M/S C-1 India Pvt Ltd vs E-Procurement Technologies Ltd & ...
2014 Latest Caselaw 87 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+    IA Nos. 19108/2012, 9821/2010 & 10333/2010 in CS(OS) 1514/2010

%                                                   Reserved on: 20th November, 2013
                                                    Decided on: 6th January, 2014

       M/S C-1 INDIA PVT LTD                                          ..... Plaintiff
                      Through                  Mr. Muneesh Malhotra, Mr. Vikram
                                               V. Minhaj, Advs.
                               versus

    E-PROCUREMENT TECHNOLOGIES LTD & ANR .... Defendant
                  Through Mr. Jayant K. Mehta, Mr. Anuj
                          Kapoor, Advs.
Coram:
HON'BLE MS. JUSTICE MUKTA GUPTA
1.     The plaintiff which is a private limited company incorporated under
the Companies Act, 1956 has filed the present suit against the defendants,
inter alia, praying for restraining them from infringing the plaintiff‟s
copyright in e-tendering solution and from marketing, publishing, producing,
distributing, selling and publicly releasing or dealing with the said software
in any manner whatsoever. The defendant No.1 is also a private limited
company incorporated under the Companies Act and defendant No.2 is the
Chief Operating Officer (in short „COO‟) of the defendant No.1 whereas the
wife of defendant No.2 is the Director of defendant No.1 company. In the
year 2000 the plaintiff was appointed as the sole representative in India and
countries in SAARC region for a multinational company, Commerce One
which was a global leader and pioneer in the business of E-commerce
solution.     The promoters of Commerce One were some of the largest
companies in the world, which include SAP which is the second largest



IA Nos. 19108/2012, 9821/2010 & 10333/2010 in CS(OS) 1514/2010            Page 1 of 11
 software company in the world. Through its products, portals and services,
Commerce One creates access to worldwide markets, allow anyone to buy
from anyone, at anytime from anywhere. Commerce One specializes in
automating the process of buying and selling thereby making the process
more efficient. Its services extend across all industries, including vertical
strategic sectors such as banking, oil and gas, metals and mining, energy,
aviation, telecom and the government sector. Commerce One‟s suite of E-
procurement solutions are robust and scalable. Most of the Government
organizations are user of Commerce One‟s solution. The plaintiff company
offered the Commerce One solution to some of the largest corporates in
India in the field of energy, textile, consumer, manufacturing etc.        The
plaintiff was the first and only company to build State Government owned
solution www.fuelxs.com for buying and selling of fuel online. The plaintiff
company is also the first company to do an e-procurement transaction for
any PSU. As the Commerce One solution did not meet the requirement of
the Indian Government process, the plaintiff company started the research
and development for an e-procurement solution (Tender Management
Solution) to suit the process of Indian Government in 2001. That around the
same time, Government of Andhra Pradesh envisaged its e-procurement
project. This project was awarded to the plaintiff company being the lowest
bidder. The plaintiff company became the first and the only company to set
up an e-procurement infrastructure for any State Government in India
www.eprocurement.gov.in in May 2002. The e-Procurement platform set up
by the plaintiff company for the Government has already processed
transactions more than Rs. 36,000 crores within the first two years of its
implementation, making it the largest e-Procurement platform in the world


IA Nos. 19108/2012, 9821/2010 & 10333/2010 in CS(OS) 1514/2010   Page 2 of 11
 and one of the largest portal based e-Commerce projects in the world. It is
stated that the plaintiff is the owner of intellectual property rights in all its
computer software including the copyright in the Electronic Tender
Management Software apart from being protected under Common Law and
Trade Secrecy Laws. The relevant computer software developed by the
plaintiff is known in the market as Electronic Tender Management System.
The plaintiff is also the owner and proprietor of all the brochures, technical
material and manual concerning the abovementioned software. All these
documents are literary and artistic work under the Copyright Act. The same
have been designed and created by the employees of the plaintiff and the first
copyright in the said work vests with the plaintiff company.

2.      The Government of Madhya Pradesh, Department of Public Relations
invited the tenders for e-procurement and e-tendering software in and around
2003.     The defendant No.2 was then the Director of M/s Applitech
Tendercity.com (Pvt.) Ltd. (in short „Tendercity‟) and approached the
plaintiff company. The plaintiff and the defendant No.2 on behalf of said
Tendercity.com agreed to bid jointly on the tender floated by the
Government of Madhya Pradesh, Department of Public Relation, Madhya
Pradesh. The defendant No.2 associated itself with the plaintiff as it did not
possess knowledge of E-Procurement and E-Tendering software system and
had not bid for any such software system in any state of the country. An
agreement dated 20th January, 2003 was executed between the plaintiff and
the Applitech Tendercity.com (Pvt.) Ltd. through defendant No.2 forming an
"association" and thus pursuant to the agreement the plaintiff was called
upon by the defendant No.2 to provide software/ product so that other



IA Nos. 19108/2012, 9821/2010 & 10333/2010 in CS(OS) 1514/2010      Page 3 of 11
 employees may get familiar with the product which was handed over to the
defendant No.2 for the purpose of submitting the joint bid with the Madhya
Pradesh Government. The parties agreed and undertook that Tendercity
shall submit the bid to GOMP under the software of C1 India and Commerce
One. Tendercity shall not at any stage of this tender (including bid, technical
evaluation, commercial evaluation and award of the tender) offer any
software other than the software of C1 India for the purpose of that bid. It
was categorically agreed between the parties that they shall maintain
confidentiality of the software during the subsistence of the agreement and
one year thereafter and shall not in any manner disclose to any person, firm
or enterprises by use of its own benefits. Vide agreement it was also clarified
that the software provided by C1 was proprietary software and C1 along with
Commerce One USA had the intellectual property rights in it. Tendercity
specifically undertook that neither it nor its directors, shareholders, parent
company or its subsidiary company or its business associate shall develop
the software, which is "comparable" to the software of C1 or Commerce
One.     It also agreed that it shall not use any functional aspect of the
"Electronic Tendering Module" and/or "Electronic Procurement Model" and
the adaptation thereof in the form of internet based tendering system and/or
internet based procurement system and related works to facilitate online
electronic trading and/or procurement with its security requirements for use
by Government Organizations etc. The Tendercity further undertook that it
shall not reproduce the work in any form including the storing of it in any
media by electronic means and/or to make any adaptation of the work and to
do any act of reproduction, issuance of copies of the work to the public, to




IA Nos. 19108/2012, 9821/2010 & 10333/2010 in CS(OS) 1514/2010    Page 4 of 11
 communicate the work to the public in relation to the work or adaptation
thereof or to sell or to give on commercial rent for sale.

3.     After entering into the agreement with the plaintiff company, the
Applitech Tendercity.com with the help of the plaintiff company participated
in the tenders invited by the Department of Public Relations, Government of
Madhya Pradesh and for this the plaintiff provided all the technical know-
how, training, literature to the defendant No.2 while working as Director of
the Tendercity. Under the agreement dated 20th January, 2003 the defendant
No.2 on behalf of the company was under restrain from developing the
software comparable to the software of the plaintiff company and use of the
functional aspects of the electronic tendering module and/or electronic
procurement module and adaptation of the same in any form to develop
internet based tendering system/ procurement system and related works
facilitating online electronic trading.            In September, 2003, the plaintiff
company came to know the illegal acts of the defendant No.2 in seeking to
contract with the various clients interested in online tendering/ procurement
systems/ solutions contrary to the terms of agreement dated 20 th January,
2003 and further breaches on or about 20th May, 2004.                  The plaintiff
company sought appointment of an Arbitrator under Section 11 of the
Arbitration and Conciliation Act before this Court and moved an application
under Section 9 of the Act seeking restrain orders against the Tendercity.com
and the defendant No.2 from utilizing the electronic tendering module and
electronic procurement module. Vide order dated 16th March, 2005 this
Court injuncted the Respondent therein from using the software of the

plaintiff in any manner whatsoever. Despite the order dated 16th March,

2005 the defendant No.2 sought to approach the I.T. Secretary, Government of Rajasthan, Department of Information Technology offering the electronic module/ procurement module with variations and adaptations to the Government of Rajasthan. The objections of the plaintiff company were brushed aside by the Government of Rajasthan and thus the plaintiff filed another application under Section 9 of the Arbitration Act wherein again an order was passed against the defendant therein restraining them from going ahead to supply of similar software to the Government of Rajasthan. Not only this, the defendant No.2 as Director/ COO of the Tendercity approached various public sectors undertakings, State Government and Central Government offering the software and thus the plaintiff filed a civil suit being CS(OS) 1675/2005 against the Tendercity and defendant No.2 seeking injunction restraining it from infringement of the Copyright, rendition of accounts etc. This Court allowed the suit and passed a decree of injunction against the Tendercity from infringing the copyright of the plaintiff in the field of e-tendering and e-procurement software developed by the plaintiff. On a contempt application being filed by the plaintiff company, the defendant No.2 appeared before this Court on 26th November, 2007 and tendered his unqualified apology for his past conduct in writing to the customers of the plaintiff and stated before this Court that he was no longer in the business of e-tendering as he was working with M/s Vardhaman Synthetics and Bulk Organics Private Limited. After tendering unconditional apology before this Court the defendant No.2 innovated and opened a new company in the name of his wife wherein his wife is the Director as well as majority shareholder i.e. 88% of the said company. The father-in-law of the defendant No.2 is also one of the Director and

shareholder. The defendant No.2 is working as COO of the defendant No.1 company. Thus, the defendant No.2 started the same work though in the garb of his wife being the Director in the name of "E-Procurement Technologies Ltd.". This company was formed on 27 th March, 2006 and at the relevant time i.e. on 26th November, 2007 when the defendant No.2 made a statement before this Court that he was working with M/s Vardhaman Synthetics and Bulk Organics Private Limited at Ahmedabad, he had already opened a company wherein his wife was the majority shareholder and thus continued to commit contempt of the orders of this Court. The plaintiff, thus, seeks injunction, as the defendants have copied and infringed the copyright of the e-tendering software of the plaintiff after unauthorizedly obtaining the access to the plaintiff product and without any license granted by the plaintiff to the defendants. These are the averments in the plaint. Thus, I proceed to deal with the applications separately.

IA 19108/2012 (u/O VII R 11 CPC)

4. Learned counsel for the defendant No.1 contends that the defendant No.1 i.e. E-Procurement Technologies Limited is a separate legal entity then defendant No.2. In the entire plaint the plaintiff has not demonstrated how does it hold the copyright which has been infringed by the defendant No.1. In the written statement filed by the defendant No.1 the defendant No.1 has clearly pointed out distinction between two softwares i.e. of the plaintiff company and the defendant No.1 company. In the replication filed by the plaintiff company there is no denial of the distinctions between the two softwares and it is only stated that the defendant will have to demonstrate how the two softwares are different. It is contended that the plaintiff has to

stand on its own legs and to prove the case the plaintiff has to prove that the software used by the defendant is identical to the software used by the plaintiff and also that the plaintiff holds the copyright in the work and thus there is infringement of the copyright of the plaintiff. In fact, the plaint does not disclose any cause of action and thus the defendant filed an application for interrogatories against the plaintiff. Vide IA 1971/2012 under Order XI Rule 1,2&4 CPC the learned Joint Registrar allowed the application directing the plaintiff to submit reply to the interrogatories at serial No. 6,7&8. However, even in the reply to the interrogatories the plaintiff has not placed any material to show that the two software used are the same and again the onus has been put on the defendant to show that the two softwares are different. Reliance is placed on Section 27 of the Contract Act and Mrs. Bacha F. Guzdar, Bombay Vs. Commissioner of Income Tax, Bombay AIR 1955 SC 74 to contend that a company is a separate legal entity from its shareholders.

5. Learned counsel for the plaintiff has referred to the facts narrated above and has stated that in order to circumvent the orders of this Court the defendant No.2 has floated another company in the name of his wife wherein his wife and father-in-law are the majority shareholders and defendant No.2 is acting as the COO. There is a decree already injuncting the defendant No.2 and Tendercity from using the plaintiff‟s software or violating its copyright and thus at this stage the defendant No.1 or defendant No.2 cannot claim that the plaintiff has failed to show that its copyright has been violated in the present plaint. Learned counsel for the plaintiff has taken me through the various orders passed in the suit being CS(OS) 1675/2005; Arbitration

Petition 62/2005 and CCP 35/2005. He has also shown the certificate of incorporation of the defendant No.1 company wherein 88% share holding is of the wife of the defendant No.2.

6. It is well settled that while deciding an application under Order VII Rule 11 CPC the averments made in the plaint and the documents filed therewith are only required to be looked into. As per the plaint the plaintiff is a copyright holder in the software programme. Even though no original document has been filed despite admission/ denial of documents, nothing dissuades the plaintiff from still proving the same during trial. Further, there is already a decree in favour of the plaintiff against the Tendercity and defendant No.2 whereby they have been injuncted from infringing the copyright of the plaintiff company in the software E-solutions. Moreover defendant No. 2 as director of Tendercity has already acknowledged the proprietary rights of the plaintiff in the software. Hence, merely because the plaintiff has not filed any documents in support of its copyright, the plaint cannot be dismissed for want of cause of action.

7. The application is dismissed.

IA 9821/2010 (u/O XXXIX R 1&2 CPC)

8. By this application the plaintiff seeks interim injunction against the defendant. Vide order dated 28th July, 2010 an ad interim ex-parte injunction was passed in favour of the plaintiff in terms of the prayers made in Paras „a‟ to „d‟ of the application and the defendants have been restrained from using the e-tendering/ e-procurement software of the plaintiff company or

representing the same to various public sector undertakings as well as the world at large.

9. A perusal of the agreement between the plaintiff company and defendant No.2 on behalf of the Tendercity shows that the defendant No.2 undertook not to even develop a software comparable to that of the plaintiff. The defendant No.2 already suffers a decree against him in this regard. Indubitably, a company is a separate legal entity from its shareholders and thus can be sued in its own name. However, in order to avoid a mala-fide exercise and if an act of the company is prima facie meant to circumvent the orders passed by the Courts, this Court will certainly pierce the Corporate veil and find out the true position. Despite an apology being tendered before this Court on 26th November, 2007 in Contempt Petition 35/2005, an independent company i.e. defendant No.1 had already been incorporated on 28th March, 2006 with the wife of defendant No.2 being its majority shareholder. On piercing the Corporate veil, I am of the considered opinion that the defendant No.1 company has been floated by defendant No.2 to circumvent the orders passed by this Court. Hence, the interim injunction granted vide order dated 28th July, 2010 is made absolute till the disposal of the suit.

10. Application is disposed of.

IA 10333/2010 (by D-1 u/S. 151 CPC)

11. By this application the defendant No.1 seeks an injunction restraining the plaintiff, its directors, officers or any person acting on its behalf from writing or communicating with the customers and clients of the applicant in

any manner whatsoever and directions to the plaintiff to issue public apology for threatening and intimidating the clients and customers of the applicant.

12. As noted above, the case of the defendant is that the software of the defendant is wholly different from that of the plaintiff and thus on the basis of the said independent software of the defendant No.1, the defendant No.1 has successfully secured various tenders relating to e-procurement since the year 2006.

13. The case of the plaintiff/non-applicant is that this application is counter-blast to the suit and is not maintainable in the absence of a counter claim filed by the defendants. The plaintiff has, however, admitted that the plaintiff in compliance of the order of this Court in application under Order XXXIX Rule 1&2 CPC duly conveyed to the officers of Government of Andhra Pradesh not to deal with the applicants/ defendants, as the same would amount to substantial loss to the plaintiff as also the parties would be involved in contravention of the order of this Hon‟ble Court and would further indulge himself into unnecessary litigation.

14. Thus without going into the maintainability of the present application, in view of this admission of the plaintiff that it has written to the Government of Andhra Pradesh not to deal with the defendants, it is hereby directed that the plaintiff will only communicate the order of injunction of this Court and make no adverse communication to anyone against the defendants.

15. Application is disposed of.

(MUKTA GUPTA) JUDGE JANUARY 06, 2014/'ga'