounding of instruments, preparation of report on amount of duty & penalty, endorsement regarding levy, transmission of authenticated copy, certificate etc, were suggested to be delegated to the Registrar by the Court.
5. Court can also give time bound directions to collector in case option (a) is selected by Court.