All IPR suits can't be valued at over ₹3 lakh: Delhi High Court Division Bench overrules Vishal Pipes judgment

The Delhi High Court recently held that the courts cannot proceed on the premise that all Intellectual Property Rights (IPR) suits would necessarily be valued at ₹3 lakh or above, and therefore, be listed before the commercial courts [Pankaj Ravjibhai Patel trading as Rakesh Pharmaceuticals v. SSS Pharmachem Pvt Ltd]..A Division Bench of Justices Yashwant Varma and Dharmesh Sharma said that it would be wholly incorrect for courts to proceed on the presumption that an IPR suit, when valued at below ₹3 lakh, is necessarily based on ulterior motives or mala fide intent to avoid application of the Commercial Courts Act, 2015 (CCA).“The CCA would inarguably be attracted to any action which relates to a commercial dispute falling within the ambit of section 2(1)(c) and where the specified value of the subject matter goes beyond the minimum ₹3 lakhs pecuniary limit as notified. Undisputedly if the declared specified value be ₹3 lakhs or above and the suit relate to a commercial dispute, it would necessarily have to be placed before the notified commercial court… Undisputedly, unless the twin factors of “commercial dispute” and “specified value” are met, a matter cannot be placed before or be taken cognizance of by a commercial court,” the judgment stated..With these observations, the Division Bench overruled a single-judge’s judgment in Vishal Pipes Limited v. Bhavya Pipe Industry, in which the Court had mandated that normally in all IPR cases, the valuation ought to be ₹3 lakh and above.In that judgment, Justice Prathiba M Singh had noted that unscrupulous plaintiffs were deliberately undervaluing IPR suits leading to a situation where they were not only choosing the court before which those matters would be listed, but also avoiding the proceedings being governed by the provisions of the CCA.Therefore, the single-judge passed a slew of directions and said that even if an IPR suit is valued at below ₹3 lakh, it should be placed before a designated commercial court to enable it to examine the suit valuation at the outset and to ascertain and ensure that it had not been deliberately undervalued.The single-judge had further ordered that all pending IPR suits presently being tried by different non-commercial courts be placed before the District Judges (Commercial)..After considering the arguments and the directions passed in Vishal Pipes, the Division Bench concluded that the issue of whether a particular suit has been deliberately undervalued is one that can always be examined and scrutinized by a competent court.“Ultimately the issue of a deliberate suppression of valuation would have to be considered and answered based on the facts obtaining in an individual case. All that we deem apposite to note and observe in this respect is that Vishal Pipes clearly appears to have been incorrectly decided when it formulated a direction mandating that normally in all IPR cases, the valuation ought to be ₹3 lakhs and above.”The Division Bench referred to paragraph 66(iv) of Vishal Pipes and noted that the fallout of the directions contained therein is that even where suits are found to have been correctly valued at below ₹3 lakh, and are thus liable to be tried as non-commercial suits, they are liable to be listed before the District Judge (Commercial) and be tried in accordance with the law as ordinarily applicable.“It would, therefore, be wholly inappropriate for us by way of a judicial fiat to direct such non-commercial suits to be tried by District Judges (Commercial) notwithstanding those suits not meeting the threshold criteria constructed in terms of the CCA.”.The Bench further said that it cannot approve the single-judge’s direction for transfer of all pending IPR suits laid before District Judges (non-commercial) to be placed before the commercial courts in Delhi.It agreed with the submission of amicus curiae Swathi Sukumar that all IPR suits in which valuation has been pegged at below ₹3 lakh may be duly examined by the court before which those matters presently lie.“If the competent court, in the facts of a particular case, ultimately comes to conclude that the valuation of an IPR suit has been deliberately suppressed, it could always frame appropriate directions for the plaint being amended and additional court fee being demanded. However, those directions would be warranted only when the concerned court comes to a definitive conclusion in the facts of a particular case that the declared valuation is patently incorrect or is actuated by ulterior motives.”.The Court also found merit in the suggestion by the amicus of an additional declaration being made by plaintiffs in IPR suits where valuation is placed at below ₹3 lakh.Therefore, in all such cases, the plaintiff would have to declare that it has not taken an inconsistent position with respect to specified value in any other litigation pending or instituted in the past, the Court ordered.“We, for reasons aforenoted, find ourselves unable to affirm or approve the directions contained in Para 66 (iv) and (v) of Vishal Pipes. They shall consequently stand overruled. Any matters which in the interregnum may have been transferred to designated commercial courts for compliance with the directions issued in Vishal Pipes shall revert to the competent courts for being tried in accordance with the observations made hereinabove,” the Bench directed..The Court requested the Registrar General to bring the judgment to notice of all the Principal District Judges for compliance. The District Judges were asked to display a list of all such matters indicating the courts to which they would revert and the dates on which they would be called before the appropriate courts.“A list of all such matters carrying details as indicated above, may also be uploaded on the web portals of the concerned District Courts. The courts upon receipt of such matters shall proceed further and in accordance with the directions framed hereinabove.”.The Division Bench passed these directions while dealing with a plea filed by one Pankaj Rajivbhai Patel, trading as Rakesh Pharmaceutical, against a pharma company called SSS Pharmachem.The appellant had challenged the order passed by the District Judge (Commercial) on February 21, 2023 vacating the ex parte injunction granted in his favour. The court had also asked him to furnish additional material in support of the Chartered Accountant’s certificate which had been presented in respect of the “specified value” of the suit.On April 25, 2023, the Division Bench had placed the order in abeyance and restored the injunction. While considering the questions before it, the Bench expressed reservation with respect to the correctness of the view expressed by the single-judge in Vishal Pipes.After overruling Vishal Pipes, the Court allowed the appeal and set aside the order dated February 21, 2023 passed on the suit by the District Judge (Commercial)..Senior Advocate Sandeep Sethi with Advocate Swathi Sukumar appeared as amicus curiae in the matter.Advocate Vikas Khera and Ved Prakash appeared for the appellant.The defendant was represented through Advocates Neeraj Gogia, Manu Prabhakar and Avinash Kumar. .[Read Judgment]