World Wrestling Entertainment, ... vs M/S Reshma Collection & Ors
2014 Latest Caselaw 5161 Del

           THE HIGH COURT OF DELHI AT NEW DELHI
%                                  Judgment delivered on: 15.10.2014

+       FAO(OS) 506/2013 & CM Nos. 17627/2013, 18606/2013

WORLD WRESTLING ENTERTAINMENT, INC.                                   ... Appellant
                                        versus
M/S RESHMA COLLECTION & ORS                                           ... Respondents

Advocates who appeared in this case:
For the Appellant   : Mr Praveen Anand with Ms Vaishali Mittal,
                      Mr Gurpreet Singh Kahlon and Ms D. Neha Reddy
For the Respondent  : None

CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE VIBHU BAKHRU

                                   JUDGMENT

BADAR DURREZ AHMED, J

1. This appeal is directed against the order dated 04.10.2013 passed by a

learned Single Judge of this Court in CS(OS) 1801/2013, whereby the plaint

filed by the appellant/plaintiff was directed to be returned to the appellant/

plaintiff under Order 7 Rule 10 of the Code of Civil Procedure, 1908

(hereinafter referred to as ‗the CPC'), to be presented before a court of

competent jurisdiction.

2. The suit had been filed by the appellant/ plaintiff seeking permanent

injunction based on alleged infringement of its copyright, infringement of its

trademarks, passing off, dilution, rendition of accounts, damages and delivery

up etc. It is an admitted position that the appellant/ plaintiff is a company

incorporated under the laws of the State of Delaware, United States of America

and that all the defendants reside in Mumbai and do not carry on business

within the jurisdiction of this Court. The appellant/ plaintiff claimed that this

Court has jurisdiction to entertain the said suit on account of the provisions of

Section 134(2) of the Trademarks Act, 1999 and Section 62(2) of the

Copyright Act, 1957. The specific plea with regard to jurisdiction was made in

paragraph 32 of the plaint which reads as under:-

―32. It is submitted that this Hon'ble Court has territorial jurisdiction to entertain and try the present suit under Section 134 (2) of the Trade Marks Act, 1999 and Section 62 (2) of the Copyright Act, 1957 on account of the fact the Plaintiff carries on business within the territorial limits of this Hon'ble court as briefly summarized below:

i. The Plaintiff's programmes, consisting of its various characters including John Cena, Undertaker, Triple H, Randy Orton and Batista are broadcast at Delhi, within the territorial limits of this Hon'ble Court;

ii. The Plaintiffs products, such as its merchandising goods and books, are available within the territorial limits of this Hon'ble Court;

iii. The Plaintiffs goods and services are sold to consumers in Delhi through its websites which can be accessed and operated from all over the country, including from Delhi.‖ (underlining added)

3. The appellant/plaintiff is, inter alia, engaged in the development,

production and marketing of television programming, pay-per-view

programming, live events and the licensing and sale of branded consumer

products featuring its well known World Wrestling Entertainment (WWE)

brand. The WWE scratch logo and World Wrestling Entertainment are

registered trademarks of the appellant/plaintiff worldwide including India. The

appellant/plaintiff is also the owner of the copyright of the pictorial

representations of World Wrestling Entertainment and WWE Wrestlers and the

WWE scratch logo as they appear on various publicity materials and

promotional merchandise of the appellant/ plaintiff. The appellant/ plaintiff

also has trademark registrations in respect of various WWE talent names and

talent slogans such as JOHN CENA, BATISTA, UNDERTAKER, TRIPLE H,

RANDY ORTON etc.

4. The appellant/ plaintiff offers a variety of memorabilia including, but

not limited to, apparel, posters, calendars, fact books, sunglasses, water

bottles, key-rings, DVD's etc. It has more than 200 licensees distributing its

products in 86 countries, including India. It has been averred by the

appellant/ plaintiff that it licenses out its well known trademarks and the

images/characters to different parties for use on merchandise in a wide range

of products.

5. It is the allegation of the appellant/ plaintiff that the defendants, who

are stationed at Mumbai, are engaged in the business of manufacture and

sale of various forms of garments and apparel, such as T-shirts, wrist

bands, caps and other counterfeit goods and garments bearing the

reproductions of the plaintiff's talents. According to the appellant/

plaintiff, the defendants, are infringing the appellant/plaintiff's registered

trademarks. It is alleged that the apparels sold by the defendants bear the

images of WWE talents and, representations of the well known WWE

characters are displayed prominently on the defendant's products.

6. The learned Single Judge, by virtue of the impugned order, has,

without issuing summons in the said suit, directed the return of the plaint to

the appellant/ plaintiff by holding that the Delhi High Court would have no

territorial jurisdiction insofar as the said suit was concerned. The learned

Single Judge rejected the pleas raised on behalf of the appellant/ plaintiff that

this Court had territorial jurisdiction to entertain the suit by virtue of the

provisions of Section 134(2) of the Trademarks Act, 1999 and Section 62(2)

of the Copyright Act, 1957. While doing so, the learned Single Judge placed

reliance on the decision of the Supreme Court in the case of Dhodha House

v. S.K. Maingi: 2006 (9) SCC 41 as also on a decision of a Division

Bench of this Court in Archie Comic Publications, Inc. v. Purple

Creations Pvt. Ltd. & Others: 172 DLT 234 (DB).

7. Before the learned Single Judge, it had been contended on behalf of

the appellant/ plaintiff that the decisions of the Supreme Court in Dhodha

House (supra) and this Court in Archie Comic (supra) were not applicable

inasmuch as they did not take into account the ―new media‖ of web-based

business models where transactions are conducted over the internet. The

learned counsel for the appellant/ plaintiff had placed reliance on Yahoo Inc.

v. Akash Arora: 1999 (19) PTC 201; Banyan Tree Holding (P) Limited v.

A. Murali Krishna Reddy and Another: 2010 (42) PTC 361 (Del); and

Wipro Limited and Another v. Oushadha Chandrika Ayurvedic India

(P) Limited and Others: 2008 (37) PTC 269 (MAD) (DB). It was also

contended on behalf of the appellant/ plaintiff before the learned Single

Judge that the question of territorial jurisdiction was a mixed question

of law and fact and, therefore, the same ought to be adjudicated at the

final stage of the suit and not at the preliminary stage of admission. All

these pleas were rejected by the learned Single Judge by placing

reliance on the decision in the case of Dhodha House (supra) which had

interpreted the expression ―carries on business‖ appearing in both,

Section 134(2) of the Trademarks Act, 1999 and Section 62(2) of the

Copyright Act, 1957. The learned Single Judge observed that the sum

and substance of the criteria laid down in Dhodha House (supra) was

that an essential part of the plaintiff's business, coupled with an element

of control exercised by the plaintiff, must exist in such a place where

the plaintiff claims to be carrying on business either on its own or

through an exclusive agent. The learned Single Judge also observed

that merely because of the e-commerce models, which have become

prevalent, and because of the use of the internet as a medium for doing

business, the tests, which apply for determination of issues, such as,

when and where the contract is made or whether the vendor carries on

business at the place where the merchandise may be sold, or service may

be offered, would not change and would be the same as applicable to

communications over the telephone and fax. For this, the learned Single

Judge made a reference to the Supreme Court decision in Bhagwan

Goverdhandas Kedia v. Girdharilal Parshottamdas & Co.: AIR 1966 SC

543.

8. With regard to the reliance placed by the appellant/ plaintiff on the

decision in Banyan Tree (supra), the learned Single Judge observed that

the same was misplaced inasmuch as, according to him, in Banyan Tree

(supra) the question related to the website of a defendant and not that of

plaintiff as in the present case. At this juncture itself we may point out

that the decision in Banyan Tree (supra) would not be applicable here just

because the questions there pertained to a defendants website but, because

(a) it specifically dealt with a case where it was admitted that the plaintiff

did not carry on business within the jurisdiction of the Court, (b) it was

concerned only with the provisions of Section 20(c) CPC, and (c) it was a

case of passing off. In Banyan Tree (supra) the Division Bench did not

examine the meaning and scope of the expression ‗carries on business' as

appearing in Section 134(2) and 62(2) of the Trademarks Act, 1999 and

the Copyright Act, 1957, respectively. That case was decided on the basis

of the plea of ‗cause of action' and not on the basis of the expression

‗carries on business', which is the case here.

9. The learned Single Judge also held that whenever the legislature

thought it necessary, it amended the laws to make provision for the ―new

media‖. He observed that while enacting the Information Technology Act,

2000 and amending other statutes, Parliament had consciously not amended

the Trademarks Act, 1999 or the Copyright Act, 1957 or the Code of Civil

Procedure, 1908 for expressly bringing in the concepts with regard to ‗new

media'. Consequently, it was observed by the learned Single Judge that the

‗new media' did not change the basic concepts or legal principles which

applied to trade and commerce and they continued to remain the same as

applicable to the ―old media‖ i.e., telephone and fax.

10. For all the above reasons, the learned Single Judge rejected the plea of

the appellant/ plaintiff that the Delhi High Court would have territorial

jurisdiction to entertain the suit. Being aggrieved by the said decision, the

appellant/ plaintiff is in appeal before us.

11. Before we proceed any further, it would be necessary to set out the

provisions of Section 134 of the Trademarks Act, 1999 and Section 62 of the

Copyright Act, 1957. They are as under:-

―134. Suit for infringement, etc., to be instituted before district Court.- (1) No suit -

(a) for the infringement of a registered trade mark, or

(b) relating to any right in a registered trade mark, or

(c) for passing off arising out of the use by the defendant of any trade mark which is identical with or deceptively similar to the plaintiff's trade mark, whether registered or unregistered.

shall be instituted in any court inferior to a District Court having jurisdiction to try the suit.

(2) For the purpose of clauses (a) and (b) of sub-section (1), a ―District Court having jurisdiction‖ shall, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908) or any other law for the time being in force, include a District Court within the local limits of whose jurisdiction, at the time of the institution of the suit or other proceeding, the person instituting the suit or proceeding, or where there are more than one such person any of them, actually and voluntarily resides or carries on business or personally works for gain.

Explanation.-- For the purpose of sub-section (2), ―person‖ includes the registered proprietor and the registered user.‖

―62. Jurisdiction of court over matters arising under this Chapter:- (1) Every suit or other civil proceeding arising under this Chapter in respect of the infringement of copyright in any work or the infringement of any other right conferred by this Act shall be instituted in the direct court having jurisdiction.

(2) For the purpose of sub-section (1), a ―district court having jurisdiction‖ shall, notwithstanding anything contained in the Code of Civil Procedure, 1908(5 of 1908), or any other law for the time being in force include a district court within the local limits of whose jurisdiction, at the time of the institution of the suit or other proceedings, the person instituting the suit or other proceeding or, where there are more than one such persons, any of them actually and voluntarily resides or carries on business or personally works for gain.‖

12. The provisions of Section 134 (2) of the Trademarks Act, 1999 and of

Section 62(2) of the Copyright Act, 1957 are material. Both the provisions are

virtually identical. They are both non-obstante provisions inasmuch as it is

clearly stated therein that they are ―notwithstanding anything contained in the

Code of Civil Procedure, 1908, or any other law for the time being in force‖.

Furthermore, the word ―include‖ is used in both the provisions so as to include

a District Court within the local limits of whose jurisdiction, at the time of

institution of the suit or other proceeding, the person instituting the suit or

proceeding, or where there are more than one such person, any of them,

actually and voluntarily resides or ―carries on business‖ or personally works

for gain. Insofar as the present case is concerned, it is not claimed by the

appellant/ plaintiff that it resides or personally works for gain in Delhi. It has,

as pointed out above, taken the plea that it ―carries on business‖ in Delhi

because, according to it, its programmes are broadcast in Delhi; its

merchandise and books are available for sale in Delhi; and its goods and

services are sold to customers in Delhi through its website which can be

accessed in Delhi over the internet.

13. Therefore, the entire case turns on the meaning to be given to the

expression ―carries on business‖ as appearing in the above two provisions. In

Dhodha House (supra), the Supreme Court, inter alia, considered the

meaning of the expression ―carries on business‖. The following extracts

from the said decision would be relevant:-

―46. The expression ‗carries on business' and the expression ‗personally works for gain' connote two different meanings. For the purpose of carrying on business only presence of a man at a place is not necessary. Such business may be carried at a place

through an agent or a manager or through a servant. The owner may not even visit that place. The phrase ―carries on business‖ at a certain place would, therefore, mean having an interest in a business at that place, a voice in what is done, a share in the gain or loss and some control thereover. The expression is much wider than what the expression in normal parlance connotes, because of the ambit of a civil action within the meaning of section 9 of the Code. But it is necessary that the following three conditions should be satisfied, namely,

―(1) The agent must be a special agent who attends exclusively to the business of the principal and carries it on in the name of the principal and not a general agent who does business for any one that pays him. Thus, a trader in the mufassil who habitually sends grain to Madras for sale by a firm of commission agents who have an independent business of selling goods for others on commission, cannot be said to ―carry on business‖ in Madras. So a firm in England, carrying on business in the name of A.B. & Co., which employs upon the usual terms a Bombay firm carrying on business in the name of C.D. & Co., to act as the English firm's commission agents in Bombay, does not ―carry on business‖ in Bombay so as to render itself liable to be sued in Bombay.

(2) The person acting as agent must be an agent in the strict sense of the term. The manager of a joint Hindu family is not an ―agent‖ within the meaning of this condition.

(3) To constitute ―carrying on business‖ at a certain place, the essential part of the business must take place in that place. Therefore, a retail dealer who sells goods in the mofussil cannot be said to ―carry on business‖ in Bombay merely because he has an agent in Bombay to import and purchase his stock for him. He cannot be said to carry on business in Bombay unless his agent made sales there on his behalf. A Calcutta firm that employs an agent at Amritsar who has no power to receive money

or to enter into contracts, but only collects orders which are forwarded to and dealt with in Calcutta, cannot be said to do business in Amritsar. But a Bombay firm that has a branch office at Amritsar, where orders are received subject to confirmation by the head office at Bombay, and where money is paid and disbursed, is carrying on business at Amritsar and is liable to be sued at Amritsar. Similarly a Life Assurance Company which carries on business in Bombay and employs an agent at Madras who acts merely as a Post Office forwarding proposals and sending moneys cannot be said to do business in Madras. Where a contract of insurance was made at place A and the insurance amount was also payable there, a suit filed at place B where the insurance Co. had a branch office was held not maintainable. Where the plaintiff instituted a suit at Kozhikode alleging that its account with the defendant Bank at its Calcutta branch had been wrongly debited and it was claimed that that court had jurisdiction as the defendant had a branch there, it was held that the existence of a branch was not part of the cause of action and that the Kozhikode Court therefore had no jurisdiction. But when a company through incorporated outside India gets itself registered in India and does business in a place in India through its agent authorized to accept insurance proposals, and to pay claims, and to do other business incidental to the work of agency, the company carries on business at the place of business in India.‖

[See Mulla on the Code of Civil Procedure, 15th Edn., Vol.I, pp 246-47.]

47. A corporation in view of Explanation appended to Section 20 of the Code would be deemed to be carrying on business inter alia at a place where it has a subordinate office. Only because, its goods are being sold at a place would thus evidently not mean that it carries a business at that place.‖

xxxx xxxx xxxx xxxx xxxx xxxx

―51. The plaintiff was not a resident of Delhi. It has not been able to establish that it carries on any business at Delhi. For our purpose, the question as to whether the defendant had been selling its produce in Delhi or not is wholly irrelevant (sic). It is possible that the goods manufactured by the plaintiff are available in the market of Delhi or they are sold in Delhi but that by itself would not mean that the plaintiff carries on any business in Delhi.‖

14. From the above extracts, it is evident that when we say that a person

‗carries on business‖ at a place we mean that the person has an interest in a

business at that place, a voice in what is done, a share in the gain or loss and

some control at that place. There is no doubt that a person may carry on

business at a place not necessarily by himself but through an agent or a

manager or through a servant. But, as pointed out in Dhodha House (supra),

three conditions have to be fulfilled: (i) the agent must be a special agent

who attends exclusively to the business of the principal and carries it on in the

name of the principal and not as a general agent who does business for any one

that pays him; (ii) the person acting as agent, must be an agent in the strict

sense of the term and a manager of a Joint Hindu Family cannot be regarded as

an ―agent‖ within the meaning of this condition; and (iii) to constitute

―carrying on business‖ at a certain place, the essential part of the business must

be performed at that place. An illustration of which is given in the above

extract itself where a Bombay firm has a branch office at Amritsar, where

orders are received, subject to confirmation by the head office at Bombay, and

where money is paid and disbursed. Such a firm is said to be carrying on

business at Amritsar and is liable to be sued at Amritsar.

15. Mr Praveen Anand, the learned counsel appearing on behalf of the

appellant/ plaintiff, submitted before us, after placing reliance on Exphar SA

and Another v. Eupharma Laboratories Limited and Another: AIR 2004

SCC 1682 that the use of the word ‗include' in Section 134(2) of the

Trademarks Act, 1999 and Section 62(2) of the Copyright Act, 1957 make the

provisions broader than Section 20 of the CPC. There is no dispute with this

proposition. There is also no dispute with the proposition of the learned

counsel for the appellant that the expression ‗carries on business' is not

confined to the head office, but can also include a branch office. This

proposition is based on a decision of the Madras High Court in Wipro Limited

(supra). But, this proposition is of no use to the appellant/ plaintiff

inasmuch as it is not the case of the appellant/ plaintiff that it has any

office within the territorial limits of this Court, what to speak of a branch

office.

16. Faced with this eventuality, Mr Anand submitted that, in fact, there

is no need to have any office at all at a particular place for establishing

the fact that a person carries on business at that place. He placed reliance,

once again, on Wipro Limited (supra), wherein it was observed that the

plain meaning of the expression ―carries on business‖ only conveys that

wherever there is a business activity - be it the principal place or branch

or branches - the party concerned is said to carry on business at such

places. In fact, we may point out that Mr Anand need not haved laboured

on this point at all because in Dhodha House (supra) itself, the Supreme

Court had clearly observed that for the purpose of carrying on business,

the presence of the person concerned at a particular place was not at all

necessary and that such business could be carried on at that place through

an agent or a manager or through a servant. Mr Anand also submitted that

while considering the question of territorial jurisdiction at the threshold

stage and particularly while considering the question of return of a plaint

under Order 7 Rule 10 CPC, only the averments made in the plaint ought

to be seen and, if, on a demurrer, a case for territorial jurisdiction has been

made out, the plaint ought not to be returned. In our view, there is no

quarrel with this proposition either.

17. The main issue before us is one of considering as to whether on the

basis of the averments made in the plaint, the appellant/ plaintiff carries on

business in Delhi. It is nowhere pleaded in the plaint that the appellant/

plaintiff, has an agent or a manager or a servant, through whom the

appellant/ plaintiff carries on business in Delhi. As pointed out above, it

is also not the appellant/ plaintiff's case that it has an office in Delhi. The

question then arises as to whether the third condition specified in Dhodha

House (supra) is satisfied or not. If we recall, in Dhodha House (supra),

the Supreme Court had observed that the expression ‗carries on business‖ ,

as appearing in the above two provisions, is much wider than what the

expression in normal parlance connotes because of the ambit of a civil action

within the meaning of Section 9 of the CPC. The Supreme Court, however,

cautioned that although the expression has a very wide meaning, it is necessary

that the three conditions specified in the said decision should be satisfied.

18. Insofar as the first two conditions are concerned, they relate to agents.

Inasmuch as it is an admitted position that the appellant/ plaintiff has no agent

in Delhi, those two conditions are clearly not fulfilled. However, it is the

appellant/ plaintiff's case that it carries on business in Delhi directly inasmuch

as its goods and services are sold to consumers in Delhi through its website

which is accessed in Delhi. It is on this basis that the learned counsel for the

appellant/ plaintiff submitted that the decision in Dhodha House (supra) as

also in Archie Comic (supra) would really not be applicable in the present

case as in those decisions web-based business models, which have been

referred to as the ‗new media', were not considered. The question which then

arises is whether the introduction and spread of e-commerce and business over

the internet impacts the meaning of the expression ‗carries on business' at a

certain place. The learned Single Judge, as we have pointed out above, felt that

the introduction of the new business models of doing business over the internet

was not any different from the old model of doing business over the telephone

or fax. He had placed reliance on the Supreme Court decision in the case of

Bhagwan Goverdhandas Kedia (supra).

19. Considering the fact that in Dhodha House (supra), the third

condition stipulated that to constitute ‗carrying on business' at a certain

place, the essential part of the business must take place there, it would be

necessary to examine this aspect in the backdrop of business over the

internet. When a transaction takes place over the internet, where is the

contract concluded? This is the question which needs to be answered. In

other words, at which place does the essential part of the business

transaction take place? The example of the Bombay firm having a branch

office at Amritsar, where orders were received, subject to confirmation by

the head office at Bombay and where money was paid and disbursed,

needs to be examined in the context of internet transactions. In that

example, it was noted that the Bombay firm could be said to be carrying

on business at Amritsar and was liable to be sued at Amritsar. In the

present case, the plaintiff/ appellant is incorporated in USA. It has a

website. We do not know as to where that website is hosted. The server

would, in all likelihood, be in USA. It has not been pleaded that the

website of the appellant/ plaintiff is hosted on a server in Delhi.

Therefore, it can be safely presumed that the web server is not located in

Delhi. However, if a customer in Delhi wishes to purchase an article,

which is available on the website of the appellant/ plaintiff, the purchaser

in Delhi accesses the said website on his or her computer in Delhi. The

said purchaser places the order for the said article from his computer in

Delhi. The payment is made either through a credit/ debit card or through

a cash card from Delhi and ultimately the goods are delivered to the

customer in Delhi. In the nature of such transactions, the question arises

as to which is the place where the essential part of the business occurs?

20. We may recall that the learned Single Judge had referred to the Supreme

Court decision in Bhagwan Goverdhandas Kedia (supra), wherein

transactions over the telephone and telegraph had been considered. It

would be instructive to examine that decision of the Supreme Court . The

facts before the Supreme Court in Bhagwan Goverdhandas Kedia (supra)

were that the plaintiff therein had commenced an action in the City Civil

Court at Ahmedabad against the defendant for a decree of Rs 31,150/- on

the plea that the defendants had failed to supply cotton seed cake, which

they had agreed to supply under an oral contract entered into on

22.07.1959, which had been negotiated between the parties through a long

distance conversation over the telephone. The question arose as to whether

the City Civil Court at Ahmedabad had jurisdiction to entertain the said

suit. The offer to purchase cotton seed cake had emanated from the

plaintiff and that offer had been accepted by the defendant. The City Civil

Court held that as the contract was concluded over the telephone, the place

where the acceptance of the offer is intimated to the offeror is the place

where the contract is made, and, therefore, the City Civil Court at

Ahmedabad would have jurisdiction to try the suit. The matter travelled up

to the Supreme Court, which, by a majority decision, upheld the conclusion

of the City Civil Court at Ahmedabad by holding that :-

―The trial Court was therefore right in the view which it has taken that a part of the cause of action arose within the jurisdiction of the Civil City Court, Ahmedabad, where acceptance was Communicated by telephone to the plaintiffs.‖

In doing so, the Supreme Court considered the relevant provisions of the

Indian Contract Act, 1872 as also the common law of England. The Supreme

Court also undertook to compare contracts concluded over the post and

telegraph on the one hand and contracts concluded over the telephone on the

other. The Supreme Court noted that acceptance and intimation of acceptance

of an offer are both necessary to result in a binding contract. The Supreme

Court held that in the case of a contract which consists of mutual promises, the

offeror must receive intimation that the offeree has accepted his offer and has

signified his willingness to perform his promise. The Supreme Court further

noted that when parties are in the presence of each other, the method of

communication will depend upon the nature of the offer and the circumstances

in which it is made and that when an offer is orally made, acceptance may be

expected to be made by an oral reply, but even a nod or other act which

indubitably intimates acceptance, may suffice. Furthermore, if the offeror

receives no such intimation, even if the offeree has resolved to accept the offer,

a contract may not result. The Supreme Court further observed as under:-

―But on this rule is engrafted an exception based on ground of convenience which has the merit not of logic or principle in support, but of long acceptance by judicial decisions. If the parties are not in the presence of each other, and the offeror has not prescribed a mode of communication of acceptance, insistence upon communication of acceptance of the offer by the offeree would be found to be inconvenient, when the contract is made by letters sent by post.....‖

xxxx xxxx xxxx xxxx xxxx xxxx

―.....The exception has long been recognised in the United Kingdom and in other countries where the law of contracts is based on the common law of England. Authorities in India also exhibit a fairly uniform trend that in case of negotiations by post the contract is complete when acceptance of the offer is put into a course of transmission to the offeror: see Baroda Oil Cakes Traders case ILR (1954) Bom 1137: (AIR) 1954 Bom 451, and cases cited therein. A similar rule has been adopted when the offer and acceptance are by telegrams. The exception to the general rule requiring intimation of acceptance may be summarised as follows. When by agreement, course of conduct, or usage of trade, acceptance by post or telegram is authorised, the bargain is struck and the contract is complete when the acceptance is put into a course of transmission by the offeree by posting a letter or dispatching a telegram.

(underlining added)

21. From the above, it is clear that the general rule is that the contract is

complete when the offeror receives intimation that the offeree has accepted his

offer. An exception to this has been carved out in respect of contracts

negotiated by postal communications or telegrams. The exception being that

the bargain in such cases (post or telegram) would be struck and the contract

would be complete when the acceptance of the offeree is put into a course of

transmission by him by posting a letter or despatching a telegram. The

Supreme Court then held as under:-

―10. It is true that the Post and Telegraphs Department has general control over communication by telephone and especially long distance telephone, but that is not a ground for assuming that the analogy of a contract made by post will govern this mode of making contracts. In the case of correspondence by post or telegraphic communication, a third agency intervenes and without the effective intervention of that third agency, Letters or messages cannot be transmitted. In the case of a conversation by telephone, once a connection is established there is in the normal course no further intervention of another agency. Parties holding conversation on the telephone are unable to see each other: They are also physically separated in space, but they are in the hearing of each other by the aid of a mechanical contrivance which makes the voice of one heard by the other instantaneously, and communication does not depend upon an external agency.‖

(underlining added) It is obvious that the Supreme Court distinguished the case of a contract

negotiated over the telephone from that of contracts through letters or through

telegrams. Whereas in the latter, there was an intervention of an external

agency, which took time to deliver the acceptance of the offer by the offeree to

the offeror, in the former, the communication of the acceptance was

instantaneous once the communication link had been established. The Supreme

Court, by virtue of its majority decision, went on to hold as under:-

―14. Obviously the draftsman of the Indian Contract Act did not envisage use of the telephone as a means of personal conversation between parties separated in space, and could not have intended to make any rule in that behalf. The question then is whether the ordinary rule which regards a contract as completed only when acceptance is intimated should apply, or whether the exception engrafted upon the rule in respect of offers and acceptances by post and by telegrams is to be accepted. If regard be had to the essential nature of conversation by telephone, it would be reasonable to hold that the parties being in a sense in the presence of each other, and negotiations are concluded by instantaneous communication of speech, communication of acceptance is a necessary part of the formation of contract, and the exception to the rule imposed on grounds of commercial expediency is in- applicable.‖

(underlining added)

22. It is interesting to note that the Supreme Court had observed that the

draftsman of the Indian Contract Act could not have envisaged use of the

telephone as a means of personal conversation between parties separated in

space and could not have intended to make any rule in that behalf. This applies

with greater vigour insofar as commerce and business over the internet is

concerned. Just as in the case of telephone conversation, there is instantaneous

communication, so, too, in the case of business over the internet. Therefore,

the rule that applies to contracts concluded over the telephone would apply

with equal vigour to contracts concluded over the internet. In other words,

contracts would be completed at the place where the acceptance is

communicated. In the case before the Supreme Court, the offer had emanated

from the plaintiff, who was situated in Ahmedabad. The acceptance of the

offer was by the defendants, who were to make the supply of cotton seed cakes

to the plaintiff therein. The acceptance, since it was over the telephone, was

instantaneously communicated via that technology to the plaintiff at

Ahmedabad. The Supreme Court held that the cause of action would arise

within the jurisdiction of the City Civil Court at Ahmedabad, where the

acceptance was communicated by telephone to the plaintiff.

23. Let us now apply these principles to the type of transaction over the

internet, which we have explained above. The website of the appellant/

plaintiff refers to various goods and services. It is not an offer but an invitation

to an offer, just as a menu in a restaurant. The invitation, if accepted by a

customer in Delhi, becomes an offer made by the customer in Delhi for

purchasing the goods ―advertised‖ on the website of the appellant/ plaintiff.

When, through the mode of the software and the browser, the transaction is

confirmed and payment is made to the appellant/ plaintiff through its website,

the appellant / plaintiff accepts the offer of the customer at Delhi. Since the

transaction between the two takes place instantaneously, the acceptance by the

appellant/ plaintiff is instantaneously communicated to its customer through

the internet at Delhi. Therefore, in such a case, part of the cause of action

would arise in Delhi.

21. But, we are not concerned with the question of cause of action between

the appellant/ plaintiff and its customers in Delhi because the defendants are

not such customers and they are, in any event, all residents of Mumbai. What

we are examining is whether the third condition specified in Dhodha House

(supra) is satisfied or not. In other words, if the contracts and/ or

transactions entered into between the appellant/ plaintiff on the one hand

and its customers are being concluded in Delhi, can it not be said that the

essential part of the business of the appellant/ plaintiff, insofar as its

transactions with customers in Delhi are concerned, takes place in Delhi?

The offers are made by customers at Delhi. The offers are subject to

confirmation/ acceptance of the appellant/ plaintiff through its website.

The money would emanate or be paid from Delhi. Can it not then be

considered that the appellant/ plaintiff is, to a certain extent, carrying on

business at Delhi? In our view, it would be so. Because of the

advancements in technology and the rapid growth of new models of

conducting business over the internet, it is possible for an entity to have a

virtual presence in a place which is located at a distance from the place

where it has a physical presence. The availability of transactions through

the website at a particular place is virtually the same thing as a seller

having shops in that place in the physical world. Let us assume for the

sake of argument that the appellant/ plaintiff had a shop in Delhi from

where it sold its various goods and services. In that case, it could not be

denied that the plaintiff carried on business in Delhi. This is apart from

the fact that the appellant/ plaintiff may also have been regarded as having

voluntarily resided in Delhi. When the shop in the ‗physical sense' is

replaced by the ‗virtual' shop because of the advancement of technology,

in our view, it cannot be said that the appellant/ plaintiff would not carry

on business in Delhi.

22. Therefore, in our view, although the learned Single Judge had made a

correct reference to the decision of the Supreme Court in the case of Bhagwan

Goverdhandas Kedia (supra), the full ramifications of that decision were

not perceived by him. When the two decisions of the Supreme Court in

Bhagwan Goverdhandas Kedia (supra) and Dhodha House (supra) are

considered in the manner indicated above, it would appear that, on the

averments made by the appellant/ plaintiff in the plaint, the Delhi High

court would, on a demurrer, have jurisdiction to entertain the suit

inasmuch as the appellant/ plaintiff would be regarded as carrying on

business in Delhi within the meaning of the expression under Section

134(2) of the Trademarks Act, 1999 and Section 62(2) of the Copyright

Act, 1957. Consequently, the learned Single Judge ought not to have

returned the plaint under Order 7 Rule 10 CPC. As a result, the impugned

order is set aside and the suit is restored to its original number and the

same be placed before the Roster Bench for further steps therein on

28.10.2014, in the first instance. This, however, would not preclude the

defendants from raising the plea of jurisdiction on facts which, if raised,

could be considered by the court based on the evidence and upon the law

explained above. The appeal is allowed, as above.

BADAR DURREZ AHMED, J

VIBHU BAKHRU, J

OCTOBER 15, 2014 SR