Delhi High Court issues directions on jurisdiction of district courts to hear IPR suits [READ ORDER]

The Delhi High Court recently issued directions on the jurisdiction of district courts to hear Intellectual Property Rights (IPR) suits, making it clear that litigants and lawyers cannot escape the provisions of the Commercial Courts Act (CCA) by valuing suits below ₹3 lakhs (Vishal Pipes Ltd v. Bhavya Pipe Industry)..In cases where a plaintiff has valued the IP at a price below ₹3 lakhs, the Court held that the suit would mandatorily have to be listed before the District Judge (Commercial) first, instead of the District Judge (Non-Commercial), in order to determine whether such valuation is arbitrary, whimsical or has been deliberately undervalued..While examining the question of whether IPR suits valued below ₹3 lakh ought to be listed before and adjudicated upon by District Judges (Commercial) as per the Commercial Courts Act, Justice Prathiba Singh issued the following directions:(i) Usually, in all IPR cases, the valuation ought to be Rs.3 lakhs and above and proper Court fee would have to be paid accordingly. All IPR suits to be instituted before District Courts, would therefore, first be instituted before the District Judge (Commercial). (ii) In case of any IPR suits valued below Rs. 3 lakhs, the Commercial Court shall examine the specified value and suit valuation to ensure it is not arbitrary or unreasonable and the suit is not undervalued. (iii) Upon such examination, the concerned Commercial Court would pass appropriate orders in accordance with law either directing the plaintiff to amend the plaint and pay the requisite Court fee or to proceed with the suit as a non-commercial suit. (iv) In order to however maintain consistency and clarity in adjudication, even such suits which may be valued below Rs.3 lakhs and continue as non-commercial suits, shall also continue to be listed before the District Judge (Commercial), but may not be subjected to the provisions of the CCA. (v) All pending IPR suits before the different District Judges (nonCommercial) in Delhi shall be placed before the concerned District Judges (Commercial) for following the procedure specified above. plaintiffs who wish to amend the Plaint would be permitted to do so in accordance with law..The present issue arose after it came to the Court's attention there were a large number of IPR matters in Delhi valued below ₹3 lakh, which were placed before the Additional District Judge (non-commercial) for adjudication..In its order, the Court noted that there are three classes of courts before which IPR cases are being listed in Delhi, depending on how they are valued:(i) District Judges/ADJs (Non-Commercial) - For suits valued below ₹3 lakh.(ii) District Judges/ADJs (Commercial)- For suits valued between ₹3 lakh and ₹2 crore.(iii) Commercial Division of the High Court (Original Jurisdiction) - For suits valued above ₹2 crore.Noting that all IPR suits are commercial disputes, the Court found that based on the 'specified value' of the suits, these suits were being made subject to different substantive and procedural laws, before different courts for adjudication..After hearing submissions by amicus curiae appointed to assist it, the Court was prompted to delve into the question as to how ‘specified value’ is to be examined and whether valuation of a suit has any role in the same. It went on to discuss conflicting High Court decisions on the aspect, noting that while the High Courts of Delhi and Kerala held that the valuation of the suit for the purposes of court fee cannot be different from the ‘specified value’, the Karnataka High Court held that the value of the suit for the purpose of court fee and the ‘specified value’ of the suit for exercising jurisdiction in an IPR matter could be different..Justice Singh also highlighted a decision taken on the administrative side by the Delhi High Court's State Courts Management System Committee in February 2020. The Committee had decided that the question as to whether a suit under the Trademarks Act, 1999 can at all be permitted to be valued at less than ₹3 lakh may be left to the discretion of the District Judge (Commercial Court) to whom such matter has been transferred."However, this Court notices that this decision may not have been uniformly implemented in District Courts. Thus, even as on date, there are several IPR suits, which are being instituted and adjudicated by District Judges (non-Commercial). In this view of the matter, this Court is of the opinion that the examination of ‘specified value’ and valuation, is imperative to determine the relevant forum," the order stated.Despite the fact that there was no specific factors described for valuation, relying on precedents and various statutory provisions, the Court summed up the legal position thus: - The Court should look into the allegations in the plaint and examine the substantive reliefs. Whimsical valuation is not permitted;- Valuation of a suit has to be adequate and reasonable. The plaintiff cannot deliberately/arbitrarily undervalue the relief. There must be a genuine effort by the plaintiff to estimate the relief;- If the valuation given by the plaintiff is arbitrary unreasonable, the Court may reject the same and permit the plaintiff to correct the valuation or have the plaint rejected;- The plaintiff cannot whimsically choose a ridiculous figure for filing the suit in an arbitrary manner where there are positive materials or objective standards of valuation of the relief;- The plaintiff has to give definite reasons for not ascertaining the exact value of the relief. If the exact valuation is not done, on the basis of certain basic requirements, the plaintiff’s discretion would become arbitrary;- The plaintiff can choose its forum. However, this prerogative cannot eclipse the requirement of justice. The right to choose the forum is not an absolute one and can be taken away;.The Court also took a dim view of litigants deliberately valuing the relief in suits below ₹3 lakhs, in order to escape the rigors of the CCA or indulge in forum shopping or bench hunting."It is thus clear to this Court that while all IPR disputes irrespective of their ‘specified value’ may not invoke the provisions of the CCA, there ought to be a preliminary exercise required to confirm that the valuation of such suits has not been done arbitrarily. This may be done on the judicial side, as per the SCMSC. Such examination by the Commercial Court is essential so as to obviate any attempts of forum shopping," it held.Before issuing its directions, the Court came to the conclusion that,"In view of the above analysis and legal position, since IPR suits have to be instituted in the District Courts “having jurisdiction”, for the territory of Delhi, it is held that the District Judges notified as Commercial Courts which have subject matter jurisdiction under the CCA, would be the District Courts “having jurisdiction”.".Advocates SK Bansal, Rishi Bansal, Ajay Amitabh Suman and Pankaj Kumar appeared for the petitioners. Senior Advocate Akhil Sibal and advocates Nikhil Chawla and Asavari Jain assisted the Court. Advocate Swathi Sukumar appeared as Amicus Curiae along with advocates Naveen Nagarjuna and Tarini Sahai.Advocates Rajeshwari H, Sugandh Shahi, Dushyant Mahant, Devesh Vashishtha and Sidharth Chopra assisted the Court. .[Read Order]