Recently, the Himachal Pradesh High Court underlined the importance of pre-institution mediation under the Commercial Court Act (CCA) by refusing to hear a patents and designs infringement suit due to plaintiff’s non compliance with the above mandatory requirement. Discussing this order and its wider significance, we are pleased to bring to you this post by SpicyIP Intern Samridhi Chugh. Samridhi is a final-year student at the Campus Law Centre, Faculty of Law, University of Delhi, and a graduate in Journalism from Lady Shri Ram College for Women. With a passion for the dynamic intersection of law, media and technology, she is particularly interested in exploring intellectual property and tech policy. Her previous posts can be accessed here.
“No Whisper of Urgency”: HP HC Dismisses Infringement Suit for Not Complying with the Mandate on Pre-Institution Mediation
By Samridhi Chugh
In a noteworthy order last week, a Single Judge Bench of the High Court of Himachal Pradesh, in Novenco Building & Industry A/S v. Xero Energy Engineering Solutions Private Ltd. & Another, dismissed a patents and designs infringement suit for failing to comply with the mandatory pre-institution mediation requirement under Section 12A of the Commercial Courts Act, 2015. Based on its holistic examination of the plaint and the submitted documents, the Court observed that the material circumstances in the suit did not contemplate any urgent relief. With this being the sole ground of exemption under the mandatory provision, which was inserted in 2018, it was held that the suit was liable to be rejected.
From a jurisprudential perspective, the order provides a succinct overview of the recently concretised law, drawing heavily from the most frequently cited Supreme Court precedents on the subject. At the same time, it also highlights the need for the courts to develop a precise yardstick to determine what constitutes an “urgency” sufficient to justify an exemption under the above provision.
Factual Background
The plaintiff in the suit had alleged that the defendant infringed its patent and design rights vested in its “axial fans.” The plaintiff claimed that the cause of action arose multiple times, beginning in July/August 2022 when it first became aware of the alleged infringement. Later that year, the plaintiff had terminated the distributor agreement, informed the defendant of its extant rights, and also issued a cease-and-desist notice. A technical expert had also confirmed the alleged infringement in December 2023.
The plaintiff contended that the cause of action persisted as the defendant continued to sell the infringing fans via various channels, including e-commerce platforms, justifying the grant of urgent relief under Order XXXIX, Rules 1 and 2 of the Civil Procedure Code (CPC). As a consequence of this suit, the defendants filed the present application under Order VII, Rule 11(c) of the CPC, praying for the rejection of the plaint on the ground that it was barred by law.
Court’s Observations – No Evidence to Show Urgency
The Court in its 17-page order first examined the substance of Section 12A(1). As per the bare reading of this provision, a suit shall not be instituted without the plaintiff first exhausting the remedy of pre-institution mediation according to the procedure outlined by the Central Government, unless its facts and circumstances warrant an urgent interim relief.
Shedding light on the terms of the provision, the Court followed the SC’s decision in Patil Automation Private Limited and Others v. Rakheja Engineers Private Limited (2022), in which it had heavily relied on its imperative language and observed that the use of the word “shall” in its phrasing implied its mandatory nature. The SC had also observed that this was in line with the legislative intent to expedite the resolution of commercial disputes and alleviate the burden on the judiciary by encouraging mediation.
The Court further noted the findings of the SC in Yamini Manohar vs. T.K.D. Keerthi (2024), which had reinforced the duty of the court to thoroughly examine the nature and the subject matter of the suit, the cause of action and the prayer for interim relief to ensure that it is not used as a “disguise or mask” to evade the pre-institution mediation requirement under Section 12A.
This being the law, the Court in the instant matter accused the plaintiff of attempting to “wriggle out” of the legal mandate without sufficiently demonstrating the need for urgent relief. While the Court did acknowledge the averments made by the plaintiff in favour of the continuity in the cause of action, it highlighted that there was no evidence to support the nature of the actual sales of the impugned fans by the defendant. It further observed that the plaintiff waited until June 2024 to file the suit without explaining the delay or the reason for not pursuing pre-institution mediation, despite having ample time since December 2023 when the expert testimony was deposed. The Court also noted that the plaintiff had ample time between December 2023 and June 2024 to pursue mediation, and the present suit was merely an act of circumventing the mandatory stipulation under Section 12A. Holding that the averments in the suit showed “no whisper of urgency,” the Court rejected the plaint.
From the above, it is considerable that the Court has reiterated the need to adduce sufficient evidence in furtherance of the claim for urgent relief, as well as the duty of the plaintiff to take expeditious steps to nip infringing actions in the bud. What is, however, worth pondering is whether the Court, despite the absence of the specific evidence as to the nature of the sales, should have also considered the continued presence of the defendant on online platforms while ascertaining the claimed urgency.
On the Larger Significance of the Order
The dismissal of the suit by way of the present order, with the Court reinforcing the mandatory nature of Section 12A, has again shed light on the burgeoning emphasis on commercial mediation and other forms of alternative dispute resolution in India, a development we had highlighted in, as early as, 2018.
Further, the order also crystallises the Supreme Court’s (SC) overarching stance on the implications of non-compliance with Section 12A. Before the landmark SC verdict in Patil Automation, there existed some legal dilemma regarding the nature of the requisite. For instance, the Madras High Court order in Shahi Exports Pvt. Ltd v. Gold Star Line Limited had contrarily observed Section 12A to be merely optional which could not be allowed to defeat access to justice. The SC in Patil Automation rendered such decisions obsolete by clarifying the mandatory nature of Section 12A requirement and holding that it came with vitiating consequences for suits filed without first resorting to mediation. The present order by the Himachal Pradesh High Court, along with a slew of recent decisions, follow Patil, including the recent Delhi High Court order in M/s Sabsons Agencies Private Limited v. M/s Harihar Polymers & Anr. (2024) emphasising the inescapable nature of the condition to pursue pre-institution mediation in commercial suits.
However, as discussed above, and also pointed here, the meaning and the decisive standard of the “urgency” so contemplated will have to be clarified, especially in the context of bypassing pre-institution mediations. This will not only guide the courts better in pronouncing clearly reasoned verdicts accepting or dismissing the applications for relief, but will also disable the parties from relying upon any and every cause as ‘urgent’ in an attempt to avoid the initial mediative stage. Further, whether the conduct of the defendant, in refusing to settle the dispute by the said mediation, as observed in Bolt Technology, OU v. Ujoy Technology Private Limited and Another, bears any impact on the need to exhaust this mandate also awaits judicial clarity. Resolving these ambiguities will further bolster the mandate under Section 12A and help achieve the legislative objective of amicable, efficient and expeditious dispute resolution, significantly reducing the litigative burden on the courts.