Supreme Court Clarifies Jurisdiction in Design Cancellation Cases: S.D. Containers vs. Mold Tek Packaging (2020)

Date of the Judgment: December 1, 2020
Citation: 2020 INSC 944
Judges: L. Nageswara Rao, Hemant Gupta, and Ajay Rastogi, JJ.
Can a commercial court at the district level decide on the cancellation of a design registration when such a claim is raised as a defense in a suit for design infringement? The Supreme Court of India addressed this question in a recent judgment, clarifying the jurisdictional aspects under the Design Act, 2000 and the Commercial Courts Act, 2015. The core issue revolved around whether a suit involving a counterclaim for design cancellation should be transferred to the High Court, even when the High Court does not have original civil jurisdiction. The judgment was authored by Justice Hemant Gupta, with Justices L. Nageswara Rao and Ajay Rastogi concurring.

Case Background

M/s. Mold Tek Packaging Ltd. (the respondent) filed a suit against S.D. Containers Indore (the appellant) in the Commercial Court, Indore, seeking a declaration and permanent injunction. The respondent alleged that the appellant was infringing on their registered designs for a container and lid. These designs were registered under Design Application Nos. 299039 and 299041, respectively.

The appellant filed a written statement and a counterclaim, seeking the cancellation of the respondent’s registered designs. The appellant argued that the designs were neither new nor original, and thus, should not have been registered under Section 4(a) of the Design Act, 2000. The appellant also filed an application under Section 22(4) of the Design Act, 2000, read with Section 19(2), requesting the suit be transferred to the Madhya Pradesh High Court, Indore Bench.

The Commercial Court initially allowed the appellant’s application and transferred the suit to the Calcutta High Court. However, the respondent challenged this order before the Madhya Pradesh High Court.

Timeline

Course of Proceedings

The Commercial Court, Indore, initially allowed the appellant’s application and transferred the suit to the Calcutta High Court. The Madhya Pradesh High Court, however, set aside the Commercial Court’s order, holding that the Commercial Court at Indore was competent to decide the matter. The High Court relied on the judgment in Godrej Sara Lee Ltd. vs Reckitt Benckiser Australia Pty. Ltd. and another, stating that the cancellation of a design registration should be addressed by the Controller, with appeals going to the High Court. The High Court also noted that the Commercial Courts Act, 2015, has an overriding effect.

Legal Framework

The case involves the interpretation of several key provisions from the Design Act, 2000 and the Commercial Courts Act, 2015. The relevant sections are:

Design Act, 2000:

• Section 4: “Prohibition of registration of certain designs. –A design which– (a) is not new or original;…shall not be registered.” This section specifies that a design that is not new or original cannot be registered.
• Section 19: “Cancellation of registration. –(1) Any person interested may present a petition for the cancellation of the registration of a design…to the Controller… (2) An appeal shall lie from any order of the Controller under this section to the High Court…” This section allows for the cancellation of a registered design by the Controller, with appeals to the High Court.
• Section 22: “Piracy of registered design… (3) In any suit…for relief under sub-section (2), every ground on which the registration of a design may be cancelled under section 19 shall be available as a ground of defence. (4) Notwithstanding anything contained in the second proviso to sub-section (2), where any ground…under section 19 has been availed of as a ground of defence…the suit…shall be transferred…to the High Court for decision.” This section states that if a defendant raises a ground for cancellation of a design as a defense in a suit for infringement, the suit must be transferred to the High Court.

Commercial Courts Act, 2015:

• Section 3: This section allows State Governments to constitute Commercial Courts at the District level.
• Section 7: This section specifies that commercial disputes in High Courts with original civil jurisdiction are to be heard by the Commercial Division of that High Court. It also states that suits transferred under Section 22(4) of the Design Act, 2000, are to be heard by the Commercial Division of the High Court.
• Section 21: “Act to have overriding effect. — Save as otherwise provided, the provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force…” This section gives the Act an overriding effect over other laws, unless specifically provided otherwise.

Arguments

Appellant’s Arguments (S.D. Containers Indore):

• The appellant argued that the High Court erred in transferring the suit to the Commercial Court (District Level).
• The appellant contended that since a plea for cancellation of the design was raised, the suit should be transferred to the High Court, as per Section 22(4) of the Design Act, 2000.
• The appellant cited several cases, including M/s Astral Polytechnic Limited v. M/s Ashirwad Pipes Private Ltd., R. N. Gupta and Co. Ltd. Jasola New Delhi v. M/s Action Construction Equipments Ltd., M/s. Escorts Construction Equipment Ltd. v. M/s Gautam Engineering Company and another, Salutri Remedies v. Unim Pharma Lab Pvt. Ltd, and Standard Glass Beads Factory and another v. Shri Dhar and Ors, to support the argument that the High Court should handle cases involving design cancellation.
• The appellant argued that the High Court incorrectly distinguished between appellate and original jurisdiction, stating that the transfer was necessary due to the cancellation plea.

Respondent’s Arguments (M/s. Mold Tek Packaging Ltd.):

• The respondent argued that the High Court was correct in holding that the Commercial Court at Indore was competent to decide the matter.
• The respondent relied on the Supreme Court’s order in Godrej Sara Lee and Whirlpool of India v. Videocon Industries Ltd. to support the High Court’s decision.
• The respondent contended that the Commercial Courts Act, 2015, gives the Commercial Court jurisdiction over design disputes.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue was:

1. Whether a suit involving a counterclaim for design cancellation should be transferred to the High Court, even when the High Court does not have original civil jurisdiction, or whether the Commercial Court at the District Level is competent to decide the matter.

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issue:

Authorities

Legal Provisions Considered:

• Section 4(a), Design Act, 2000: Prohibition of registration of designs that are not new or original.
• Section 19, Design Act, 2000: Cancellation of design registration by the Controller and appeals to the High Court.
• Section 22(4), Design Act, 2000: Transfer of suits to the High Court when a ground for cancellation is raised as a defense.
• Section 3, Commercial Courts Act, 2015: Constitution of Commercial Courts at the District level.
• Section 7, Commercial Courts Act, 2015: Jurisdiction of Commercial Divisions of High Courts.
• Section 21, Commercial Courts Act, 2015: Overriding effect of the Act.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Godrej Sara Lee Ltd. vs Reckitt Benckiser Australia Pty. Ltd.: The Court held that the High Court had wrongly relied on this case. The Supreme Court clarified that the case pertained to an order by the Controller of Patents and Designs, not a suit for infringement where a plea of revocation was raised.
• M/s Astral Polytechnic Limited v. M/s Ashirwad Pipes Private Ltd. [ILR 2008 Kar 2533]: The Karnataka High Court’s view that a suit must be transferred when a defense under Section 19 is raised was followed.
• R. N. Gupta and Co. Ltd. Jasola New Delhi v. M/s Action Construction Equipments Ltd. [2016 SCC OnLine All 975]: The Allahabad High Court’s view that the District Court cannot examine the merits of a defense under Section 19 was followed.
• M/s. Escorts Construction Equipment Ltd. v. M/s Gautam Engineering Company and another [AIR 2010 J&K 13]: The Jammu and Kashmir High Court’s view that a civil court cannot decide on the revocation of a design was followed.
• Salutri Remedies v. Unim Pharma Lab Pvt. Ltd: This case was referred to, but not discussed in detail.
• Standard Glass Beads Factory and another v. Shri Dhar and Ors [AIR 1961 All 101]: The Allahabad High Court’s interpretation of “shall be transferred” was followed, emphasizing the mandatory nature of the transfer.
• Whirlpool of India v. Videocon Industries Ltd.: The Bombay High Court’s view on the difference between Section 19 and Section 22 was distinguished as it was not a case of counterclaim for cancellation of registration.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily driven by the mandatory language of Section 22(4) of the Design Act, 2000, which requires the transfer of a suit to the High Court when a defense for cancellation of design registration is raised. The Court emphasized that this transfer is a ministerial act, not subject to the discretion of the lower court. The Court also noted that the Commercial Courts Act, 2015, does not prohibit such a transfer, and that its overriding effect under Section 21 only applies when there is an inconsistency between the Acts. The Court found no such inconsistency in this case, as the Commercial Courts Act does not address the transfer of proceedings under the Design Act, 2000, to High Courts that do not have original civil jurisdiction.

The Court’s decision was primarily based on the legal interpretation of Section 22(4) of the Design Act, 2000, and the absence of any conflicting provision in the Commercial Courts Act, 2015.

The Court’s reasoning was based on a strict interpretation of the law, emphasizing the mandatory nature of the transfer under Section 22(4) of the Design Act, 2000. The Court also considered the legislative intent behind the Commercial Courts Act, 2015, and found no conflict with the transfer provisions of the Design Act, 2000.

The Supreme Court emphasized the importance of transferring the suit to the High Court, stating, “The transfer of suit is a ministerial act if there is a prayer for cancellation of the registration.” The Court further clarified the relationship between the Design Act, 2000 and the Commercial Courts Act, 2015, noting, “Since the 2015 Act has no provision either prohibiting or permitting the transfer of proceedings under the 2000 Act, Section 21 of the 2015 Act cannot be said to be inconsistent with the provisions of the 2000 Act.” The Court also highlighted that the High Court where the cause of action arises has jurisdiction, stating, “The High Court, where the cause of action arises has the Jurisdiction to entertain the Suit in terms of Godrej Sara Lee.”

The Court did not discuss any alternative interpretations. The decision was unanimous.

Key Takeaways

• When a defendant raises a plea for cancellation of a registered design in a suit for infringement, the suit must be transferred to the High Court.
• This transfer is mandatory under Section 22(4) of the Design Act, 2000 and is a ministerial act.
• The Commercial Courts Act, 2015 does not override the transfer provisions of the Design Act, 2000 in cases where the High Court does not have original civil jurisdiction.
• The High Court where the cause of action arises has jurisdiction to entertain the suit.
• The Commercial Court at the district level cannot decide on the cancellation of a design registration when a counterclaim is filed.

Directions

The Supreme Court set aside the order of the Madhya Pradesh High Court and remitted the matter to the High Court of Madhya Pradesh, Indore Bench, to decide the suit in accordance with the law.

Development of Law

The ratio decidendi of the case is that when a counterclaim for cancellation of a design registration is filed in a suit for design infringement, the suit must be transferred to the High Court where the cause of action arises. This judgment clarifies the interplay between the Design Act, 2000 and the Commercial Courts Act, 2015, and emphasizes the mandatory nature of the transfer under Section 22(4) of the Design Act, 2000. There is no change in the previous position of law, but the judgment clarifies the procedure and jurisdiction in such cases.

Conclusion

The Supreme Court’s judgment in S.D. Containers Indore vs. M/s. Mold Tek Packaging Ltd. clarifies that when a defendant seeks cancellation of a design registration as a counterclaim in an infringement suit, the case must be transferred to the High Court. This decision reinforces the mandatory nature of Section 22(4) of the Design Act, 2000 and clarifies that the Commercial Courts Act, 2015, does not override this provision. The judgment ensures that High Courts handle complex design cancellation matters, maintaining consistency and expertise in intellectual property disputes.