TaxTMI 
TaxTMI 
2018 (4) TMI 1901
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as the truth). This maxim of Roman law is based upon two other fundamental maxims of Roman law, namely, interest reipublicae ut sit finis litium (it concerns the State that there be an end to law suits) and nemo debet bis vexari pro una at eadem causa (no man should be vexed twice over for the same cause). Indeed, that this maxim is almost universal in all ancient laws, including ancient Hindu texts, was discussed by Sir Lawrence Jenkins in Sheoparsan Singh v. Ramnandan Singh, AIR 1916 PC 78 at 80-81 as follows: "There has been much discussion at the Bar as to the application of the plea of res judicata as a bar to this suit. In the view their Lordships take, the case has not reached the stage at which an examination of this plea and this discussion would become relevant. But in view of the arguments addressed to them, their Lordships desire to emphasise that the rule of res judicata, while founded on ancient precedent, is dictated by a wisdom which is for all time. "It has been well said," declared Lord Coke, "interest reipublicae ut sit finis litium, otherwise great oppression might be done under colour and pretence of law": (6 Coke, 9a). Though, the rule of the Code ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....judicata", it is observed in Corpus Juris, "is a rule of universal law pervading every well regulated system of jurisprudence, and is put upon two grounds, embodied in various maxims of the common law; the one, public policy and necessity, which makes it to the interest of the State that there should be an end to litigation - interest republicae ut sit finis litium; the other, the hardship on the individual that he should be vexed twice for the same cause - nemo debet bis vexari pro eadem causa" [Corpus Juris, Vol. 34, p. 743]. In this sense the recognised basis of the rule of res judicata is different from that of technical estoppel. "Estoppel rests on equitable principles and res judicata rests on maxims which are taken from the Roman Law" [Ibid p. 745]. Therefore, the argument that res judicata is a technical rule and as such is irrelevant in dealing with petitions under Article 32 cannot be accepted." 4. The link between the doctrine of res judicata and the prevention of abuse of process is very felicitously stated in Virgin Atlantic Airways Ltd. v. Zodiac Seats UK Ltd. [2013] 4 All ER 715 (at 730-731) as follows: "The principle in Henderson v Henderson has always b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. The brief facts necessary to appreciate the applicability of the said exception to the doctrine of res judicata are as follows. In the present case, respondent No.1 availed a credit facility from the petitioner bank sometime in 2001. Respondent No.2, his son, stood as a guarantor for repayment of the said facility. As respondent No.1 defaulted in repayment of a sum of Rs. 53,49,970.22, the petitioner bank filed O.A. No. 440 of 2002 before the DRT Bangalore, against respondent Nos.1 and 2. Respondent No.1, in order to repay the dues of the bank, signed an assignment deed dated 8.10.2003 with the Chief Manager, Basavanagudi Branch, Bangalore for assignment of the trademark "EENADU" in respect of agarbathies (incense sticks) on certain terms and conditions. Clauses 1 to 7 of the aforesaid assignment are set out hereunder: "NOW THIS DEED OF ASSIGNMENT OF TRADE MARK "EENADU" WITNESSETH AS FOLLOWS: 1. The Assignor hereby grant, transfer and assign upon th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Manager wrote to respondent No.1 stating that: "We have been informed by our higher authorities that as per the Banking Company's Regulation Act, 1949, the bank cannot be "patent right holder". Hence, please note that we are not interested in holding the patent right of Eenadu and as such by this letter, we are cancelling the above assignment deed dated 8-10-2003." 7. On 15.4.2004, respondent No.1 filed O.S. No.2832 of 2004 against the bank challenging the cancellation of the said assignment deed and for recovery of Rs. 2,16,000/- with interest thereon for the period 1.10.2003 to 31.3.2004. On 17.9.2004, the petitioner bank filed O.S. No.7018 of 2004 for a declaration that the assignment deed entered into between it and respondent No.1 is vitiated by mistake, undue influence and fraud and that, therefore, the said deed is unenforceable in the eye of law. 8. Meanwhile, the Chief Manager who signed the assignment deed on behalf of the bank, namely, one N.V. Narayana Rao, was dismissed from service pursuant to disciplinary proceedings taken against him on 26.5.2005. 9. The two suits as aforestated were consolidated and disposed of by a common judgment. Issue....
X X X X Extracts X X X X
X X X X Extracts X X X X
....with the same fate in that, by the impugned judgment dated 31.7.2017, the High Court of Karnataka dismissed the appeal filed by the bank on the self-same ground of res judicata. It may be noted that on 14.7.2017, the hearing of the appeal, which culminated in the impugned judgment, was concluded and judgment was reserved. It was only after this that the petitioner bank, for the first time on 26.7.2017, filed a review petition against the judgment dated 27.4.2013 with a condonation of delay application of 1548 days. This review petition is also stated to be pending. 11. Shri Dhruv Mehta, learned senior advocate appearing onbehalf of the petitioner bank, has argued that no issue was struck as to res judicata as the same had not specifically been pleaded in the plaint of the suit of 2008. Indeed, the judgment dated 27.4.2013 came long after the pleading in the second suit, and no amendment of the plaint was sought so as to incorporate the plea of res judicata. No issue having been raised, it was impermissible, according to the learned senior advocate, to have gone into this plea at all. It was also argued that on the assumption that the said plea could be gone into, there were two ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1 and 2, on the other hand, defended the judgments of the Courts below. According to the learned counsel, the judgment dated 27.4.2013 was delivered long after the Chief Manager was dismissed and after the Sessions Judge's judgment dated 29.1.2011 convicting respondent Nos. 1 and 2. This judgment specifically held that there was no fraud played, that the bank itself sought the assignment from respondent Nos. 1 and 2, and that since there was no misrepresentation, undue influence etc., the assignment deed was valid in law, the cancellation of the said deed being illegal. This judgment is final between the parties and has never been challenged, except by way of a review which was filed belatedly after hearing both parties in the appeal. The said review petition, which is obviously an abuse of process with huge delay, could not possibly render the res sub judice so as to affect the judgments of the Courts below. According to the learned counsel, neither Section 45 of the Trade Marks Act nor Sections 6 and 8 of the Banking Regulation Act are capable of only one obvious interpretation so that, on their application, the assignment deed becomes illegal in law. 13. We had appointed Shri....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... both sides that the trial Court in the judgment dated 30.10.2015 accepted the respondent's plea of res judicata. Even before the appellate Court, the point of res judicata was argued by both parties without adverting to the aforesaid objection. It is obvious, therefore, that this ground raised for the first time before this Court, cannot non-suit the respondents. 15. The doctrine of res judicata is contained in Section 11 of the Code of Civil Procedure, 1908, which, though not exhaustive of all the facets of the doctrine, delineates what exactly the doctrine of res judicata is in the Indian context. Section 11 reads as under: "11. Res judicata - No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such Court. Explanation I.-The expression "former suit" shall denote a suit which has been decided p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r suit must have been a suitbetween the same parties or between parties under whom they or any of them claim; (iii) The parties must have litigated under thesame title in the former suit; (iv) The court which decided the former suit mustbe a court competent to try the subsequent suit or the suit in which such issue is subsequently raised; and (v) The matter directly and substantially in issuein the subsequent suit must have been heard and finally decided by the court in the first suit. Further Explanation I shows that it is not the date on which the suit is filed that matters but the date on which the suit is decided, so that even if a suit was filed later, it will be a former suit if it has been decided earlier. In order therefore that the decision in the earlier two appeals dismissed by the High Court operates as res judicata it will have to be seen whether all the five conditions mentioned above have been satisfied." 17. As to what happens when an appeal is filed against a judgment in the first proceeding, a Full Bench of the Allahabad High Court in Balkishan v. Kishan Lal, (1888) ILR 11 All 148 (at 159-161), is most instructive. Mahmood, J., speaki....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a particular issue is appealed against, that judgment ceases to be res judicata and becomes res sub judice." In this case, therefore, both the Courts below were wrong in law in holding that the previous judgment of the 10th March, 1886, which at the date of the institution of this suit was still liable to appeal, and which at the date of the decision of this suit by the first Court, as also at the date of the decision by the lower appellate Court, was the subject of a second appeal pending in this Court (S.A. No. 973 of 1886) could operate as res judicata in favour of the plaintiff in regard to his title as to the malikana." 18. The Privy Council, in an early judgment in S.P.A. Annamalay Chetty v. B.A. Thornhill AIR 1931 PC 263 (at 264), was faced with the question as to whether the filing of an appeal would by itself take away the res judicata effect or whether a matter heard and finally decided by the first Court was res judicata until it was set aside on appeal. The Privy Council held: "Section 207 of the Civil Procedure Code, 1889, provides as follows: "All decrees passed by the Court shall, subject to appeal, when an appeal is allowed, be final b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the present Code (of 1908) and the omission (which was in all probability made in view of the decision in Bal Kishan v. Kishan Lal (1889) 11 All 148) removes any doubts or difficulties in dealing with the question and it is not necessary to speculate on the class of cases to which this explanation can be applied if a judgment liable to appeal is only held to be provisional and not operative as res judicata. In dealing with Section 52 of the Transfer of Property Act it has been held that a person who purchases property between the date of the disposal of the suit and the filing of the appeal would be bound by the rule of lis pendens: Gobind Chunder Roy v. Guru Churn Kurmokar (1888) 15 Cal. 94, Dinonath Ghose v. Shama Bibi (1901) 28 Cal. 23, Sukhdeo Prasad v. Jamna (1901) 23 All 60, Settappa Gounden v. Muthia Gounden (1908) 31 Mad. 268. If the appeal is only a continuation of the original proceedings and the suit is, for the purpose of Section 52 of the Transfer of Property Act, regarded as pending between the date of the decree and that of the filing of an appeal, it is difficult to see why the same rule should not apply when dealing with Section 11 of the Civil Procedu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing 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 - for example, the fact that the appeal against the first judgment is grossly belated; or that the said appeal would, in the ordinary course, be heard after many years in the first proceeding; or, the fact that third party rights have intervened, thereby making it unlikely that delay would be condoned in the appeal in the first proceeding. As has been stated, 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he parties and cannot be re-opened between them in another proceeding. The previous decision on a matter in issue alone is res judicata: the reasons for the decision are not res judicata. A matter in issue between the parties is the right claimed by one party and denied by the other, and the claim of right from its very nature depends upon proof of facts and application of the relevant law thereto. A pure question of law unrelated to facts which give rise to a right, cannot be deemed to be a matter in issue. When it is said that a previous decision is res judicata, it is meant that the right claimed has been adjudicated upon and cannot again be placed in contest between the same parties. A previous decision of a competent Court on facts which are the foundation of the right and the relevant law applicable to the determination of the transaction which is the source of the right is res judicata. A previous decision on a matter in issue is a composite decision: the decision on law cannot be dissociated from the decision on facts on which the right is founded. A decision on an issue of law will be as res judicata in a subsequent proceeding between the same parties, if the cause of acti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng the application ofthe rule of res judicata the Court is not concerned with the correctness or otherwise of the earlier judgment. The matter in issue, if it is one purely of fact, decided in the earlier proceeding by a competent Court must in a subsequent litigation between the same parties be regarded as finally decided and cannot be reopened. A mixed question of law and fact determined in the earlier proceeding between the same parties may not, for the same reason, be questioned in a subsequent proceeding between the same parties. But, where the decision is on a question of law i.e. the interpretation of a statute, it will be res judicata in a subsequent proceeding between the same parties where the cause of action is the same, for the expression "the matter in issue" in Section 11 of the Code of Civil Procedure means the right litigated between the parties i.e. the facts on which the right is claimed or denied and the law applicable to the determination of that issue. Where, however, the question is one purely of law and it relates to the jurisdiction of the Court or a decision of the Court sanctioning something which is illegal, by resort to the rule of res judicata a party a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Court of Small Causes for determining the standard rent of premises constructed in pursuance of a building lease of an open site. Therefore, the authority is a precedent primarily on the limited issue of the jurisdiction of a Court. What directly arose for determination therein and what has been specifically laid down by their Lordships is that a patently erroneous decision (directly contrary to a Supreme Court judgment) in a previous proceeding in regard to the jurisdiction of a Court could not becomes res judicata between the parties. The weighty reason for so holding was that such a result would create a special rule of law applicable to the parties in relation to the jurisdiction of the Court in violation of rule of law declared by the legislature. It is manifest that this enunciation was an engrafted exception to the general principle noticed in the judgment itself, i.e., a question of law including the interpretation of a statute would be res judicata between the same parties where the cause of action is the same. I am inclined to the view that it is unprofitable and indeed unwarranted to extract an observation and a sentence here and there from the judgment and to b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eir Lordships herein have reiterated is that a pure question of law including the interpretation of a statute will be res judicata in a subsequent proceeding between the same parties. To this salutary rule, four specific exceptions are indicated. Firstly, the obvious one, that when the cause of action is different, the rule of res judicata would not be attracted. Secondly, where the law has, since the earlier decision, been altered by a competent authority. Thirdly, where the earlier decision between the parties related to the jurisdiction of the Court to try the earlier proceedings, the same would not be allowed to assume the status of a special rule of law applicable to the parties and therefore, the matter would not be res judicata. Fourthly, where the earlier decision declared valid a transaction which is patently prohibited by law, that is to say, it sanctifies a glaring illegality." On facts, the majority judgment of the Full Bench held that the earlier decision inter parties was res judicata as it was on a question of law which was not unrelated to the rights of the parties. Sharma, J. dissented with this view, and held that the decision rendered in the earlier case was e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nality of a provision of law stands on a different footing from other questions of law. As there is a presumption of constitutionality of all statutes, the "might and ought" rule of constructive res judicata cannot be applied. Instead what was applied by this Court was that part of the decision in Mathura Prasad (supra) which stated that when the law has, since the earlier decision in the appellant's writ petition, been altered by a competent authority, res judicata cannot apply. The Full Bench of the Punjab High Court was expressly overruled on the point that a "competent authority" can also be a Court. Hence, a changed declaration of law would also fall within an earlier decision being altered by a competent authority. This Court, therefore, held that since this Court itself had altered the law when it declared the pari materia rule as unconstitutional, the doctrine of res judicata could not apply. 30. In Allahabad Development Authority v. Nasiruzzaman (1996) 6 SCC 424, this Court held that when the previous decision was found to be erroneous on its face, such judgment cannot operate as res judicata, as to give effect to such judgment would be to counter a statutory prohibitio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly decided. This phrase "matter directly and substantially in issue" has to be given a sensible and businesslike meaning, particularly in view of Ex. 4,Section 11, Civil P.C., which contains the expression "grounds of defence or attack". Section 11 of the Code says nothing about causes of action, a phrase which always requires careful handling. Nor does the section say anything about points or points of law, or pure points of law. As a rule parties do not join issue upon academic or abstract questions but upon matters of importance to themselves. The section requires that the doctrine be restricted to matters in issue and of these to matters which are directly as well as substantially in issue. (3) Questions of law are of all kinds and cannotbe dealt with as though they were all the same. Questions of procedure, questions affecting jurisdiction, questions of limitation, may all be questions of law. In such questions the rights of parties are not the only matter for consideration. The Court and the public have an interest. When plea of res judicata is raised with reference to such matters, it is at least a question whether special considerations do not apply. (4) I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Indian 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. As an example, under Section 28 of the Bombay Rent Act, 1947, the Small Causes Court has exclusive jurisdiction to hear and decide proceedings between a landlord and a tenant in respect of rights which arise out of the Bombay Rent Act, and no other Court has jurisdiction to embark upon the same. In this case, even though the Civil Court, in the absence of the statutory bar created by the Rent Act, would have jurisdiction to decide such suits, it is the statutory bar cre....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... previous suit or proceeding, because the law to be interpreted is different. 34. On the facts of this case, Shri Mehta referred us to the statutory prohibition contained in the Trade Marks Act and the Banking Regulation Act. The relevant provisions are Section 45 of the Trade Marks Act and Sections 6 and 8 of the Banking Regulation Act read with Section 46(4) thereto. The aforesaid statutory provisions are set out hereinbelow: "TRADE MARKS ACT, 1999 45. Registration of assignments and transmissions (1) Where a person becomes entitled byassignment or transmission to a registered trade mark, he shall apply in the prescribed manner to the Registrar to register his title, and the Registrar shall, on receipt of the application and on proof of title to his satisfaction, register him as the proprietor of the trade mark in respect of the goods or services in respect of which the assignment or transmission has effect, and shall cause particulars of the assignment or transmission to be entered on the register. Provided that where the validity of an assignment or transmission is in dispute between the parties, the Registrar may refuse to register the assignment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of customers, but excluding the business of a Managing Agent or Secretary and Treasurer of a company; (c) contracting for public and private loans andnegotiating and issuing the same; (d) the effecting, insuring, guaranteeing,underwriting, participating in Managing and carrying out of any issue, public or private, of State, municipal or other loans or of shares, stock, debentures, or debenture stock of any company, corporation or association and the lending of money for the purpose of any such issue; (e) carrying on and transacting every kind ofguarantee and indemnity business; (f) Managing, selling and realising any propertywhich may come into the possession of the company in satisfaction or part satisfaction of any of its claims; (g) acquiring and holding and generally dealingwith any property or any right, title or interest in any such property which may form the security or part of the security for any loans or advances or which may be connected with any such security; (h) undertaking and executing trusts; (i) undertaking the administration of estates asexecutor, trustee or otherwise; (j) establishing and s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... xxx xxx xxx 46. Penalties (1) - (3) xxx xxx xxx (4) If any other provision of this Act is contravened or if any default is made in- (i) complying with any requirement of this Act orof any order, rule or direction made or condition imposed there under, or (ii) carrying out the terms of, or the obligationsunder, a scheme sanctioned under sub-section (7) of section 45, by any person, such person shall be punishable with fine which may extend to one crore rupees or twice the amount involved in such contravention or default where such amount is quantifiable, whichever is more, and where a contravention or default is a continuing one, with a further fine which may extend to one lakh rupees for every day, during which the contravention or default continues." 35. 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 aforesaid plea taken on behalf of the bank, but turned it down in paragraphs 44 and 56 as follows: "44. The bank has also taken further steps ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pite of that, the Trade Mark Authorities have not registered the Trade Mark and as such, the learned counsel for defendant No.1 vehemently argued that the said Trade Mark "Eenadu" is not registered in accordance with law and as such, same cannot be considered for any of the purposes. Further, it is contended that the Assignment Deed is not registered in accordance with laws. But when the Assignment Deed has been relied upon in the earlier judgments and parties have accepted the execution of the document, then defendant No.1 cannot again contend that said Assignment Deed is not registered and cannot be considered for any of the purposes, does not hold good. It is nothing but res judicata as contended by the plaintiff in the decisions cited above." 37. The impugned judgment dated 31.7.2017 also records the aforesaid submission and turns it down stating: "...Indisputably, the grounds regarding insufficiently stamped assignment deed and non-registration of the trade mark were argued by the Bank which were considered and addressed by the trial Court in O.S. No.2832/2004 and O.S. No.7018/2004. In such circumstances, raising the very same grounds in the second round of proceed....