Code of Civil Procedure, 1908 – s.11 – Res judicata – General rule and its exceptions – Erroneous decision given on a statutory prohibition in former suit – Statutory prohibition not given effect to – Plea of res judicata in subsequent suit – Held: An issue of law which arises between the same parties in a subsequent suit or proceeding is not res judicata if, by an erroneous decision given on a statutory prohibition in the former suit or proceeding, the statutory prohibition is not given effect to – On facts, respondent in order to repay dues of the bank, signed assignment deed with Bank Manager for assignment of the trademark and after several months bank cancelled the assignment deed – Litigations between the parties, first proceeding, second proceeding – Trial court and first appellate court treating the statutory prohibition contained in s.45(2) of the Trade Marks Act as res judicata, was erroneous – Neither of the court adverted to and/or interpreted s.45, which makes it clear that the assignment deed, if unregistered, cannot be admitted in evidence by any court in proof of title to the trademark by the assignment, unless the court itself directs otherwise – Thus, any reliance upon the assignment deed by the earlier judgment cannot be sanctified by the plea of res judicata, when reliance upon the assignment deed is prohibited by law – Furthermore, trademark cannot be said to be property which has come into the possession of the bank in satisfaction or part satisfaction of any of the claims of the bank – Trademarks are not part of any security for loans or advances that have been made to the first respondent, or connected with the same – Thus, the assignment deed clearly hit by ss.6(2) and 8 read with s.46(4) – Judgment of the trial court and first appellate court set aside – Trade Marks Act, 1999 – s.45(2) – Banking Regulation Act, 1949 – ss.6(2), 8 and 46(4).
Allowing the appeal, the Court
HELD: 1.1 Res judicata is a doctrine of fundamental importance in our legal system, though it is stated to belong to the realm of procedural law, being statutorily embodied in Section
11 of the Code of Civil Procedure, 1908. However, it is not a mere technical doctrine, but it is fundamental in our legal system that there be an end to all litigation, this being the public policy of Indian law. The obverse side of this doctrine is that, when applicable, if it is not given full effect to, an abuse of process of the Court takes place. However, there are certain notable exceptions to the application of the doctrine. One well known exception is that the doctrine cannot impart finality to an erroneous decision on the jurisdiction of a Court. Likewise, an erroneous judgment on a question of law, which sanctions something that is illegal, also cannot be allowed to operate as res judicata. This case is concerned with the application of the last mentioned exception to the rule of res judicata. [Para 5][894-H; 895-A-B]
1.2 Until the limitation period for filing of an appeal is over, the res remains sub judice. After the limitation period is over, the res decided by the first Court would then become judicata. However, questions arise as to what is to be done in matters where the hearing in the second case is shortly after the limitation period for filing an appeal in the first case has ended. At least two judgments, of the Privy Council and the High Court, have referred to the fact that, in appropriate cases, the hearing in the second case may be adjourned or may be stayed in order to await the outcome of the appeal in the first case. [Para 22][906-G-H; 907A]
1.3 If the period of limitation for filing an appeal has not yet expired or has just expired, the Court hearing the second proceeding can very well ask the party who has lost the first round whether he intends to appeal the aforesaid judgment. If the answer is yes, then it would be prudent to first adjourn the second proceeding and then stay the aforesaid proceedings, after the appeal has been filed, to await the outcome of the appeal in the first proceeding. If, however, a sufficiently long period has elapsed after limitation has expired, and no appeal has yet been filed in the first proceeding, the Court hearing the second proceeding would be justified in treating the first proceeding as res judicata. No hard and fast rule can be applied. The entire fact circumstance in each case must be looked at before deciding whether to proceed with the second proceeding on the basis of res judicata or to adjourn and/or stay the second proceeding to await the outcome in the first proceeding. Many factors have to be considered before exercising this discretion. The judicious use of the weapon of stay would, in many cases, obviate a Court of first instance in the second proceeding treating a matter as res judicata only to find that by the time the appeal has reached the hearing stage against the said judgment in the second proceeding, the res becomes sub judice again because of condonation of delay and the consequent hearing of the appeal in the first proceeding. This would result in setting aside the trial court judgment in the second proceeding, and a de novo hearing on merits in the second proceeding commencing on remand, thereby wasting the Court’s time and dragging the parties into a second round of litigation on the merits of the case. [Para 23][907-B-G]
1.4 In the instant case, a belated review petition was filed after arguments were heard and judgment reserved by the appellate Court. This Court would not have to await the outcome of the said review petition before deciding whether the judgment dated 27.4.2013 is res judicata. It is clear that a review petition filed long after the judgment dated 27.4.2013, with a condonation application for a delay of over four years, could not possibly be held to be anything but an abuse of the process of the Court. This being so, it is examined whether the judgment dated 27.4.2013 can be considered to be res judicata in the second proceeding in this case, namely the suit of 2008 filed by respondent No.1. [Para 24][907-H; 908-A-B]
1.5 The general rule is that all issues that arise directly and substantially in a former suit or proceeding between the same parties are res judicata in a subsequent suit or proceeding between the same parties. These would include issues of fact, mixed questions of fact and law, and issues of law. To this, there are certain exceptions when it comes to issues of law:
(i) Where an issue of law decided between the same parties in a former suit or proceeding relates to the jurisdiction of the Court, an erroneous decision in the former suit or proceeding is not res judicata in a subsequent suit or proceeding between the same parties, even where the issue raised in the second suit or proceeding is directly and substantially the same as that raised in the former suit or proceeding. This follows from a reading of Section 11 CPC itself, for the Court which decides the suit has to be a Court competent to try such suit. When read with Explanation (I) to Section 11, it is obvious that both the former as well as the subsequent suit need to be decided in Courts competent to try such suits, for the “former suit” can be a suit instituted after the first suit, but which has been decided prior to the suit which was instituted earlier. An erroneous decision as to the jurisdiction of a Court cannot clothe that Court with jurisdiction where it has none. Obviously, a Civil Court cannot send a person to jail for an offence committed under the Penal Code. If it does so, such a judgment would not bind a Magistrate and/or Sessions Court in a subsequent proceeding between the same parties, where the Magistrate sentences the same person for the same offence under the Penal Code. Equally, a Civil Court cannot decide a suit between a landlord and a tenant arising out of the rights claimed under a Rent Act, where the Rent Act clothes a special Court with jurisdiction to decide such suits;
(ii) An issue of law which arises between the same parties in a subsequent suit or proceeding is not res judicata if, by an erroneous decision given on a statutory prohibition in the former suit or proceeding, the statutory prohibition is not given effect to. This is despite the fact that the matter in issue between the parties may be the same as that directly and substantially in issue in the previous suit or proceeding. This is for the reason that in such cases, the rights of the parties are not the only matter for consideration (as is the case of an erroneous interpretation of a statute inter parties), as the public policy contained in the statutory prohibition cannot be set at naught. This is for the same reason as that contained in matters which pertain to issues of law that raise jurisdictional questions. The public policy contained in other statutory prohibitions, which need not necessarily go to jurisdiction of a Court, must equally be given effect to, as otherwise special principles of law are fastened upon parties when special considerations relating to public policy mandate that this cannot be done;
(iii) Another exception to this general rule follows from the matter in issue being an issue of law different from that in the previous suit or proceeding. This can happen when the issue of law in the second suit or proceeding is based on different facts from the matter directly and substantially in issue in the first suit or proceeding. Equally, where the law is altered by a competent authority since the earlier decision, the matter in issue in the subsequent suit or proceeding is not the same as in the previous suit or proceeding, because the law to be interpreted is different. [Para 33][917-B, C-F; 918-C-E, F-G]
1.6 Insofar as Section 45 of the Trade Marks Act is concerned, it is clear that this plea was raised throughout both the proceedings. Insofar as the suits of 2004 were concerned, the judgment dated 27.4.2013 expressly recorded the said plea taken on behalf of the bank, but turned it down. Equally, insofar as the trial court judgment in the second suit of 2008 is concerned, the said plea was expressly raised and turned down. The impugned judgment dated 31.7.2017 also records the submission and turns it down. Both the trial court and the first appellate court were entirely wrong in treating the statutory prohibition contained in Section 45(2) of the Trade Marks Act as res judicata. Neither of the court bothered to advert to Section 45 and/or interpret the same. The second proceeding contained in O.S. No.495 of 2008 prayed for payment of a sum of Rs.17,89,915/- along with interest thereon for the period 1.4.2004 to 30.4.2007. Clearly, therefore, the subsequent suit of 2008 raises an issue which is different from that contained in the earlier suit filed by the same party in 2004. Also, the earlier decision in the judgment dated 27.4.2013 has declared valid a transaction which is prohibited by law. A cursory reading of Section 45(2) of the Trade Marks Act makes it clear that the assignment deed, if unregistered, cannot be admitted in evidence by any court in proof of title to the trademark by the assignment, unless the court itself directs otherwise. It is clear, therefore, that any reliance upon the assignment deed dated 8.10.2003 by the earlier judgment cannot be sanctified by the plea of res judicata, when reliance upon the assignment deed is prohibited by law. [Para 35- 39][922-G; 923-F; 924-C, G; 925-BC]
1.7 Equally, a reference to Sections 6, 8 and 46(4) of the Banking Regulation Act would also make it clear that a bank cannot use the trademark “Eenadu” to sell agarbathies. This would be directly interdicted by Section 8, which clearly provides that notwithstanding anything contained in Section 6 or in any contract, no banking company shall directly or indirectly deal in the selling of goods, except in connection with the realisation of security given to or held by it. Also, granting permission to third parties to use the trademark “Eenadu” and earn royalty upon the same would clearly be outside Section 6(1) and would be interdicted by Section 6(2) which states that no bank shall engage in any form of business other than those referred to in sub-section (1). The trademark cannot be said to be property which has come into the possession of the bank in satisfaction or part satisfaction of any of the claims of the bank. The trademarks are not part of any security for loans or advances that have been made to the first respondent, or connected with the same. It is thus clear that the assignment deed dated 8.10.2003 is clearly hit by Section 6(2) and Section 8 read with the penalty provision contained in Section 46(4) of the Banking Regulation Act. The judgment of the trial court and the first appellate court are set aside. [Para 40-42][925-D-E, G-H; 926-A]
Natraj Studios (P) Ltd. v. Navrang Studios & Anr. (1981)
2 SCR 466 – relied on.
Sheoparsan Singh v. Ramnandan Singh AIR 1916 PC 78; Daryao and others v. State of U.P. and others, [1962] 1 SCR 574; Mathura Prasad Bajoo Jaiswal & Ors v. Dossibai N. B. Jeejeebhoy (1970) 1 SCC 613 : [1970] 3 SCR 830; V. Rajeshwari v. T.C. Saravanabava (2004) 1 SCC 551 : [2003] 6 Suppl. SCR 927; Sheodan Singh v. Daryao Kunwar (1966) 3 SCR 300; Balkishan v. Kishan Lal (1888) ILR 11 All 148; S.P.A. Annamalay Chetty v. B.A. Thornhill AIR 1931 PC 263; Parshotam Parbhudas v. Bai Moti AIR 1963 Gujarat 30; Bhavani Amma v. Narayana Acharya AIR 1963 Mysore 120; Satyanarayan Prosad Gooptu v. Diana Engineering Company AIR 1952 Calcutta 124; Venkateswarlu v. Venkata Narasimham AIR 1957 Andhra Pradesh 557; Chengalavala Gurraju v. Madapathy Venkateswara Row Pantulu Garu AIR 1917 Madras 597; Baijnath Karnani v. Vallabhdas Damani AIR 1933 Madras 511; Chandra Singh Dudhoria v. Midnapore Zemindary Co. Ltd. (1941) 69 IA 51 (PC); Indra Singh and Sons Ltd. v. Shiavax. C. Cambata ILR 1948 Bom 346; Sushil Kumar Mehta v. Gobind Ram Bohra (1990) 1 SCC 193 : [1989] 2 Suppl. SCR 149; Isabella Johnson (Smt.) v. M.A. Susai (1991) 1 SCC 494 : [1990] 2 Suppl. SCR 213; State of Punjab v. Nand Kishore AIR 1974 Punjab & Haryana 303; Mohanlal Goenka v. Benoy Krishna Mukherjee [1953] SCR 377; Nand Kishore v. State of Punjab (1995) 6 SCC 614 : [1995] 4 Suppl. SCR 16; Moti Ram Deka v. General Manager, N.E. Frontier Railways [1964] 5 SCR 683; Gurdev Singh Sidhu v. State of Punjab [1964] 7 SCR 587; Allahabad
Development Authority v. Nasiruzzaman (1996) 6 SCC
424 : [1996] 5 Suppl. SCR 435; Shakuntla Devi v. Kamla (2005) 5 SCC 390; V. Tulasamma v. V.Sesha Reddy (1977) 3 SCC 99 : [1977] 3 SCR 261; Tarini Charan Bhattacharjee and others v. Kedar Nath Haldar AIR 1928 Calcutta 777 – referred to.
Virgin Atlantic Airways Ltd. v. Zodiac Seats UK Ltd. [2013] 4 All ER 715 - referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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