M/S. Action Construction ... vs M/S. Gulati Industrial Fabric P. ...
2009 Latest Caselaw 1368 Del

*          HIGH COURT OF DELHI : NEW DELHI

+              IA No.10073/2006 in CS (OS) No.1740/2006

%                      Judgment reserved on :     10th February, 2009

                       Judgment pronounced on :      13th April, 2009

M/s. Action Construction Equipment                  ....Plaintiff
                     Through : Mr. Sanjeev Narula, Adv.

                       Versus

M/s. Gulati Industrial Fabric P. Ltd.                ..... Defendant
                       Through : Mr. Manish Dhir, Adv.
Coram:

HON'BLE MR. JUSTICE MANMOHAN SINGH

1. Whether the Reporters of local papers may
   be allowed to see the judgment?                                 Yes

2. To be referred to Reporter or not?                              Yes

3. Whether the judgment should be reported                         Yes
   in the Digest?

MANMOHAN SINGH, J.

1. The plaintiff has filed the instant suit for permanent

injunction and misuse of confidential information.

2. Alongwith the suit, the Plaintiff has also filed an

application under Order 39 Rule 1 and 2 read with Section

151 CPC.

3. An ex parte ad-interim order was passed against the

defendant on 11.09.2006 in IA No. 10073/2006.

4. The case of the plaintiff company has been in

existence for more than a decade. It started manufacturing

Mobile Tower Cranes and other infrastructure construction

equipment and is a major supplier of products to a number of

reputed companies in the Private as well as Government

Sector, to name a few CCL, Ranchi, WCl, Nagpur, SECL,

Bilaspur, Punjab State Electricity Board, Rajasthan State

Electricity Board, NHPC, NTPC, Railways, BSES, Delhi Jal

Board, MCD and Defence etc. in the public sector and

Reliance, ACC, Punj Lyod Limited, Gammon India Limited.

etc. in the Private Sector.

5. The Plaintiff Company has also been exporting

cranes to U.A.E, Saudi Arabia, Qatar, Bahrain, Kuwait,

South Africa, Kenya, Nigeria, Mozambique, Ethopia,

Algeria, Libya, Mouritious, Madagascar, Sri Lanka, Nepal,

Bangladesh, Bhutan, Malaysia, Singapore, New Zealand,

Kazakhstan Portugal and many other countries.

6. For the last 10 years, the Company is operating on

independent basis for manufacturing six models of

Hydraulics Mobile Cranes, Front End Loader and Mobiles

Cranes Handler of capacities ranging from 5 tons to 20 tons

and for last eight years manufacturing 2 models of Tower

cranes. The Company provides complete range of Pick-N-

Move cranes suiting to the core sector of Indian Industry.

7. The Plaintiff company is the leading manufacturer

of the Hydraulic Mobile Cranes & Tower Cranes in India.

The Plaintiff Company has already supplied over 4000

cranes of different models as on date. The products have also

been endorsed and certified to be quality products by the

Ministry of Defense, SAIL, Engineers India Limited.,

Department of Atomic Energy for the purposes of competing

its tenders.

8. The Plaintiff has achieved a net turnover of Rs.200

crore for the period ending 31st March, 2006. The net-worth

of the Company Was Rs.3914 lacs as on 31 st March 2006.

The Balance sheets of the Plaintiff Company for last five

years are being filed along with the plaint.

9. As per Plaintiff, when the company was

incorporated in 1995, R&D (Research Development) Team

was constituted. They started developing and designing the

cranes. This involved extensive use of labour and money on

the part of the company and thereafter the successful type

and design of Mobile Tower Cranes was developed. This

was done by the Company‟s design Engineers, who were

involved in R&D (Research Development) Team of the

Plaintiff.

10. The Tower Cranes have two models depending on

lifting capacity and not limited to the models marketed as

"MTC2418, MTC3625" etc.

11. Sometime in 1997, the defendant approached the

Plaintiff for the supply of the fabricated components of the

Tower crane.

12. The plaintiffs gave the industrial drawings of the

key components of Tower Cranes to the Defendants for

exclusively manufacturing and specifically supplying the

manufactured key components to the Plaintiffs Only. The

Drawing stipulated as under :-

"This drawing is the property of "Action Constructions Equipments (P) Ltd." It is furnished to you for development purposes only and is to be returned to ACE upon request. Unauthorised use of the drawing and duplicating or making product as per our drawing without our permission or any other misuse is not permitted."

13. It was thus agreed between the parties that the

defendants would maintain confidentiality and secrecy of the

Plaintiff‟s industrial drawings of Tower Cranes and use them

only for the purpose of manufacturing of the components

specifically for the plaintiff company only.

14. The key components are in the nature of (1)

Pyramid 2) Winch Housing Stripped (3) Weight Box Assy.

(4) Base Frame/Chassis for tower Crane (5) Axle Assy.

These components constitute the major portion of the tower

crane. The line diagram of the tower crane is also being

annexed alongwith the plaint to show the placement of the

aforesaid components on the crane and its use. From 1997 to

2004 the plaintiff had placing order on the defendants for

manufacturing and supplying of the key components

required for the manufacturing of the tower cranes. In this

period, the defendants manufactured various components

which are used by the Plaintiff in the manufacture of its

tower crane.

15. The value of these components manufactured by

the defendant based on the industrial drawing and designs of

the plaintiff over this period was crores of rupees. The said

orders were executed by the Defendants on the basis of

industrial drawings, which were handed over to the

defendants specifically for the above purpose. According to

the plaintiff, the defendants from Sept, 2003 turned

dishonest and devised and tried to pass off sub standard

goods manufactured by the defendants for greater market

penetration of the premier brand of the Plaintiff namely

ACE.

16. The Defendants originally set up a fabrication unit

and Mr. Sanjay Gulati came in contact with the Plaintiff

Company and offered services for manufacturing

components for "Hydraulic mobile cranes". Thereafter they

started also dealing in the fabrication of the components of

Tower Crane.

17. It has recently come to the knowledge of the Plaintiff,

that the modus operandi adopted by the defendants in the

"Hydraulic mobile cranes" has been the same. The Plaintiff

has initiated separate actions for the hydraulic mobiles

cranes and present suit is only with respect to "Tower

Cranes".

18. The Defendants are thus habitual offenders. In the past

they have misused the drawings of the components of the

"Hydraulic Mobile Cranes". Now they are making attempts

to misuse the drawings of the "Tower Cranes".

19. The Defendant are inducing the general public into

booking orders to buy their inferior, low-grade Tower

Cranes (which they claim, would be introduced in market

shortly) by exhibiting of their works of the Tower Crane

purchased from one of the Defendant‟s Customer and

manufactured by the Plaintiff Company. The Defendants

project that the said tower crane as their own product under

the defendant‟s brand name "Omega".

20. It is contested by the Plaintiff that the defendants

are also using unauthorizedly the drawings of the Plaintiff

which were given to the Defendants by the Plaintiffs for

manufacturing the components exclusively to be supplied to

the Plaintiff and nobody else. The defendant are

manufacturing inferior low grade Tower cranes under the

brand name of "Omega" which is also contrary to the terms

of the contact between the parties and the stipulation of the

drawings.

21. It is averred in the plaint, that the defendants

thereafter started approaching the employees of the plaintiff

including some who had worked previously and were well

versed with the company‟s technology and affairs of the

plaintiffs, who were involved in the Design, Engineering,

Purchasing, Production, Marketing, Service & Spare parts of

the Cranes. The Plaintiff has given the details in Para 24 of

the plaint about the workers and senior employees and

claimed that the defendants are indulging in the unfair

practices.

22. The defendant has contested the suit and has also challenged

the interim order passed by this Court. The main contention of the

defendant is that the plaintiff has filed the suit with mala fide intentions

for restraining the defendants from manufacturing and marketing Tower

Cranes while the plaintiff knows that the defendants are not

manufacturing or marketing Tower Cranes at the moment.

23. It is further contended that the plaintiff has no exclusive

rights in the industrial drawings or specifications of the Tower Crane

manufactured and marketed by it under the trademark „ACE‟ as the

same is a hundred percent copy of the tower crane being manufactured

by M/s. Alpha Services, A-8, Shivalik, New Delhi, India. The

defendant further contended that it was M/s.Stanford Engineering Ltd.,

who in 1987 acquired the technology and specifications of the said

tower crane from one Monitou of France to manufacture and market the

said crane model in India. It is further contended by the defendants that

defendant nos.1 and 2 have introduced their hydraulic mobile cranes in

the market based on their own drawings and specifications, which are

giving strong competition to the plaintiff and in fact the hydraulic

mobile cranes introduced by the defendants are better and far more

efficient than the hydraulic mobile cranes of the plaintiff. It is further

contended by the defendants that the suit of the plaintiff is based on two

premises, firstly that the defendants are likely to infringe the plaintiffs

copyright in certain industrial drawings pertaining to the tower cranes of

the plaintiff and secondly that the defendants have purchased a tower

crane of the plaintiff from one of the plaintiff‟s customers and are

exhibiting the same in their factory in order to misrepresent to the world

at large. The defendants further contended that the defendants neither

have, nor intend to misuse or copy the alleged but not admitted,

industrial drawings of the plaintiff in respect of their tower crane.

24. It is submitted by the defendants that they have not

purchased any tower crane of the plaintiff from any of its customers and

the tower crane present in the factory of the defendants was actually sent

to the defendants‟ factory by one of their clients for servicing and

repairs.

25. The defendant has also contended that as the plaintiff is

scared of losing market share once the more efficient and qualitatively

superior tower cranes of the defendants are introduced in the market, has

instituted the present suit to paralyze the business of the defendant and

is seeking exclusive rights in what is an item of public domain. It is

further contended that the mobile tower cranes are an item of public

domain and are made by a number of manufacturers around the country,

many of whom have been in business much prior to the plaintiff.

26. During the course of the hearing of the interim application,

learned counsel for the defendants has also drawn the attention of this

court to the replication filed by the plaintiff wherein the statement has

been made by the plaintiff that the suit of the plaintiff is not based on

infringement of copyright. Learned counsel for the defendant states that

in view of the said statement, the suit of the plaintiff is liable to be

dismissed as the plaintiff himself is not claiming infringement of

copyright.

27. On the other hand, learned counsel for the plaintiff has

argued that the present suit is based upon misappropriation of the

industrial designs, which were given to the defendants for the purpose

of manufacturing the component. There are no contradictory stands.

The plaintiff is admittedly not claiming the copyright. In fact, the

defendant has dismantled the tower crane purchased from one of the

customers of the plaintiff and has performed reverse engineering of the

crane purchased from the plaintiff and has not misused the industrial

drawings of the plaintiff. Learned counsel for the plaintiff has also

relied upon the report of the local commissioner in this regard.

28. Learned counsel for the plaintiff has further argued that the

case of the plaintiff is based upon the breach of trust and

misappropriation of industrial drawings of the plaintiff. In fact, the

defendants have done breach of contract and violated the confidentiality

of the industrial drawings handed over to them exclusively for the

purpose of manufacturing of the components for the plaintiff company.

29. I have gone through the pleadings and the documents filed by

the parties. At the initial stage when the suit was taken up, this Court on

11.09.2006 passed an ex parte ad interim order and the said interim

order is still continuing against the defendant. The main thrust of the

defendants is that the plaintiff is not the owner of the drawings in

question as the plaintiff himself has copied the same from the third

party.

30. The defendants have filed the brochure of the third party in

order to prove the same. It is well established law that the copyright

subsists only in the original work under Sections 13 and 14 of the

Copyright Act 1957, which is exclusively protectable under the Act. In

this case, the defendants have not disputed the fact that for number of

years the defendants were doing job work for fabricating the

components for the plaintiff. It is also a matter of fact that the matter

has already gone for trial where the plaintiff has already produced the

evidence by way of affidavit.

31. All the defences raised by the defendant can only be

examined at the time of trial. At this stage, since the evidence produced

by the defendant is not clear and cogent, therefore, it would be

appropriate that in case any defence of the defendants is valid, the same

can be determined after the trial.

32. In the case of Mr. Diljeet Titus, Advocate vs. Alfred A

Adebare & Ors., 130 (2006) DLT 330 this Court has gone far ahead

while making the survey of all the authorities on trade secret and has

interpreted the employer and employee relation which also includes the

lawyer and his associates. This Court has restrained the defendant

from misappropriating the information including the lists of clients and

other information forming database of the said law firm.

33. In the case of Burlington Home Shopping Pvt. Ltd. vs.

Rajnish Chibber, 61 (199) DLT 6 this Court has granted the

injunction restraining the defendants from using the compilations,

database comprising the list of the clients.

34. In the case of M/s J. C. Bamford Excavators Ltd. & Anr.

V. Action Construction Equipment Ltd. & Ors. in I.A. No. 3741/06

in CS (OS) 566/06 decided on 26.5.2006, the plaintiff in that suit

claimed copyright in the drawings of the component produced and

manufactured by it alleging that the defendant (who is now plaintiff in

the present case) copied the drawings of the plaintiff and therefore the

plaintiff would suffer irreparable damage if the defendants are not

restrained. While refusing the injunction, the court held that the

drawing does not seem to be similar to the open eye, on technical

specifications it might be similar, still refused to grant an injunction in

favour of the plaintiff.

35. The interim order in the present case has been continuing for

the last more than two and a half years, it is not proper at this stage to

interfere with the said interim order in view of reasons given in para 30

to 33 of my order. Therefore, I am of the considered view that ex parte

ad interim injunction order granted on 11.09.2006 be made absolute till

the disposal of the suit. IA no. 10073/06 is allowed.

CS [OS] no.1740 of 2006

36. List this matter before Joint Registrar for directions on cross-

examination on 21.07.2009 of the witnesses of the Plaintiff.

MANMOHAN SINGH, J APRIL 13, 2009 sa