[This post is authored by Md. Sabeeh Ahmad. Sabeeh is a recent law graduate from AMU, Aligarh. His previous posts can be accessed here.]
The Controller General of Patents, Designs, and Trade Marks (CGPDTM) seems to have embroiled itself into a fresh set of controversy, highlighting a major problem with the functioning of the Trademark Registry. This latest issue could mean that the last 2 years of trademark application examinations need to be reviewed, because they were assigned to third parties as opposed to the Trademark registry examiners! It was reported on August 11 by Ravi Dutta Mishra and Ananthakrishnan G for the Indian Express that as per two different legal opinions given to the DPIIT (one by the Department of Legal Affairs, Ministry of Law and Justice and a second by an Additional Solicitor General of India, Aishwarya Bhati), the orders passed by contractual staff used by the CGPDTM are legally unenforceable as they were made by outsourced employees. This is also indicated from a straightforward reading of Section 3(2) of the Trade Marks Act (discussed further, later below). These staff members were recruited by a third party, Quality Council of India (QCI) (Incidentally, QCI was previously involved in a controversy surrounding appointment of patent examiners, among other things- more on this below). Today, in what seems to be a follow up news article, Ravi Dutta Mishra quotes an official saying that following the legal advice, the DPIIT on July 18th 2024 had directed the CGPDTM to terminate its MoU with QCI, and to form a committee of 5-10 CGPDTM officers to re-validate the orders passed by these contractual staff. There was also a useful clarification made that the current controversy relates to only trademark matters, and not patents too (as yesterday’s IE report implied). Lastly, the article also states that the issue was looked into after a complaint before the DPIIT by an advocate, Mukesh Jain.
This controversy seems to be reinvigorated following an August 2nd Calcutta High Court judgment which held that only administrative powers and functions (and not quasi judicial functions) can be delegated by the Registrar of Trade Marks to other contractual staff. Meanwhile, as a side note, this controversy is also right on the heels of other allegations relating to administrative lapses by the CGPDTM in the procurement of computers bypassing the Ministry of Commerce.
Examination of Trademark Applications by Outsourced Staff
As per the Indian Express report, on March 29, 2024, the DPIIT issued a show cause notice to the CGPDTM asking why action should not be initiated against him for violating the General Finance Rules 2017 and for delegating quasi-judicial powers to contractual staff without its consent. (For those unaware, the CGPDTM is a subordinate office to the DPIIT) The Controller General reportedly replied that the DPIIT has delegated full financial powers to him by the virtue of him being the head of the department. He further reportedly replied saying that the recruitment was done by the QCI after it was approved by the DPIIT.
Before we discuss further, for a quick background let’s understand what is the relationship between the CGPDTM and QCI. Reportedly, the CGPDTM had decided to “outsource” 790 employees through QCI at an annual cost of Rs 50.26 crore from October 10, 2022. Indicatively, as per a 2023 notification on the QCI’s website, these staff members were recruited for the position of “Associate Manager”, “Analyst I” and “Analyst II” and were empowered, inter alia, to hear matters concerning oppositions and pass speaking orders thereafter. Specific roles of these employees can be seen below :-
Please note: Excerpted from this PDF that was available on the QCI website earlier. The notification seems to no longer be up now.
The QCI is an autonomous body registered under the Societies Registration Act XXI of 1860 and according to its website, is set up with the support of the Government and industry associations. It is noteworthy to point out that the leadership of QCI comprises individuals who continue to hold or have held positions in the private sector. On this alone, there is a natural justice question, as those in the private sector cannot be made responsible for performing granting or rejecting trademark applications given they may be connected directly or through competitors. Anyhow, moving on.
Previously, the role of QCI has been discussed in context of the recent recruitment of Patent Examiners (see here) and allegations of corruption which led to a request for investigation by the Chief Vigilance Commission (see here). While the current clarification that outsourced staff cannot take on the duties of government appointed examiners under the trademark act answers one set of questions, another set of questions remain to be answered: How did DPIIT authorise 50 crores for this purpose that is not within the scope of the Act? Surely this illegal purpose should’ve been noticed ‘before’ granting the money for this purpose, and not 2 years later! While the current clarification that outsourced staff cannot take on the duties of government appointed examiners under the trademark act answers one set of questions, another set of questions remain to be answered: How did DPIIT authorise 50 crores for this purpose that is not within the scope of the Act? Surely this illegal purpose should’ve been noticed ‘before’ granting the money for this purpose, and not 2 years later! For that matter, were any audits not held in this meantime? Or perhaps this was part of what was referred to in Adhir Ranjan Chowdhary’s note as Chairperson, Public Accounts Committee, mentioned earlier.
The above mentioned reply to the show case notice opens up Pandora’s box of few more inconsistencies, highlighting the glaring lack of transparency behind the whole process. For instance, CGPDTM’s reply states that “despite not being explicitly recorded”, QCI emerged as the preferred “Research Management Organization” and the CGPDTM was “directed” to oversee the recruitment process through QCI. Furthermore, the reply also states that the DPIIT was periodically updated about the hiring process and the DPIIT approved the renewal of the MoU between CGPDTM and the QCI. On the delegation of authority, the reply stated that consent of the DPIIT is not required for such a delegation as per the scheme of the Trademarks Act (more on the last point below).
For relevant context: Assistant Examiners and Examiners of Trademarks and GIs are “Group B” gazetted officers, and Senior Examiners (and above) are Group A gazetted officers. While the recruitment of officers in the CGPDTM has not always been smooth, their tasks are seen as specifically assigned under the Trademarks Act.
Such delegation of power thus lacks an inherent legality that this process must have, as reportedly pointed out in the Ministry’s opinion. The ASG’s opinion has further stated that compliance with the General Financial Rules (GFRs) 2017 is indispensable when it comes to outsourcing hiring of employees from any agency. And in any case, these employees cannot discharge quasi judicial functions such as passing orders against trademark applications and oppositions. The judgment by the Cal HC, discussed below, further strengthens and affirms the legal opinion by the Ministry. Importantly, the strongly worded opinion also says that these decisions by outsourced staffcan be “successfully challenged as null and void in any statutory proceeding.” Though in the context of patents, long time readers would remember that this is not the first time where delegation of crucial functions of the CGPDTM has drawn limelight. Back in 2011 Prashant Reddy had raised some pressing questions concerning the decision to delegate the important function of prior art search to CSIR.
Calcutta HC Judgment and the Issue of Discharging Quasi Judicial Functions
The Calcutta HC in a judgment dated Aug 2, 2024, made it clear that contractual staff hired under the Trade Marks Registry can only discharge administrative functions on behalf of the Registrar, and not quasi judicial functions like issuing orders. By a Public Notice dated December 21, 2021, applications were invited from the eligible candidates for hiring as “Hearing Officers” purely on contract basis. It was also stated that selected candidates are to hear pending contested matters, under opposition proceedings, related to Trade Marks applications and dispose of the opposition by passing reasoned decision /order as per the provision of law. The contract was initially for one year with quarterly evaluations.
In the case before Cal HC, the Appellants (Visa International Service Association & Anr.) had essentially appealed that the officer designated as Associate Manager of Trade Mark was not authorised to pass orders or to conduct hearings and adjudicate matters. Accepting their arguments, the Cal HC had held that the power vested on a Registrar Trade Mark is one that is quasi judicial in nature. And when this power is to be exercised on behalf of the Registrar (as given in Section 3(2), Trade Marks Act) by “other officers”, the word “officers” indicates that they should be from the cadre of officers. The Court has reasoned as follows:
“The use of expression with such designation as it thinks fit indicates that there are no fetters or limitations with regard to designations of the officers appointed by the Central Government for the said purpose. The Central Government may appoint officers of any designation to perform the functions of the Registrar. Sub-Section (2) of Section 3 prescribes the requirement that the other officers appointed to discharge the functions of the Registrar are required to function under the superintendence and direction of the Registrar. The quasi judicial functions are required to be performed independently and not subject to the superintendence or direction of any other person including the Registrar. Sub-Section (2) of Section 3 is only intended to empower the delegation of administrative power and not quasi judicial power.”
Reading this in light of the reported reply by the Controller, it is clear that while DPIIT’s consent for delegation of work is not required, the judgement in clear terms states that the quasi judicial functions like passing orders cannot be delegated to contractual staff.
Procurement Power of CGPDTM
As per Rule 21(b) of the Delegation of Financial Power Rules (DFPR, 1978), any procurement that is negotiated or done via a single tender above Rs. 5 crore will require the approval of the minister in charge, in this case the Ministry of Commerce and Industry. The CGPDTM was under the scanner last month for procedural irregularities in procuring computers worth ₹9,99,75,600 from a single vendor: Minitek Systems India Pvt Ltd. As per the HBL article linked, the process of procuring the computers is further alleged to be vitiated for instances of collusion between two bidders, rejection of bidders due to non-submission of EMD (which was exemptible) and non-enquiry on behalf of CGPDTM of the market rates.
Consequences for These Mishaps: How Can These Mistakes be Rectified?
As reported in the Indian Express report, the ASG in her opinion has suggested either rolling back all these decisions (presumably passed between the period where these appointments have been made and by such employees) Or alternatively, if the decisions are to be retained they can be done through a review of patents granted by a body of officials who are statutorily empowered to do so. Implementing either of these solutions may seem like a herculean task but considering the situation, the suggestion to have a special committee to review the orders may seem like the most workable solution. Looks like the department is going ahead with this suggestion as reported today, it has directed to form a committee of 5-10 officers from the CGPDTM to revalidate the impugned orders passed by these contractual staff.
This also puts up another question- why should the committee stop at only reviewing these decisions? Looking at the above discussion on the way in which quasi judicial functions have been delegated to contractual staff without understanding the scheme of the Act, it is imperative that a thorough and transparent investigation of the whole ordeal takes place to identify the oversights committed by different players involved here.
Conclusion
The legal opinions by the Ministry and ASG along with the Cal HC decision seem to be hard reminders about the hierarchy that has been clearly pre-defined via the Trademark Act as well as their rules. Even in the absence of specific explanations about the authority of the officers, logic should have prevailed in matters of critical nature such as dealing with trademark applications and oppositions. The whole episode serves as a stark reminder that it’s perhaps time that the authorities should not be mesmerised by the statistics and higher number of grants, so much so that they ultimately forget about the legitimacy and competency of the authority issuing such orders.
Quasi judicial powers are without doubt a higher degree of power that is both sensitive and cardinal. The hazards of an illegal order cannot be emphasised more upon. With lakhs of such applications being made, such handling heavily risks undermining the faith and confidence in such institutions.
Thanks to Praharsh and Swaraj for their inputs on the post.