Supreme Court of India
CANARA BANKversusN. G. SUBBARAYA SETTY & ANR.
- Citation
- 2018 INSC 385
- Decided
- 20 April 2018
- Disposal
- Appeal(s) allowed
- Bench
- ADARSH KUMAR GOEL
Holding
An issue of law decided on an erroneous basis of a statutory prohibition is not res judicata, so the earlier judgment cannot bar the later suit.
Summary
Canara Bank granted a loan to N.G. Subbaraya Setty, who signed an unregistered assignment deed transferring the trademark "Eenadu" to the bank as security. The bank later cancelled the deed, invoking the Banking Regulation Act, and both parties litigated in 2004 – the bank seeking to declare the deed void and the respondent seeking a monetary decree. The trial court and first appellate court held the deed valid, ignoring the statutory prohibition in Section 45(2) of the Trade Marks Act and Sections 6, 8 and 46(4) of the Banking Regulation Act. In 2008 the respondent filed a fresh suit for recovery, and the bank raised res judicata, arguing the earlier judgment barred the claim. The Supreme Court held that an issue of law decided erroneously on a statutory prohibition cannot be res judicata, and therefore the earlier judgment could not preclude the 2008 suit. The appeal was allowed, setting aside the lower courts' judgments and dismissing the 2008 suit.
Issues considered
- The applicability of the doctrine of res judicata to a later suit where the earlier judgment upheld a transaction that is prohibited by statute.
- Whether Section 45(2) of the Trade Marks Act and Sections 6, 8 and 46(4) of the Banking Regulation Act constitute statutory prohibitions that defeat the operation of res judicata.
Legislation cited
- Banking Regulation Act, 1949s. 46(4), s. 6(2), s. 8
- Code of Civil Procedure, 1908s. 11
- Trade Marks Act, 1999s. 45(2)
Subjects
res judicatastatutory prohibitiontrade marksbanking regulationassignment deedjurisdictioncivil procedureappeal
Judgment
884 [2018]REPORTS
SUPREME COURT 3 S.C.R. 884 [2018] 3 S.C.R.
A CANARA BANK
v.
N. G. SUBBARAYA SETTY & ANR.
(Civil Appeal No. 4233 of 2018)
B APRIL 20, 2018
[ADARSH KUMAR GOEL AND R. F. NARIMAN, JJ.]
Code of Civil Procedure, 1908 – s.11 – Res judicata – General
rule and its exceptions – Erroneous decision given on a statutory
prohibition in former suit – Statutory prohibition not given effect to
C
– Plea of res judicata in subsequent suit – Held: An issue of law
which arises between the same parties in a subsequent suit or
proceeding is not res judicata if, by an erroneous decision given on
a statutory prohibition in the former suit or proceeding, the statutory
prohibition is not given effect to – On facts, respondent in order to
D repay dues of the bank, signed assignment deed with Bank Manager
for assignment of the trademark and after several months bank
cancelled the assignment deed – Litigations between the parties,
first proceeding, second proceeding – Trial court and first appellate
court treating the statutory prohibition contained in s.45(2) of the
Trade Marks Act as res judicata, was erroneous – Neither of the
E
court adverted to and/or interpreted s.45, which makes it clear that
the assignment deed, if unregistered, cannot be admitted in evidence
by any court in proof of title to the trademark by the assignment,
unless the court itself directs otherwise – Thus, any reliance upon
the assignment deed by the earlier judgment cannot be sanctified
F by the plea of res judicata, when reliance upon the assignment deed
is prohibited by law – Furthermore, trademark cannot be said to be
property which has come into the possession of the bank in
satisfaction or part satisfaction of any of the claims of the bank –
Trademarks are not part of any security for loans or advances that
have been made to the first respondent, or connected with the same
G
– Thus, the assignment deed clearly hit by ss.6(2) and 8 read with
s.46(4) – Judgment of the trial court and first appellate court set
aside – Trade Marks Act, 1999 – s.45(2) – Banking Regulation Act,
1949 – ss.6(2), 8 and 46(4).
H
884
CANARA BANK v. N. G. SUBBARAYA SETTY 885
Allowing the appeal, the Court A
HELD: 1.1 Res judicata is a doctrine of fundamental
importance in our legal system, though it is stated to belong to
the realm of procedural law, being statutorily embodied in Section
11 of the Code of Civil Procedure, 1908. However, it is not a
mere technical doctrine, but it is fundamental in our legal system B
that there be an end to all litigation, this being the public policy
of Indian law. The obverse side of this doctrine is that, when
applicable, if it is not given full effect to, an abuse of process of
the Court takes place. However, there are certain notable
exceptions to the application of the doctrine. One well known
exception is that the doctrine cannot impart finality to an C
erroneous decision on the jurisdiction of a Court. Likewise, an
erroneous judgment on 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. [Para 5][894-H; D
895-A-B]
1.2 Until the limitation period for filing of an appeal is over,
the res remains sub judice. After the limitation period is over,
the res decided by the first Court would then become judicata.
However, questions arise as to what is to be done in matters E
where the hearing in the second case is shortly after the limitation
period for filing an appeal in the first case has ended. At least two
judgments, of the Privy Council and the High Court, have referred
to the fact that, in appropriate cases, the hearing in the second
case may be adjourned or may be stayed in order to await the
outcome of the appeal in the first case. [Para 22][906-G-H; 907- F
A]
1.3 If the period of limitation for filing an appeal has not yet
expired or has just expired, the Court hearing the second
proceeding can very well ask the party who has lost the first round
whether he intends to appeal the aforesaid judgment. If the G
answer is yes, then it would be prudent to first adjourn the second
proceeding and then stay the aforesaid proceedings, after the
appeal has been filed, to await the outcome of the appeal in the
first proceeding. If, however, a sufficiently long period has elapsed
after limitation has expired, and no appeal has yet been filed in
H
886 SUPREME COURT REPORTS [2018] 3 S.C.R.
A the first proceeding, the Court hearing the second proceeding
would be justified in treating 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
B
outcome in the first proceeding. Many factors have to be
considered before exercising this discretion. 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
C 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 the trial court judgment in the
second proceeding, and a de novo hearing on merits in the second
proceeding commencing on remand, thereby wasting the Court’s
D
time and dragging the parties into a second round of litigation on
the merits of the case. [Para 23][907-B-G]
1.4 In the instant case, a belated review petition was filed
after arguments were heard and judgment reserved by the
appellate Court. This Court would not have to await the outcome
E of the said review petition before deciding whether the judgment
dated 27.4.2013 is res judicata. It is clear that a review petition
filed long after the judgment dated 27.4.2013, with a condonation
application for a delay of over four years, could not possibly be
held to be anything but an abuse of the process of the Court.
F This being so, it is examined whether the judgment dated
27.4.2013 can be considered to be res judicata in the second
proceeding in this case, namely the suit of 2008 filed by respondent
No.1. [Para 24][907-H; 908-A-B]
1.5 The general rule is that all issues that arise directly
and substantially in a former suit or proceeding between the same
G parties are res judicata in a subsequent suit or proceeding
between the same parties. These would include issues of fact,
mixed questions of fact and law, and issues of law. To this, there
are certain exceptions when it comes to issues of law:
(i) Where an issue of law decided between the same parties
H in a former suit or proceeding relates to the jurisdiction of
CANARA BANK v. N. G. SUBBARAYA SETTY 887
the Court, an erroneous decision in the former suit or A
proceeding is not res judicata in a subsequent suit or
proceeding between the same parties, even where the issue
raised in the second suit or proceeding is directly and
substantially the same as that raised in the former suit or
proceeding. This follows from a reading of Section 11 CPC
B
itself, for the Court which decides the suit has to be a Court
competent to try such suit. When read with Explanation (I)
to Section 11, it is obvious that both the former as well as
the subsequent suit need to be decided in Courts competent
to try such suits, for the “former suit” can be a suit
instituted after the first suit, but which has been decided C
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 Penal Code. If it does so, such a judgment would
D
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 E
clothes a special Court with jurisdiction to decide such suits;
(ii) An issue of law which arises between the same parties
in a subsequent suit or proceeding is not res judicata if, by
an erroneous decision given on a statutory prohibition in
the former suit or proceeding, the statutory prohibition is F
not given effect to. This is despite the fact that the matter
in issue between the parties may be the same as that
directly and substantially in issue in the previous suit or
proceeding. This is for the reason that in such cases, the
rights of the parties are not the only matter for consideration
(as is the case of an erroneous interpretation of a statute G
inter parties), as the public policy contained in the statutory
prohibition cannot be set at naught. This is for the same
reason as that contained in matters which pertain to issues
of law that raise jurisdictional questions. The public policy
contained in other statutory prohibitions, which need not H
888 SUPREME COURT REPORTS [2018] 3 S.C.R.
A necessarily go to jurisdiction of a Court, must equally be
given effect to, as otherwise special principles of law are
fastened upon parties when special considerations relating
to public policy mandate that this cannot be done;
(iii) Another exception to this general rule follows from the
B matter in issue being an issue of law different from that in
the previous suit or proceeding. This can happen when the
issue of law in the second suit or proceeding is based on
different facts from the matter directly and substantially in
issue in the first suit or proceeding. Equally, where the law
is altered by a competent authority since the earlier
C decision, the matter in issue in the subsequent suit or
proceeding is not the same as in the previous suit or
proceeding, because the law to be interpreted is different.
[Para 33][917-B, C-F; 918-C-E, F-G]
1.6 Insofar as Section 45 of the Trade Marks Act is
D 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 said plea
taken on behalf of the bank, but turned it down. Equally, insofar
as the trial court judgment in the second suit of 2008 is concerned,
E the said plea was expressly raised and turned down. The impugned
judgment dated 31.7.2017 also records the submission and turns
it down. Both the trial court and the first appellate court were
entirely wrong in treating the statutory prohibition contained in
Section 45(2) of the Trade Marks Act as res judicata. Neither of
the court bothered to advert to Section 45 and/or interpret the
F same. The second proceeding contained in O.S. No.495 of 2008
prayed for payment of a sum of Rs.17,89,915/- along with interest
thereon for the period 1.4.2004 to 30.4.2007. Clearly, therefore,
the subsequent suit of 2008 raises an issue which is different
from that contained in the earlier suit filed by the same party in
G 2004. Also, the earlier decision in the judgment dated 27.4.2013
has declared valid a transaction which is prohibited by law. A
cursory reading of Section 45(2) of the Trade Marks Act makes
it clear that the assignment deed, if unregistered, cannot be
admitted in evidence by any court in proof of title to the trademark
by the assignment, unless the court itself directs otherwise. It is
H
CANARA BANK v. N. G. SUBBARAYA SETTY 889
clear, therefore, that any reliance upon the assignment deed dated A
8.10.2003 by the earlier judgment cannot be sanctified by the
plea of res judicata, when reliance upon the assignment deed is
prohibited by law. [Para 35- 39][922-G; 923-F; 924-C, G; 925-B-
C]
1.7 Equally, a reference to Sections 6, 8 and 46(4) of the B
Banking Regulation Act would also make it clear that a bank
cannot use the trademark “Eenadu” to sell agarbathies. This
would be directly interdicted by Section 8, which clearly provides
that notwithstanding anything contained in Section 6 or in any
contract, no banking company shall directly or indirectly deal in
the selling of goods, except in connection with the realisation of C
security given to or held by it. Also, granting permission to third
parties to use the trademark “Eenadu” and earn royalty upon
the same would clearly be outside Section 6(1) and would be
interdicted by Section 6(2) which states that no bank shall engage
in any form of business other than those referred to in sub-section D
(1). The trademark cannot be said to be property which has come
into the possession of the bank in satisfaction or part satisfaction
of any of the claims of the bank. The trademarks are not part of
any security for loans or advances that have been made to the
first respondent, or connected with the same. It is thus clear that
the assignment deed dated 8.10.2003 is clearly hit by Section E
6(2) and Section 8 read with the penalty provision contained in
Section 46(4) of the Banking Regulation Act. The judgment of
the trial court and the first appellate court are set aside. [Para
40-42][925-D-E, G-H; 926-A]
Natraj Studios (P) Ltd. v. Navrang Studios & Anr. (1981) F
2 SCR 466 – relied on.
Sheoparsan Singh v. Ramnandan Singh AIR 1916
PC 78; Daryao and others v. State of U.P. and others,
[1962] 1 SCR 574; Mathura Prasad Bajoo Jaiswal &
Ors v. Dossibai N. B. Jeejeebhoy (1970) 1 SCC 613 : G
[1970] 3 SCR 830; V. Rajeshwari v. T.C. Saravanabava
(2004) 1 SCC 551 : [2003] 6 Suppl. SCR 927; Sheodan
Singh v. Daryao Kunwar (1966) 3 SCR 300; Balkishan
v. Kishan Lal (1888) ILR 11 All 148; S.P.A. Annamalay
Chetty v. B.A. Thornhill AIR 1931 PC 263; Parshotam H
890 SUPREME COURT REPORTS [2018] 3 S.C.R.
A Parbhudas v. Bai Moti AIR 1963 Gujarat 30; Bhavani
Amma v. Narayana Acharya AIR 1963 Mysore 120;
Satyanarayan Prosad Gooptu v. Diana Engineering
Company AIR 1952 Calcutta 124; Venkateswarlu v.
Venkata Narasimham AIR 1957 Andhra Pradesh 557;
Chengalavala Gurraju v. Madapathy Venkateswara
B
Row Pantulu Garu AIR 1917 Madras 597; Baijnath
Karnani v. Vallabhdas Damani AIR 1933 Madras 511;
Chandra Singh Dudhoria v. Midnapore Zemindary Co.
Ltd. (1941) 69 IA 51 (PC); Indra Singh and Sons Ltd.
v. Shiavax. C. Cambata ILR 1948 Bom 346; Sushil
C Kumar Mehta v. Gobind Ram Bohra (1990) 1 SCC 193
: [1989] 2 Suppl. SCR 149; Isabella Johnson (Smt.) v.
M.A. Susai (1991) 1 SCC 494 : [1990] 2 Suppl. SCR
213; State of Punjab v. Nand Kishore AIR 1974 Punjab
& Haryana 303; Mohanlal Goenka v. Benoy Krishna
Mukherjee [1953] SCR 377; Nand Kishore v. State of
D
Punjab (1995) 6 SCC 614 : [1995] 4 Suppl. SCR 16;
Moti Ram Deka v. General Manager, N.E. Frontier
Railways [1964] 5 SCR 683; Gurdev Singh Sidhu v.
State of Punjab [1964] 7 SCR 587; Allahabad
Development Authority v. Nasiruzzaman (1996) 6 SCC
E 424 : [1996] 5 Suppl. SCR 435; Shakuntla Devi v.
Kamla (2005) 5 SCC 390; V. Tulasamma v. V.Sesha
Reddy (1977) 3 SCC 99 : [1977] 3 SCR 261; Tarini
Charan Bhattacharjee and others v. Kedar Nath Haldar
AIR 1928 Calcutta 777 – referred to.
F Virgin Atlantic Airways Ltd. v. Zodiac Seats UK Ltd.
[2013] 4 All ER 715 - referred to.
Case Law Reference
AIR 1916 PC 78 referred to Para 2
G [1962] 1 SCR 574 referred to Para 3
[1970] 3 SCR 830 referred to Para 11
[2003] 6 Suppl. SCR 927 referred to Para 14
[1966] 3 SCR 300 referred to Para 16
H (1888) ILR 11 All 148 referred to Para 17
CANARA BANK v. N. G. SUBBARAYA SETTY 891
AIR 1931 PC 263 referred to Para 1 A
AIR 1963 Gujarat 30 referred to Para 19
AIR 1963 Mysore 120 referred to Para 19
AIR 1952 Calcutta 124 referred to Para 19
AIR 1957 Andhra Pradesh 557 referred to Para 19 B
AIR 1917 Madras 597 referred to Para 20
AIR 1933 Madras 511 referred to Para 21
(1941) 69 IA 51 (PC) referred to Para 22
C
ILR 1948 Bom 346 referred to Para 22
[1989] 2 Suppl. SCR 149 referred to Para 27
[1990] 2 Suppl. SCR 213 referred to Para 27
AIR 1974 Punjab & Haryana 303 referred to Para 28
D
[1953] SCR 377 referred to Para 28
[1995] 4 Suppl. SCR 16 referred to Para 29
[1964] 5 SCR 683 referred to Para 29
[1964] 7 SCR 587 referred to Para 29
E
[1996] 5 Suppl. SCR 435 referred to Para 30
(2005) 5 SCC 390 referred to Para 31
[1977] 3 SCR 261 referred to Para 31
AIR 1928 Calcutta 777 referred to Para 32 F
[1981] 2 SCR 466 relied on Para 33
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4233
of 2018.
From the Judgment and Order dated 31.07.2017 of the High Court
G
of Karnataka at Bengaluru in First Appeal (RFA) No. 818 of 2016.
K. V. Viswanathan (AC), Dhruv Mehta, Sr.Advs., Abhishek
Kaushik, Srigesh M.K., Ravi Raghunath, Dhananjay B. Ray, Siddhant
Busy, Ms. Vrinda Bhandari, Mukunda Rao, Jaishree Vishwanathan,
Rajesh Kumar – I, Gaurav Singh, Anant Gautam, Aakash Sehrawat,
H
892 SUPREME COURT REPORTS [2018] 3 S.C.R.
A V. Govinda Ramanan, Soumu Palit, Shanthkumar V. Mahale,
R. P. Kulkarni, Rajesh Mahale, Advs. for the appearing parties.
The Judgment of the Court was delivered by
R. F. NARIMAN, J. 1. Leave granted.
B 2. Roma locuta est; causa finita est. Rome has spoken, the cause
is ended. Rome spoke through her laws. One of the pillars of Roman
law is contained in the maxim res judicata pro veritate accipitur (a
thing adjudicated is received 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
C 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
D 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.
E 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,
F the rule of the Code may be traced to an English source, it embodies
a doctrine in no way opposed to the spirit of the law as expounded
by the Hindu commentators. Vijnanesvara and Nilakantha include
the plea of a former judgment among those allowed by law, each
citing for this purpose the text of Katyayana, who describes the
G plea thus: “If a person though defeated at law sue again he should
be answered, ‘You were defeated formerly’. This is called the
plea of former judgment.” (See “The Mitakshara (Vyavahara)”
Bk. II, ch. i, edited by J.R. Gharpure, p. 14, and “The Mayuka,”
Ch. I., sec. 1, p. 11 of Mandlik’s edition.)
H
CANARA BANK v. N. G. SUBBARAYA SETTY 893
[R. F. NARIMAN, J.]
And so the application of the rule by the Courts in India should be A
influenced by no technical considerations of form, but by matter
of substance within the limits allowed by law.”
3. This Court in Daryao and others v. State of U.P. and others,
(1962) 1 SCR 574 at 583-584, put it very well when it said:
“In considering the essential elements of res judicata one inevitably B
harks back to the judgment of Sir William De Grey (afterwards
Lord Walsingham) in the leading Duchess of Kingston’s case [2
Smith Lead. Cas. 13th Ed. pp. 644, 645]. Said William De Grey,
(afterwards Lord Walsingham) “from the variety of cases relative
to judgments being given in evidence in civil suits, these two C
deductions seem to follow as generally true: First, that the judgment
of a court of concurrent jurisdiction, directly upon the point, is as
a plea, a bar, or as evidence, conclusive between the same parties,
upon the same matter, directly in question in another court; Secondly,
that the judgment of a court of exclusive jurisdiction, directly upon
the point, is in like manner conclusive upon the same matter, between D
the same parties, coming incidentally in question in another court
for a different purpose”. As has been observed by Halsbury, “the
doctrine of res judicata is not a technical doctrine applicable only
to records; it is a fundamental doctrine of all courts that there
must be an end of litigation [Halsbury’s Laws of England, 3rd E
Ed., Vol. 15, para. 357, p. 185]”. Halsbury also adds that the doctrine
applies equally in all courts, and it is immaterial in what court the
former proceeding was taken, provided only that it was a Court
of competent jurisdiction, or what form the proceeding took,
provided it was really for the same cause (p. 187, paragraph 362).
“Res judicata”, it is observed in Corpus Juris, “is a rule of universal F
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 G
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
H
894 SUPREME COURT REPORTS [2018] 3 S.C.R.
A 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
B Ltd. v. Zodiac Seats UK Ltd. [2013] 4 All ER 715 (at 730-731) as
follows:
“The principle in Henderson v Henderson has always been
thought to be directed against the abuse of process involved in
seeking to raise in subsequent litigation points which could and
C should have been raised before. There was nothing controversial
or new about this notion when it was expressed by Lord
Kilbrandon in the Yat Tung case [1975] AC 581. The point has
been taken up in a large number of subsequent decisions, but for
present purposes it is enough to refer to the most important of
them, Johnson v Gore-Wood & Co [2002] 2 AC 1, in which the
D House of Lords considered their effect. This appeal arose out of
an application to strike out proceedings on the ground that the
plaintiffs claim should have been made in an earlier action on the
same subject matter brought by a company under his control.
Lord Bingham of Cornhill took up the earlier suggestion of Lord
E Hailsham of St Marylebone LC in Vervaeke (formerly Messina)
v Smith [1983] 1 AC 145, 157 that the principle in Henderson v
Henderson was “both a rule of public policy and an application of
the law of res judicata”. He expressed his own view of the
relationship between the two at p. 31 as follows: “Henderson v
Henderson abuse of process, as now understood, although
F separate and distinct from cause of action estoppel and issue
estoppel, has much in common with them. The underlying public
interest is the same: that there should be finality in litigation and
that a party should not be twice vexed in the same matter. This
public interest is reinforced by the current emphasis on efficiency
G and economy in the conduct of litigation, in the interests of the
parties and the public as a whole”.”
5. Res judicata is, thus, a doctrine of fundamental importance in
our legal system, though it is stated to belong to the realm of procedural
law, being statutorily embodied in Section 11 of the Code of Civil
H Procedure, 1908. However, it is not a mere technical doctrine, but it is
CANARA BANK v. N. G. SUBBARAYA SETTY 895
[R. F. NARIMAN, J.]
fundamental in our legal system that there be an end to all litigation, this A
being the public policy of Indian law. The obverse side of this doctrine is
that, when applicable, if it is not given full effect to, an abuse of process
of the Court takes place. However, there are certain notable exceptions
to the application of the doctrine. One well known exception is that the
doctrine cannot impart finality to an erroneous decision on the jurisdiction
B
of a Court. Likewise, an erroneous judgment on 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 C
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
D
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 E
“EENADU” WITNESSETH AS FOLLOWS:
1. The Assignor hereby grant, transfer and assign upon the
Assignee upon the terms and conditions mentioned hereunder,
the exclusive use and all benefits of the aforesaid trade mark
“Eenadu” in relation to the agarbathies (incense sticks) for a period F
TEN years from the date of this Agreement i.e. 1.10.03 to 30.9.13.
2. The Assignee shall pay the sum of Rs. 76,000.00 (Rupees
seventy six thousand only) per month payable for the period of
first six years: i.e. from 1.10.03 to 30.9.09:
G
(i) Rs. 40,000.00 shall be credited to the loan amount of the
Assignor every month and (ii) the balance of Rs.36,000.00 (Rupees
thirty six thousand only) to be paid to the Assignor/permitted to be
drawn by him until the expiry of first six years i.e. 1.10.03 to
30.9.09; and
H
896 SUPREME COURT REPORTS [2018] 3 S.C.R.
A 3. The Assignee shall pay the sum of Rs.83,600.00 (Rupees Eighty
three thousand six hundred only) per month payable for the period
of next four years i.e. from 1.10.09 to 30.9.13.
(i) Rs. 40,000 shall be credited to the loan account of the Assignor
every month and (ii) the balance of Rs.43,600.00 (Rupees forty
B three thousand six hundred only) to be paid to the Assignor/
permitted to be drawn by him until the expiry of next four years
i.e. from 1.10.09 to 30.9.13.
4. The aforesaid payments shall be unconditionally made by the
Assignee continuously and uninterruptedly for the aforesaid period
C of TEN years.
5. The Assignee shall have the right to use the trade mark “Eenadu”
on its own and shall also be entitled to grant permission to third
party/parties to use the same, subject to the said parties agreeing
to maintain the good quality and reputation of the trade mark
D “Eenadu” during the period of validity of assignment (the above
said ten years i.e. 1.10.03 to 30.9.13).
6. The Assignee shall be entitled to collect “Royalty” from the
permitted users during the period of validity of assignment (the
above said ten years).
E 7. The period of assignment granted under this deed shall come to
an end on the expiry of the period of ten years from the date of
this agreement i.e. on 30.9.13 and the agreement shall stand
terminated without any notice in relation thereto and the licences,
permissions, etc. granted by the Assignee to the third parties in
F respect of the trade mark of the Assignor “Eenadu” shall also
come to an end simultaneously, without such notice.”
6. By a letter dated 27.1.2004, the Chief Manager wrote to
respondent No.1 stating that:
“We have been informed by our higher authorities that as per the
G 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.”
H
CANARA BANK v. N. G. SUBBARAYA SETTY 897
[R. F. NARIMAN, J.]
7. On 15.4.2004, respondent No.1 filed O.S. No.2832 of 2004 A
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
B
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. C
9. The two suits as aforestated were consolidated and disposed
of by a common judgment. Issues were framed separately in both suits
and it was found that the assignment deed was not vitiated by fraud,
misrepresentation or undue influence. Consequently, the bank had no
right to cancel or rescind the aforesaid assignment deed. Respondent D
No.1’s claim for a money decree for Rs.2,16,000/- was dismissed. It
was also held that the Civil Court had jurisdiction to entertain the suits,
despite the pendency of DRT proceedings. The bank’s suit came to be
dismissed. The ultimate order passed in the two suits is as follows:
“O.S. 2832/2004 is hereby decreed in part, granting a relief in E
favour of the plaintiff as against the 1st defendant/bank, declaring
that the unilateral cancellation of the assignment agreement dated
8.10.2003 by the 1st defendant bank vide letter No. LPD/SSI/
1034/2004 dated 27.1.2004, is illegal and unsustainable.
The further prayer of the plaintiff seeking money decree against F
the 1st plaintiff bank, directing to pay him Rs.2,16,000.00 together
with interest at 18% p.a. is hereby rejected.
O.S. 7018/2004 is hereby dismissed, thereby the prayer of the
plaintiff/bank to declare that the assignment agreement dated
8.10.2003 entered into between the bank and the 1st defendant, G
as vitiated by virtue of undue influence, fraud and
misrepresentation, practiced by the 1st defendant on the bank, is
hereby rejected.”
10. Respondent No.1 filed a review petition, being miscellaneous
petition No.324 of 2013, seeking review of the aforesaid judgment to the H
898 SUPREME COURT REPORTS [2018] 3 S.C.R.
A extent that his prayer for payment of Rs.2,16,000/- was rejected. On
16.3.2015, this petition was allowed, and O.S. No.2832 of 2004 filed by
respondent No.1 was fully decreed against the bank, including the prayer
for payment. Against the aforesaid review judgment dated 16.3.2015,
an appeal was filed by the bank on 4.1.2016 with an application for
condoning the delay of 175 days. We are informed that this appeal is
B
still pending. Meanwhile, respondent No.1, on the basis of the assignment
deed, filed another suit, being O.S. No.495 of 2008, against the bank for
recovery of a sum of Rs.17,89,915/- with interest for the period 1.4.2004
to 30.4.2007. By a judgment dated 30.10.2015, this suit was decreed on
the footing that the earlier judgment dated 27.4.2013, not having been
C appealed against, was res judicata between the parties. An appeal filed
against this judgment met 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.
D
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 on behalf
E 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
F 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 statutory bars to
relief, namely, Section 45 of the Trade Marks Act, 1999 and Sections 6
and 8 read with Section 46(4) of the Banking Regulation Act, 1949. The
first statutory bar made it clear that unless the assignment deed was
G registered, it could not be received in evidence by any Court. Sections 6
and 8 of the Banking Regulation Act interdicted the bank from doing any
business other than banking business and that, therefore, the assignment
deed which enabled the bank to trade in goods and to earn royalty from
an assignment of the trademark would be hit by the aforestated provisions
H
CANARA BANK v. N. G. SUBBARAYA SETTY 899
[R. F. NARIMAN, J.]
and, therefore, would be void in law. For this purpose, he relied strongly A
upon the judgment of this Court in Mathura Prasad Bajoo Jaiswal &
Ors v. Dossibai N. B. Jeejeebhoy, (1970) 1 SCC 613, and various
other judgments which have followed the law laid down by the aforesaid
judgment. According to him, therefore, these two statutory prohibitions
being pure questions of law, which are unrelated to facts which give rise
B
to a right, cannot be res judicata between the parties. According to the
learned senior advocate, both points had been raised before the Courts
below with no success. Indeed, the very letter dated 27.1.2004 cancelling
the assignment deed would itself show that the plea of the assignment
deed being contrary to the Banking Regulation Act was the very reason
for cancelling the aforesaid deed. He also referred to and relied upon C
the fact that the Bank Manager responsible for signing the said deed
had been dismissed from service by an order dated 26.5.2005. Shri Mehta
also strongly relied upon a judgment dated 29.1.2011, by the Sessions
Court in Bangalore, by which the Chief Manager, one A. Sheshagiri
Rao, who was made accused No.1 in a special criminal case filed by the
D
CBI and respondent Nos. 1 and 2, who were made accused nos. 2 and
3 respectively, were each sentenced to 6 months, three years and two
years respectively by the learned Sessions Judge, having been convicted
under Sections 120B and 420 of the Indian Penal Code. Accused No.1
was also convicted of an offence under Section 13 of the Prevention of
Corruption Act, 1988. According to the learned senior advocate, E
therefore, the doctrine of res judicata cannot be stretched to allow
perpetuation of a fraud committed upon the bank.
12. Shri Shanthakumar Mahale, learned advocate appearing for
respondent nos. 1 and 2, on the other hand, defended the judgments of
the Courts below. According to the learned counsel, the judgment dated F
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 G
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
H
900 SUPREME COURT REPORTS [2018] 3 S.C.R.
A 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.
B 13. We had appointed Shri K.V. Viswanathan, learned senior
counsel, as Amicus Curiae to guide us in this matter. He has referred to
a large number of judgments and has rendered invaluable assistance to
this Court in order that we arrive at a proper and just conclusion in this
matter. He has argued that the review petition that is filed belatedly
against the judgment dated 27.4.2013, being grossly belated with no
C chance of success, would not take away the res judicata effect of the
judgment dated 27.4.2013. According to the learned senior counsel, the
case law makes it clear that if an appeal is filed within limitation, the res
never becomes judicata. In fact, until the limitation for filing an appeal is
over, the res remains sub judice. It is only also when the limitation
D period is over that the res can be considered to be judicata. Depending
upon the length of time for which delay is sought to be condoned, the
Court can either proceed with the matter and consider the case on the
footing of res judicata or stay further proceedings in order to await the
outcome of the proceedings in the appeal in the other case. The test,
according to the learned senior counsel, is whether the delay in filing the
E appeal can be considered by the Court to be without sufficient cause
and, therefore, an abuse of process. It is also important to find out
whether third party rights have arisen in the meanwhile. He has cited a
large number of judgments before us, including the position in the U.K.
and U.S. Interestingly, he cited judgments to show that in the United
F States, res judicata attaches the moment a judgment is pronounced,
despite the fact that an appeal may be filed against the said judgment.
14. We may first deal with the preliminary point urged by Shri
Mehta. He pressed into service the judgment in V. Rajeshwari v. T.C.
Saravanabava, (2004) 1 SCC 551 for the proposition that a plea of res
G judicata not properly raised in the pleadings or put in issue at the stage of
trial could not be permitted to be taken. A closer look at the said judgment
shows that the judgment dealt with such a plea not being permitted to be
raised for the first time at the stage of appeal. In the present case,
though an issue as to res judicata was not struck between the parties,
both parties argued the matter based upon the pleadings and the judgment
H
CANARA BANK v. N. G. SUBBARAYA SETTY 901
[R. F. NARIMAN, J.]
contained in the two suits of 2004. It is only after full arguments on both A
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.
B
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 C
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. D
Explanation I.—The expression “former suit” shall denote a suit
which has been decided prior to the suit in question whether or
not it was instituted prior thereto.
Explanation II.—For the purposes of this section, the competence E
of a Court shall be determined irrespective of any provisions as to
a right of appeal from the decision of such Court.
Explanation III.—The matter above referred to must in the former
suit have been alleged by one party and either denied or admitted,
expressly or impliedly, by the other. F
Explanation IV.—Any matter which might and ought to have been
made ground of defence or attack in such former suit shall be
deemed to have been a matter directly and substantially in issue
in such suit.
Explanation V.—Any relief claimed in the plaint, which is not G
expressly granted by the decree, shall, for the purposes of this
section, be deemed to have been refused.
Explanation VI.—Where persons litigate bona fide in respect of
public right or of a private right claimed in common for themselves
H
902 SUPREME COURT REPORTS [2018] 3 S.C.R.
A and others, all persons interested in such right shall, for the purposes
of this section, be deemed to claim under the persons so litigating.
Explanation VII.—The provisions of this section shall apply to a
proceeding for the execution of a decree and reference in this
section to any suit, issue or former suit shall be construed as
B references, respectively, to proceedings for the execution of the
decree, question arising in such proceeding and a former
proceeding for the execution of that decree.
Explanation VIII.—An issue heard and finally decided by a Court
of limited jurisdiction, competent to decide such issue, shall operate
C as res judicata in a subsequent suit, notwithstanding that such
Court of limited jurisdiction was not competent to try such
subsequent suit or the suit in which such issue has been
subsequently raised.”
16. This Court in Sheodan Singh v. Daryao Kunwar, (1966) 3
D SCR 300 (at 304-305) has stated with some felicity the conditions that
need to be satisfied in order to constitute a matter as res judicata. This
Court held:
“A plain reading of Section 11 shows that to constitute a matter
res judicata, the following conditions must be satisfied, namely—
E (i) The matter directly and substantially in issue in the subsequent
suit or issue must be the same matter which was directly and
substantially in issue in the former suit;
(ii) The former suit must have been a suit between the same
parties or between parties under whom they or any of them claim;
F
(iii) The parties must have litigated under the same title in the
former suit;
(iv) The court which decided the former suit must be a court
competent to try the subsequent suit or the suit in which such
issue is subsequently raised; and
G
(v) The matter directly and substantially in issue in 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
H
CANARA BANK v. N. G. SUBBARAYA SETTY 903
[R. F. NARIMAN, J.]
suit if it has been decided earlier. In order therefore that the A
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 B
Balkishan v. Kishan Lal, (1888) ILR 11 All 148 (at 159-161), is most
instructive. Mahmood, J., speaking for the Full Bench, referred to
Explanation IV to Section 13 of the Code of Civil Procedure, as it then
stood. The learned Judge referred to the said explanation in the following
terms:
C
“The latter part of the Explanation IV of that section has been
framed in somewhat unspecific language, and runs as follows:
“A decision liable to appeal may be final within the meaning of
this section until the appeal is made.”
The language of the section is silent as to what happens when an D
appeal has been preferred; and no doubt much depends upon the
interpretation of two vague words “may” and “until” as they occur
in the sentence which I have just quoted. I may perhaps say that
more has been aimed at by that sentence than the few words of
which that sentence consists could convey. What has been left E
unsettled by that sentence is the difficulty pointed out by a juristic
Judge of such eminence as Mr. Justice Holloway of Madras in
Sri Raja Kakarlapudi Suriyanarayanarazu Garu v.
Chellamkuri Chellamma [5 M.H.C.R. 176] when that learned
Judge said:
F
“In the lower Court it seems to have been taken for granted
that the former judgment could not be conclusive because an
appeal was pending. This is not in accordance with English
law, as the judgment on the rejoinder in Doe v. Wright [10 A.
& E. 763] shows. It would, however, be perfectly sound doctrine
in the view of other jurists (Unger Oct. Priv. Recht, II, 603, G
Sav. Syst., 297, Seq. Waihier, II, 549). As an Englishman I
should be sorry to invite a comparison between the reasons
given by these great jurists for their and those embodied in the
English cases for the contrary doctrine.”
H
904 SUPREME COURT REPORTS [2018] 3 S.C.R.
A xxx xxx xxx
I hold that the views thus expressed by Pothier and, as Mr. Justice
Holloway has indicated, adopted by other continental jurists as to
the doctrine of res judicata, are consistent with the interpretation
which I place upon Explanation IV of s. 13 of the Code of Civil
B Procedure in relation to the authority of judgments still liable to
appeal. Such judgments are not definitive adjudications. They
are only provisional, and not being final cannot operate as res
judicata. Such indeed seems to be the view adopted by the learned
Judges of the Bombay High Court when they said, in Nilvaru v.
Nilvaru [ILR 6 Bom. 110.], “We consider that when the judgment
C of a Court of first instance upon 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,
D 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
E 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
F 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
G an appeal is allowed, be final between the parties; and no
plaintiff shall be non-suited.”
The appellant maintained that, under this provision, no decree,
from which an appeal lies and has in fact been taken, is final
between the parties so as to form res judicata, while the respondent
H
CANARA BANK v. N. G. SUBBARAYA SETTY 905
[R. F. NARIMAN, J.]
contended that such a decree was final between the parties and A
formed res adjudicata until it was set aside on appeal. In their
Lordships’ opinion the former view is the correct one, and where
an appeal lies the finality of the decree on such appeal being taken,
is qualified by the appeal and the decree is not final in the sense
that it will form res adjudicata as between the same parties. The
B
opinion of the learned Judges of the Supreme Court clearly inclined
to the same view, and their Lordships have a difficulty in
appreciating why the learned Judges found it unnecessary to decide
this point, for this view still leaves it open to the Court to see that
the appellant does not get decree twice over for the same sum,
and it is inconsistent with the other ground expressed by them for C
their decision that the appellant’s cause of action had been merged
into the decree in Action No. 4122, since, according to this view,
that decree was not final. Their Lordships regret that the second
action was not adjourned pending the decision of the appeal in the
first action, as that would have simplified procedure and saved
D
expense.”
19. Our law, therefore, is different from the American law – a
decree from which an appeal lies and has in fact been filed would render
the res sub judice and not judicata. This judgment of the Privy Council
has been repeatedly followed by the High Courts in this country. See,
Parshotam Parbhudas v. Bai Moti AIR 1963 Gujarat 30 at para 8, E
Bhavani Amma v. Narayana Acharya AIR 1963 Mysore 120 at para
2, Satyanarayan Prosad Gooptu v. Diana Engineering Company
AIR 1952 Calcutta 124 at para 10 and Venkateswarlu v. Venkata
Narasimham AIR 1957 Andhra Pradesh 557 at para 3.
20. In Chengalavala Gurraju v. Madapathy Venkateswara F
Row Pantulu Garu AIR 1917 Madras 597 at 599-600, a Division Bench
of the Madras High Court referred to and relied upon Balkishan (supra).
The Court then held:
“Explanation 4 to Section 13 of the Civil Procedure Code of 1882
which enacted that a decision liable to appeal may be final within G
the meaning of the Section until the appeal is made has been
omitted 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 H
906 SUPREME COURT REPORTS [2018] 3 S.C.R.
A 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
B 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
C 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 Procedure Code.
D xxx xxx xxx
As regards appeals filed out of time and after independent rights
between the parties have ripened, it is unlikely that courts would
excuse the delay, if during the interval other rights come into
existence, which would render it inequitable that questions disposed
E of should be re-opened at the instance of a party who seeks the
indulgence of the court: Esdaile v. Payne (1889) 40 Ch. D. 520.
Following the decision in Bal Kishen v. Kishen Lal, we are of
opinion that the Sub-Collector was wrong in holding that the
decision passed by him in Suits Nos. 466 of 1909 and 276 of 1910
F had the force of res judicata during the interval between the date
of his decree and the time allowed by law for filing the appeal.”
21. This judgment was followed in Baijnath Karnani v.
Vallabhdas Damani, AIR 1933 Madras 511 at 514.
22. The conspectus of the above authorities shows that until the
G limitation period for filing of an appeal is over, the res remains sub judice.
After the limitation period is over, the res decided by the first Court
would then become judicata. However, questions arise as to what is to
be done in matters where the hearing in the second case is shortly after
the limitation period for filing an appeal in the first case has ended. At
least two judgments, one of the Privy Council and one of the Bombay
H
CANARA BANK v. N. G. SUBBARAYA SETTY 907
[R. F. NARIMAN, J.]
High Court, have referred to the fact that, in appropriate cases, the A
hearing in the second case may be adjourned or may be stayed in order
to await the outcome of the appeal in the first case. See, Chandra
Singh Dudhoria v. Midnapore Zemindary Co. Ltd. (1941) 69 IA 51
(PC) at 58-59 and Indra Singh and Sons Ltd. v. Shiavax. C. Cambata,
ILR 1948 Bom 346 at 352.
B
23. If the period of limitation for filing an appeal has not yet expired
or has just expired, the Court hearing the second proceeding can very
well ask the party who has lost the first round whether he intends to
appeal the aforesaid judgment. If the answer is yes, then it would be
prudent to first adjourn the second proceeding and then stay the aforesaid
proceedings, after the appeal has been filed, to await the outcome of the C
appeal in the first proceeding. If, however, a sufficiently long period has
elapsed after limitation has expired, and no appeal has yet been filed in
the first proceeding, the Court hearing the second proceeding would be
justified in treating the first proceeding as res judicata. No hard and fast
rule can be applied. The entire fact circumstance in each case must be D
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 E
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 F
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 the trial Court judgment
in the second proceeding, and a de novo hearing on merits in the second
proceeding commencing on remand, thereby wasting the Court’s time G
and dragging the parties into a second round of litigation on the merits of
the case.
24. In the present case, a belated review petition was filed after
arguments were heard and judgment reserved by the appellate Court.
H
908 SUPREME COURT REPORTS [2018] 3 S.C.R.
A Would this Court have to await the outcome of the said review petition
before deciding whether the judgment dated 27.4.2013 is res judicata?
Obviously not. It is clear that a review petition filed long after the
judgment dated 27.4.2013, with a condonation application for a delay of
over four years, could not possibly be held to be anything but an abuse of
the process of the Court. This being so, we proceed to examine whether
B
the judgment dated 27.4.2013 can be considered to be res judicata in the
second proceeding in this case, namely the suit of 2008 filed by respondent
No.1. We now come to the argument of Shri Dhruv Mehta based on the
application of the principles contained in Mathura Prasad (supra).
25. In Mathura Prasad (supra), a question arose as to whether
C an erroneous judgment on the jurisdiction of the Small Causes Court in
relation to a proceeding arising out of the Bombay Rents, Hotel and
Lodging House Rates Control Act, 1947 would be res judicata. The
view expressed by the High Court was overruled by this Court in 1962,
by which time the trial Judge and the High Court of Bombay rejected an
D application filed by the appellant for an order determining standard rent
of the premises. This Court laid down:
“5. But the doctrine of res judicata belongs to the domain of
procedure: it cannot be exalted to the status of a legislative direction
between the parties so as to determine the question relating to the
E interpretation of enactment affecting the jurisdiction of a Court
finally between them, even though no question of fact or mixed
question of law and fact and relating to the right in dispute between
the parties has been determined thereby. A decision of a competent
Court on a matter in issue may be res judicata in another proceeding
between the same parties: the “matter in issue” may be an issue
F of fact, an issue of law, or one of mixed law and fact. An issue of
fact or an issue of mixed law and fact decided by a competent
Court is finally determined between the 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
G 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
H
CANARA BANK v. N. G. SUBBARAYA SETTY 909
[R. F. NARIMAN, J.]
decision is res judicata, it is meant that the right claimed has been A
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
B
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 action of
the subsequent proceeding be the same as in the previous
proceeding, but not when the cause of action is different, nor C
when the law has since the earlier decision been altered by a
competent authority, nor when the decision relates to the jurisdiction
of the Court to try the earlier proceeding, nor when the earlier
decision declares valid a transaction which is prohibited by law.
xxx xxx xxx D
7. Where the law is altered since the earlier decision, the earlier
decision will not operate as res judicata between the same parties:
Tarini Charan Bhattacharjee’s case. It is obvious that the matter
in issue in a subsequent proceeding is not the same as in the
previous proceeding, because the law interpreted is different. E
8. In a case relating to levy of tax a decision valuing property or
determining liability to tax in a different taxable period or event is
binding only in that period or event, and is not binding in the
subsequent years, and therefore the rule of res judicata has no
application: See Broken Hill Proprietary Company Ltd. v. F
Municipal Council of Broken Hill [(1926) AC 94].
9. A question of jurisdiction of the Court, or of procedure, or a
pure question of law unrelated to the right of the parties to a
previous suit, is not res judicata in the subsequent suit. Rankin,
C.J., observed in Tarini Charan Bhattacharjee’s case: G
“The object of the doctrine of res judicata is not to fasten upon
parties special principles of law as applicable to them inter se,
but to ascertain their rights and the facts upon which these
rights directly and substantially depend; and to prevent this
ascertainment from becoming nugatory by precluding the parties
H
910 SUPREME COURT REPORTS [2018] 3 S.C.R.
A from reopening or recontesting that which has been finally
decided.”
10. A question relating to the jurisdiction of a Court cannot be
deemed to have been finally determined by an erroneous decision
of the Court. If by an erroneous interpretation of the statute the
B Court holds that it has no jurisdiction, the question would not, in
our judgment, operate as res judicata. Similarly by an erroneous
decision if the Court assumes jurisdiction which it does not possess
under the statute, the question cannot operate as res judicata
between the same parties, whether the cause of action in the
subsequent litigation is the same or otherwise.
C
11. It is true that in determining the application of the 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
D 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
E 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
F 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 affected by the
decision will not be precluded from challenging the validity of that
order under the rule of res judicata, for a rule of procedure cannot
G supersede the law of the land.”
[Emphasis Supplied]
(at pages 617-619)
26. Ultimately, the Court held that since the decision of the Civil
Judge that he had no jurisdiction to entertain the application of standard
H rent, in view of the judgment of the Supreme Court, was plainly erroneous,
CANARA BANK v. N. G. SUBBARAYA SETTY 911
[R. F. NARIMAN, J.]
the decision in the previous proceedings cannot be regarded as conclusive. A
The appeals were, therefore, allowed and the orders passed by the High
Court and the Court of Small Causes were set aside and the proceedings
were remanded to the Court of first instance.
27. This judgment has been followed in a number of cases. In
Sushil Kumar Mehta v. Gobind Ram Bohra (1990) 1 SCC 193, the B
aforesaid judgment was referred to in paragraphs 20 and 21 and followed,
holding that where there is an inherent lack of jurisdiction, which depends
upon a wrong decision, the earlier wrong decision cannot be res judicata.
Similarly, in Isabella Johnson (Smt.) v. M.A. Susai (1991) 1 SCC
494, this Court, after setting out the law contained in Mathura Prasad
(supra), stated that a Court which has no jurisdiction in law cannot be C
conferred with jurisdiction by applying the principle of res judicata, as it
is well settled that there is no estoppel on a pure question of law which
relates to jurisdiction.
28. An instructive Full Bench decision of the Punjab and Haryana
High Court was cited before us by Shri Viswanathan, State of Punjab D
v. Nand Kishore, AIR 1974 Punjab & Haryana 303 at 308-309, which
further explained the ratio of Mathura Prasad (supra). What troubled
the Full Bench, after referring to Mathura Prasad (supra), was as to
whether an issue of law decided inter parties could be held to be res
judicata in a subsequent proceeding between the same parties. After E
referring to Mohanlal Goenka v. Benoy Krishna Mukherjee, (1953)
SCR 377, which held that even an erroneous decision on a question of
law operates as res judicata between parties, and various other Supreme
Court judgments, the Full Bench of the Punjab and Haryana High Court,
by a majority decision, went on to hold:
F
“17. What exactly then is the ratio decidendi in Mathura Prasad’s
case? It is manifest that the sole issue in the appeal was as to the
jurisdiction of the 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 G
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 H
912 SUPREME COURT REPORTS [2018] 3 S.C.R.
A 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
B
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 build upon it on the ground that
certain results logically follow therefrom. Such a use of precedent
C was disapproved by the Earl of Halsbury L. C. in Quinn v. Leathem
1901 AC 405. Approving that view and quoting extensively
therefrom their Lordships of the Supreme Court in State of Orissa
v. Sudhansu Sekhar Misra AIR 1968 SC 647 have categorically
observed as follows:
D “A decision is only an authority for what it actually decides.
What is of the essence in a decision is its ratio and not every
observation found therein nor what logically follows from the
various observations made in it.”
18. In strictness, therefore, the ratio decidendi of Mathura Prasad’s
E case is confined to the issue of jurisdiction of the Court but is
equally well-settled that the obiter dicta of their Lordships is entitled
to the greatest respect and weight and is indeed binding if it can
be found that they intended to lay down a principle of law. The
issue, therefore, is as to what else, apart from the ratio, was sought
F to be laid down by the Supreme Court in this case. The very
closely guarded language used by their Lordships in the body of
the judgment leads me to conclude that they wished to confine
their observations within the narrowest limits. The expression used
(which is sought to be extended on behalf of the respondent) is “a
pure question of law unrelated to the right of the parties to a
G previous suit.” It is very significant that their Lordships, with their
meticulous precision of language, have no where laid down in the
judgment that a pure question of law can never be res judicata
between the parties. Indeed it has been said to the contrary in
terms. The emphasis, therefore, in the expression abovesaid is on
H the fact that such a pure question of law must be unrelated to the
CANARA BANK v. N. G. SUBBARAYA SETTY 913
[R. F. NARIMAN, J.]
rights of the parties. It stands noticed that a decision by a Court A
on a question of law cannot be absolutely dissociated from the
decision on the facts on which the right is founded. Consequently
what was exactly to be connoted by the expression “a pure
question of law unrelated to the rights of the parties” was itself
expounded upon by their Lordships. Without intending to be
B
exhaustive, the Court has indicated specifically the exceptional
cases in which special considerations apply for excluding them
from the ambit of the general principle of res judicata. The principle
of law which their 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. C
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
D
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.” E
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 erroneous and related to the jurisdiction of the Court. Since a F
wrong decision on a point of jurisdiction could not operate as res judicata,
the learned Judge dissented.
29. An appeal from the Division Bench judgment pursuant to the
Full Bench decision resulted in the decision in Nand Kishore v. State
of Punjab, (1995) 6 SCC 614. A brief resume of the facts show that the G
appellant had been compulsorily retired, having completed only ten years’
qualifying service in pursuance of Rule 5.32(b) of the Punjab Civil
Services Rules, Volume II. A writ petition that was moved by the appellant
against the compulsory retirement order was dismissed on 2.2.1962.
The appellant had not questioned the validity of Rule 5.32(b) in the
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914 SUPREME COURT REPORTS [2018] 3 S.C.R.
A aforesaid writ petition. However, in Moti Ram Deka v. General
Manager, N.E. Frontier Railways, (1964) 5 SCR 683, this Court held
that if the compulsory retirement rule permitted an authority to retire a
public servant at a very early stage of his career, such rule might be
constitutionally invalid. The appellant, spurred by the decision in Moti
Ram Deka (supra), filed a suit in 1964 for a declaration that Rule 5.32
B
of the aforesaid rules was constitutionally invalid. A pari materia rule to
that of Rule 5.32 was struck down by this Court in Gurdev Singh Sidhu
v. State of Punjab, (1964) 7 SCR 587. However, since a writ petition
had been filed by the appellant earlier, the State of Punjab, in its written
statement to the suit filed by the appellant, took up the plea of constructive
C res judicata. This plea found favour with the Full Bench of the High
Court on 8.5.1974, following which a Division Bench allowed the appeal
of the State of Punjab on 13.8.1974. It is from this judgment that an
appeal landed up before this Court, as is stated hereinabove. This Court,
on 6.12.1990, advised the appellant to file a special leave petition from
the order of the High Court dismissing his writ petition dated 5.2.1962,
D
with an appropriate application for condonation of delay. The delay was
condoned by this Court in the interest of justice in the special
circumstances of this case under Article 142, and the said belated appeal
was allowed following Gurdev Singh (supra) and striking down the
order of compulsory retirement of the appellant. Despite having so decided,
E this Court went into the doctrine of constructive res judicata and decided
that the constitutionality 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
F
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
G 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
H
CANARA BANK v. N. G. SUBBARAYA SETTY 915
[R. F. NARIMAN, J.]
found to be erroneous on its face, such judgment cannot operate as res A
judicata, as to give effect to such judgment would be to counter a statutory
prohibition. On the facts of that case, it was held that in a land acquisition
case, after vesting has taken place in favour of the State, obviously, the
lapse of a notification under Section 6 of the Land Acquisition Act, 1894
could not possibly arise.
B
31. In Shakuntla Devi v. Kamla (2005) 5 SCC 390, this Court
held that in view of the changed position in law consequent to a contrary
interpretation put on Section 14 of the Hindu Succession Act, 1956 by
V.Tulasamma vs. V.Sesha Reddy (1977) 3 SCC 99, the earlier decree
based on judgments that were overruled cannot operate as res judicata.
This is in consonance with the law laid down by this Court in Nand C
Kishore (supra).
32. Since Mathura Prasad (supra) followed the Full Bench
judgment of the Calcutta High Court in Tarini Charan Bhattacharjee
and others v. Kedar Nath Haldar, AIR 1928 Calcutta 777 (at 781-
782), it is important to set out what the Full Bench said in answer to the D
question posed by it – namely, whether an erroneous decision on a pure
question of law operates as res judicata in a subsequent suit where the
same question is raised. The answer given by the Full Bench is in four
propositions set out hereinbelow:
“(1) The question whether the decision is correct or erroneous E
has no bearing upon the question whether it operates or does not
operate as res judicata. The doctrine is that in certain
circumstances, the Court shall not try a suit or issue, but shall deal
with the matter on the footing that it is a matter no longer open to
contest by reason of a previous decision. In these circumstances, F
it must necessarily be wrong for a Court to try the suit or issue,
come to its own conclusion thereon, consider whether the previous
decision is right and give effect to it or not accordingly, as it
conceives the previous decision to be right or wrong. To say as a
result of such disorderly procedure that the previous decision was
wrong and that it was wrong on a point of law, or on a pure point G
of law, and that, therefore, it may be disregarded, is an indefensible
form of reasoning. For this purpose, it is not true that a point of
law is always open to a party.
H
916 SUPREME COURT REPORTS [2018] 3 S.C.R.
A (2) In India, at all events, a party who takes a plea of res judicata
has to show that the matter directly and substantially in issue has
been directly and substantially in issue in the former suit and also
that it has been heard and finally 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
B
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
C 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 cannot be dealt with as
D 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.
E
(4) In any case in which it is found that the matter directly and
substantially in issue has been directly and substantially in issue in
the former suit and has been heard and finally decided by such
Court, the principle of res judicata is not to be ignored merely on
the ground that the reasoning, whether in law or otherwise of the
F previous decision can be attacked on a particular point. On the
other hand it is plain from the terms of Section 11 of the Code that
what is made conclusive between the parties is the decision of
the Court and that the reasoning of the Court is not necessarily
the same thing as its decision. The object of the doctrine of res
G judicata is not to fasten upon parties special principles of law as
applicable to them inter se, but to ascertain their rights and the
facts upon which these rights directly and substantially depend;
and to prevent this ascertainment from becoming nugatory by
precluding the parties from reopening or recontesting that which
has been finally decided.”
H
CANARA BANK v. N. G. SUBBARAYA SETTY 917
[R. F. NARIMAN, J.]
33. Given the conspectus of authorities that have been referred to A
by us hereinabove, the law on the subject may be stated as follows:
(1) The general rule is that all issues that arise directly and
substantially in a former suit or proceeding between the same parties
are res judicata in a subsequent suit or proceeding between the same
parties. These would include issues of fact, mixed questions of fact and B
law, and issues of law.
(2) To this general proposition of law, there are certain exceptions
when it comes to issues of law:
(i) Where an issue of law decided between the same parties in a
former suit or proceeding relates to the jurisdiction of the Court, an C
erroneous decision in the former suit or proceeding is not res judicata in
a subsequent suit or proceeding between the same parties, even where
the issue raised in the second suit or proceeding is directly and substantially
the same as that raised in the former suit or proceeding. This follows
from a reading of Section 11 of the Code of Civil Procedure itself, for D
the Court which decides the suit has to be a Court competent to try such
suit. When read with Explanation (I) to Section 11, it is obvious that both
the former as well as the subsequent suit need to be decided in Courts
competent to try such suits, for the “former suit” can be a suit instituted
after the first suit, but which has been decided prior to the suit which
was instituted earlier. An erroneous decision as to the jurisdiction of a E
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 F
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 G
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 created by the Rent Act that must be given H
918 SUPREME COURT REPORTS [2018] 3 S.C.R.
A effect to as a matter of public policy. (See, Natraj Studios (P) Ltd. v.
Navrang Studios & Anr., (1981) 2 SCR 466 at 482). An erroneous
decision clothing the Civil Court with jurisdiction to embark upon a suit
filed by a landlord against a tenant, in respect of rights claimed under the
Bombay Rent Act, would, therefore, not operate as res judicata in a
subsequent suit filed before the Small Causes Court between the same
B
parties in respect of the same matter directly and substantially in issue in
the former suit.
(ii) An issue of law which arises between the same parties in a
subsequent suit or proceeding is not res judicata if, by an erroneous
decision given on a statutory prohibition in the former suit or proceeding,
C the statutory prohibition is not given effect to. This is despite the fact
that the matter in issue between the parties may be the same as that
directly and substantially in issue in the previous suit or proceeding. This
is for the reason that in such cases, the rights of the parties are not the
only matter for consideration (as is the case of an erroneous interpretation
D of a statute inter parties), as the public policy contained in the statutory
prohibition cannot be set at naught. This is for the same reason as that
contained in matters which pertain to issues of law that raise jurisdictional
questions. We have seen how, in Natraj Studios (supra), it is the public
policy of the statutory prohibition contained in Section 28 of the Bombay
Rent Act that has to be given effect to. Likewise, the public policy
E contained in other statutory prohibitions, which need not necessarily go
to jurisdiction of a Court, must equally be given effect to, as otherwise
special principles of law are fastened upon parties when special
considerations relating to public policy mandate that this cannot be done.
(iii) Another exception to this general rule follows from the matter
F in issue being an issue of law different from that in the previous suit or
proceeding. This can happen when the issue of law in the second suit or
proceeding is based on different facts from the matter directly and
substantially in issue in the first suit or proceeding. Equally, where the
law is altered by a competent authority since the earlier decision, the
G matter in issue in the subsequent suit or proceeding is not the same as in
the 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
H Act. The relevant provisions are Section 45 of the Trade Marks Act
CANARA BANK v. N. G. SUBBARAYA SETTY 919
[R. F. NARIMAN, J.]
and Sections 6 and 8 of the Banking Regulation Act read with Section A
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 by assignment or transmission B
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 C
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 or transmission until the rights of the parties have been
determined by a competent court. D
(2) Except for the purpose of an application before the Registrar
under sub-section (1) or an appeal from an order thereon, or an
application under section 57 or an appeal from an order thereon, a
document or instrument in respect of which no entry has been
made in the register in accordance with sub-section (1), shall not E
be admitted in evidence by the Registrar or the Appellate Board
or any court in proof of title to the trade mark by assignment or
transmission unless the Registrar or the Appellate Board or the
Court, as the case may be, otherwise directs.
xxx xxx xxx F
BANKING REGULATION ACT, 1949
6. Forms of business in which banking companies may
engage
(1) In addition to the business of banking, a banking company
may engage in any one or more of the following forms of business, G
namely:
(a) the borrowing, raising, or taking up of money; the lending or
advancing of money either upon or without security; the drawing,
making, accepting, discounting, buying, selling, collecting and dealing
H
920 SUPREME COURT REPORTS [2018] 3 S.C.R.
A in bills of exchange, hundies, promissory notes, coupons, drafts,
bills of lading, railway receipts, warrants, debentures, certificates,
scrips and other instruments and securities whether transferable
or negotiable or not; the granting and issuing of letters of credit,
traveller’s cheques and circular notes; the buying, selling and
dealing in bullion and specie; the buying and selling of foreign
B
exchange including foreign bank notes; the acquiring, holding,
issuing on commission, underwriting and dealing in stock, funds,
shares, debentures, debenture stock, bonds, obligations, securities
and investments of all kinds; the purchasing and selling of bonds,
scrips or other forms of securities on behalf of constituents or
C others, the negotiating of loans and advances; the receiving of all
kinds of bonds, scrips or valuables on deposit or for safe custody
or otherwise; the providing of safe deposit vaults; the collecting
and transmitting of money and securities;
(b) acting as agents for any Government or local authority or any
D other person or persons; the carrying on of agency business of
any description including the clearing and forwarding of goods,
giving of receipts and discharges and otherwise acting as an
attorney on behalf of customers, but excluding the business of a
Managing Agent or Secretary and Treasurer of a company;
E (c) contracting for public and private loans and negotiating 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
F 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 of guarantee and
indemnity business;
(f) Managing, selling and realising any property which may come
G into the possession of the company in satisfaction or part
satisfaction of any of its claims;
(g) acquiring and holding and generally dealing with 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
H which may be connected with any such security;
CANARA BANK v. N. G. SUBBARAYA SETTY 921
[R. F. NARIMAN, J.]
(h) undertaking and executing trusts; A
(i) undertaking the administration of estates as executor, trustee
or otherwise;
(j) establishing and supporting or aiding in the establishment and
support of associations, institutions, funds, trusts and conveniences
calculated to benefit employees or ex-employees of the company B
or the dependents or connections of such persons; granting
pensions and allowances and making payments towards insurance;
subscribing to or guaranteeing moneys for charitable or benevolent
objects or for any exhibition or for any public, general or useful
object; C
(k) the acquisition, construction, maintenance and alteration of
any building or works necessary or convenient for the purposes
of the company;
(l) selling, improving, managing, developing, exchanging, leasing,
mortgaging, disposing of or turning into account or otherwise D
dealing with all or any part of the property and rights of the
company;
(m) acquiring and undertaking the whole or any part of the business
of any person or company, when such business is of a nature
enumerated or described in this sub-section; E
(n) doing all such other things as are incidental or conducive to
the promotion or advancement of the business of the company;
(o) any other form of business which the Central Government
may, by notification in the Official Gazette, specify as a form of
F
business in which it is lawful for a banking company to engage.
(2) No banking company shall engage in any form of business
other than those referred to in sub-section (1).
xxx xxx xxx
8. Prohibition of trading G
Notwithstanding anything contained in section 6 or in any contract,
no banking company shall directly or indirectly deal in the buying
or selling or bartering of goods, except in connection with the
H
922 SUPREME COURT REPORTS [2018] 3 S.C.R.
A realisation of security given to or held by it, or engage in any
trade, or buy, sell or barter goods for others otherwise than in
connection with bills of exchange received for collection or
negotiation or with such of its business as is referred to in clause
(i) of sub-section (1) of section 6:
B PROVIDED that this section shall not apply to any such business
as is specified in pursuance of clause (o) of sub-section (1) of
section 6.
Explanation- For the purposes of this section, “goods” means every
kind of movable property, other than actionable claims, stocks,
C shares, money, bullion and specie, and all instruments referred to
in clause (a) of sub-section (1) of section 6.
xxx xxx xxx
46. Penalties
D (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 or of any order,
rule or direction made or condition imposed there under, or
E (ii) carrying out the terms of, or the obligations under, 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,
F 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
G 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 by virtue of the
assignment deed dated 8.10.2003 obtained by them from N.G.
H
CANARA BANK v. N. G. SUBBARAYA SETTY 923
[R. F. NARIMAN, J.]
Subbaraya Setty and filed an application to the Trademark Registry A
as per Ex.D2, seeking for registration of the assignment of the
trademark obtained by them from N. Subbaraya Setty, the
registered owner of the trademark, and the bank has also paid
Rs.5,000-00 towards the registration fee. But the Trademark
Registry returned the said application contending that, deficit
B
registration fee is payable by the assignee and the assignor/
registered owner of the trademark has to file an affidavit confirming
the assignment of the trademark in favour of the bank.
Subsequently, it appears no further steps have been taken by the
bank to comply with the objections raised by the Trademark
Registry, and hence the said assignment of the trademark in favour C
of the bank, could not be registered with the Trademark Registry.
xxx xxx xxx
56. So far as issue no.1 and 2 raised in O.S. No.7018/2004 is
concerned, since the plaintiff bank, has miserably failed to establish
the allegations of misrepresentation, fraud and undue influence D
alleged to have been played, by N.G. Subbaraya Setty on the bank,
the plaintiff bank cannot escape from the legal consequences of
assignment deed obtained by them dated 8.10.2003 and it cannot
be held that the assignment deed obtained, by the bank from N.G.
Subbaraya Setty is unenforceable. Therefore, I answer both the E
issues 1 and 2 raised in O.S. 7018/2004 in the negative.”
(Issue No.2 in O.S. No.7018 of 2004 read as follows: Whether
plaintiff proves that the deed of assignment of trademark, entered into
between plaintiff and 1st defendant is not enforceable in law?)
36. Equally, insofar as the trial Court judgment in the second suit F
of 2008 is concerned, the said plea was expressly raised and turned
down in the following manner:
“…The defendant No.1 himself has produced the original
Assignment Deed and in this case defendant No.1 himself has
taken up the contention that said Assignment Deed is not registered G
as per Trade Mark Act and as such, the said document cannot be
considered. There are certain procedures that within 5 days the
Assignor file an affidavit to the Trade Mark Authority in respect
of change of user of the Trade Mark and defendant No.1 himself
has moved application by paying Rs.5,000/- D.D. for registering
H
924 SUPREME COURT REPORTS [2018] 3 S.C.R.
A the document. Inspite 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
B
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
C 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
D 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 proceedings, the issue in which the matter directly and
E substantially has been heard and finally decided in a former suit
between the same parties, litigating under the same title amounts
to res judicata. Defendant No.1-Bank is precluded from raising
the same objection in the present proceedings which is finally
decided holding the assignment deed as legal and binding on the
defendant No.1-Bank…”
F
38. We are of the opinion that both the trial Court and the first
appellate Court were entirely wrong in treating the statutory prohibition
contained in Section 45(2) of the Trade Marks Act as res judicata. It is
obvious that neither Court has bothered to advert to Section 45 and/or
interpret the same. The second proceeding contained in O.S. No.495 of
G 2008 prayed for payment of a sum of Rs.17,89,915/- along with interest
thereon for the period 1.4.2004 to 30.4.2007. Paragraph 8 of the plaint in
the said suit reads as under:
“8. The plaintiff has already filed a suit in O.S. No.2832/2004
against the 1st defendant for the recovery of the amount payable
H
CANARA BANK v. N. G. SUBBARAYA SETTY 925
[R. F. NARIMAN, J.]
by it under the said Assignment Deed till the end of 31.3.2004. A
The cause of action for the present suit claim had not arisen by
then as the amount had not become payable by then i.e. for the
period 1.4.2004 to 30.4.2007.”
39. Clearly, therefore, the subsequent suit of 2008 raises an issue
which is different from that contained in the earlier suit filed by the same B
party in 2004. Also, the earlier decision in the judgment dated 27.4.2013
has declared valid a transaction which is prohibited by law. A cursory
reading of Section 45(2) of the Trade Marks Act makes it clear that the
assignment deed, if unregistered, cannot be admitted in evidence by any
Court in proof of title to the trademark by the assignment, unless the
Court itself directs otherwise. It is clear, therefore, that any reliance C
upon the assignment deed dated 8.10.2003 by the earlier judgment cannot
be sanctified by the plea of res judicata, when reliance upon the
assignment deed is prohibited by law.
40. Equally, a reference to Sections 6, 8 and 46(4) of the Banking
Regulation Act would also make it clear that a bank cannot use the D
trademark “Eenadu” to sell agarbathies. This would be directly interdicted
by Section 8, which clearly provides that notwithstanding anything
contained in Section 6 or in any contract, no banking company shall
directly or indirectly deal in the selling of goods, except in connection
with the realisation of security given to or held by it. Also, granting E
permission to third parties to use the trademark “Eenadu” and earn royalty
upon the same would clearly be outside Section 6(1) and would be
interdicted by Section 6(2) which states that no bank shall engage in any
form of business other than those referred to in sub-section (1).
41. Shri Shanthakumar Mahale, however, exhorted us to read F
Sections 6(1)(f) and (g) as permitting the sale of goods under the
trademark and/or earning royalty from a sub-assignment thereto. We
are of the view that the trademark cannot be said to be property which
has come into the possession of the bank in satisfaction or part satisfaction
of any of the claims of the bank. We are further of the view that the
trademarks are not part of any security for loans or advances that have G
been made to the first respondent, or connected with the same. It is
thus clear that the assignment deed dated 8.10.2003 is clearly hit by
Section 6(2) and Section 8 read with the penalty provision contained in
Section 46(4) of the Banking Regulation Act.
H
926 SUPREME COURT REPORTS [2018] 3 S.C.R.
A 42. The appeal is allowed and the judgment of the trial Court and
the first appellate Court are set aside. Consequently, O.S. No.495 of
2008 filed by respondent No.1 will stand dismissed.
Nidhi Jain Appeal allowed.
B
C
D
E
F
G
H
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