Statutory illegality overrides res judicata where a prior decree would validate a prohibited trade mark and banking arrangement.

Res judicata does not bar a later challenge where the earlier decree would effectively validate a transaction prohibited by statute, especially on a pure question of law or jurisdiction. The earlier finality could not insulate alleged illegality from scrutiny, and the later suit raised a distinct cause of action. The assignment deed and the bank's trade mark and royalty arrangement were also contrary to the Trade Marks Act, 1999 and the Banking Regulation Act, 1949, because an unregistered assignment could not prove title and the banking company's commercial use fell outside permitted statutory business. The appeal succeeded and the suit was dismissed.

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Issues: (i) Whether the earlier decree could operate as res judicata in the later suit where the challenge involved a pure question of law based on statutory prohibitions; (ii) Whether the assignment deed and the bank's use of the trade mark and royalty arrangement were hit by the Trade Marks Act, 1999 and the Banking Regulation Act, 1949.

Issue (i): Whether the earlier decree could operate as res judicata in the later suit where the challenge involved a pure question of law based on statutory prohibitions.

Analysis: The doctrine of res judicata promotes finality, but it does not bar a subsequent challenge where the earlier decision has declared valid a transaction prohibited by law or where the issue is one of jurisdiction or another pure question of law that cannot be insulated from statutory mandate. A decision cannot be allowed to sanctify illegality merely because it was rendered earlier between the same parties. On the facts, the later suit raised a distinct cause of action, and the statutory objections could not be excluded merely by invoking finality.

Conclusion: The plea of res judicata did not bar examination of the statutory objections, and the contrary view taken by the courts below was unsustainable.

Issue (ii): Whether the assignment deed and the bank's use of the trade mark and royalty arrangement were hit by the Trade Marks Act, 1999 and the Banking Regulation Act, 1949.

Analysis: Under Section 45(2) of the Trade Marks Act, 1999, an unregistered assignment instrument cannot be admitted in evidence to prove title except where the Court otherwise directs. Under Sections 6(2) and 8 of the Banking Regulation Act, 1949, a banking company cannot engage in business outside the statutory forms permitted to it, nor directly or indirectly trade in goods except within the narrow statutory exceptions. The arrangement by which the bank used the trade mark on agarbathies and earned royalty fell outside those exceptions and was therefore contrary to statute.

Conclusion: The assignment deed and the connected commercial arrangement were hit by the statutory prohibitions and could not be sustained.

Final Conclusion: The appeal succeeded, the judgments below were set aside, and the suit filed by the respondent stood dismissed.

Ratio Decidendi: An earlier judgment cannot operate as res judicata where its effect would be to validate a transaction prohibited by statute; statutory prohibitions governing admissibility and the scope of banking business override finality when the later proceedings raise the same illegality.

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