The Supreme Court of India, in a significant judgment, has clarified the interpretation of “contemplates any urgent interim relief” under Section 12A of the Commercial Courts Act, 2015, particularly in its application to intellectual property (IP) infringement actions.
The Court held that in suits alleging continuing infringement of IP rights, mere delay in approaching the court does not by itself negate the element of urgency required to seek an exemption from mandatory pre-institution mediation.
The bench, comprising Justice Sanjay Kumar and Justice Alok Aradhe, allowed the appeal filed by Novenco Building and Industry A/S, setting aside the judgments of a Division Bench and a learned Single Judge of the Himachal Pradesh High Court, which had rejected the appellant’s commercial suit for non-compliance with Section 12A. The Supreme Court has restored the suit to the file of the High Court to be decided on merits.
Background of the Case
The appellant, Novenco Building and Industry A/S, a Danish company, manufactures industrial fans marketed under the brand ‘Novenco ZerAx’, for which it stated it had secured several patents and design registrations in India.
A dealership agreement was executed on September 1, 2017, with Respondent No. 1, Xero Energy Engineering Solutions Pvt. Ltd., for the marketing and sale of these fans in India. According to the appellant, Xero Energy’s Director, in violation of the agreement, incorporated Respondent No. 2, Aeronaut Fans Industry Pvt. Ltd., to manufacture and sell “identical fans under deceptively similar name and appearance.”
The appellant stated it discovered the marketing of competing products by Xero Energy in July 2022. After communications seeking clarification went unanswered, the appellant terminated the dealership on October 14, 2022, and subsequently sent a cease-and-desist notice to Aeronaut Fans on December 23, 2022.
On December 6, 2023, a technical expert for the appellant inspected fans installed by Aeronaut Fans and submitted an affidavit on February 6, 2024, confirming the alleged infringement. After obtaining patent and design certificates in March-May 2024, the appellant filed a commercial suit (COMS No. 13 of 2024) before the High Court on June 4, 2024, alleging patent and design infringement.
Along with the plaint, the appellant filed applications for an ad interim injunction (under Order XXXIX Rules 1 and 2) and for an exemption from the mandatory pre-institution mediation under Section 12A of the Act, citing urgency.
The respondents filed applications for rejection of the plaint under Order VII Rule 11 of the CPC, arguing that the suit was barred by non-compliance with Section 12A, as no real urgency was involved.
Rulings of the High Court
The learned Single Judge of the High Court, by an order dated August 28, 2024, allowed the respondents’ application and rejected the plaint. The Single Judge held that: (i) there was a six-month delay between the expert’s inspection (December 2023) and the filing of the suit (June 2024); (ii) the plea of urgency was unsubstantiated as the appellant had issued a cease-and-desist notice as early as December 2022; and (iii) in the absence of “genuine urgency,” non-compliance with the mandatory mediation was fatal.
The Division Bench of the High Court, in its judgment dated November 13, 2024, affirmed this order. It held that the “delay between inspection of fans and filing of the commercial suit exhibits patent lack of urgency.” The bench further held that exemption from Section 12A “cannot be claimed merely because interim reliefs were sought” and that “mere continuous infringement of intellectual property rights could not override the statutory mediation requirements.”
Submissions before the Supreme Court
Learned senior counsel for the appellant (Novenco) submitted that the High Court had erred in applying the test for urgency and that the relief was not sought to “bypass the statutory mandate.” It was contended that “mere delay in filing the suit for infringement and injunction against continuing violation of intellectual property rights by itself is not a ground to decline the injunction,” placing reliance on Midas Hygiene Industries Private Ltd. & Anr. v. Sudhir Bhatia & Ors.
Learned senior counsel for the respondents argued that the High Court had rightly found no urgency, noting “not a single word on the urgency” in the plaint. The delay of one and a half years from the cease-and-desist notice, and four months from the expert opinion, demonstrated the lack of urgency, submitting that the “mere filing of an application for interim relief does not ipso-facto indicate urgency.”
The Supreme Court’s Analysis
The Supreme Court began its analysis by examining Section 12A of the Act, which mandates pre-institution mediation for any suit “which does not contemplate any urgent interim relief.”
The judgment distilled the legal test from recent decisions, including Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd., Yamini Manohar v. T.K.D. Keerthi, and DHANBAD FUELS (P) LTD. v. UOI. The Court summarized the principles, stating that the test is not whether the interim relief “actually comes to be allowed or not,” but whether, from the standpoint of the plaintiff, the prayer is “contemplable.”
The Court held that the High Court had “erred in construing the test for urgent relief.” The judgment stated: “…the courts have proceeded to examine the entitlement of the appellant to urgent relief based on the merits of the case rather than looking at the urgency as is evident from the plaint and the documents annexed thereto from the standpoint of the plaintiff.”
Applying this test, the Supreme Court found that the subject matter was “continuing infringement of intellectual property.” The Court held: “Each act of manufacture, sale, or offer for sale of the infringing product constitutes a fresh wrong and recurring cause of action.”
Relying on Midas Hygiene, the Court reiterated that “mere delay in bringing an action does not legalise an infringement.”
The judgment established that the urgency in such cases is inherent in the nature of the continuing wrong. “From the standpoint of the appellant, each day of continuing infringement aggravates injury to its intellectual property and erodes its market standing,” the Court observed. “The urgency, therefore, is inherent in the nature of the wrong and does not lie in the age of the cause but in the persistence of the peril.”
The Court also introduced a public interest dimension, stating, “When imitation masquerades as innovation, it sows confusion among consumers, taints the market place and diminishes faith in the sanctity of the trade. The public interest, therefore, becomes the moral axis upon which the urgency turns.”
The Supreme Court concluded that the High Court’s approach, which “proceeded on the premise that lapse of time… negated the element of urgency,” was “contrary to the principles laid down by the decisions of this Court” and failed to account for the “continuous infringement of intellectual property.”
Decision
The Supreme Court allowed the appeal and set aside the impugned judgments of the High Court. The Court laid down two concluding principles:
“(i) In actions alleging continuing infringement of intellectual property rights, urgency must be assessed in the context of the ongoing injury and the public interest in preventing deception, (ii) Mere delay in institution of a suit by itself, does not negate urgency when the infringement is continuing.”
The Commercial Suit No. 13 of 2024 was restored to the file of the High Court to be proceeded with on merits in accordance with law.
