The forum for adjudicating commercial suits in India is governed by the Commercial Courts Act, 2015 (“CCA”), where cases are heard by courts at different levels depending on the valuation of the suits. Lesser-valued cases are heard by courts lower in the judicial hierarchy and fall outside the direct scrutiny of the CCA, thus being subject to relatively lower regulation. As valuation tends to be based on self-assessment of the party instituting the suit, without adequate and rigorous enforcement, this provision can lend itself to considerable manipulation. Parties may deliberately value their suits to indulge in ‘forum shopping’, i.e., choose a court that is the most convenient and may provide them the most favourable outcome. Acknowledging this concern, the Delhi High Court earlier this month laid down significant directions concerning the valuation of Intellectual Property Rights (“IPR”) suits, where this provision has been particularly abused.
The issue confronting the Court in Vishal Pipes Ltd vs Bhavya Pipe Industry (FAO-IPD 1/2022 & CM APPLs. 12-14/2022, 3 June 2022, Delhi High Court) was that IPR suits were being deliberately valued below Rs. 3Lakhs (~USD 4000) by plaintiffs in order to avoid being regulated by the CCA, thereby indulging in forum shopping or bench hunting. Justice Pratibha Singh held that all IPR suits valued below Rs. 3 Lakhs in the jurisdiction of Delhi (where the bulk of Indian IP litigation takes place), at the first instance, would be listed before the District Judge (Commercial) to determine and ensure that such undervaluation is not arbitrary or unreasonable. On the basis of such examination, the concerned commercial court would have to pass an appropriate order either directing the plaintiff to amend the plaint and pay the requisite fee or to proceed with the suit.
The Court was faced with two specific questions:
(i) Can IPR suits be valued below Rs.3 lakhs and be listed before the District Judges who are not notified as Commercial Courts?; and
(ii) Whether the provisions of CCA would be applicable to such disputes?”
The first question was answered clearly in the negative, for various reasons. Firstly, the Court said that although judicial principles allow the plaintiff to value the suit in the manner it chooses, it must be in the bounds of the CCA, and this cannot be stretched to justify an undervaluation of IPR disputes and payment of a lower court fee.
Secondly, the Court noted that the CCA requires every commercial suit to have a ‘specified value’, and not ascribing a ‘specified value’ would be contrary to the scheme of the Act. Section 12(1)(d) of the CCA allows the ‘specified value’ in case of intangible rights to be the market value of those rights as estimated by the plaintiff.
Thirdly, it would be mandatory for IPR suits to be ascribed a ‘specified value’, in the absence of which the valuation of the suit below Rs.3 lakhs would be arbitrary, whimsical and wholly unreasonable. In this view, IPRs being intangible rights, some value would have to be given to the subject matter of the dispute as well. The Court would have to take into consideration the ‘specified value’ based upon not merely the value of the relief sought but also the market value of the intangible right involved in the said dispute.
Fourthly, the Court delved into the legislative intent of the CCA, noting that the amount of Rs.3 lakhs is the estimation of the legislature as the lowest threshold in any ‘commercial dispute’ in India which deserves to benefit from speedier adjudication, owing to the economic progress in the country. The legislative intent behind a lower threshold in a ‘commercial dispute’ cannot be rendered meaningless, and only in exceptional cases could a valuation of IPR disputes below Rs.3 lakhs be justified.
The Court also laid bare some practices in IPR suits in the Delhi jurisdiction. It said that the average court fee paid in Delhi in any civil suit is approximately 3% to 1% of the pecuniary value ascribed to the suit. Thus, the Court said, at Rs.3 lakhs, the court fee payable is minimal, and it becomes apparent that the only reason for which IPR disputes may be valued below Rs.3 lakhs would be to indulge in forum shopping and bench hunting, and not to genuinely exercise the option of the forum where relief is sought. The purpose would also be to escape the rigors of the CCA, and it would amount to abuse by plaintiffs of their rights, at the very least.
There was also no issue of affordability, since IPR disputes are usually filed by business entities, and if valued at a minimum of Rs.3,00,000/-, even individual IPR owners would be easily able to afford the court fee at the rate of 1-3%. Thus, the discretion vested in the plaintiff to value the suit as it pleases, ought not to be extended to an extent that it encourages malpractice, misuse, abuse and forum shopping.
In view of this analysis, the Court held that since IPR suits must be instituted in the District Courts “having jurisdiction”, for the territory of Delhi, District Judges notified as Commercial Courts which have subject matter jurisdiction under the CCA would be the District Courts “having jurisdiction”.
While the Court admitted that valuation of intellectual property by itself is very complex, it clarified that the commercial court is not expected to value the specific IP on the basis of any mathematical formula but to broadly take into consideration whether the said IP would be more than the minimum threshold of Rs. 3 Lakhs.
On the basis of the above, in order to maintain consistency and clarity in adjudication, such suits that may be valued below Rs.3 Lakhs shall continue as non-commercial and are to be listed before the District Judge (Commercial) without being subjected to the CCA. Further, all pending IPR cases currently before the Additional District Judges (Non-Commercial) in Delhi, shall be placed before the concerned District Judges (Commercial) while giving the Plaintiffs the liberty to amend their suits.
The judgement is a noteworthy step towards deterring forum shopping done by arbitrarily and unreasonably undervaluing IPR suits by the litigants. Routinely condemned by Courts for years, this concrete decision nips this practice in the bud. By holding that litigants and lawyers cannot escape the rigours of the CAA by undervaluing their suits, the Court has laid down boundaries for the judicial principle of dominus litis: the plaintiff is ordinarily the ‘master of the suit’, but this principle cannot be stretched to justify undervaluation of IPR suits to indulge in forum shopping.