Intellectual Property Rights

Idea - Expression Dichotomy

The idea-expression dichotomy was formulated to ensure that the manifestation of an idea (i.e. an
expression) is protected rather than the idea itself. The doctrine has been widely used in the
United States and is not really alien to Indian jurisprudence. Courts have repeatedly opined that
ideas per se are not copyrightable; only the expression of an idea is copyrightable. An idea is the
formulation of thought on a particular subject whereas an expression constitutes the
implementation of the said idea. While many persons may individually arrive at the same idea,
they can claim copyright only in the form of an expression to this idea. Such expression must be a
specific, particular arrangement of words, designs or other forms. Thus, such a doctrine allows for
several expressions to be available for the same idea.

Baker v Selden

Selden had written a book which described an improved system of book keeping by a particular
arrangement of columns and headings which made the ledger book easier to read. Baker
accomplished a similar result, but using a different means of arrangement of columns and
headings. The court held that while a copyright may exist over the publishing and sale of a book,
it does not extend to the ideas and “art” illustrated in the book. The U.S. Supreme Court created a
clear description between an idea and its expression, the primary reason being that otherwise, it
would result in providing an undue scope of monopoly to the copyright holder and would amount
to anti-competitive practice.

Stowe v Thomas

Plaintiff author brought an action for copyright infringement against defendant translator for
alleged misappropriation of her published book. The court dismissed, holding that by the
publication of her book, the creations of the genius and imagination of the author had become
public property, and her conceptions and inventions could be used and abused by imitators,
playwrights, and translators. The author only had a remaining right in the copyright of her book;
the exclusive right to print, reprint, and vend it. On appeal, the court held that the only infringers to
the author's rights, or pirates of her property, were those who were guilty of printing, publishing,
importing, or vending without her license, copies of her book. A translation could not be correctly
called a copy of her book.

White-Smith Music Publishing Co. v Apollo Co.

The actions were brought against a salesman to restrain infringement of the copyrights of two
certain musical compositions, published in the form of sheet music, entitled, respectively, "Little
Cotton Dolly" and "Kentucky Babe.” The salesman engaged in the sale of player pianos and
perforated rolls of music used in connection therewith and contended that it only copied the order
of the notes in the compositions. Use of music rolls in player pianos was a familiar practice of the
era. The trial court dismissed the case. On appeal, the appeals court also held for the salesman.
Appellant sought review, contending the copyright laws protected intellectual conception of the
composers including their means of expression in arranging and developing the order of the
notes. The U.S. Supreme Court considered the construction of copyright statutes to determine if
Congress intended to extend copyright protection to composers of music rolls. The Court
concluded the perforated music rolls were parts of a machine which, when properly operated,
produced musical tones in harmonious combination, but were not copies within the meaning of
the copyright act. Given that appellant did not complain against public performance of
copyrighted music, the Court affirmed the appeals court's decrees.

Litchfield v Spielberg

Litchfield wrote and copyrighted Lokey from Maldemar. Subsequently the defendants produced
E.T. Litchfield sued for copyright infringement, unfair competition, and various state claims,
alleging that E.T. was copied from her play. The district court granted defendants' motion for
summary judgment on the copyright claim and dismissed the remaining claims. On appeal, the
main question is whether summary judgment was proper on the issue of substantial similarity. The
Court pointed out that to prove copyright infringement, the plaintiff must show (1) ownership of
the copyright, (2) access to the copyrighted work, and (3) substantial similarity between the
copyrighted work and the defendant's work. To prove infringement, a plaintiff must show that
the works are substantially similar in both ideas and expression. Similarity of ideas may be shown
by an extrinsic test which focuses on alleged similarities in the objective details of the works. The
extrinsic test requires a comparison of plot, theme, dialogue, mood, setting, pace and sequence.
Similarity of expression depends on a subjective, intrinsic test. This test focuses on the response
of the "ordinary reasonable person" to the works. Since neither of the test were satisfied, the
Court held that there was no copyright infringement.

Universal City Studios, Inc. v Film Ventures International, Inc.

Universal produced the motion picture “Jaws” based on the book “Jaws” written by Benchley
which is a fictional story about a great white shark that terrorises the inhabitants of a coastal town
on the Atlantic seaboard. Defendants produced a motion picture about a great white shark that
terrorises the inhabitants of a coastal town on the Atlantic seaboard. UTI and Horizon promoted
that motion picture in the United States, and it has been distributed in some foreign countries,
using the title “The Last Jaws”. That motion picture has been distributed in the United States
using the title “Great White” and will be referred to hereinafter as “Great White”. Defendants had
no permission or consent from Universal or Benchley to produce or distribute “Great White”.

The general idea of the motion picture “Jaws” and “Great White” is the same, i.e., the motion
picture depiction of a terror fish attacking a coastal town on the Atlantic seaboard. Defendants
have stipulated that the general idea of both “Jaws” and “Great White” is the same, and, thus, the
first prong of the bifurcated substantial similarity test. The expression of the general idea in “Great
White” and the motion picture “Jaws” is substantially similar under the intrinsic “ordinary
observer” test. For example, and without limitation, the basic story points, the major characters,
the sequence of incident, and the development and interplay of the major characters and story
points of “Great White” are substantially similar to these elements in “Jaws”.

Substantial similarity could be found in the basic story points, all the major characters and the
development and interplay of the major characters and story points. Therefore, injunction was
granted to the distribution of “Great White”.

Barbara Taylor Bradford v Sahara Media Entertainment

This suit was filed by the author of a book named “A Woman of Substance” alleging that the
copyright in that book was infringed by the respondents who produced a serial called “Karishma -
The Miracle of Destiny”. The only material of the plaintiffs is a sneaked out interview of one
journalist. The interview mentions that the serial has taken the rags to riches theme of the book. It
mentions some four other characters common to the serial and the book. The Court held that the
Copyright Law does not protect basic plots and stock characters. If it granted such protection,
four or five writers writing 15 or 20 novels with stock characters and stock plots could stop all
writers of pop literature from writing anything thenceforth.

Herbert Rosenthal Jewellery Corp. v Kalpakian

Plaintiff and defendants are engaged in the design, manufacture, and sale of fine jewelry. Plaintiff
charged defendants with infringing plaintiff's copyright registration of a pin in the shape of a bee
formed of gold encrusted with jewels. Plaintiff contends that its copyright registration of a jeweled
bee entitles it to protection from the manufacture and sale by others of any object that to the
ordinary observer is substantially similar in appearance. In deciding for the case, the court noted
the difference between a patent and a copyright; according to the Court, a copyright conferred no
right to the conception reflected in the general subject matter and just protected the expression of
the idea, not the idea itself. The Court determined that a copyright must not be treated like a
patent or it would confer rights over private activity without satisfying the procedural and
substantive prerequisites to the grant of such privilege. The Court reasoned that defendants were
entitled to use the idea of a jeweled bee but were not able to copy plaintiff's expression of that
bee. However, the Court found that, because the idea of the bee and its jeweled expression were
inseparable, copying the expression was not barred; thus, the Court held that the defendants did
not infringe plaintiff’s copyright nor violate the consent decree entered into by the parties.

Mattel, Inc. v Jayant Agarwalla

The first plaintiff is a company incorporated in Delaware, United States. One of the well-known
products of the plaintiffs is the board game marketed and popularized by the name ‘SCRABBLE’.
This word-based game challenges the players to form words on a grid; points are scored by
forming such words. The plaintiffs allege being appalled to find out that the defendants had
launched an online version of their board game under the mark SCRABULOUS. The plaintiffs
claim that defendants have infringed their copyright in the game board and the rules. By the use
of red, pink, blue and light blue tiles, use of identical patterns of arrangement of coloured tiles and
the use of a star pattern on the central square, the plaintiffs claim that the defendants have
infringed their copyright in the game board which is an artistic work. Such infringing use of the
plaintiffs' board game it is alleged cause grave and irreparable loss, since they were planning to
launch their online version of the board game. Therefore, the plaintiffs sought an interim injunction
restraining the defendants. The Court observed that In the realm of copyright law the doctrine of
merger postulates that were the idea and expression are inextricably connected, it would not
possible to distinguish between two. In other words, the expression should be such that it is the
idea, and vice-versa, resulting in an inseparable “merger” of the two. Applying this doctrine courts
have refused to protect (through copyright) the expression of an idea, which can be expressed
only in a very limited manner, because doing so would confer monopoly on the ides itself. The
Court held that the collocation of lines on the game board are concerned; the diagonal colour
scheme with values for words, and the combination thereof, the element of modicum of creativity
has not been shown, to measure up to the test of “originality”. Even otherwise, the creative
expression, if any is minimalistic not to warrant copyright protection. Furthermore, the application
of the doctrine of merger would mean that the colour scheme on such a board can be expressed
only in a limited number of ways; if the plaintiffs' arrangement were to be avoided, it is not known
whether the idea of such a word game could be played at all. This doctrine of merger is applicable
with respect to games as (according to those decisions) “they consist of abstract rules and play
ideas.” By way of illustration, the arrangement of colours, values on the board, the collocation of
lines, value for individual alphabetical tiles, etc have no intrinsic meaning, but for the rules. If these
rules-which form the only method of expressing the underlying idea are to be subject to copyright,
the idea in the game would be given monopoly: a result not intended by the lawmakers, who only
wanted expression of ideas to be protected. Thus, the court concluded, prima facie, that the
copyright claim of the plaintiff cannot be granted.

Cain v Universal Pictures Co.

The plaintiff, James M. Cain, is a wellknown writer who has written several novels. He wrote a
novel called ‘Serenade‘, which he copyrighted. The plaintiff sold to the film corporation, for the
sum of $17,500, a story entitled ‘Modern Cinderella‘. The motion picture was completed and
released under the title ‘When Tomorrow Comes‘. Credit for the screen play was given to Dwight
Taylor and the further legend ‘Based upon an original story by James M. Cain.’ The plaintiff, in his
complaint, charges that the motion picture infringes ‘Serenade‘. More particularly, he claims that
the church sequence in the motion picture is copied from the church sequence in the book. The
Court observed that the choice of the church as a refuge in storm lends itself to the assertion of
copyrightable originality. Houses of worship have been asylums since their very beginning. The
other small details, on which stress is laid, such as the playing of the piano, the prayer, the hunger
motive, as it called, are inherent in the situation itself. They are what the French call ‘scenes a
faire‘. Once having placed two persons in a church during a big storm, it was inevitable that
incidents like these and others which are, necessarily, associated with such a situation should
force themselves upon the writer in developing the theme. Courts have held repeatedly that such
similarities and incidental details necessary to the environment or setting of an action are not the
material of which copyrightable originality consists. Due to the amount of dissimilarities, the Court
held that there was no copyright infringement.

Originality Test

In V. Errabhadrarao v B.N. Sarma, the Andhra Pradesh High Court observed that by an original
composition it is not meant to convey that it is confined to a field which has never been traversed
hitherto by any other person or persons, either in respect of ideas of material comprised therein.
Indeed such contributions are few, as most works must depend upon the contributions of others,
using them as steps in aid of reaching a particular object which may be original in its design and
conception. The originality which is required relates to the expression of thought, and that the
work should not be copied from another work, but should be original from the author. Much
depends on the skill, labour, knowledge and the capacity to digest and utilise the raw materials
contributed by others in imparting to the product the quality and character which those materials
did not possess and which differentiates the product from the materials used.

In University of London Press, Ltd. v University Tutorial Press, Ltd., examiners were appointed
for a matriculation examination of the University of London, a condition of appointment being that
any copyright in the examination papers should belong to the University. The University agreed
with the plaintiff company to assign the copyright, and by deed purported to assign it, to the
plaintiff company. After the examination the defendant company issued a publication containing a
number of the examination papers (including three which had been set by two examiners who
were co-plaintiffs), with criticisms on the papers and answers to questions. The question for the
Court was whether these examination papers subject of copyright. The Copyright Act of 1911
provides for copyright in “every original literary dramatic musical and artistic work”. The Court
observed that the originality which is required relates to the expression of the thought. But the Act
does not require that the expression must be in an original or novel form, but that the work must
not be copied from another work — that it should originate from the author. In the present case it
was not suggested that any of the papers were copied. The papers which they examiners
prepared originated from themselves, and were, within the meaning of the Act, original. It was,
however, drew upon the stock of knowledge common to mathematicians, and that the time spent
in producing the questions was small. These cannot be tests for determining whether copyright
exists. If an author, for purposes of copyright, must not draw on the stock of knowledge which is
common to himself and others who are students of the same branch of learning, only those
historians who discovered fresh historical facts could acquire copyright for their works. If time
expended is to be the test, the rapidity of an author like Lord Byron in producing a short poem
might be an impediment in the way of acquiring copyright, and, the completer his mastery of his
subject, the smaller would be the prospect of the author's success in maintaining his claim to
copyright.

In Burlington Home Shopping Pvt Ltd v Rajnish Chibber, the plaintiff is a mail order service
company. According to the plaintiff it publishes mail order catalogues dealing with several
consumer items which are posted to the select list of the plaintiff's clients. A major investment
notably in the business of mail order shopping is the compilation of a list of clientele/customers
database which is of essential importance and consequence. The plaintiff has developed a list of
clientele/customers database over a period of three years prior to the institution of the suit by
investing considerable amount of money and time. The said database is an expensive and gradual
process of compilation. The defendant was at one time an employee of the plaintiff. On severing
relationship with the plaintiff the defendant has established himself as a competitor by entering
into mail order shopping business. He has managed to get a copy of the database, an otherwise
guarded secret of the plaintiff and has started making use of the same for the purpose of
establishing relationship with the plaintiff's customers. It was submitted that the said database is
an original ‘literary work’ wherein the plaintiff has the copyright and the defendant has infringed
the same by his illegal act. The Court held that a compilation of addresses developed by any one
by devoting time, money labour and skill though the sources may be commonly situated
amounts to a ‘literary work’ wherein the author has a copyright. The database available with the
defendant was substantially a copy of the database available with the plaintiff and compiled by
him. The striking similarities noticed in the two databases could not have existed but for the fact
of the defendant having made use of plaintiff's database. Therefore, a strong prima facie case of
infringement by the defendant of the plaintiff's copyright had been made out.

In Eastern Book Company v D.B. Modak, the appellant was involved in the publication of law
report “Supreme Court Cases”. The appellant published all reportable judgments of the Supreme
Court of India in SCC. Short judgments, orders, practice directions and records of proceedings
were also available in SCC. The appellants procure judgments, orders, etc. from the Court and
make copy-editing inputs which is done by a team of editorial staff so as to make the judgments
user-friendly by adding cross-references, standardisation or formatting of the text, paragraph
numbering, verification and by putting other inputs. Further, headnotes are also added which is a
brief discussion of facts and relevant extracts of the judgment. The appellants submit that these
additions require considerable amounts of skill, labour and expertise and for this a substantial
amount of capital expenditure on infrastructure is incurred by the appellant. Appellants contend
that this constitutes a “original literary work” which is provided copyright protection under Section
13 of the Copyright Act 1957. The respondents produced a CD which contains the appellant’s
work. The respondents had copied the appellant’s sequencing, selection and arrangement of
cases together with copy edited judgments as was published in SCC.

The question for the Court was regarding the standard of originality in the copy edited judgment
soft the Supreme Court which is a derivative work and the requirements in a derivative work to
treat it the original work of an author.

The Court observed that there are two classes of literary works:

A. Primary or prior works: literary works not based on existing subject-matter.

B. Secondary or derivative works: literary works based on existing subject-matter.

Copyrighted material is that what is created by the author by him own skill, labour and
investment of capital, maybe it is a derivative work which gives a flavour of creativity. The
Copyright work which comes into being should be original in the sense that by virtue of selection,
coordination or arrangement of pre-existing data contained in the work, a work somewhat
different in character is produced by the author. To claim copyright in a compilation, the author
must produce the material with exercise of his skill and judgment which may not be creativity in
the sense that it is novel or non-obvious, but at the same time it is not a product of merely labour
and capital.

The sweat of the brow approach to originality is too low a standard which shifts the balance of
copyright to protect the public’s interest in maximising the production and dissemination of
intellectual works. On the other hand, the creativity standard of originality is too high. A creative
standard implies that something must be novel or non-obvious - concepts more properly
associated with patent law than copyright law.

In the present case, Supreme Court judgments are available in the public domain and copy-edited
judgments would not satisfy the copyright merely by establishing amount of skill, labour and
capital put in the inputs of the copy-edited judgments and the original or innovative thoughts for
the creativity are completely excluded. To secure a copyright for the judgments delivered by the
court, it is necessary that the labour, skill and capital invested should be sufficient to
communicate or impart to the judgment some quality or character which the original judgment
does not possess and which differentiates the original judgment from the printed one. The work
must have some distinguishable features and labor to the raw text delivered by the Court. Trivial
variations or inputs would not satisfy the test of copyright. The Court partly allowed the appeals,
stating that the appellants had copyright.

History of Patent

Darcy v Allein

The plaintiff, Edward Darcy, a Groom of the Chamber in the court of Queen Elizabeth, received
from the Queen a license to import and sell all playing cards to be marketed in England. When the
defendant, Thomas Allin, a member of the Worshipful Company of Haberdashers, sought to make
and sell his own playing cards, Darcy sued, bringing an action on the case for damages. The
Queen's Bench court delivered judgment for the defendant, resolving that the Queen's grant of a
monopoly was invalid because such a monopoly prevents persons who may be skilled in a trade
from practicing their trade, and therefore promotes idleness. The Court also observed that grant
of a monopoly damages not only tradesmen in that field, but everyone who wants to use the
product, because the monopolist will raise the price, but will have no incentive to maintain the
quality of the goods sold.

In Liardet v Johnson, Lord Mansfield, the presiding judge, outlined in his instructions to the jury
that if Liardet’s specification was not sufficient to instruct others in the use of his invention (a
formulation for concrete or stucco), his patent would be void. 

Right to Reproduce

British Leyland Motor Corporation v Armstrong Patents Co Ltd

The plaintiffs were designers and manufacturers of motor cars and they also produced some of
the spare parts for their cars. In addition, they licensed other manufacturers to copy and sell spare
parts in consideration of a royalty payment. The defendants declined to obtain a licence from the
plaintiffs, but produced replacement exhaust pipes for the plaintiffs' cars by copying the shape
and dimensions of the original. The plaintiffs commenced an action, alleging that the defendants
had by indirect copying infringed the copyright in the plaintiffs' original drawings of the exhaust
system. The Court held that for the purposes of the Copyright Act 1956, the manufacture of a
purely functional object was capable of being a “reproduction” in breach of the copyright in the
mechanical drawing of the object if a nonexpert recognised the object as a copy of the drawing;
and that, accordingly, the manufacture of exhaust pipes, although achieved by indirect copying,
amounted to an infringement by the defendants of the plaintiffs' copyright in the drawings.
However, the Court held that car owners had an inherent right to repair their cars in the most
economical way possible and for that purpose to have access to a free market in spare parts and
that the plaintiffs were not entitled to derogate from or interfere with that right by asserting their
copyright even against a person manufacturing parts solely for repair.

Star India Pvt Ltd v Leo Burnett Pvt Ltd

The plaintiffs entered into an agreement dated 9th April, 2000 with Balaji Telefilms Pvt. Ltd. (Balaji)
in order to create, compose and produce 262 episodes of a television serial entitled “KYUN KI
SAAS BHI KABHI BAHU THI”. The plaintiffs are the exclusive owners of the copyright in this serial.
It was the case of the plaintiffs that the comparison of the plaintiffs serial with the commercial of
Tide Detergent produced by the defendants would show that there is substantial copying. An
average person viewing the defendants commercial would immediately notice the glaring identity
similarity between the plaintiffs serial and the defendants commercial and such a person would
get an impression that the defendants commercial has been authored by the plaintiffs or has been
produced under the permission or licensed by the plaintiffs. The plaintiffs contended that the
defendants by telecasting/broadcasting the commercial with the title “KYUN KI BHAU BHI KABHI
SAAS BENEGI” with identical characters viz., Tulsi, Savita and JD are deliberately and dishonestly
seeking to trade upon and misappropriate the reputation and goodwill of the said serial and its
characters. It was also contended that the defendants have misrepresented to the members of
the public at large that the defendants have been authorized to make use of the original artistic
literary and musical work and also the cinematographic film for merchandising the said product.
Therefore, the question for the Court was whether defendants' commercial is a copy of the
plaintiffs' TV serial. The Court held that the defendants made their own film independently. The
film of the defendants, therefore, is not a copy and, therefore would not amount to an
infringement of the plaintiffs' copyright in its film considering the language of section 14(d) of our
Copyright Act.

With respect to copy, the Court held that a copy of even a single image or frame is made it
amounts to violation of the plaintiffs' copyright in the film. Copying means and would include
making something which bears a substantial degree of resemblance to the original. Therefore
even if exact words, scenes of events are not reproduced, if the plaintiffs show a substantial
degree of resemblance or imitation of the original, copying would be established. What is material
is that skill, labour and judgment in the process of copying cannot confer copyright and a mere
copyist cannot have protection for his copy.

Zee Entertainment Enterprises v Gajendra Singh

The suit is filed for a perpetual injunction restraining the defendants from infringing the plaintiff's
copyright in the literary work and cinematograph film embodying the television game show “Titan
Antakshari” being broadcast on its television channel “Zee” by defendant broadcasting the
television game show “Antakshari - The Great Challenge”. The plaintiff has also sought an order
restraining the defendants from making and broadcasting the television game show “Antakshari -
The Great Challenge” and/or using the content and/or presentation and/or the word “Antakshari”
in relation to any television game show so as to pass off such show as being a television game
show associated with and/or authorized by and/or having any connection with the plaintiff's game
show “Titan Antakshari”. It was contended that the copyright in a cinematographic film is
infringed only by making a physical copy of that film and that there is no infringement of the
cinematographic film if a film is independently made. It was submitted that the plaintiff's claim for
infringement of the cinematographic film must fall as the plaintiff, as a producer, does not have a
right to prevent anyone else from making another film even if the same is identical, so long as it is
not a physical copy of the plaintiff's film. Admittedly, the third defendant's film is not a physical
copy of the plaintiff's cinematographic film. The Court relied on Star India judgment and held that
there is no infringement of the plaintiff's copyright in the films embodying the plaintiffs game
show.

Shree Venkatesh Films Pvt Ltd v Vipul Amrutlal Shah

A Hindi film titled as ‘Namastey London’ was released. It was a run away success. The Bengali
film titled as ‘Poran Jaye Joliya Rae’ appeared to be a copy of this Hindi film. The Court observed
that a cinematography film is a homogenous material. It is a collection or collage or ensemble of
various works like story, screenplay, dialogue, sound track, video images, lyrics etc. Each of these
works may also enjoy copyright protection. By operation of law or by contract or assignment the
producer of the film may be vested copyrights in the above works. For example, the producer
may employ a storywriter or a screenplay writer or a singer under a contract of employment. In
that case the employer, subject to contract, is the first owner of the copyright. Otherwise, the
author of the work may retain his individual copyright. Now, when all these works are put together
and a cinematography film is made, a new copyright over the film is vested in the maker of the
film or its producer. When the film as a whole is exhibited the individual owners of copyright in
works who have permitted the film to be made cannot claim copyright but if a part of the film is
segregated and the individual work is culled out and exhibited then the individual owner can
assert his copyright. Now, suppose the producer of the film without taking permission of the
owners of the copyrighted works exhibits the film, the film may not have any copyright at all as a
substantial part of the film in infringement of other work or works.

However, not each and every work is entitled to copyright protection. Copyright protection is
extended to original literary, dramatic, musical and artistic works; cinematograph films and sound
recording. In order to claim copyright there must be some originality in the work. The author of a
work may obtain raw materials for the work from any or many sources but will only be entitled to
copyright if these raw materials are converted, by use of his labour skill, capital and intelligence to
create another material or work which is something different from the raw materials and has an
element of novelty.

The next legal issue which has to be considered is the meaning to be ascribed to the word
“copy”. Does copy mean

(a) a carbon copy or an exact replica of the original? or

(b) a substantial replica of the original or a substantial replica of a part of the original or

(c) a substantial similarity of the copied work with the original work is in the both works viewed by
viewer of ordinary prudence.

Where there is an alleged substantial similarity in the film taken as a whole with another film, in the
opinion of the said viewer there is infringement of the copyright in the film. A part of a film, e.g.
story and screenplay may similarly enjoy copyright. A narrow meaning of the word “copy” is an
apposite and should never be given.

The Court opined that there is only one type of infringement where the physical film or any
electronic form of it is ‘carbon copied or replicated’. It covers a case where the whole film or a
part of it is stolen and exhibited and situations analogous thereto. Infringement has other
elements. In that context ‘copy’ has to be given a broad meaning.

The Court, therefore, held that a scene by scene comparison of the two films and we prima facie
hold that the Bengali film is substantially if not a verbatim copy of the Hindi film as a whole.

Right to issue copies

Parallel Import

Penguin Books Ltd v India Book Distributors

The appellants brought a suit for perpetual injunction against the respondents restraining them
from infringing appellants’ territorial copyrights/licence in 23 books, the subject matter of the suit.
Admittedly the respondents are importing, distributing and offering for sale in India 13 out of these
23 titles. The Court held that the expression “owner of copyright” includes an exclusive licensee.
(Sec. 54(a)). Exclusive licensee is defined in section 2(g) as a licensee having “any right comprised
in the copyright” in a work to the exclusion of all other persons including the owner of the
copyright. Licences may be limited in time, territory and scope. Assignment either wholly or
partially of the rights of the copyright owner is permissible under the Act. If any person, without
the licence of the copyright owner, imports into India for the purpose of selling or distributing for
purposes of trade the literary work the copyright is infringed. Any importation of infringing copies
is therefore an infringement unless it is for the importer's own use. American books may be
lawfully published in America. But when the copies of those publications are imported into this
country, an action for infringement would lie in this country against the importer in respect of
those copies. An action would also lie against any person who for instance sold or distributed
such copies here. Because the books have been imported and sold without the licence of the
owner of the copyright or his exclusive licensee. “Infringing copy” is defined in section 2(m). An
infringing copy means a copy “imported in contravention of provisions of the Act.” The central
provision in section 51 which says that copyright shall be deemed to be infringed where any
person without a licence granted by owner of the copyright “does anything, the exclusive right to
do which is by this Act conferred upon the owner of the copyright.” The owner of the copyright or
his licensee has the “exclusive right” of printing, or otherwise multiplying, publishing and vending
copies of the copyrighted literary production in India. India Distributors are infringing this right.
Therefore, India Distributors are dealers in “infringing copies”. They are handling unlicensed
copies. Importation of “infringing copies” is prohibited by the Act. Because if made in India these
titles would infringe the copyright of Penguins. Not only this. India Distributors are “publishing”
these titles.

Then came the 1994 amendment to S. 14

Eurokids International Pvt. Ltd. v India Book Distributors Egmont Books Ltd.

The suit has been filed by the plaintiff in it's capacity as an exclusive licensee of one Egmont
Books limited, United Kingdom. The exclusive license is for importing and distributing various
titles including “TINTIN” in the territories of India, Srilanka, Nepal, Bangladesh, Bhutan and
Maldives. It is the case of the plaintiff that second defendant is one of the largest children book
publishers in the United Kingdom and is also the UK publisher of the English Translations of
TinTin. First defendant is a distributor of books in India. Plaintiff submits that one Casterman
Editions had the exclusive publishing rights relating to Herge's TinTin and had the sole and
exclusive right to exploit the publishing rights. Defendants No. 2 entered into an agreement dated
July 23, 2001 with the said Casterman Editions whereby Casterman Editions granted to defendant
No. 2 the exclusive right to publish and distribute TinTin books in various territories including
India. It is the contention of the plaintiffs that once an exclusive license to import and distribute
various titles published by defendant No. 2 in the territories set out in the agreement is granted
then there cannot be any question of first defendant bringing in these titles within the territories
earmarked in the agreement. Certain titles which were covered by agreement but which are not
distributed or imported by the plaintiff, were available in the Indian market. These titles had been
illegally imported into India by defendant No. 1. These titles were acquired through Little Brown &
Co. of the United State of America (USA). Little Brown & Co. is the America Publisher of TinTin
titles. However, Little Brown & Co. has been granted rights by Casterman in respect of these titles
only for the territory of USA. The Court held that the books imported and distributed by Little
Brown & Co. in USA cannot be imported and disturbed in India by first defendant. Such an action
on their part contravenes agreement and defeats plaintiffs rights thereunder. Since Little Brown &
Co. itself has no authority to import or distribute the titles in question in India, then they could not
have created any rights in favour of first defendant.

John Wiley & Sons Inc. v Prabhat Chander Kumar Jain

The plaintiffs decided to expand their operations in India by introducing Low Price Editions of their
books so that the same international level books which are otherwise quite costly may be made
available to Indian and other Asian students in a cost effective manner at the rates befitting the
Asian markets. The plaintiffs contend that any attempt by anyone to sell, distribute or circulate the
books outside the territories prescribed by the owners of the copyright shall cause infringement of
the copyright. The said claim is averred in the plaint by stating that India is signatory to the
Universal Copyright Convention and the Berne Convention and the rights of a copyright holder
shall extend to the member countries by virtue of Section 40 of the Copyright Act. The grievance
of the plaintiffs begins with the rampant problem of the export of books which are reprint editions
meant for the Indian and neighbouring territories to the Western Countries which not only causes
copyright infringement but also leads to royalty losses of the plaintiffs who are the owners of the
respective copyrights. The defendant, a bookseller in Delhi trading under a website, was offering
online sale and delivery worldwide of the Low Price Editions of the plaintiffs' publications.

The plaintiffs allege that these acts of the defendants of diverting the Low Price Edition books
which are meant for sale in India and its neighbouring states to the USA, UK and other countries
for which the books are not meant amounts to infringement of the plaintiffs copyright in the said
books. It is submitted that the placing of the said books in circulation, that too in the countries for
which the books are not meant, without the permission of the plaintiffs, is a clear infringement of
the copyright of the plaintiffs. The Court held that the said acts of the defendants of purchase of
the books from the exclusive licensees/licensees are legitimate in nature and do not hinder or take
away anyone's rights including the rights of exclusive licensees/licensee. But once the said
defendant no. 3 offers for sale the books or publications (which are fettered by territorial
restrictions purchased from exclusive licensees) and puts them into circulation by selling or
offering for sale or by taking orders for sale to the territories beyond the ones for which
permission has been granted by the owners of the copyright, the said acts are prima facie
tantamount to putting into circulation or issuance of copies not being in circulation in other
territories where the right to do so is of the owner to exercise and violates the rights of the owner
of the copyright under Section 14 read with Section 51 of the Act, if not the rights of the exclusive
licensee. In other words, the said acts of selling the books from India or offering for sale from India
through website and thereafter accepting the money and couriering the books to an unauthorized
territory will violate the right of the owners of the copyright which are plaintiff no. 1, 3, 5 to issue
the copies to the public not already in circulation (not of exclusive licensees) and thus will, prima
facie, infringe their copyright.

The defendants' argument that the first sale doctrine will exhaust the rights of the plaintiffs
internationally is incongruous and the same will lead to absurd results in as much as the
defendants are the purchasers of the books with notice from the exclusive licensee and not from
the owner of the copyright. Accepting the contention of the defendants would again be nugatory
to the principle of the ownership and license. The owner has full right to enjoy the property and if
the property is purchased from the owner only then will the owner lose his rights. The same is
applicable in the present circumstances. The purchaser after purchasing from the exclusive
licensee cannot by claiming the principle of exhaustion or extinguishment of rights defeat the
rights of the owner.

The Chancellor, Masters & Scholars of the University of Oxford & Ors. v. Rameshwari
Photocopy Services & Ors.

The suit was instituted before the Delhi High Court in August 2012 by three of the foremost
publishers of scholarly, general and reference books in all disciplines of academia, namely, the
Oxford University Press, the Cambridge University Press and the Taylor & Francis Group
(“Plaintiff-Publishers”) for permanent injunction against infringement of copyright in their
publications by the University of Delhi (“Delhi University” or “Defendant No. 2”) and a photocopy
shop named Rameshwari Photocopy Service (“Defendant No. 1”) operating in the University
under a license from it. The Plaintiff-Publishers alleged that the Defendants had been
photocopying substantial excerpts from their publications that were part of the prescribed
syllabus and issuing/selling unauthorized compilations of them in the form of course packs or
anthologies, thereby infringing their copyright in those publications under Section 51 r/w Section
14 of the Copyright Act. the Defendants contested the suit by arguing, inter alia, that their actions
constituted fair use of the Plaintiff-Publishers’ works under sections 52(1)(i), 52(1)(a) and 52(1)(h) of
the Act and therefore did not amount to copyright infringement.

A single judge bench of Delhi HC gave interim injunction to the Plaintiff-Publishers restraining the
Defendant No. 1 from making/selling these course packs. ASEAK (Association of Students for
Equitable Access to Knowledge), an association of students of the Delhi University, approached
the High Court to be impleaded as a ‘necessary party’ to represent the large numbers of students
directly affected by the interim injunction and having a direct interest in the outcome of the suit. It
stated that the course packs are the only effective means to ensure access to knowledge and is
excepted from copyright infringement under Sections 52(1)(a) and 52(1)(i) of the Copyright Act.
ASEAK’s application was allowed and it was impleaded as Defendant No. 3.

Similarly, SPEAK (Society for Promotion of Equitable Access to Knowledge), a society of scholars
and academics from amongst varied disciplines in law and social sciences approached the High
Court seeking to be made a ‘necessary party’. SPEAK argued that the educational exception
contained in Section 52(1)(i) of the Copyright Act ought not to be viewed as a mere exception, but
a potent right in favour of students and universities. Pertinently, SPEAK pointed to some of the
critical institutional issues and resource constraints around higher education in India. It referred to
an empirical study where the authors had demonstrated that a number of legal and social science
texts were prohibitively expensive. The latest editions of these texts were not often available in
India. Rather the publishers were content with dumping old outdated editions (at lower prices) in
India. As for the latest editions, they had to be imported at considerable costs, often exceeding
those charged in the western markets, home to many of these profiteering publishers. SPEAK’s
application was also allowed and it was impleaded as Defendant No. 4.

On September 16, 2016, Justice Rajiv Sahai Endlaw dismissed the entire suit of the plaintiffs. He
concluded that the impugned actions of the Defendants do not amount to copyright infringement,
relying pertinently upon Section 52(1)(i) of the Act, which provides that any reproduction of a
copyrighted work by a teacher or pupil in the course of instruction does not constitute copyright
infringement. He stated that Section 52 is to be interpreted as a narrow exception but a full-
fledged defence in favour of educational institutions and students. Further, the term ‘teacher’ in
Section 52(1)(i) is not restricted to an individual teacher but extends to educational institutions as
a whole. Similarly, the word “ instruction” in section 52 (1) (i) is not limited to a lecture in the
classroom and thus the scope of this provision is not limited to reproduction of a work by a
teacher in the course of a lecture but also includes reproduction for the purpose of making and
issuing course packs. The imparting of instruction does not begin and end in the classroom or
tutorials only but extends beyond that and thus Section 52(1)(i) covers reproduction by an
educational institution during the entire academic session. Since the reproduction of pages from
the books by each of the students, whether by way of photocopying, copying by hand or clicking
photographs, for his/her private use does not amount to copyright infringement by virtue of
Section 52(1)(a), the photocopying of the same by the university for the benefit of the students
due to certain resource constraints cannot be said to be infringement when the result/effect of
both is the same.

On December 9, 2016, the Division Bench, comprising Justices Pradeep Nandrajog and Yogesh
Khanna, decided the appeal refusing to grant an interim injunction to the plaintiff-publishers and
emphatically ruling that making and distribution of course packs to students does not amount to
copyright infringement as long as the inclusion of the works photocopied (irrespective of the
quantity) was justified by the purpose of educational instruction. The court rejected the argument
of the publishers that unauthorized making and distribution of course packs has caused or is
likely to cause an adverse impact on the market of their books. It observed that a student is not a
potential customer of the multiple books used in the course packs and in the absence of course
packs he/she would refer to these books in the library. Interestingly, it further noted that instead,
the improved education could very well lead to an expansion of the market for these books.

 Banking Law

Rajat Solanki

Sajjan Bank Pvt Ltd v Reserve Bank of India

The Sajjan Bank (Private) Ltd originated from Sajjan and Co. Ltd., which was incorporated in
November, 1944 with the main object of carrying on money-lending business. In May 1946, the
company was converted into a banking company and in November of that year its name was
changed into Sajjan Bank (Private) Ltd. All its shares are held by its three directors who are said to
be closely related. The Banking Companies Act, 1949, referred to hereafter as the Act, came into
force on 6th March, 1949. S. 22 of the Act provided amongst other things that every banking
company in existence at the commencement of this Act should before the expiry of six months
from such commencement and, every other company before commencing banking business in
India, apply in writing to the Reserve Bank for a licence under the section to carry on banking
business. The section further provided that the Banking Companies in existence at the
commencement of the Act could continue to carry on their banking business till final orders were
passed on their application for licence.

On 14th September, 1949, the petitioner bank applied under S. 22 of the Act, to the respondent
for a licence to carry of banking business. The Officers of the Reserve Bank inspected the
petitioner-bank under S. 22 of the Act in July, 1952. A report of that inspection was prepared on
11th October, 1952. The inspection appears to have revealed the existence of certain defects in
the working of the bank. The Reserve Bank therefore decided to keep in abeyance the
consideration of the question of issuing a licence evidently with a view to watch the progress of
the bank in eradicating the defects pointed out by the inspection report. The defects noticed were
the subject matter of subsequent correspondence between the petitioner and the Reserve Bank.
A fresh inspection of the petitioner bank was carried out in September, 1956, under S. 35 of the
Act. That also revealed certain defects. The respondent was evidently not satisfied that the affairs
of the petitioner-bank were being conducted in the interests of the depositors. The question of the
grant of licence was taken up. The petitioner was directed to show cause against the refusal of
the licence. The bank was also furnished with a copy of the inspection report. After considering
the representation of the petitioner the respondent by its letter dated 18th March, 1957 declined
to grant the licence to the petioner to carry on Ranking business in the terms of the first proviso to
Sub-S. 2 of S. 22 of the Act. Aggrieved by that the petitioner has moved the Court for the issue of
a writ of certiorari to quash the order of the respondent refusing to grant a licence to carry on
business as a banking company.

The issues for the Court are (1) That S. 22 of the Banking Companies Act was unconstitutional in
so far as it proceeded to restrict the fundamental right of the petitioner to carry on its business,
namely, the banking business; (2) even if the provisions of S. 22 of the Act be held to be in
accordance with the Constitution, the action of the respondent was arbitrary; (3) in any event the
procedure adopted by the respondent was illegal and in that after an inspection under S. 35, it
could only proceed to act under S. 35(4) and not ref use the licence altogether.

About Reserve Bank of India

The Reserve Bank of India came into existence on 1st April, 1935. It is a central bank combining
in its functions the regulation of both the credit and the currency of the country. Prior to its
formation the responsibility, for the currency was vested in the Central Government. The banking
functions were performed by the Imperial Bank of India. This dichotomy between currency and
credit was found to be a weakness in the Indian monetary system by the Royal Commission on
Indian Currency and Finance in 1926. The Commission recommended the establishment of a
Central Bank by charter on certain lines which experience had proved to be sound. It is said that
the structure of the Bank was modelled very largely on the Bank of England. It is a non-political
statutory body, the general superintendence and management of the bank's affairs being vested
in the Central Board of Directors. For each of the four regional areas, Bombay, Calcutta, Madras
and New Delhi, there is a local Board functioning. The functions of the local Boards are to advise
the Central Board on such matters as may be referred to them or perform such duties as the
Central Board may validly delegate to them. The preamble to the Reserve Bank Act states that the
bank was constituted to regulate the issue of bank notes, to keep up reserves with a view to
secure monetary stability in India and generally to operate currency and credit system of the
country to its advantage. The main function, therefore, of the Reserve Bank is to regulate the
monetary system of the country so as to ensure the maintenance of economic stability and assist
in its growth. The bank has got the sole right to issue currency notes and it also acts as the
Banker to the Government. It also acts as a banker to the various Commercial Banks and other
financial institutions and it has got various rights and duties prescribed in Chapter II of the
Reserve Bank Act. For the performance of its duties in regard to the regulation of the credit of the
country, the Reserve Bank is invested with powers of control of the bank rate, open market
transactions etc. The Reserve Bank's responsibilities include the development of an adequate and
sound banking system not only for trade and commerce but also for the agricultural industry. The
Reserve Bank is, therefore, occupying a position of considerable importance in the economic
development of the country and its monetary system.

Definition of Banking Under

S. 5(b) of the Act, the term “banking” has been defined as “Accepting, for the purpose of lending
or investment, of deposits of money from the public, repayable on demand or otherwise, and with
drawable by cheque, draft, order or otherwise.”

This definition follows the accepted legal concept of the word “banking” In Hart on the Law of
Banking, a banker or a bank has been defined as “a person or company carrying on business of
receiving moneys and collecting drafts for customers subject to the obligation of honouring
cheques drawn upon them from time to time by the, customers to the extent of the amounts
available on their current accounts.”

The essence of a banking business is, therefore, receiving money on current account for deposit
from the public repayable on demand and with drawable by cheque, draft or otherwise.

Cheque and Money Lender

An ordinary money lender who does not accept moneys on terms enabling a depositor to draw
cheques upon him would not, therefore, be a bank or banker properly so called. The provisions of
the Act would, therefore, apply only to the limited class of cases where the bank or banker allows
the withrawal of money by the issue of cheques.

Licence and Permit

A licence is not necessarily a permit. A licence is intended to regulate a business, while a permit
would be one without which a business can never be started so that a permit may amount to a
prohibition of the business in regard to persons who are unable to obtain the same.

Excessive delegation of power to RBI

The banking law has been comprehensively laid down in the Indian Banking Companies Act,
1949. The question then is only to administer the law. A power to carry out its provisions would be
necessary having regard to the technical nature of the subject and necessity for investigation of
details in individual cases. Such a power is given to the Reserve Bank of India under S. 22. There
could therefore be no valid objections to the grant of the power.

Arbitrary actions of RBI

There is no complaint in this case that sufficient opportunity was not given. But what is contended
on behalf of the petitioner is that further opportunities should have been given to rectify the errors
rather than refuse the licence. It is also contended that the petitioner had complied with all the
directions which the respondent gave from time to time and that there was really no default on its
part. The first inspection by the respondent of the petitioner was in 1952 under the provisions of
S. 22. That revealed that the petitioner bank was not conducted on sound banking lines. It was
not till 1955 that the defects pointed out were sought to be explained away or remedied. The
respondent did not take any hasty action. The progress and working of the bank was closely
watched for more than 4 years and every opportunity was given to the bank to justify its claim as
a sound banking concern. Therefore, the actions of RBI is not arbitrary.

Shivabhai Zaverbhai Patel v Reserve Bank of India

The two petitioners are the promoters of a proposed Urban Co-operative Bank. They have
challenged the refusal of the banking licence by Reserve Bank of India. In the application, they
have mentioned that Chaklashi town (in which the proposed Urban Co-operative Bank was to be
established) was having population of about 30,000 and as per the census of 1971 the population
was 20900. A case was sought to be made out for the necessity and feasibility of the proposed
co-operative bank by citing various needs of different kinds of business, industries, etc. On that
application, the Reserve Bank asked the Assistant District Registrar of Co-operative Societies,
Nadiad, to conduct a preliminary survey of the area of operation of the proposed Bank with the
assistance of its promoters and their State/district central co-operative bank to identify the
potentials for the growth of the proposed bank i.e. potential for deposit mobilisation as well as
lending, particularly lending to small scale and cottage industries.

The Reserve Bank refused the licence after considering the preliminary survey report and the Joint
Survey Report and observed that the area of operation of the proposed bunk was limited to Nagar
Panchayat. Chaklashi and the inclusion of non-urban area was not permissible in the area of
operation of a Urban Co-operative Bank and it was further observed that Chaklashi was reported
to have the population of 9000 (urban population) and was served by two commercial banks and
therefore there was existing adequate banking facility. It was also observed that the Chaklashi and
the surrounding villages were predominantly agricultural in character and the preliminary and joint
studies showed that there was little scope for industrial advances and therefore a need for
organising a new primary (Urban) co-operative bank was not established and therefore, the
Reserve Bank refused the licence and refused the registering authority to proceed with the
registration of the co-operative bank.

The Court held that the decision of the Reserve Bank is based on relevant material and germane
considerations and the High Court cannot sit in appeal over the judgment of the Reserve Bank
unless it is shown that the decision of the Reserve bank is based on extraneous considerations or
is perverse. In the present case, the Reserve Bank has clearly shown that on relevant material and
on germane considerations it had come to a conclusion that the proposed Urban Bank in
Chaklashi would not be a viable unit and, therefore, the licence has been refused. It is the
discretion of the licensing authority to grant or refuse the licence and when such decision is based
on relevant material and germane considerations the High Court cannot sit in appeal over the
decision of the Reserve Bank. Thus the contention of the petitioners fail.

It was also submitted that the permission to open a new branch of another co-operative bank in
the same village Chaklashi in favour of Natpur Co-operative Bank Ltd. shows that the decision of
the licensing authority to refuse the licence to the petitioner for the same area is ex facie illegal
and perverse. the Reserve Bank had pointed out that the viability norms in case of a branch of an
existing urban co-operative bank are much lower than what have been laid down in the case of
new urban co-operative bank and the cost of operation of a new branch of a bank is
comparatively lower than the cost of setting up a new bank and moreover it was pointed out that
a branch may not be a self balancing centre as in the case of a new Urban bank office in the
sense that the deposits collected by the branch may not invariably be in a proportion to its
lending; whereas on the other hand a branch may be a more deposit mobilisation centre and may
have little scope for lending in the area: and the surplus funds raised at the branch may be
gainfully deployed through its head office and/or other branches, where there is a larger potential
for providing toans can draw on the pooled resources at the head office. All these opportunities
will not be available in case of a new urban bank which has to rely on the mobilisation of iis
resources and proper and gainful deployment thereof in the area and quite a big contingent of
staff is required for a new urban bank which being unitary office is required to control and operate
a number of head office functions such as calling of board meetings, issue of shares,
administration, scrutiny and sanction of toan application etc. Thus the economics and norms of
the working of a branch vis-a-vis that of a new urban bank are always much lower and always on
a different footing. Therefore granting of licence or permission for opening a new branch cannot
take the case of the petitioners any further.

Dolly Jabal

Meaning of Customer

In Mathews v Williams, Brown & Co, a person was thought to become a bank’s customer only
when banking services were habitually performed for him by that bank. Merely opening an
account in that customer’s name was insufficient to confer that status.

In Great Western Railway Company v London and County Banking Company, Ltd, in
determining that a person was a customer, the Court held that he had been in the habit for many
years of using the defendant bank in connection with transactions which undoubtedly constitute
part of a banker's business — namely, the collection of cheques; and he was well known to the
bank. This is sufficient to constitute him a customer.

In Ladbroke v Todd, the bank opened an account for a thief who, as first transaction handed to
the bank for collection a cheque which he has stolen. The court need to decide whether the thief
was a customer of the bank or not. It was contended that as the banker-relationship could only be
established over a period of time, so the thief is not considered as a customer. Finally the court
held that a person need not have a series of dealings with the bank before he get the status of a
customer. The costumer status will be given at the moment the bank received money or cheque
abd agreed to open an account in the bank.

In Commissioners of Taxation v English, Scottish & Australian Bank Ltd, their Lordships are of
opinion that the word “customer” signifies a relationship in which duration is not of the essence. A
person whose money has been accepted by a bank on the footing that they undertake to honour
cheques up to the amount standing to his credit is in the view of their Lordships a customer of the
bank in the sense of the statute, irrespective of whether his connection is of short or long
standing. The contract is not between an habitue and a newcomer, but between a person for
whom the bank performs a casual service such as, for example, cashing a cheque for a person
introduced by one of their customers and a person who has an account of his own at the bank.

The Madras Provincial Co-operative Bank, Ltd v The South Indian Match Factory Ltd (in
liquidation) by its Official Liquidator, the Official Receiver, Madras

An order for the compulsory winding up of the South Indian Match Factory, Limited, was passed
in proceedings on the Original Side of this Court and one M. Ramachandra Rao, who was then an
Advocate of this Court, was appointed the official liquidator. The main assets consisted of the
factory building and machinery. The Court directed the sale of these properties by private treaty
and the official liquidator entered into negotiations with one Shamsuddin Rowther. In the month of
January, 1940 an agreement was entered into between the official liquidator and Shamsuddin
Rowther for the sale of the properties, subject to the confirmation of the Court, for the sum of Rs.
5750 and Rs. 200 was paid as earnest money. This payment was made by a crossed cheque in
favour of the official liquidator. Under S. 244-A of the Indian Companies Act the official liquidator
was required to open an account with a bank and pay therein moneys received by him in the
course of the liquidation. R. 66 of the rules framed then by this Court under the Indian Companies
Act required that all bills and other securities payable to the company or to the official liquidator
should, unless the Judge otherwise directed, as soon as they came into the hands of the official
liquidator, be deposited by him in the bank for the purpose of being presented for acceptance and
payment or payment only as the case might be. The official liquidator here failed to open an
account with a bank. The cheque for Rs. 200 was drawn by the purchaser of the factory and plant
on the Madras Provincial Co-operative Bank Limited. It was a crossed cheque but the liquidator
induced the bank to cash the cheque. The Court sanctioned the sale to Shamsuddin Rowther and
on the 9th May a cheque for Rs. 5,550 was handed over to the Official Liquidator by the
purchaser in discharge of the balance of purchase consideration. This cheque was drawn on the
Madras Provincial Co-operative Bank, Ltd. by the Advocate who was acting for the purchaser. It
was an open cheque. The same day the official liquidator presented it to the Madras Provincial
Co-operative Bank, Limited, for payment, and payment was made. The official liquidator
misappropriated the proceeds, for which he was prosecuted, convicted and sentenced. An order
removing M. Ramachandra Rao from the office of the official liquidator was passed and the
Official Receiver of Madras was appointed to act in that capacity. The new official liquidator on
the 12th February, 1943 instituted a suit on the Original Side of this Court against the Madras
Provincial Co-operative Bank, Limited, for the recovery of Rs. 5,550. He alleged that the Bank had
acted negligently in paying the cheque, and that it was also liable for conversion.

The drawer of the cheque had an account with the bank and there was sufficient money in the
account to meet the cheque. It is the duty of a bank, in such circumstances to obey the order of
its customer. S. 31 of the Negotiable Instruments Act says that the drawee of a cheque having
sufficient funds of the drawer in his hands properly applicable to the payment of such cheque
must pay the cheque when duly required so to do, and, in default of such payment, must
compensate the drawer for any loss or damage caused by such default. If the payee had been a
private individual the action of the bank in paying the amount of the cheque could not have been
called in question. It is said that inasmuch as the cheque was drawn in favour of an official
liquidator the bank was put on inquiry and was negligent in paying over to him personally the
amount for which the cheque was drawn. Before paying M. Ramachandra Rao the Rs. 5550 the
bank called for his order of appointment which was, it is said, sufficient in itself to put it on inquiry.
It is also said that its officers must be deemed to know the law and that M. Ramachandra Rao
had no right to ask for payment to him personally.

Negotiable Instruments Act. S. 85 says that where a cheque payable to order purports to be
endorsed by or on behalf of the payee, the drawee is discharged by payment “in due course.” S.
10 defines what is payment “in due course” and it says it means payment in accordance with the
apparent tenor of the instrument in good faith and without negligence to any person in possession
thereof under circumstances which do not afford a reasonable ground for believing that he is not
entitled to receive payment of the amount therein mentioned. Therefore S. 85 only protected the
bank if it made payment in accordance with the tenor of the instrument, in good faith and without
negligence. The officers of the bank did not realise, as they should have done, that the bank was
doing something improper, but in the circumstances there was negligence. They knew or must be
deemed to have known that this money could only be collected by the payee through his own
bank and therefore it was most improper on his part to ask for payment over the drawee's
counter. In our judgment there was here a clear breach of a statutory duty placed upon the bank
and the learned Judge was right in holding the bank liable.

Bank of Maharashtra v Automotive Engineering Co.

The respondent firm opened a current account in the appellant bank’s new branch in Thane.
Another firm, ‘ITHM’ opened an account with the Union Bank of India’s Thane Branch and within
three days of opening that account, it presented a cheque of Rs. 6,500 to that branch of the
Union Bank for crediting the amount in its account. The cheque was sent to the clearing house by
the Union Bank and on its presentation for payment the appellant bank passed it and debited the
amount to the account of the respondent. At the time of debiting the amount the respondent had
a credit of Rs. 20,000 in its account with the appellant bank. The agent of the appellant bank
deposed that before passing the said cheque for payment, he had checked the serial number and
the date of the cheque and also compared the signature of the defendant appearing on the
cheque with the specimen signature of the defendant, that the endorsement on the cheque was
also verified by him and that from the visual appearance of the cheque, no infirmity was noted by
him and from the tenor of the cheque it appeared to be a genuine one and therefore, the cheque
was passed be him for payment. However, the cheque could not be examined under the
ultraviolet ray lamp as the Thane Branch of the plaintiff back had no ultraviolet ray lamp for
scrutinising the cheques although in other branches of the said bank, such lamp was made
available.

When the appellant bank forwarded statement of account to the respondent, the respondent
raised objection that the amount of the cheque was wrongly debited for Rs. 6,500. The agent of
the Bank thereafter went to Thane Branch of the Union Bank and on examining the cheque under
the ultraviolet ray lamp it transpired that the original cheque was issued in favour of someone else
and the amount under the said cheque was Rs. 95.98. The writing on the cheque was chemically
altered with regard to the date, the name of the pause and also the amount. The respondent
therefore made demand to the appellant to credit the same amount to his account. The appellant
thereupon filed a suit for recovery of the amount with interest.

The Court held that under Section 31 of the NI Act, the appellant bank had a liability to honour the
cheque and make payment if the cheque was otherwise in order. ‘Payment un due course’ under
Section 10 of the Act means payment in accordance with the apparent tenor of the instrument in
good faith and without negligence. In the facts of the case, there was no occasion to doubt about
the genuineness of the cheque from the apparent tenor of the instrument. Nor is there any
evidence showing that the payment of the said cheque had not been made in good faith.
Although no strait-jacket formula can be laid down to cover each case of negligence of a banker
and the question of negligence requires to be deiced in the facts and circumstances in each case,
but the appellant bank cannot be held to be guilty of negligence simply because an ultraviolet ray
Lampo was not kept in the branch and the cheque in question was not subjected under the
ultraviolet ray lamp. It has not been established in evidence that invariably the other branches of
the appellant bank or the other commercial banks had been following a practice of scrutinising
each and every cheque under the ultraviolet ray lamp or there was any prevalent practice to
scrutinise cheques involving a particular amount under such Lampo by way of extra precaution. In
such circumstances, it cannot be contended as a correct legal proposition that the bank, in order
to get absolved from the liability of negligence, was under an obligation to verify the cheque for
further scrutiny under advanced technology or for that matter under ultraviolet ray lamp apart from
visual scrutiny. The cost of the ultraviolet ray lamp was only nominal and it might have been
desirable to keep such lamp in the branch in question to take aid in appropriate case. But even
then, it cannot be contended that although no forgery could be detected on visual scrutiny on the
apparent tenor of the cheque in question and the reasonable care by way of scrutiny of the
cheque with reference to its serial number, verification of the specimen signature of the signatory
of the cheque had been made, the bank officials should have resorted to scrutiny of the cheque
under ultraviolet ray lamp by way of additional precaution and by not taking such extra precaution
the bank may be held guilty of negligence.

 Direct Taxation

Deccan Wine and General Stores v Commissioner of Income Tax, AP

Late Pannalal, apart from owning immovable properties with which we are not concerned, ran
certain businesses known as “Deccan Wine and General Stores”, “Moti Wine and General Stores”
and “Tinu's Bar and Hotel”. Pannalal died in 1959 and his heirs, his widow and two minor children
succeeded to the three businesses. For the assessment years 1959-60 and 1960-61,
assessments in respect of the income from the three businesses were made as if the assessee's
collective status was that of an “individual”. For the assessment years 1961-62, 1962-63 and
1963-64, assessments were made as if the assessee's status was a “Hindu undivided family”. For
the assessment years 1964-65 and 1965-66 the assessee claimed the status of an “association of
persons” and assessments were made on that basis. For the assessment year 1966-67 also the
assessee submitted a return claiming the status of an “association of persons”. However, by a
subsequent letter dated March 27, 1967, it was claimed that each of the three individuals, i.e., the
mother and the two minor children (the children continued to be minors), should be separately
assessed in their “individual” status on their respective one-third share of the income from the
businesses. It was pointed out in the letter that in the course of the year of account there was a
partition of the businesses in the sense that the capital of the businesses was divided in equal
shares between the three individuals. The Income-tax Officer did not accept the plea that the
three persons should be separately assessed as individuals. The Income-tax Officer held that the
three persons constituted a “body of individuals” and should be assessed as such and not as an
“association of persons” either. The order of assessment made by the Income-tax Officer was
confirmed by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal.

The question for the Court was whether on the facts and in the circumstances of the case, the
assessment for the assessment year 1966-67 has been validly made in the status of a ‘body of
individuals?

The mother and the two minor children would not constitute an “association of persons” since it
could not in law be said that these three individuals had joined together in a common purpose or
a common action with a view to produce income, profits or gains.

An association of persons does not mean any and every combination of persons. It is only when
they associate themselves in an income-producing activity that they become an association of
persons. They must combine to engage in such an activity; the engagement must be pursuant to
the combined will of the persons constituting the association; there must be a meeting of the
minds, so to speak. In a nutshell, there must be a common design to produce income. If there is
no common design, there is no association. When the word “association” is replaced by the word
“body”, it must follow that the feature of common design or combined will so peculiar or
distinctive to an association of persons is not a characteristic of a body of individuals. The
absence of a common design is what principally distinguishes a body of individuals from an
association of persons. Another distinguishing feature is that the one refers to persons and the
other to individuals. A person, by definition, includes an individual. But an individual, apparently,
does not include a person. An individual under the new Act means only a human being.

In the present case, the three individuals have a common interest in the businesses. The
businesses are carried on for the benefit of all of them. They cannot constitute an association of
persons because two of them are minors and their guardian is herself the third person of the
combination and there is, therefore, none who can agree on their behalf with the third person. But,
though the businesses are not carried on pursuant to a common design, they are carried on for
their common benefit by one of them representing all of them. The Court, therefore, held that they
constitute a body of individuals.

Commissioner of Income Tax v G.R. Karthikeyan

The assessee participated in an All India Highway Motor Car Rally and on being declared a
winner, received an amount of Rs. 22,000 as prize money. The IT officer included the prize money
in his income for the relevant assessment year relying upon the definition of ‘income’ in S. 2(24) of
IT Act. On an appeal preferred by the respondent-assessee the Appellate Assistant
Commissioner held that as the Rally was not a race, the prize money cannot be treated as
income within the meaning of section 2(24) (ix). The Tribunal on an appeal by the Revenue, held
that the Rally was not a race and as it was a test of skill and endurance, it was not a ‘game'
within the meaning of Sec. 2 (24) (ix). As the prize money received was casual in nature it fell
outside Sec. 10(3) of the Act.

The High Court on a reference at the instance of the Revenue officer, upholding the findings of the
Tribunal, observed that the expression ‘winnings’ connotes money won by betting or gambling
and therefore the prize money does not represent ‘winnings’. Inasmuch as the amount in question
was obtained by participating in a rally which involved skill in driving the vehicle, it held, it cannot
be included in the assessee’s income, also because it fell outside the purview of S. 10(3). An
appeal was made to the Supreme Court.

The Supreme Court held that the expression ‘income’ must be construed in the widest sense. The
definition of ‘income’ is an inclusive one. Even if a receipt does not fall within S. 2(24)(ix) or any
other sub-clauses, it may yet constitute income. Hence, the prize money received constitutes
income.

Commissioner of Income Tax v Kamalini Gautam Sarabhai

For the assessment year 1972–73, the assessee filed a return of income disclosing a total income
of Rs. 81,289. The assessment was completed on March 10, 1975. Later on, the Income-tax
Officer, during the course of assessment of Messrs. Karamchand Premchand Pvt. Ltd., came to
know that the said company had incurred expenditure on the foreign tours of one of its directors,
Gautam Sarabhai, and his wife, Smt. Kamalini, the assessee. He also noticed that for the tour of
Smt. Kamalini, the company had expended Rs. 39,753. In view of this information, the Income-tax
Officer reopened the assessment and ultimately included the said amount of Rs. 39,753 in the
total income of the assessee and assessed it accordingly. The assessee then preferred an appeal.
The question for the Court was whether, on the facts and in the circumstances of the case, the
expenditure of Rs. 39,753 incurred by Messrs. Karamchand Premchand Pvt. Ltd. on the foreign
tour of the assessee is not includible as income under section 2(24)(iv) of the Income-tax Act,
1961, in the computation of total income of the assessee?

It was contended by the Revenue that in the absence of any evidence on record, that the
assessee had not gone abroad for the business purpose of the company. The Court was required
to consider whether by undertaking the foreign tour, the assessee can be said to have obtained
any benefit from the company in which her husband was a director. The answer would obviously
depend upon the true interpretation of the word “benefit” occurring in the first part of the said
clause. The clause refers to “benefit obtained from a company”. If a person derives any
advantage, it can be said that he was benefited. If he gains something either monetarily or
otherwise it can be said that he was benefited. If he is able to improve his condition, it can be said
that he has benefited to that extent. Thus, the word “benefit” implies an element of advantage,
profit or gain. Moreover, the word “benefit” occurs in a provision which treats the benefit given by
a company as income of the person who can be said to have obtained it, with the result that it
would become taxable in his hands. Considering all these aspects, the Court opined that the word
“benefit” occurring in clause (iv) would mean “any advantage, gain or improvement in condition”
and only if such a thing is obtained by an assessee from a company and if the other conditions
are satisfied, then and then only can the value of it be treated as his income. On the facts, the
Court found that the assessee did not derive any personal gain.

Mehboob Productions Pvt Ltd v Commissioner of Income Tax, Bombay City

The assessee, viz., Mehboob Productions Private Ltd. is, as its name indicates, a private limited
company which, at all relevant times, was doing business in production of films. We are
concerned in this reference with the assessment year 1959-60, the corresponding previous year
being the year ended 30th September, 1958. Sometime in 1957, the assessee-company
completed the production of a film entitled Mother India. In that very year, i.e., in 1957, it was
awarded a certificate of merit (presumably by the Government of India), and the assessee-
company preferred a claim before the State Government that the picture should be declared as
“exempt from entertainment duty” and that as producer of that picture it was entitled to that
portion of the proceeds of the exhibition of the film which represented entertainment duty. The
claim of the assessee was accepted by the then Government of Bombay on 25th October, 1957,
and in pursuance of that decision the assessee-company recovered from the various exhibitors
and theatres in the then State of Bombay the aggregate amount of Rs. 10,67,212 being the
amount these exhibitors and theatre-owners had collected by way of entertainment duty in the
year of account. Before the Income-tax Officer the assessee-company claimed that the amount of
Rs. 10,67,212 was not liable to be included in its total income because it was not a trading receipt
but only an amount received by way of a personal testimonial and that, at any rate, it was casual
and nonrecurring and was, therefore, exempt under section 4(3)(vii) of the Act. The Court
observed that on the material before it there is nothing to show that the assessee-company had
produced the said picture Mother India with the slightest expectation that the same would be
exempt from entertainment duty and that the amounts collected by the exhibitors as and by way
of such duty would be directed to be paid over to it as producers by the Government of Bombay.
The fact that the payments appear to be entirely at the discretion of the Government and that the
exemption can be withdrawn by the Government even without any default on the part of the
assessee would not be sufficient to disentitle the receipts from being considered as income. The
Court held that these receipts do not partake of the element of a return which is necessary for it to
constitute income, and further that it was of the nature of a windfall—a windfall as to the factum
and not a windfall as to mere quantum. On both the counts, therefore, the answer to the question
whether these receipts constitute income of the assessee must be in the negative and in favour of
the assessee, viz., that they did not constitute income.

Oil Palm India Ltd, Kottayam v Assistant Commissioner of Income Tax

In the assessee's appeal the grievance of the assessee would be that the income from extracting
oil from palm fruits owned by the assessee's palm estates at Yenoor, Chithara and Kulathupuzha
to the extent of 3645.64 hectares amounts to agricultural income. The assessee returned the
income under the head claiming it as agricultural income. However, the authorities below were of
the view that agricultural income would mean only the income derived from such land by the
performance by a cultivator. The Court observed that the objection of the Department would be
that the product manufactured by the assessee company viz. crude palm oil and the nuts
extracted during processing is clearly not agricultural produce. The fact that State Agricultural
Income-tax Authorities assessed this income as agricultural income will not have any implication
while the assessment comes under the Central Income-tax merely on the fact simplicitor that the
activity of the assessee company cannot be considered as an activity of an agriculturist to render
the produce fit for the market. Therefore, the Court held that the income is partly agricultural and
partly business.

Commissioner of Income Tax v Raja Benoy Kumar Sahas Roy

The respondent owns an area of 6000 acres of forest land assessed to land revenue and grown
with Sal and Piyasal trees. The forest was originally of spontaneous growth, “not grown by the aid
of human skill and labour” and it has been in existence for about 150 years. A considerable
income is derived by the assessee from sales of trees from this forest. The assessment year in
which this forest income was last taxed under the IT Act was 1923-24 but thereafter till 1944-45
which is the assessment year in question, it was always left out of account. The assessment for
1944-45 also was first made without including therein any forest income, but the assessment was
subsequently reopened under Section 34. In response to a notice under Section 22(2) read with
Section 34 of the Act, the respondent submitted a return showing the gross receipt of Rs. 51, 798
from the said forest. A claim was, however, made that the said income was not assessable under
the Act as it was agricultural income and was exempted. The IT officer rejected the claim. The
assessee appealed.

The Court noted that in order for an income to fall within the definition of agricultural income, two
conditions are necessary to be satisfied: (i) that the land from which it is derived should be used
for agricultural purposes and is either assessed for land revenue in the taxable terrirotires or is
subject to local rates assessed and collected by the officers of the Government as such; and (ii)
that the income should be derived from such land by agriculture or by one or the other of the
operations described in clauses 2 and 3 of S. 2(b).

The Court further observed that agriculture is the basic idea underlying the expressions
“agricultural purposes” and “agricultural operations” and it is pertinent therefore to enquire what is
the connotation of the term “agriculture”. Agriculture is to be restricted only to cultivation of the
land in the strict sense of the term meaning thereby, tilling of the land, sowing of the seeds,
planting and similar operations of the land. They would be the basic operations and would require
the expenditure of human skill and labour upon the land itself.

The Court held that where agricultural products are not raised on the land by the performance of
the basic operations, it cannot be characterised to be agricultural operations. It is only if the
products are raised and sold from the land by the performance of basic operations then it could
be said to be agricultural income.

 Personal Law I

In Gopal Krishan Sharma v Mithilesh Kumari Sharma, the Allahabad High Court observed that
the the institution of matrimony under the Hindu law is a sacrament, and not a mere socio-legal
contract. It is not performed for mere emotional gratification and is not a mere betrothal. Its
content is religious. A sacramental marriage, to our mind, stands on a higher and stronger footing
than a contractual one in the sense that though made dissoluble by law, it is intrinsically
indissoluble by its nature while the contractual marriage is dissoluble basically. Hence they do not
stand at par so far as the nature of kinship is concerned. Spiritual unity being the true content of
sacramental marriage, disruption at that level may have to be found while assessing a conduct
complained of. A contractual marriage may or may not require going that far.

In Indra Sarma v V.K.V Sarma, the Supreme Court of India described marriage as one of the
basic civil rights of man/woman, which is voluntarily undertaken by the parties in public in a
formal way, and once concluded, recognises the parties as husband and wife. Marriage, as per
the common law, constitutes a contract between a man and a woman, in which the parties
undertake to live together and support each other. Three elements of common law marriage are:
(i) agreement to be married (ii) living together as husband and wife, (iii) holding out to the public
that they are married. Sharing a common household and duty to live together form part of the
consortium omnis vitae which obliges spouses to live together, afford each other reasonable
marital privileges and rights and be honest and faithful to each other. Marriage involves legal
requirements of formality, publicity, exclusivity and all the legal consequences flow out of that
relationship.

Marriage in India take place either following personal law of the religion to which the party belongs
to or following the provisions of the Special Marriage Act, 1954. Entering into a marriage is
entering into a relationship of “public significance”, since marriage being a social institution, many
rights and liabilities flow out of that legal relationship.

In Ashok Kumar v Usha Kumari, the husband had denied solemnisation of marriage but
admitted that it was performed by affidavits. The parties lived together after marriage. The
question for the Court was whether there was presumption is in favour of validity of the marriage.
Affirming it, the Court held that it was difficult to believe that a girl will live in her husband's house
for such a long time without any marriage having taken place. He has further admitted that she
has been holding out she was his wife. If she were not he would not allow her to do so. Even after
the passing of the Hindu Marriage Act, 1955, the doctrine of factum valvet should be invoked. If
the parties are recognised as man and wife, there is a strong presumption in favour of the
marriage and the ‘legitimacy of its offspring’. Where a man and woman had lived together as man
and wife, the law will presume, until the contrary is proved that they were living together by virtue
of a legal marriage and not in concubinage. Such presumption can be rebuted only by showing
that the marriage was most highly improbable and not reasonable possible, marriage can be
proved by repute and intention to enter into wedlock.

In B. Vasundhara v B. Aswarthanarayana Rao, the appellant had gotten married again with the
consent of his first wife, the respondent. The Andhra Pradesh High Court held that the second
marriage was void ab initio and consent cannot validate such void marriage. The Act stipulates
some grounds, which make the marriage void, and those, which make it voidable. It is only in
respect of voidable grounds that the consent or acquiescence of a party can sustain the marriage.
The same is not the case with the grounds, which make the marriage void. If the respondent was
aware of the subsistence of a valid marriage between the appellant and another person, he was
not supposed to marry the appellant. Equally, the latter was not supposed to give consent.

In Sharda v Dharmpal, the parties were married in 1991. In 1995, the respondent filed an
application for divorce against the appellant. He filed an application seeking directions for medical
examination of the appellant. The appellant objected thereto inter alia on the ground that the court
had no jurisdiction to pass such directions. The court allowed the application and directed the
appellant to submit herself to the medical examination. She appealed. The Court held that for the
purpose of grant of a decree of divorce the petitioner must establish that unsoundness of mind of
the respondent is incurable or his/her mental disorder is of such a kind and to such an extent that
the petitioner cannot reasonably be expected to live with his/her spouse. Medical testimony may
not be imperative but would be of considerable assistance. However, it might not be sufficient for
the Court to satisfy itself of this point beyond reasonable doubt. The burden of proof is on the
spouse claiming the state of fact. Although the HMA does not provide for examination, it does not
preclude a court from passing such an order. In short, a matrimonial court has the power to order
a person to undergo medical test. Passing of such an order would not be in violation of the right
to personal liberty under Article 21. However, the Court must exercise this power if the applicant
has a strong prima facie case and there is sufficient material before the Court.