Jurisdiction of courts in online transactions: Impresario Entertainment & Hospitality Pvt Ltd V. S & D Hospitality

26th February, 2018 - 12:56 pm Categories: Legal Issues 0 Comments

Introduction

Over the last decade or so, the Delhi HC has become the hub for cases pertaining to IP litigation. This prompts parties to initiate proceedings in Delhi HC relating to IP laws which has eventually raised questions regarding the jurisdiction of the court especially in online transactions. This issue has been  dealt by Mukta Gupta, J. in the present case.

Background of the case

The plaintiff is a company that provides restaurant services with its registered office in Mumbai and is carrying its business in HKV, New Delhi and a restaurant under the name and style of ‘SOCIAL’ which it has trademarked and has various coffee shops as well. It came to know in 2017 that the defendant has 2 restaurants in Hyderabad under the name ‘SOCIAL MONKEY’. Also, it has a popular beverage by the name ‘A GAME OF SLING’ and the defendant has named a beverage as ‘HYDERABAD SLING’ which is identical and/or deceptively similar to the plaintiff’s beverage.

Hence, the plaintiff had filed for seeking permanent injunction against the defendant from manufacturing, selling, marketing, advertising, and/or offering its services under the trademarks ‘SOCIAL’ and ‘STONE WATER’ or anything similar to them or any attempt to pass off its trademark in defendant’s outlets.

Both these outlets have entered into contract with popular websites like Zomato and Dine Out and so the information of both, along with menu and contact info is available on the websites of Zomato and Dine Out.

Issue

Without going into the merits of the case, the court must first satisfy itself that it has the jurisdiction to entertain the case. So, the issue before the court in this case was whether it had the jurisdiction to entertain the case or not?

Contentions

The primary contention of the defendant was that the court didn’t have the jurisdiction to entertain the suit as it neither had its registered office in Delhi nor it carried on any business in Delhi. Also, plaintiff’s registered office was located in Mumbai which was also outside the jurisdiction of Delhi HC. Defendant’s other contention was that the plaintiff failed to prove its principal office’s location as Delhi.

Responding to this, the plaintiff contended that it didn’t have any office or branch in Hyderabad and that its principal office for financing and licensing of all its brands was located in Delhi only.

The plaintiff also contended that due to the presence of the defendant on websites like Zomato and Dine-out, it was in a position to invite the customers of its plaintiff to visit its outlet in Hyderabad. This was vehemently opposed by the defendants as a misconceived proposition as mere booking or placing an order through internet was insufficient to conclude that a transaction had taken place.

The plaintiff had also contended that the defendant was planning to expand pan India as it had filed for trademark application which was opposed by the defendant stating that the plaintiff’s qua timet action lacks the necessary ingredients of any imminent danger.

Plaintiff also claimed that at least one customer from Delhi had booked a table in defendant’s outlet in Hyderabad and so the cause of action had arisen in Delhi.

Held and Analysis

Gupta J dismissed the case, for want of jurisdiction.

In reaching to this decision, the court relied heavily on the standards of jurisdiction set by the Delhi HC in the case of Banyan Tree Pvt Ltd. v. A. Murali Krishna Reddy[1]. In the Banyan Tree case, the court has held:

“…that the mere accessibility of the Defendants website in Delhi would enable this Court to exercise jurisdiction. A passive website, with no intention to specifically target audiences outside the State where the host of the website is located, cannot vest the forum court with jurisdiction.”

Necessary distinction was made between the ‘purposeful availment’ test and the ‘purposeful avoidance’ test. The court held that to establish the case, it was incumbent upon the plaintiffs to show that the defendants had purposely tried to target the customers of the jurisdiction of forum State. Once it was established, it was now upon the defendants to show that they had intended to avoid the availment of the jurisdiction of the forum State. Applying this in the case of the websites, the court held that mere interactivity of the website in the forum State did not attract its jurisdiction.

Considering the extent of burden of proof on the plaintiff to show that the defendant had purposefully availed the jurisdiction of the forum State, the court held that the defendant must enter in some commercial transaction with the customers of the forum State intending to pass off their goods as that of the plaintiffs. Material must be produced to the court by the plaintiff regarding the same and not the mere possibility of it.

The court thus held that even if the defendant attracted or had been able to attract the customers from other jurisdictions by way of Zomato and Dine-out, the customers would still be required to go to Hyderabad to avail the services. The best that could be done by the customers of other jurisdictions, the court held, was to book a table at defendant’s restaurant which ultimately led the completion of transaction at Hyderabad where the cause of action would eventually lie.

Despite being well reasoned judgement, the court has in this case intended to relate the cause of action with the completion of transaction. So, clouds of uncertainty still hover over the situation where delivery of goods can be made to the forum State or where assistance of an intermediary can be obtained. Not much can be said where the defendants are set ex parte as has happened in the previous case of Impresario Entertainment & Hospitality Pvt. Ltd v. Urban Masala[2] where Manmohan J. granted an ex parte injunction in the favour of the plaintiff against the defendant without even considering the jurisdictional claim.

Conclusion

The present case has dealt at length with the competency of the courts to entertain cases related to online transactions. Mere accessibility of the defendant’s website in the forum State can no longer be a ground for the courts to exercise jurisdiction.

Further, the law laid down in Banyan Tree (discussed here) has been upheld and the court has further narrowed down. The judgment in this case has paved the way for a more rigorous and consistent standard in determining the competency of the courts to entertain cases in case of online transactions.

Author: Hunney Mittal, intern at Khurana & Khurana, Advocates and IP Attorneys. Can be reached at swapnils@khuranaandkhurana.com.

References:

[1]CS (OS) No.894/2008

[2]CS(COMM) 441/2017

[3] CS(COMM) 111/2017