CANARA BANK versus N. G. SUBBARAYA SETTY & ANR. on 20 April 2018

[2018] 3 S.C.R. 884

SUPREME COURT REPORTS

[2018] 3 S.C.R.

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CANARA BANK

v.

N. G. SUBBARAYA SETTY & ANR.

(Civil Appeal No. 4233 of 2018)

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APRIL 20, 2018

[ADARSH KUMAR GOEL AND R. F. NARIMAN, JJ.]

Code of Civil Procedure, 1908 – s.11 – Res judicata – Generalrule and its exceptions – Erroneous decision given on a statutoryprohibition in former suit – Statutory prohibition not given effect toC

– Plea of res judicata in subsequent suit – Held: An issue of lawwhich arises between the same parties in a subsequent suit orproceeding is not res judicata if, by an erroneous decision given ona statutory prohibition in the former suit or proceeding, the statutoryprohibition is not given effect to – On facts, respondent in order toDrepay dues of the bank, signed assignment deed with Bank Managerfor assignment of the trademark and after several months bankcancelled the assignment deed – Litigations between the parties,first proceeding, second proceeding – Trial court and first appellatecourt treating the statutory prohibition contained in s.45(2) of theTrade Marks Act as res judicata, was erroneous – Neither of theEcourt adverted to and/or interpreted s.45, which makes it clear thatthe assignment deed, if unregistered, cannot be admitted in evidenceby any court in proof of title to the trademark by the assignment,unless the court itself directs otherwise – Thus, any reliance uponthe assignment deed by the earlier judgment cannot be sanctifiedFby the plea of res judicata, when reliance upon the assignment deedis prohibited by law – Furthermore, trademark cannot be said to beproperty which has come into the possession of the bank insatisfaction or part satisfaction of any of the claims of the bank –Trademarks are not part of any security for loans or advances thathave been made to the first respondent, or connected with the sameG– Thus, the assignment deed clearly hit by ss.6(2) and 8 read withs.46(4) – Judgment of the trial court and first appellate court setaside – Trade Marks Act, 1999 – s.45(2) – Banking Regulation Act,1949 – ss.6(2), 8 and 46(4).

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Allowing the appeal, the Court

HELD: 1.1 Res judicata is a doctrine of fundamentalimportance in our legal system, though it is stated to belong tothe realm of procedural law, being statutorily embodied in Section11 of the Code of Civil Procedure, 1908. However, it is not amere technical doctrine, but it is fundamental in our legal systemthat there be an end to all litigation, this being the public policyof Indian law. The obverse side of this doctrine is that, whenapplicable, if it is not given full effect to, an abuse of process ofthe Court takes place. However, there are certain notableexceptions to the application of the doctrine. One well knownexception is that the doctrine cannot impart finality to anerroneous decision on the jurisdiction of a Court. Likewise, anerroneous judgment on a question of law, which sanctionssomething that is illegal, also cannot be allowed to operate as resjudicata. This case is concerned with the application of the lastmentioned exception to the rule of res judicata. [Para 5][894-H;895-A-B]

1.2 Until the limitation period for filing of an appeal is over,the res remains sub judice. After the limitation period is over,the res decided by the first Court would then become judicata.However, questions arise as to what is to be done in matterswhere the hearing in the second case is shortly after the limitationperiod for filing an appeal in the first case has ended. At least twojudgments, of the Privy Council and the High Court, have referredto the fact that, in appropriate cases, the hearing in the secondcase may be adjourned or may be stayed in order to await theoutcome of the appeal in the first case. [Para 22][906-G-H; 907-A]

Procedure

1.3 If the period of limitation for filing an appeal has not yetexpired or has just expired, the Court hearing the secondproceeding can very well ask the party who has lost the first roundwhether he intends to appeal the aforesaid judgment. If theanswer is yes, then it would be prudent to first adjourn the secondproceeding and then stay the aforesaid proceedings, after theappeal has been filed, to await the outcome of the appeal in thefirst proceeding. If, however, a sufficiently long period has elapsedafter limitation has expired, and no appeal has yet been filed in A

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Athe first proceeding, the Court hearing the second proceedingwould be justified in treating the first proceeding as res judicata.No hard and fast rule can be applied. The entire fact circumstancein each case must be looked at before deciding whether toproceed with the second proceeding on the basis of res judicataor to adjourn and/or stay the second proceeding to await theBoutcome in the first proceeding. Many factors have to beconsidered before exercising this discretion. The judicious useof the weapon of stay would, in many cases, obviate a Court offirst instance in the second proceeding treating a matter as resjudicata only to find that by the time the appeal has reached theChearing stage against the said judgment in the second proceeding,the res becomes sub judice again because of condonation of delayand the consequent hearing of the appeal in the first proceeding.This would result in setting aside the trial court judgment in thesecond proceeding, and a de novo hearing on merits in the second proceeding commencing on remand, thereby wasting the Court’sDtime and dragging the parties into a second round of litigation onthe merits of the case. [Para 23][907-B-G]1.4 In the instant case, a belated review petition was filedafter arguments were heard and judgment reserved by theappellate Court. This Court would not have to await the outcomeEof the said review petition before deciding whether the judgmentdated 27.4.2013 is res judicata. It is clear that a review petitionfiled long after the judgment dated 27.4.2013, with a condonationapplication for a delay of over four years, could not possibly beheld to be anything but an abuse of the process of the Court.FThis being so, it is examined whether the judgment dated27.4.2013 can be considered to be res judicata in the secondproceeding in this case, namely the suit of 2008 filed by respondentNo.1. [Para 24][907-H; 908-A-B]

1.5 The general rule is that all issues that arise directlyand substantially in a former suit or proceeding between the sameGparties are res judicata in a subsequent suit or proceedingbetween the same parties. These would include issues of fact,mixed questions of fact and law, and issues of law. To this, thereare certain exceptions when it comes to issues of law:

(i) Where an issue of law decided between the same partiesHin a former suit or proceeding relates to the jurisdiction of

the Court, an erroneous decision in the former suit orproceeding is not res judicata in a subsequent suit orproceeding between the same parties, even where the issueraised in the second suit or proceeding is directly andsubstantially the same as that raised in the former suit orproceeding. This follows from a reading of Section 11 CPCitself, for the Court which decides the suit has to be a Courtcompetent to try such suit. When read with Explanation (I)to Section 11, it is obvious that both the former as well asthe subsequent suit need to be decided in Courts competentto try such suits, for the “former suit” can be a suitinstituted after the first suit, but which has been decidedprior to the suit which was instituted earlier. An erroneousdecision as to the jurisdiction of a Court cannot clothe thatCourt with jurisdiction where it has none. Obviously, a CivilCourt cannot send a person to jail for an offence committedunder the Penal Code. If it does so, such a judgment wouldnot bind a Magistrate and/or Sessions Court in a subsequentproceeding between the same parties, where theMagistrate sentences the same person for the same offenceunder the Penal Code. Equally, a Civil Court cannot decidea suit between a landlord and a tenant arising out of therights claimed under a Rent Act, where the Rent Actclothes a special Court with jurisdiction to decide such suits;

(ii) An issue of law which arises between the same partiesin a subsequent suit or proceeding is not res judicata if, byan erroneous decision given on a statutory prohibition inthe former suit or proceeding, the statutory prohibition isnot given effect to. This is despite the fact that the matterin issue between the parties may be the same as thatdirectly and substantially in issue in the previous suit orproceeding. This is for the reason that in such cases, therights of the parties are not the only matter for consideration(as is the case of an erroneous interpretation of a statuteinter parties), as the public policy contained in the statutoryprohibition cannot be set at naught. This is for the samereason as that contained in matters which pertain to issuesof law that raise jurisdictional questions. The public policycontained in other statutory prohibitions, which need not ABCDE

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Anecessarily go to jurisdiction of a Court, must equally begiven effect to, as otherwise special principles of law arefastened upon parties when special considerations relatingto public policy mandate that this cannot be done;

(iii) Another exception to this general rule follows from theBmatter in issue being an issue of law different from that inthe previous suit or proceeding. This can happen when theissue of law in the second suit or proceeding is based ondifferent facts from the matter directly and substantially inissue in the first suit or proceeding. Equally, where the lawis altered by a competent authority since the earlierCdecision, the matter in issue in the subsequent suit orproceeding is not the same as in the previous suit orproceeding, because the law to be interpreted is different.[Para 33][917-B, C-F; 918-C-E, F-G]

1.6 Insofar as Section 45 of the Trade Marks Act isDconcerned, it is clear that this plea was raised throughout boththe proceedings. Insofar as the suits of 2004 were concerned,the judgment dated 27.4.2013 expressly recorded the said pleataken on behalf of the bank, but turned it down. Equally, insofaras the trial court judgment in the second suit of 2008 is concerned,Ethe said plea was expressly raised and turned down. The impugnedjudgment dated 31.7.2017 also records the submission and turnsit down. Both the trial court and the first appellate court wereentirely wrong in treating the statutory prohibition contained inSection 45(2) of the Trade Marks Act as res judicata. Neither ofthe court bothered to advert to Section 45 and/or interpret theFsame. The second proceeding contained in O.S. No.495 of 2008prayed for payment of a sum of Rs.17,89,915/- along with interestthereon for the period 1.4.2004 to 30.4.2007. Clearly, therefore,the subsequent suit of 2008 raises an issue which is differentfrom that contained in the earlier suit filed by the same party inG2004. Also, the earlier decision in the judgment dated 27.4.2013has declared valid a transaction which is prohibited by law. Acursory reading of Section 45(2) of the Trade Marks Act makesit clear that the assignment deed, if unregistered, cannot beadmitted in evidence by any court in proof of title to the trademarkby the assignment, unless the court itself directs otherwise. It isH

clear, therefore, that any reliance upon the assignment deed dated8.10.2003 by the earlier judgment cannot be sanctified by theplea of res judicata, when reliance upon the assignment deed isprohibited by law. [Para 35- 39][922-G; 923-F; 924-C, G; 925-B-C]

1.7 Equally, a reference to Sections 6, 8 and 46(4) of theBanking Regulation Act would also make it clear that a bankcannot use the trademark “Eenadu” to sell agarbathies. Thiswould be directly interdicted by Section 8, which clearly providesthat notwithstanding anything contained in Section 6 or in anycontract, no banking company shall directly or indirectly deal inthe selling of goods, except in connection with the realisation ofsecurity given to or held by it. Also, granting permission to thirdparties to use the trademark “Eenadu” and earn royalty uponthe same would clearly be outside Section 6(1) and would beinterdicted by Section 6(2) which states that no bank shall engagein any form of business other than those referred to in sub-section(1). The trademark cannot be said to be property which has comeinto the possession of the bank in satisfaction or part satisfactionof any of the claims of the bank. The trademarks are not part ofany security for loans or advances that have been made to thefirst respondent, or connected with the same. It is thus clear thatthe assignment deed dated 8.10.2003 is clearly hit by Section6(2) and Section 8 read with the penalty provision contained inSection 46(4) of the Banking Regulation Act. The judgment ofthe trial court and the first appellate court are set aside. [Para40-42][925-D-E, G-H; 926-A]

Natraj Studios (P) Ltd. v. Navrang Studios & Anr. (1981)2 SCR 466 – relied on.

Sheoparsan Singh v. Ramnandan Singh AIR 1916PC 78; Daryao and others v. State of U.P. and others,[1962] 1 SCR 574; Mathura Prasad Bajoo Jaiswal &Ors v. Dossibai N. B. Jeejeebhoy (1970) 1 SCC 613 :[1970] 3 SCR 830; V. Rajeshwari v. T.C. Saravanabava(2004) 1 SCC 551 : [2003] 6 Suppl. SCR 927; SheodanSingh v. Daryao Kunwar (1966) 3 SCR 300; Balkishanv. Kishan Lal (1888) ILR 11 All 148; S.P.A. AnnamalayChetty v. B.A. Thornhill AIR 1931 PC 263; Parshotam A

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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4233of 2018.

From the Judgment and Order dated 31.07.2017 of the High Courtof Karnataka at Bengaluru in First Appeal (RFA) No. 818 of 2016.

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K. V. Viswanathan (AC), Dhruv Mehta, Sr.Advs., AbhishekKaushik, Srigesh M.K., Ravi Raghunath, Dhananjay B. Ray, SiddhantBusy, Ms. Vrinda Bhandari, Mukunda Rao, Jaishree Vishwanathan,Rajesh Kumar – I, Gaurav Singh, Anant Gautam, Aakash Sehrawat, H

AV. Govinda Ramanan, Soumu Palit, Shanthkumar V. Mahale,

R. P. Kulkarni, Rajesh Mahale, Advs. for the appearing parties.

The Judgment of the Court was delivered by

R. F. NARIMAN, J. 1. Leave granted.

B2. Roma locuta est; causa finita est. Rome has spoken, the causeis ended. Rome spoke through her laws. One of the pillars of Romanlaw is contained in the maxim res judicata pro veritate accipitur (athing adjudicated is received as the truth). This maxim of Roman law isbased upon two other fundamental maxims of Roman law, namely,interest reipublicae ut sit finis litium (it concerns the State that thereCbe an end to law suits) and nemo debet bis vexari pro una at eademcausa (no man should be vexed twice over for the same cause). Indeed,that this maxim is almost universal in all ancient laws, including ancientHindu texts, was discussed by Sir Lawrence Jenkins inSheoparsan Singh v. Ramnandan Singh, AIR 1916 PC 78 at 80-81as follows:D

“There has been much discussion at the Bar as to the applicationof the plea of res judicata as a bar to this suit. In the view theirLordships take, the case has not reached the stage at which anexamination of this plea and this discussion would become relevant.EBut in view of the arguments addressed to them, their Lordshipsdesire to emphasise that the rule of res judicata, while foundedon ancient precedent, is dictated by a wisdom which is for alltime. “It has been well said,” declared Lord Coke, “interestreipublicae ut sit finis litium, otherwise great oppression mightbe done under colour and pretence of law”: (6 Coke, 9a). Though,Fthe rule of the Code may be traced to an English source, it embodiesa doctrine in no way opposed to the spirit of the law as expoundedby the Hindu commentators. Vijnanesvara and Nilakantha includethe plea of a former judgment among those allowed by law, eachciting for this purpose the text of Katyayana, who describes theGplea thus: “If a person though defeated at law sue again he shouldbe answered, ‘You were defeated formerly’. This is called theplea of former judgment.” (See “The Mitakshara (Vyavahara)”Bk. II, ch. i, edited by J.R. Gharpure, p. 14, and “The Mayuka,”Ch. I., sec. 1, p. 11 of Mandlik’s edition.)

And so the application of the rule by the Courts in India should beinfluenced by no technical considerations of form, but by matterof substance within the limits allowed by law.”

3. This Court in Daryao and others v. State of U.P. and others,(1962) 1 SCR 574 at 583-584, put it very well when it said:

“In considering the essential elements of res judicata one inevitablyharks back to the judgment of Sir William De Grey (afterwardsLord Walsingham) in the leading Duchess of Kingston’s case [2Smith Lead. Cas. 13[th] Ed. pp. 644, 645]. Said William De Grey,(afterwards Lord Walsingham) “from the variety of cases relativeto judgments being given in evidence in civil suits, these twodeductions seem to follow as generally true: First, that the judgmentof a court of concurrent jurisdiction, directly upon the point, is asa plea, a bar, or as evidence, conclusive between the same parties,upon the same matter, directly in question in another court; Secondly,that the judgment of a court of exclusive jurisdiction, directly uponthe point, is in like manner conclusive upon the same matter, betweenthe same parties, coming incidentally in question in another courtfor a different purpose”. As has been observed by Halsbury, “thedoctrine of res judicata is not a technical doctrine applicable onlyto records; it is a fundamental doctrine of all courts that theremust be an end of litigation [Halsbury’s Laws of England, 3[rd]Ed., Vol. 15, para. 357, p. 185]”. Halsbury also adds that the doctrineapplies equally in all courts, and it is immaterial in what court theformer proceeding was taken, provided only that it was a Courtof competent jurisdiction, or what form the proceeding took,provided it was really for the same cause (p. 187, paragraph 362).“Res judicata”, it is observed in Corpus Juris, “is a rule of universallaw pervading every well regulated system of jurisprudence, andis put upon two grounds, embodied in various maxims of thecommon law; the one, public policy and necessity, which makes itto the interest of the State that there should be an end to litigation— interest republicae ut sit finis litium; the other, the hardshipon the individual that he should be vexed twice for the same cause— nemo debet bis vexari pro eadem causa” [Corpus Juris, Vol.34, p. 743]. In this sense the recognised basis of the rule of resjudicata is different from that of technical estoppel. “Estoppelrests on equitable principles and res judicata rests on maxims which A

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Aare taken from the Roman Law” [Ibid p. 745]. Therefore, theargument that res judicata is a technical rule and as such is irrelevantin dealing with petitions under Article 32 cannot be accepted.”

4. The link between the doctrine of res judicata and the preventionof abuse of process is very felicitously stated in Virgin Atlantic AirwaysBLtd. v. Zodiac Seats UK Ltd. [2013] 4 All ER 715 (at 730-731) asfollows:

“The principle in Henderson v Henderson has always beenthought to be directed against the abuse of process involved inseeking to raise in subsequent litigation points which could andCshould have been raised before. There was nothing controversialor new about this notion when it was expressed by LordKilbrandon in the Yat Tung case [1975] AC 581. The point hasbeen taken up in a large number of subsequent decisions, but forpresent purposes it is enough to refer to the most important ofthem, Johnson v Gore-Wood & Co [2002] 2 AC 1, in which theDHouse of Lords considered their effect. This appeal arose out ofan application to strike out proceedings on the ground that theplaintiffs claim should have been made in an earlier action on thesame subject matter brought by a company under his control.Lord Bingham of Cornhill took up the earlier suggestion of LordEHailsham of St Marylebone LC in Vervaeke (formerly Messina)v Smith [1983] 1 AC 145, 157 that the principle in Henderson vHenderson was “both a rule of public policy and an application ofthe law of res judicata”. He expressed his own view of therelationship between the two at p. 31 as follows: “Henderson vHenderson abuse of process, as now understood, althoughFseparate and distinct from cause of action estoppel and issueestoppel, has much in common with them. The underlying publicinterest is the same: that there should be finality in litigation andthat a party should not be twice vexed in the same matter. Thispublic interest is reinforced by the current emphasis on efficiencyGand economy in the conduct of litigation, in the interests of theparties and the public as a whole”.”

5. Res judicata is, thus, a doctrine of fundamental importance inour legal system, though it is stated to belong to the realm of procedurallaw, being statutorily embodied in Section 11 of the Code of CivilHProcedure, 1908. However, it is not a mere technical doctrine, but it is fundamental in our legal system that there be an end to all litigation, thisbeing the public policy of Indian law. The obverse side of this doctrine isthat, when applicable, if it is not given full effect to, an abuse of processof the Court takes place. However, there are certain notable exceptionsto the application of the doctrine. One well known exception is that thedoctrine cannot impart finality to an erroneous decision on the jurisdictionof a Court. Likewise, an erroneous judgment on a question of law, whichsanctions something that is illegal, also cannot be allowed to operate asres judicata. This case is concerned with the application of the lastmentioned exception to the rule of res judicata. The brief facts necessaryto appreciate the applicability of the said exception to the doctrine of resjudicata are as follows. In the present case, respondent No.1 availed acredit facility from the petitioner bank sometime in 2001. RespondentNo.2, his son, stood as a guarantor for repayment of the said facility. Asrespondent No.1 defaulted in repayment of a sum of Rs.53,49,970.22,the petitioner bank filed O.A. No. 440 of 2002 before the DRT Bangalore,against respondent Nos.1 and 2. Respondent No.1, in order to repay thedues of the bank, signed an assignment deed dated 8.10.2003 with theChief Manager, Basavanagudi Branch, Bangalore for assignment of thetrademark “EENADU” in respect of agarbathies (incense sticks) oncertain terms and conditions. Clauses 1 to 7 of the aforesaid assignmentare set out hereunder:

“NOW THIS DEED OF ASSIGNMENT OF TRADE MARK“EENADU” WITNESSETH AS FOLLOWS:

“NOW THIS DEED OF ASSIGNMENT OF TRADE MARK“EENADU” WITNESSETH AS FOLLOWS:

1. The Assignor hereby grant, transfer and assign upon theAssignee upon the terms and conditions mentioned hereunder,the exclusive use and all benefits of the aforesaid trade mark“Eenadu” in relation to the agarbathies (incense sticks) for a periodTEN years from the date of this Agreement i.e. 1.10.03 to 30.9.13.

2. The Assignee shall pay the sum of Rs. 76,000.00 (Rupeesseventy six thousand only) per month payable for the period offirst six years: i.e. from 1.10.03 to 30.9.09:

(i) Rs. 40,000.00 shall be credited to the loan amount of theAssignor every month and (ii) the balance of Rs.36,000.00 (Rupeesthirty six thousand only) to be paid to the Assignor/permitted to bedrawn by him until the expiry of first six years i.e. 1.10.03 to30.9.09; and AB

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3. The Assignee shall pay the sum of Rs.83,600.00 (Rupees Eightythree thousand six hundred only) per month payable for the periodof next four years i.e. from 1.10.09 to 30.9.13.

(i) Rs. 40,000 shall be credited to the loan account of the Assignorevery month and (ii) the balance of Rs.43,600.00 (Rupees fortyBthree thousand six hundred only) to be paid to the Assignor/permitted to be drawn by him until the expiry of next four yearsi.e. from 1.10.09 to 30.9.13.

4. The aforesaid payments shall be unconditionally made by theAssignee continuously and uninterruptedly for the aforesaid periodof TEN years.

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5. The Assignee shall have the right to use the trade mark “Eenadu”on its own and shall also be entitled to grant permission to thirdparty/parties to use the same, subject to the said parties agreeingto maintain the good quality and reputation of the trade markD“Eenadu” during the period of validity of assignment (the abovesaid ten years i.e. 1.10.03 to 30.9.13).

6. The Assignee shall be entitled to collect “Royalty” from thepermitted users during the period of validity of assignment (theabove said ten years).

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E7. The period of assignment granted under this deed shall come toan end on the expiry of the period of ten years from the date ofthis agreement i.e. on 30.9.13 and the agreement shall standterminated without any notice in relation thereto and the licences,permissions, etc. granted by the Assignee to the third parties inrespect of the trade mark of the Assignor “Eenadu” shall alsoFcome to an end simultaneously, without such notice.”

6. By a letter dated 27.1.2004, the Chief Manager wrote torespondent No.1 stating that:

“We have been informed by our higher authorities that as per theGBanking Company’s Regulation Act, 1949, the bank cannot be“patent right holder”.

Hence, please note that we are not interested in holding the patentright of Eenadu and as such by this letter, we are cancelling theabove assignment deed dated 8-10-2003.”

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7. On 15.4.2004, respondent No.1 filed O.S. No.2832 of 2004against the bank challenging the cancellation of the said assignment deedand for recovery of Rs.2,16,000/- with interest thereon for the period1.10.2003 to 31.3.2004. On 17.9.2004, the petitioner bank filed O.S.No.7018 of 2004 for a declaration that the assignment deed entered intobetween it and respondent No.1 is vitiated by mistake, undue influenceand fraud and that, therefore, the said deed is unenforceable in the eyeof law.

8. Meanwhile, the Chief Manager who signed the assignmentdeed on behalf of the bank, namely, one N.V. Narayana Rao, wasdismissed from service pursuant to disciplinary proceedings taken againsthim on 26.5.2005.

9. The two suits as aforestated were consolidated and disposedof by a common judgment. Issues were framed separately in both suitsand it was found that the assignment deed was not vitiated by fraud,misrepresentation or undue influence. Consequently, the bank had noright to cancel or rescind the aforesaid assignment deed. RespondentNo.1’s claim for a money decree for Rs.2,16,000/- was dismissed. Itwas also held that the Civil Court had jurisdiction to entertain the suits,despite the pendency of DRT proceedings. The bank’s suit came to bedismissed. The ultimate order passed in the two suits is as follows:

“O.S. 2832/2004 is hereby decreed in part, granting a relief infavour of the plaintiff as against the 1st defendant/bank, declaringthat the unilateral cancellation of the assignment agreement dated8.10.2003 by the 1st defendant bank vide letter No. LPD/SSI/1034/2004 dated 27.1.2004, is illegal and unsustainable.

The further prayer of the plaintiff seeking money decree againstthe 1st plaintiff bank, directing to pay him Rs.2,16,000.00 togetherwith interest at 18% p.a. is hereby rejected.

O.S. 7018/2004 is hereby dismissed, thereby the prayer of theplaintiff/bank to declare that the assignment agreement dated8.10.2003 entered into between the bank and the 1st defendant,as vitiated by virtue of undue influence, fraud andmisrepresentation, practiced by the 1st defendant on the bank, ishereby rejected.”

10. Respondent No.1 filed a review petition, being miscellaneouspetition No.324 of 2013, seeking review of the aforesaid judgment to the A

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Aextent that his prayer for payment of Rs.2,16,000/- was rejected. On16.3.2015, this petition was allowed, and O.S. No.2832 of 2004 filed byrespondent No.1 was fully decreed against the bank, including the prayerfor payment. Against the aforesaid review judgment dated 16.3.2015,an appeal was filed by the bank on 4.1.2016 with an application forcondoning the delay of 175 days. We are informed that this appeal isBstill pending. Meanwhile, respondent No.1, on the basis of the assignmentdeed, filed another suit, being O.S. No.495 of 2008, against the bank forrecovery of a sum of Rs.17,89,915/- with interest for the period 1.4.2004to 30.4.2007. By a judgment dated 30.10.2015, this suit was decreed onthe footing that the earlier judgment dated 27.4.2013, not having beenCappealed against, was res judicata between the parties. An appeal filedagainst this judgment met with the same fate in that, by the impugnedjudgment dated 31.7.2017, the High Court of Karnataka dismissed theappeal filed by the bank on the self-same ground of res judicata. It maybe noted that on 14.7.2017, the hearing of the appeal, which culminated in the impugned judgment, was concluded and judgment was reserved.DIt was only after this that the petitioner bank, for the first time on26.7.2017, filed a review petition against the judgment dated 27.4.2013with a condonation of delay application of 1548 days. This review petitionis also stated to be pending.

11. Shri Dhruv Mehta, learned senior advocate appearing on behalfEof the petitioner bank, has argued that no issue was struck as to resjudicata as the same had not specifically been pleaded in the plaint of thesuit of 2008. Indeed, the judgment dated 27.4.2013 came long after thepleading in the second suit, and no amendment of the plaint was soughtso as to incorporate the plea of res judicata. No issue having beenFraised, it was impermissible, according to the learned senior advocate, tohave gone into this plea at all. It was also argued that on the assumptionthat the said plea could be gone into, there were two statutory bars torelief, namely, Section 45 of the Trade Marks Act, 1999 and Sections 6and 8 read with Section 46(4) of the Banking Regulation Act, 1949. The

first statutory bar made it clear that unless the assignment deed wasGregistered, it could not be received in evidence by any Court. Sections 6and 8 of the Banking Regulation Act interdicted the bank from doing anybusiness other than banking business and that, therefore, the assignmentdeed which enabled the bank to trade in goods and to earn royalty froman assignment of the trademark would be hit by the aforestated provisionsH

and, therefore, would be void in law. For this purpose, he relied stronglyupon the judgment of this Court in Mathura Prasad Bajoo Jaiswal &Ors v. Dossibai N. B. Jeejeebhoy, (1970) 1 SCC 613, and variousother judgments which have followed the law laid down by the aforesaidjudgment. According to him, therefore, these two statutory prohibitionsbeing pure questions of law, which are unrelated to facts which give riseto a right, cannot be res judicata between the parties. According to thelearned senior advocate, both points had been raised before the Courtsbelow with no success. Indeed, the very letter dated 27.1.2004 cancellingthe assignment deed would itself show that the plea of the assignmentdeed being contrary to the Banking Regulation Act was the very reasonfor cancelling the aforesaid deed. He also referred to and relied uponthe fact that the Bank Manager responsible for signing the said deedhad been dismissed from service by an order dated 26.5.2005. Shri Mehtaalso strongly relied upon a judgment dated 29.1.2011, by the SessionsCourt in Bangalore, by which the Chief Manager, one A. SheshagiriRao, who was made accused No.1 in a special criminal case filed by theCBI and respondent Nos. 1 and 2, who were made accused nos. 2 and3 respectively, were each sentenced to 6 months, three years and twoyears respectively by the learned Sessions Judge, having been convictedunder Sections 120B and 420 of the Indian Penal Code. Accused No.1was also convicted of an offence under Section 13 of the Prevention ofCorruption Act, 1988. According to the learned senior advocate,therefore, the doctrine of res judicata cannot be stretched to allowperpetuation of a fraud committed upon the bank.

12. Shri Shanthakumar Mahale, learned advocate appearing forrespondent nos. 1 and 2, on the other hand, defended the judgments ofthe Courts below. According to the learned counsel, the judgment dated27.4.2013 was delivered long after the Chief Manager was dismissedand after the Sessions Judge’s judgment dated 29.1.2011 convictingrespondent Nos. 1 and 2. This judgment specifically held that there wasno fraud played, that the bank itself sought the assignment fromrespondent Nos. 1 and 2, and that since there was no misrepresentation,undue influence etc., the assignment deed was valid in law, the cancellationof the said deed being illegal. This judgment is final between the partiesand has never been challenged, except by way of a review which wasfiled belatedly after hearing both parties in the appeal. The said reviewpetition, which is obviously an abuse of process with huge delay, could AB

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Anot possibly render the res sub judice so as to affect the judgments ofthe Courts below. According to the learned counsel, neither Section 45of the Trade Marks Act nor Sections 6 and 8 of the Banking RegulationAct are capable of only one obvious interpretation so that, on theirapplication, the assignment deed becomes illegal in law.

B13. We had appointed Shri K.V. Viswanathan, learned seniorcounsel, as Amicus Curiae to guide us in this matter. He has referred toa large number of judgments and has rendered invaluable assistance tothis Court in order that we arrive at a proper and just conclusion in thismatter. He has argued that the review petition that is filed belatedlyagainst the judgment dated 27.4.2013, being grossly belated with noCchance of success, would not take away the res judicata effect of thejudgment dated 27.4.2013. According to the learned senior counsel, thecase law makes it clear that if an appeal is filed within limitation, the resnever becomes judicata. In fact, until the limitation for filing an appeal isover, the res remains sub judice. It is only also when the limitationDperiod is over that the res can be considered to be judicata. Dependingupon the length of time for which delay is sought to be condoned, theCourt can either proceed with the matter and consider the case on thefooting of res judicata or stay further proceedings in order to await theoutcome of the proceedings in the appeal in the other case. The test,according to the learned senior counsel, is whether the delay in filing theEappeal can be considered by the Court to be without sufficient causeand, therefore, an abuse of process. It is also important to find outwhether third party rights have arisen in the meanwhile. He has cited alarge number of judgments before us, including the position in the U.K.and U.S. Interestingly, he cited judgments to show that in the UnitedFStates, res judicata attaches the moment a judgment is pronounced,despite the fact that an appeal may be filed against the said judgment.

14. We may first deal with the preliminary point urged by ShriMehta. He pressed into service the judgment in V. Rajeshwari v. T.C.Saravanabava, (2004) 1 SCC 551 for the proposition that a plea of resGjudicata not properly raised in the pleadings or put in issue at the stage oftrial could not be permitted to be taken. A closer look at the said judgmentshows that the judgment dealt with such a plea not being permitted to beraised for the first time at the stage of appeal. In the present case,though an issue as to res judicata was not struck between the parties,both parties argued the matter based upon the pleadings and the judgmentH

contained in the two suits of 2004. It is only after full arguments on bothsides that the trial Court in the judgment dated 30.10.2015 accepted therespondent’s plea of res judicata. Even before the appellate Court, thepoint of res judicata was argued by both parties without adverting to theaforesaid objection. It is obvious, therefore, that this ground raised forthe first time before this Court, cannot non-suit the respondents.

15. The doctrine of res judicata is contained in Section 11 of theCode of Civil Procedure, 1908, which, though not exhaustive of all thefacets of the doctrine, delineates what exactly the doctrine of res judicatais in the Indian context. Section 11 reads as under:

“11. Res judicata - No Court shall try any suit or issue in whichthe matter directly and substantially in issue has been directly andsubstantially in issue in a former suit between the same parties, orbetween parties under whom they or any of them claim, litigatingunder the same title, in a Court competent to try such subsequentsuit or the suit in which such issue has been subsequently raised,and has been heard and finally decided by such Court.

Explanation I.—The expression “former suit” shall denote a suitwhich has been decided prior to the suit in question whether ornot it was instituted prior thereto.

Explanation II.—For the purposes of this section, the competenceof a Court shall be determined irrespective of any provisions as toa right of appeal from the decision of such Court.

Explanation III.—The matter above referred to must in the formersuit have been alleged by one party and either denied or admitted,expressly or impliedly, by the other.

Explanation IV.—Any matter which might and ought to have beenmade ground of defence or attack in such former suit shall bedeemed to have been a matter directly and substantially in issuein such suit.

Explanation V.—Any relief claimed in the plaint, which is notexpressly granted by the decree, shall, for the purposes of thissection, be deemed to have been refused.

Explanation VI.—Where persons litigate bona fide in respect ofpublic right or of a private right claimed in common for themselves A

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Aand others, all persons interested in such right shall, for the purposesof this section, be deemed to claim under the persons so litigating.

Explanation VII.—The provisions of this section shall apply to aproceeding for the execution of a decree and reference in thissection to any suit, issue or former suit shall be construed asBreferences, respectively, to proceedings for the execution of thedecree, question arising in such proceeding and a formerproceeding for the execution of that decree.

Explanation VIII.—An issue heard and finally decided by a Courtof limited jurisdiction, competent to decide such issue, shall operateCas res judicata in a subsequent suit, notwithstanding that suchCourt of limited jurisdiction was not competent to try suchsubsequent suit or the suit in which such issue has beensubsequently raised.”

16. This Court in Sheodan Singh v. Daryao Kunwar, (1966) 3DSCR 300 (at 304-305) has stated with some felicity the conditions thatneed to be satisfied in order to constitute a matter as res judicata. ThisCourt held:

“A plain reading of Section 11 shows that to constitute a matterres judicata, the following conditions must be satisfied, namely—

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(i) The matter directly and substantially in issue in the subsequentsuit or issue must be the same matter which was directly andsubstantially in issue in the former suit;

(ii) The former suit must have been a suit between the sameparties or between parties under whom they or any of them claim; F

(iii) The parties must have litigated under the same title in theformer suit;

(iv) The court which decided the former suit must be a courtcompetent to try the subsequent suit or the suit in which suchissue is subsequently raised; and G

(v) The matter directly and substantially in issue in the subsequentsuit must have been heard and finally decided by the court in thefirst suit. Further Explanation I shows that it is not the date onwhich the suit is filed that matters but the date on which the suit isdecided, so that even if a suit was filed later, it will be a former H

suit if it has been decided earlier. In order therefore that thedecision in the earlier two appeals dismissed by the High Courtoperates as res judicata it will have to be seen whether all thefive conditions mentioned above have been satisfied.”

17. As to what happens when an appeal is filed against a judgmentin the first proceeding, a Full Bench of the Allahabad High Court inBalkishan v. Kishan Lal, (1888) ILR 11 All 148 (at 159-161), is mostinstructive. Mahmood, J., speaking for the Full Bench, referred toExplanation IV to Section 13 of the Code of Civil Procedure, as it thenstood. The learned Judge referred to the said explanation in the followingterms:

“The latter part of the Explanation IV of that section has beenframed in somewhat unspecific language, and runs as follows:

“A decision liable to appeal may be final within the meaning ofthis section until the appeal is made.”

The language of the section is silent as to what happens when anappeal has been preferred; and no doubt much depends upon theinterpretation of two vague words “may” and “until” as they occurin the sentence which I have just quoted. I may perhaps say thatmore has been aimed at by that sentence than the few words ofwhich that sentence consists could convey. What has been leftunsettled by that sentence is the difficulty pointed out by a juristicJudge of such eminence as Mr. Justice Holloway of Madras inSri Raja Kakarlapudi Suriyanarayanarazu Garu v.Chellamkuri Chellamma [5 M.H.C.R. 176] when that learnedJudge said:

“In the lower Court it seems to have been taken for grantedthat the former judgment could not be conclusive because anappeal was pending. This is not in accordance with Englishlaw, as the judgment on the rejoinder in Doe v. Wright [10 A.& E. 763] shows. It would, however, be perfectly sound doctrinein the view of other jurists (Unger Oct. Priv. Recht, II, 603,Sav. Syst., 297, Seq. Waihier, II, 549). As an Englishman Ishould be sorry to invite a comparison between the reasonsgiven by these great jurists for their and those embodied in theEnglish cases for the contrary doctrine.”

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I hold that the views thus expressed by Pothier and, as Mr. JusticeHolloway has indicated, adopted by other continental jurists as tothe doctrine of res judicata, are consistent with the interpretationwhich I place upon Explanation IV of s. 13 of the Code of CivilBProcedure in relation to the authority of judgments still liable toappeal. Such judgments are not definitive adjudications. Theyare only provisional, and not being final cannot operate as resjudicata. Such indeed seems to be the view adopted by the learnedJudges of the Bombay High Court when they said, in Nilvaru v.Nilvaru [ILR 6 Bom. 110.], “We consider that when the judgmentCof a Court of first instance upon a particular issue is appealedagainst, that judgment ceases to be res judicata and becomesres sub judice.”

In this case, therefore, both the Courts below were wrong in lawin holding that the previous judgment of the 10th March, 1886,Dwhich at the date of the institution of this suit was still liable toappeal, and which at the date of the decision of this suit by thefirst Court, as also at the date of the decision by the lower appellateCourt, was the subject of a second appeal pending in this Court(S.A. No. 973 of 1886) could operate as res judicata in favourEof the plaintiff in regard to his title as to the malikana.”

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18. The Privy Council, in an early judgment in S.P.A. AnnamalayChetty v. B.A. Thornhill AIR 1931 PC 263 (at 264), was faced withthe question as to whether the filing of an appeal would by itself takeaway the res judicata effect or whether a matter heard and finally decidedFby the first Court was res judicata until it was set aside on appeal. ThePrivy Council held:

“Section 207 of the Civil Procedure Code, 1889, provides asfollows:

“All decrees passed by the Court shall, subject to appeal, whenGan appeal is allowed, be final between the parties; and noplaintiff shall be non-suited.”

The appellant maintained that, under this provision, no decree,from which an appeal lies and has in fact been taken, is finalbetween the parties so as to form res judicata, while the respondent H

contended that such a decree was final between the parties andformed res adjudicata until it was set aside on appeal. In theirLordships’ opinion the former view is the correct one, and wherean appeal lies the finality of the decree on such appeal being taken,is qualified by the appeal and the decree is not final in the sensethat it will form res adjudicata as between the same parties. Theopinion of the learned Judges of the Supreme Court clearly inclinedto the same view, and their Lordships have a difficulty inappreciating why the learned Judges found it unnecessary to decidethis point, for this view still leaves it open to the Court to see thatthe appellant does not get decree twice over for the same sum,and it is inconsistent with the other ground expressed by them fortheir decision that the appellant’s cause of action had been mergedinto the decree in Action No. 4122, since, according to this view,that decree was not final. Their Lordships regret that the secondaction was not adjourned pending the decision of the appeal in thefirst action, as that would have simplified procedure and savedexpense.”

19. Our law, therefore, is different from the American law – adecree from which an appeal lies and has in fact been filed would renderthe res sub judice and not judicata. This judgment of the Privy Councilhas been repeatedly followed by the High Courts in this country. See,Parshotam Parbhudas v. Bai Moti AIR 1963 Gujarat 30 at para 8,Bhavani Amma v. Narayana Acharya AIR 1963 Mysore 120 at para2, Satyanarayan Prosad Gooptu v. Diana Engineering CompanyAIR 1952 Calcutta 124 at para 10 and Venkateswarlu v. VenkataNarasimham AIR 1957 Andhra Pradesh 557 at para 3.

20. In Chengalavala Gurraju v. Madapathy VenkateswaraRow Pantulu Garu AIR 1917 Madras 597 at 599-600, a Division Benchof the Madras High Court referred to and relied upon Balkishan (supra).The Court then held:

“Explanation 4 to Section 13 of the Civil Procedure Code of 1882which enacted that a decision liable to appeal may be final withinthe meaning of the Section until the appeal is made has beenomitted in the present Code (of 1908) and the omission (whichwas in all probability made in view of the decision in Bal Kishanv. Kishan Lal (1889) 11 All 148) removes any doubts or difficultiesin dealing with the question and it is not necessary to speculate on ABCD

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the class of cases to which this explanation can be applied if ajudgment liable to appeal is only held to be provisional and notoperative as res judicata.

In dealing with Section 52 of the Transfer of Property Act it hasbeen held that a person who purchases property between theBdate of the disposal of the suit and the filing of the appeal wouldbe bound by the rule of lis pendens: Gobind Chunder Roy v.Guru Churn Kurmokar (1888) 15 Cal. 94, Dinonath Ghose v.Shama Bibi (1901) 28 Cal. 23, Sukhdeo Prasad v. Jamna (1901)23 All 60, Settappa Gounden v. Muthia Gounden (1908) 31Mad. 268. If the appeal is only a continuation of the originalCproceedings and the suit is, for the purpose of Section 52 of theTransfer of Property Act, regarded as pending between the dateof the decree and that of the filing of an appeal, it is difficult to seewhy the same rule should not apply when dealing with Section 11of the Civil Procedure Code.

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As regards appeals filed out of time and after independent rightsbetween the parties have ripened, it is unlikely that courts wouldexcuse the delay, if during the interval other rights come intoexistence, which would render it inequitable that questions disposedEof should be re-opened at the instance of a party who seeks theindulgence of the court: Esdaile v. Payne (1889) 40 Ch. D. 520.Following the decision in Bal Kishen v. Kishen Lal, we are ofopinion that the Sub-Collector was wrong in holding that thedecision passed by him in Suits Nos. 466 of 1909 and 276 of 1910Fhad the force of res judicata during the interval between the dateof his decree and the time allowed by law for filing the appeal.”

21. This judgment was followed in Baijnath Karnani v.Vallabhdas Damani, AIR 1933 Madras 511 at 514.

22. The conspectus of the above authorities shows that until theGlimitation period for filing of an appeal is over, the res remains sub judice.After the limitation period is over, the res decided by the first Courtwould then become judicata. However, questions arise as to what is tobe done in matters where the hearing in the second case is shortly afterthe limitation period for filing an appeal in the first case has ended. Atleast two judgments, one of the Privy Council and one of the BombayH

High Court, have referred to the fact that, in appropriate cases, thehearing in the second case may be adjourned or may be stayed in orderto await the outcome of the appeal in the first case. See, ChandraSingh Dudhoria v. Midnapore Zemindary Co. Ltd. (1941) 69 IA 51(PC) at 58-59 and Indra Singh and Sons Ltd. v. Shiavax. C. Cambata,ILR 1948 Bom 346 at 352.

23. If the period of limitation for filing an appeal has not yet expiredor has just expired, the Court hearing the second proceeding can verywell ask the party who has lost the first round whether he intends toappeal the aforesaid judgment. If the answer is yes, then it would beprudent to first adjourn the second proceeding and then stay the aforesaidproceedings, after the appeal has been filed, to await the outcome of theappeal in the first proceeding. If, however, a sufficiently long period haselapsed after limitation has expired, and no appeal has yet been filed inthe first proceeding, the Court hearing the second proceeding would bejustified in treating the first proceeding as res judicata. No hard and fastrule can be applied. The entire fact circumstance in each case must belooked at before deciding whether to proceed with the second proceedingon the basis of res judicata or to adjourn and/or stay the second proceedingto await the outcome in the first proceeding. Many factors have to beconsidered before exercising this discretion – for example, the fact thatthe appeal against the first judgment is grossly belated; or that the saidappeal would, in the ordinary course, be heard after many years in thefirst proceeding; or, the fact that third party rights have intervened, therebymaking it unlikely that delay would be condoned in the appeal in the firstproceeding. As has been stated, the judicious use of the weapon of staywould, in many cases, obviate a Court of first instance in the secondproceeding treating a matter as res judicata only to find that by the timethe appeal has reached the hearing stage against the said judgment inthe second proceeding, the res becomes sub judice again because ofcondonation of delay and the consequent hearing of the appeal in thefirst proceeding. This would result in setting aside the trial Court judgmentin the second proceeding, and a de novo hearing on merits in the secondproceeding commencing on remand, thereby wasting the Court’s timeand dragging the parties into a second round of litigation on the merits ofthe case.

24. In the present case, a belated review petition was filed afterarguments were heard and judgment reserved by the appellate Court.

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AWould this Court have to await the outcome of the said review petitionbefore deciding whether the judgment dated 27.4.2013 is res judicata?Obviously not. It is clear that a review petition filed long after thejudgment dated 27.4.2013, with a condonation application for a delay ofover four years, could not possibly be held to be anything but an abuse ofthe process of the Court. This being so, we proceed to examine whetherBthe judgment dated 27.4.2013 can be considered to be res judicata in thesecond proceeding in this case, namely the suit of 2008 filed by respondentNo.1. We now come to the argument of Shri Dhruv Mehta based on theapplication of the principles contained in Mathura Prasad (supra).

25. In Mathura Prasad (supra), a question arose as to whetherCan erroneous judgment on the jurisdiction of the Small Causes Court inrelation to a proceeding arising out of the Bombay Rents, Hotel andLodging House Rates Control Act, 1947 would be res judicata. Theview expressed by the High Court was overruled by this Court in 1962,by which time the trial Judge and the High Court of Bombay rejected anDapplication filed by the appellant for an order determining standard rentof the premises. This Court laid down:

“5. But the doctrine of res judicata belongs to the domain ofprocedure: it cannot be exalted to the status of a legislative directionbetween the parties so as to determine the question relating to theEinterpretation of enactment affecting the jurisdiction of a Courtfinally between them, even though no question of fact or mixedquestion of law and fact and relating to the right in dispute betweenthe parties has been determined thereby. A decision of a competentCourt on a matter in issue may be res judicata in another proceedingbetween the same parties: the “matter in issue” may be an issueFof fact, an issue of law, or one of mixed law and fact. An issue offact or an issue of mixed law and fact decided by a competentCourt is finally determined between the parties and cannot be re-opened between them in another proceeding. The previousdecision on a matter in issue alone is res judicata: the reasons forGthe decision are not res judicata. A matter in issue between theparties is the right claimed by one party and denied by the other,and the claim of right from its very nature depends upon proof offacts and application of the relevant law thereto. A pure questionof law unrelated to facts which give rise to a right, cannot bedeemed to be a matter in issue.When it is said that a previousH

decision is res judicata, it is meant that the right claimed has beenadjudicated upon and cannot again be placed in contest betweenthe same parties. A previous decision of a competent Court onfacts which are the foundation of the right and the relevant lawapplicable to the determination of the transaction which is thesource of the right is res judicata. A previous decision on a matterin issue is a composite decision: the decision on law cannot bedissociated from the decision on facts on which the right is founded.A decision on an issue of law will be as res judicata in a subsequentproceeding between the same parties, if the cause of action ofthe subsequent proceeding be the same as in the previousproceeding, but not when the cause of action is different, norwhen the law has since the earlier decision been altered by acompetent authority, nor when the decision relates to the jurisdictionof the Court to try the earlier proceeding, nor when the earlierdecision declares valid a transaction which is prohibited by law.

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7. Where the law is altered since the earlier decision, the earlierdecision will not operate as res judicata between the same parties:Tarini Charan Bhattacharjee’s case. It is obvious that the matterin issue in a subsequent proceeding is not the same as in theprevious proceeding, because the law interpreted is different.

8. In a case relating to levy of tax a decision valuing property ordetermining liability to tax in a different taxable period or event isbinding only in that period or event, and is not binding in thesubsequent years, and therefore the rule of res judicata has noapplication: See Broken Hill Proprietary Company Ltd. v.Municipal Council of Broken Hill [(1926) AC 94].

9. A question of jurisdiction of the Court, or of procedure, or apure question of law unrelated to the right of the parties to aprevious suit, is not res judicata in the subsequent suit. Rankin,C.J., observed in Tarini Charan Bhattacharjee’s case:

“The object of the doctrine of res judicata is not to fasten uponparties special principles of law as applicable to them inter se,but to ascertain their rights and the facts upon which theserights directly and substantially depend; and to prevent thisascertainment from becoming nugatory by precluding the parties AB

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Afrom reopening or recontesting that which has been finallydecided.”

10. A question relating to the jurisdiction of a Court cannot bedeemed to have been finally determined by an erroneous decisionof the Court. If by an erroneous interpretation of the statute theBCourt holds that it has no jurisdiction, the question would not, inour judgment, operate as res judicata. Similarly by an erroneousdecision if the Court assumes jurisdiction which it does not possessunder the statute, the question cannot operate as res judicatabetween the same parties, whether the cause of action in thesubsequent litigation is the same or otherwise.

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11. It is true that in determining the application of the rule of resjudicata the Court is not concerned with the correctness orotherwise of the earlier judgment. The matter in issue, if it is onepurely of fact, decided in the earlier proceeding by a competentCourt must in a subsequent litigation between the same parties beDregarded as finally decided and cannot be reopened. A mixedquestion of law and fact determined in the earlier proceedingbetween the same parties may not, for the same reason, bequestioned in a subsequent proceeding between the same parties.But, where the decision is on a question of law i.e. the interpretationEof a statute, it will be res judicata in a subsequent proceedingbetween the same parties where the cause of action is the same,for the expression “the matter in issue” in Section 11 of the Code of Civil Procedure means the right litigated between the partiesi.e. the facts on which the right is claimed or denied and the lawapplicable to the determination of that issue. Where, however, theFquestion is one purely of law and it relates to the jurisdiction of theCourt or a decision of the Court sanctioning something which isillegal, by resort to the rule of res judicata a party affected by thedecision will not be precluded from challenging the validity of thatorder under the rule of res judicata, for a rule of procedure cannotGsupersede the law of the land.”

[Emphasis Supplied] (at pages 617-619)

26. Ultimately, the Court held that since the decision of the CivilJudge that he had no jurisdiction to entertain the application of standardHrent, in view of the judgment of the Supreme Court, was plainly erroneous, the decision in the previous proceedings cannot be regarded as conclusive.The appeals were, therefore, allowed and the orders passed by the HighCourt and the Court of Small Causes were set aside and the proceedingswere remanded to the Court of first instance.

27. This judgment has been followed in a number of cases. InSushil Kumar Mehta v. Gobind Ram Bohra (1990) 1 SCC 193, theaforesaid judgment was referred to in paragraphs 20 and 21 and followed,holding that where there is an inherent lack of jurisdiction, which dependsupon a wrong decision, the earlier wrong decision cannot be res judicata.Similarly, in Isabella Johnson (Smt.) v. M.A. Susai (1991) 1 SCC494, this Court, after setting out the law contained in Mathura Prasad(supra), stated that a Court which has no jurisdiction in law cannot beconferred with jurisdiction by applying the principle of res judicata, as itis well settled that there is no estoppel on a pure question of law whichrelates to jurisdiction.

28. An instructive Full Bench decision of the Punjab and HaryanaHigh Court was cited before us by Shri Viswanathan, State of Punjabv. Nand Kishore, AIR 1974 Punjab & Haryana 303 at 308-309, whichfurther explained the ratio of Mathura Prasad (supra). What troubledthe Full Bench, after referring to Mathura Prasad (supra), was as towhether an issue of law decided inter parties could be held to be resjudicata in a subsequent proceeding between the same parties. Afterreferring to Mohanlal Goenka v. Benoy Krishna Mukherjee, (1953)SCR 377, which held that even an erroneous decision on a question oflaw operates as res judicata between parties, and various other SupremeCourt judgments, the Full Bench of the Punjab and Haryana High Court,by a majority decision, went on to hold:

“17. What exactly then is the ratio decidendi in Mathura Prasad’scase? It is manifest that the sole issue in the appeal was as to thejurisdiction of the Court of Small Causes for determining thestandard rent of premises constructed in pursuance of a buildinglease of an open site. Therefore, the authority is a precedentprimarily on the limited issue of the jurisdiction of a Court. Whatdirectly arose for determination therein and what has beenspecifically laid down by their Lordships is that a patentlyerroneous decision (directly contrary to a Supreme Court judgment)in a previous proceeding in regard to the jurisdiction of a Courtcould not becomes res judicata between the parties. The weighty A

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reason for so holding was that such a result would create a specialrule of law applicable to the parties in relation to the jurisdiction ofthe Court in violation of rule of law declared by the legislature. Itis manifest that this enunciation was an engrafted exception tothe general principle noticed in the judgment itself, i.e., a questionof law including the interpretation of a statute would be res judicatabetween the same parties where the cause of action is the same.

I am inclined to the view that it is unprofitable and indeedunwarranted to extract an observation and a sentence here andthere from the judgment and to build upon it on the ground thatcertain results logically follow therefrom. Such a use of precedentwas disapproved by the Earl of Halsbury L. C. in Quinn v. Leathem1901 AC 405. Approving that view and quoting extensivelytherefrom their Lordships of the Supreme Court in State of Orissav. Sudhansu Sekhar Misra AIR 1968 SC 647 have categoricallyobserved as follows:

“A decision is only an authority for what it actually decides.What is of the essence in a decision is its ratio and not everyobservation found therein nor what logically follows from the various observations made in it.”

18. In strictness, therefore, the ratio decidendi of Mathura Prasad’scase is confined to the issue of jurisdiction of the Court but isequally well-settled that the obiter dicta of their Lordships is entitledto the greatest respect and weight and is indeed binding if it canbe found that they intended to lay down a principle of law. Theissue, therefore, is as to what else, apart from the ratio, was soughtto be laid down by the Supreme Court in this case. The veryclosely guarded language used by their Lordships in the body ofthe judgment leads me to conclude that they wished to confinetheir observations within the narrowest limits. The expression used(which is sought to be extended on behalf of the respondent) is “apure question of law unrelated to the right of the parties to aprevious suit.” It is very significant that their Lordships, with theirmeticulous precision of language, have no where laid down in thejudgment that a pure question of law can never be res judicatabetween the parties. Indeed it has been said to the contrary interms. The emphasis, therefore, in the expression abovesaid is onthe fact that such a pure question of law must be unrelated to the rights of the parties. It stands noticed that a decision by a Courton a question of law cannot be absolutely dissociated from thedecision on the facts on which the right is founded. Consequentlywhat was exactly to be connoted by the expression “a purequestion of law unrelated to the rights of the parties” was itselfexpounded upon by their Lordships. Without intending to beexhaustive, the Court has indicated specifically the exceptionalcases in which special considerations apply for excluding themfrom the ambit of the general principle of res judicata. The principleof law which their Lordships herein have reiterated is that a purequestion of law including the interpretation of a statute will be resjudicata in a subsequent proceeding between the same parties.To this salutary rule, four specific exceptions are indicated. Firstly,the obvious one, that when the cause of action is different, therule of res judicata would not be attracted. Secondly, where thelaw has, since the earlier decision, been altered by a competentauthority. Thirdly, where the earlier decision between the partiesrelated to the jurisdiction of the Court to try the earlier proceedings,the same would not be allowed to assume the status of a specialrule of law applicable to the parties and therefore, the matterwould not be res judicata. Fourthly, where the earlier decisiondeclared valid a transaction which is patently prohibited by law,that is to say, it sanctifies a glaring illegality.”

On facts, the majority judgment of the Full Bench held that theearlier decision inter parties was res judicata as it was on a question oflaw which was not unrelated to the rights of the parties. Sharma, J.dissented with this view, and held that the decision rendered in the earliercase was erroneous and related to the jurisdiction of the Court. Since awrong decision on a point of jurisdiction could not operate as res judicata,the learned Judge dissented.

29. An appeal from the Division Bench judgment pursuant to theFull Bench decision resulted in the decision in Nand Kishore v. Stateof Punjab, (1995) 6 SCC 614. A brief resume of the facts show that theappellant had been compulsorily retired, having completed only ten years’qualifying service in pursuance of Rule 5.32(b) of the Punjab CivilServices Rules, Volume II. A writ petition that was moved by the appellantagainst the compulsory retirement order was dismissed on 2.2.1962.The appellant had not questioned the validity of Rule 5.32(b) in the AB

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Aaforesaid writ petition. However, in Moti Ram Deka v. GeneralManager, N.E. Frontier Railways, (1964) 5 SCR 683, this Court heldthat if the compulsory retirement rule permitted an authority to retire apublic servant at a very early stage of his career, such rule might beconstitutionally invalid. The appellant, spurred by the decision in MotiRam Deka (supra), filed a suit in 1964 for a declaration that Rule 5.32Bof the aforesaid rules was constitutionally invalid. A pari materia rule tothat of Rule 5.32 was struck down by this Court in Gurdev Singh Sidhuv. State of Punjab, (1964) 7 SCR 587. However, since a writ petitionhad been filed by the appellant earlier, the State of Punjab, in its writtenstatement to the suit filed by the appellant, took up the plea of constructiveCres judicata. This plea found favour with the Full Bench of the HighCourt on 8.5.1974, following which a Division Bench allowed the appealof the State of Punjab on 13.8.1974. It is from this judgment that anappeal landed up before this Court, as is stated hereinabove. This Court,on 6.12.1990, advised the appellant to file a special leave petition from the order of the High Court dismissing his writ petition dated 5.2.1962,Dwith an appropriate application for condonation of delay. The delay wascondoned by this Court in the interest of justice in the specialcircumstances of this case under Article 142, and the said belated appealwas allowed following Gurdev Singh (supra) and striking down theorder of compulsory retirement of the appellant. Despite having so decided,Ethis Court went into the doctrine of constructive res judicata and decidedthat the constitutionality of a provision of law stands on a different footingfrom other questions of law. As there is a presumption of constitutionalityof all statutes, the “might and ought” rule of constructive res judicatacannot be applied. Instead what was applied by this Court was that partof the decision in Mathura Prasad (supra) which stated that when theFlaw has, since the earlier decision in the appellant’s writ petition, beenaltered by a competent authority, res judicata cannot apply. The FullBench of the Punjab High Court was expressly overruled on the pointthat a “competent authority” can also be a Court. Hence, a changeddeclaration of law would also fall within an earlier decision being alteredGby a competent authority. This Court, therefore, held that since thisCourt itself had altered the law when it declared the pari materia ruleas unconstitutional, the doctrine of res judicata could not apply.

30. In Allahabad Development Authority v. Nasiruzzaman(1996) 6 SCC 424, this Court held that when the previous decision was H

found to be erroneous on its face, such judgment cannot operate as resjudicata, as to give effect to such judgment would be to counter a statutoryprohibition. On the facts of that case, it was held that in a land acquisitioncase, after vesting has taken place in favour of the State, obviously, thelapse of a notification under Section 6 of the Land Acquisition Act, 1894could not possibly arise.

31. In Shakuntla Devi v. Kamla (2005) 5 SCC 390, this Courtheld that in view of the changed position in law consequent to a contraryinterpretation put on Section 14 of the Hindu Succession Act, 1956 byV.Tulasamma vs. V.Sesha Reddy (1977) 3 SCC 99, the earlier decreebased on judgments that were overruled cannot operate as res judicata.This is in consonance with the law laid down by this Court in NandKishore (supra).

32. Since Mathura Prasad (supra) followed the Full Benchjudgment of the Calcutta High Court in Tarini Charan Bhattacharjeeand others v. Kedar Nath Haldar, AIR 1928 Calcutta 777 (at 781-782), it is important to set out what the Full Bench said in answer to thequestion posed by it – namely, whether an erroneous decision on a purequestion of law operates as res judicata in a subsequent suit where thesame question is raised. The answer given by the Full Bench is in fourpropositions set out hereinbelow:

“(1) The question whether the decision is correct or erroneoushas no bearing upon the question whether it operates or does notoperate as res judicata. The doctrine is that in certaincircumstances, the Court shall not try a suit or issue, but shall dealwith the matter on the footing that it is a matter no longer open tocontest by reason of a previous decision. In these circumstances,it must necessarily be wrong for a Court to try the suit or issue,come to its own conclusion thereon, consider whether the previousdecision is right and give effect to it or not accordingly, as itconceives the previous decision to be right or wrong. To say as aresult of such disorderly procedure that the previous decision waswrong and that it was wrong on a point of law, or on a pure pointof law, and that, therefore, it may be disregarded, is an indefensibleform of reasoning. For this purpose, it is not true that a point oflaw is always open to a party.

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(2) In India, at all events, a party who takes a plea of res judicatahas to show that the matter directly and substantially in issue hasbeen directly and substantially in issue in the former suit and alsothat it has been heard and finally decided. This phrase “matterdirectly and substantially in issue” has to be given a sensible andbusinesslike meaning, particularly in view of Ex. 4,Section 11, CivilP.C., which contains the expression “grounds of defence orattack”. Section 11 of the Code says nothing about causes ofaction, a phrase which always requires careful handling. Nor doesthe section say anything about points or points of law, or purepoints of law. As a rule parties do not join issue upon academic orabstract questions but upon matters of importance to themselves.The section requires that the doctrine be restricted to matters inissue and of these to matters which are directly as well assubstantially in issue.

(3) Questions of law are of all kinds and cannot be dealt with asthough they were all the same. Questions of procedure, questionsaffecting jurisdiction, questions of limitation, may all be questionsof law. In such questions the rights of parties are not the onlymatter for consideration. The Court and the public have an interest.When plea of res judicata is raised with reference to such matters,it is at least a question whether special considerations do not apply.

(4) In any case in which it is found that the matter directly andsubstantially in issue has been directly and substantially in issue inthe former suit and has been heard and finally decided by suchCourt, the principle of res judicata is not to be ignored merely onthe ground that the reasoning, whether in law or otherwise of theprevious decision can be attacked on a particular point. On theother hand it is plain from the terms of Section 11 of the Code thatwhat is made conclusive between the parties is the decision ofthe Court and that the reasoning of the Court is not necessarilythe same thing as its decision. The object of the doctrine of resjudicata is not to fasten upon parties special principles of law asapplicable to them inter se, but to ascertain their rights and thefacts upon which these rights directly and substantially depend;and to prevent this ascertainment from becoming nugatory byprecluding the parties from reopening or recontesting that whichhas been finally decided.”

33. Given the conspectus of authorities that have been referred toby us hereinabove, the law on the subject may be stated as follows:

(1) The general rule is that all issues that arise directly andsubstantially in a former suit or proceeding between the same partiesare res judicata in a subsequent suit or proceeding between the sameparties. These would include issues of fact, mixed questions of fact andlaw, and issues of law.

(2) To this general proposition of law, there are certain exceptionswhen it comes to issues of law:

(i) Where an issue of law decided between the same parties in aformer suit or proceeding relates to the jurisdiction of the Court, anerroneous decision in the former suit or proceeding is not res judicata ina subsequent suit or proceeding between the same parties, even wherethe issue raised in the second suit or proceeding is directly and substantiallythe same as that raised in the former suit or proceeding. This followsfrom a reading of Section 11 of the Code of Civil Procedure itself, forthe Court which decides the suit has to be a Court competent to try suchsuit. When read with Explanation (I) to Section 11, it is obvious that boththe former as well as the subsequent suit need to be decided in Courtscompetent to try such suits, for the “former suit” can be a suit institutedafter the first suit, but which has been decided prior to the suit whichwas instituted earlier. An erroneous decision as to the jurisdiction of aCourt cannot clothe that Court with jurisdiction where it has none.Obviously, a Civil Court cannot send a person to jail for an offencecommitted under the Indian Penal Code. If it does so, such a judgmentwould not bind a Magistrate and/or Sessions Court in a subsequentproceeding between the same parties, where the Magistrate sentencesthe same person for the same offence under the Penal Code. Equally, aCivil Court cannot decide a suit between a landlord and a tenant arisingout of the rights claimed under a Rent Act, where the Rent Act clothesa special Court with jurisdiction to decide such suits. As an example,under Section 28 of the Bombay Rent Act, 1947, the Small Causes Courthas exclusive jurisdiction to hear and decide proceedings between alandlord and a tenant in respect of rights which arise out of the BombayRent Act, and no other Court has jurisdiction to embark upon the same.In this case, even though the Civil Court, in the absence of the statutorybar created by the Rent Act, would have jurisdiction to decide suchsuits, it is the statutory bar created by the Rent Act that must be given A

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Aeffect to as a matter of public policy. (See, Natraj Studios (P) Ltd. v.Navrang Studios & Anr., (1981) 2 SCR 466 at 482). An erroneousdecision clothing the Civil Court with jurisdiction to embark upon a suitfiled by a landlord against a tenant, in respect of rights claimed under theBombay Rent Act, would, therefore, not operate as res judicata in asubsequent suit filed before the Small Causes Court between the sameBparties in respect of the same matter directly and substantially in issue inthe former suit.

(ii) An issue of law which arises between the same parties in asubsequent suit or proceeding is not res judicata if, by an erroneousdecision given on a statutory prohibition in the former suit or proceeding,Cthe statutory prohibition is not given effect to. This is despite the factthat the matter in issue between the parties may be the same as thatdirectly and substantially in issue in the previous suit or proceeding. Thisis for the reason that in such cases, the rights of the parties are not theonly matter for consideration (as is the case of an erroneous interpretation

Dof a statute inter parties), as the public policy contained in the statutoryprohibition cannot be set at naught. This is for the same reason as thatcontained in matters which pertain to issues of law that raise jurisdictionalquestions. We have seen how, in Natraj Studios (supra), it is the publicpolicy of the statutory prohibition contained in Section 28 of the BombayRent Act that has to be given effect to. Likewise, the public policyEcontained in other statutory prohibitions, which need not necessarily goto jurisdiction of a Court, must equally be given effect to, as otherwisespecial principles of law are fastened upon parties when specialconsiderations relating to public policy mandate that this cannot be done.

(iii) Another exception to this general rule follows from the matterFin issue being an issue of law different from that in the previous suit orproceeding. This can happen when the issue of law in the second suit orproceeding is based on different facts from the matter directly andsubstantially in issue in the first suit or proceeding. Equally, where thelaw is altered by a competent authority since the earlier decision, theGmatter in issue in the subsequent suit or proceeding is not the same as inthe previous suit or proceeding, because the law to be interpreted isdifferent.

34. On the facts of this case, Shri Mehta referred us to the statutoryprohibition contained in the Trade Marks Act and the Banking RegulationHAct. The relevant provisions are Section 45 of the Trade Marks Act and Sections 6 and 8 of the Banking Regulation Act read with Section46(4) thereto. The aforesaid statutory provisions are set out hereinbelow:

“TRADE MARKS ACT, 1999

45. Registration of assignments and transmissions

(1) Where a person becomes entitled by assignment or transmissionto a registered trade mark, he shall apply in the prescribed mannerto the Registrar to register his title, and the Registrar shall, onreceipt of the application and on proof of title to his satisfaction,register him as the proprietor of the trade mark in respect of thegoods or services in respect of which the assignment ortransmission has effect, and shall cause particulars of theassignment or transmission to be entered on the register. Providedthat where the validity of an assignment or transmission is in disputebetween the parties, the Registrar may refuse to register theassignment or transmission until the rights of the parties have beendetermined by a competent court.

(2) Except for the purpose of an application before the Registrarunder sub-section (1) or an appeal from an order thereon, or anapplication under section 57 or an appeal from an order thereon, adocument or instrument in respect of which no entry has beenmade in the register in accordance with sub-section (1), shall notbe admitted in evidence by the Registrar or the Appellate Boardor any court in proof of title to the trade mark by assignment ortransmission unless the Registrar or the Appellate Board or theCourt, as the case may be, otherwise directs.

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BANKING REGULATION ACT, 1949

6. Forms of business in which banking companies mayengage

(1) In addition to the business of banking, a banking companymay engage in any one or more of the following forms of business,namely:

(a) the borrowing, raising, or taking up of money; the lending oradvancing of money either upon or without security; the drawing,making, accepting, discounting, buying, selling, collecting and dealing A

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Ain bills of exchange, hundies, promissory notes, coupons, drafts,bills of lading, railway receipts, warrants, debentures, certificates,scrips and other instruments and securities whether transferableor negotiable or not; the granting and issuing of letters of credit,traveller’s cheques and circular notes; the buying, selling anddealing in bullion and specie; the buying and selling of foreignBexchange including foreign bank notes; the acquiring, holding,issuing on commission, underwriting and dealing in stock, funds,shares, debentures, debenture stock, bonds, obligations, securitiesand investments of all kinds; the purchasing and selling of bonds,scrips or other forms of securities on behalf of constituents orCothers, the negotiating of loans and advances; the receiving of allkinds of bonds, scrips or valuables on deposit or for safe custodyor otherwise; the providing of safe deposit vaults; the collectingand transmitting of money and securities; (b) acting as agents for any Government or local authority or anyDother person or persons; the carrying on of agency business ofany description including the clearing and forwarding of goods,giving of receipts and discharges and otherwise acting as anattorney on behalf of customers, but excluding the business of aManaging Agent or Secretary and Treasurer of a company; E(c) contracting for public and private loans and negotiating andissuing the same; (d) the effecting, insuring, guaranteeing, underwriting, participatingin Managing and carrying out of any issue, public or private, ofState, municipal or other loans or of shares, stock, debentures, orFdebenture stock of any company, corporation or association andthe lending of money for the purpose of any such issue; (e) carrying on and transacting every kind of guarantee andindemnity business; (f) Managing, selling and realising any property which may comeGinto the possession of the company in satisfaction or partsatisfaction of any of its claims; (g) acquiring and holding and generally dealing with any propertyor any right, title or interest in any such property which may formthe security or part of the security for any loans or advances orHwhich may be connected with any such security; (h) undertaking and executing trusts;

(i) undertaking the administration of estates as executor, trusteeor otherwise; (j) establishing and supporting or aiding in the establishment andsupport of associations, institutions, funds, trusts and conveniencescalculated to benefit employees or ex-employees of the companyor the dependents or connections of such persons; grantingpensions and allowances and making payments towards insurance;subscribing to or guaranteeing moneys for charitable or benevolentobjects or for any exhibition or for any public, general or usefulobject; (k) the acquisition, construction, maintenance and alteration ofany building or works necessary or convenient for the purposesof the company;

(l) selling, improving, managing, developing, exchanging, leasing,mortgaging, disposing of or turning into account or otherwisedealing with all or any part of the property and rights of thecompany; (m) acquiring and undertaking the whole or any part of the businessof any person or company, when such business is of a natureenumerated or described in this sub-section; (n) doing all such other things as are incidental or conducive tothe promotion or advancement of the business of the company;

(o) any other form of business which the Central Governmentmay, by notification in the Official Gazette, specify as a form ofbusiness in which it is lawful for a banking company to engage.

(2) No banking company shall engage in any form of businessother than those referred to in sub-section (1).

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8. Prohibition of trading

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realisation of security given to or held by it, or engage in anytrade, or buy, sell or barter goods for others otherwise than inconnection with bills of exchange received for collection ornegotiation or with such of its business as is referred to in clause(i) of sub-section (1) of section 6:

PROVIDED that this section shall not apply to any such businessas is specified in pursuance of clause (o) of sub-section (1) ofsection 6.

Explanation- For the purposes of this section, “goods” means everykind of movable property, other than actionable claims, stocks,shares, money, bullion and specie, and all instruments referred toin clause (a) of sub-section (1) of section 6.

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46. Penalties

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(4) If any other provision of this Act is contravened or if anydefault is made in-

(i) complying with any requirement of this Act or of any order,rule or direction made or condition imposed there under, or

(ii) carrying out the terms of, or the obligations under, a schemesanctioned under sub-section (7) of section 45, by any person,such person shall be punishable with fine which may extend toone crore rupees or twice the amount involved in such contraventionor default where such amount is quantifiable, whichever is more,and where a contravention or default is a continuing one, with afurther fine which may extend to one lakh rupees for every day,during which the contravention or default continues.”

35. Insofar as Section 45 of the Trade Marks Act is concerned, itis clear that this plea was raised throughout both the proceedings. Insofaras the suits of 2004 were concerned, the judgment dated 27.4.2013expressly recorded the aforesaid plea taken on behalf of the bank, butturned it down in paragraphs 44 and 56 as follows:

“44. The bank has also taken further steps by virtue of theassignment deed dated 8.10.2003 obtained by them from N.G.

Subbaraya Setty and filed an application to the Trademark Registryas per Ex.D2, seeking for registration of the assignment of thetrademark obtained by them from N. Subbaraya Setty, theregistered owner of the trademark, and the bank has also paidRs.5,000-00 towards the registration fee. But the TrademarkRegistry returned the said application contending that, deficitregistration fee is payable by the assignee and the assignor/registered owner of the trademark has to file an affidavit confirmingthe assignment of the trademark in favour of the bank.Subsequently, it appears no further steps have been taken by thebank to comply with the objections raised by the TrademarkRegistry, and hence the said assignment of the trademark in favourof the bank, could not be registered with the Trademark Registry.

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56. So far as issue no.1 and 2 raised in O.S. No.7018/2004 isconcerned, since the plaintiff bank, has miserably failed to establishthe allegations of misrepresentation, fraud and undue influencealleged to have been played, by N.G. Subbaraya Setty on the bank,the plaintiff bank cannot escape from the legal consequences ofassignment deed obtained by them dated 8.10.2003 and it cannotbe held that the assignment deed obtained, by the bank from N.G.Subbaraya Setty is unenforceable. Therefore, I answer both theissues 1 and 2 raised in O.S. 7018/2004 in the negative.”

(Issue No.2 in O.S. No.7018 of 2004 read as follows: Whetherplaintiff proves that the deed of assignment of trademark, entered intobetween plaintiff and 1[st] defendant is not enforceable in law?)

36. Equally, insofar as the trial Court judgment in the second suitof 2008 is concerned, the said plea was expressly raised and turneddown in the following manner:

“…The defendant No.1 himself has produced the originalAssignment Deed and in this case defendant No.1 himself hastaken up the contention that said Assignment Deed is not registeredas per Trade Mark Act and as such, the said document cannot beconsidered. There are certain procedures that within 5 days theAssignor file an affidavit to the Trade Mark Authority in respectof change of user of the Trade Mark and defendant No.1 himselfhas moved application by paying Rs.5,000/- D.D. for registering AB

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Athe document. Inspite of that, the Trade Mark Authorities havenot registered the Trade Mark and as such, the learned counselfor defendant No.1 vehemently argued that the said Trade Mark“Eenadu” is not registered in accordance with law and as such,same cannot be considered for any of the purposes. Further, it iscontended that the Assignment Deed is not registered inBaccordance with laws. But when the Assignment Deed has beenrelied upon in the earlier judgments and parties have accepted theexecution of the document, then defendant No.1 cannot againcontend that said Assignment Deed is not registered and cannotbe considered for any of the purposes, does not hold good. It isCnothing but res judicata as contended by the plaintiff in thedecisions cited above.”

37. The impugned judgment dated 31.7.2017 also records theaforesaid submission and turns it down stating:

“…Indisputably, the grounds regarding insufficiently stampedDassignment deed and non-registration of the trade mark wereargued by the Bank which were considered and addressed by thetrial Court in O.S. No.2832/2004 and O.S. No.7018/2004. In suchcircumstances, raising the very same grounds in the second roundof proceedings, the issue in which the matter directly andEsubstantially has been heard and finally decided in a former suitbetween the same parties, litigating under the same title amountsto res judicata. Defendant No.1-Bank is precluded from raisingthe same objection in the present proceedings which is finallydecided holding the assignment deed as legal and binding on thedefendant No.1-Bank…”F

38. We are of the opinion that both the trial Court and the firstappellate Court were entirely wrong in treating the statutory prohibitioncontained in Section 45(2) of the Trade Marks Act as res judicata. It isobvious that neither Court has bothered to advert to Section 45 and/orinterpret the same. The second proceeding contained in O.S. No.495 ofG2008 prayed for payment of a sum of Rs.17,89,915/- along with interestthereon for the period 1.4.2004 to 30.4.2007. Paragraph 8 of the plaint inthe said suit reads as under:

“8. The plaintiff has already filed a suit in O.S. No.2832/2004against the 1[st] defendant for the recovery of the amount payable H

by it under the said Assignment Deed till the end of 31.3.2004.The cause of action for the present suit claim had not arisen bythen as the amount had not become payable by then i.e. for theperiod 1.4.2004 to 30.4.2007.”

39. Clearly, therefore, the subsequent suit of 2008 raises an issuewhich is different from that contained in the earlier suit filed by the sameparty in 2004. Also, the earlier decision in the judgment dated 27.4.2013has declared valid a transaction which is prohibited by law. A cursoryreading of Section 45(2) of the Trade Marks Act makes it clear that theassignment deed, if unregistered, cannot be admitted in evidence by anyCourt in proof of title to the trademark by the assignment, unless theCourt itself directs otherwise. It is clear, therefore, that any relianceupon the assignment deed dated 8.10.2003 by the earlier judgment cannotbe sanctified by the plea of res judicata, when reliance upon theassignment deed is prohibited by law.

40. Equally, a reference to Sections 6, 8 and 46(4) of the BankingRegulation Act would also make it clear that a bank cannot use thetrademark “Eenadu” to sell agarbathies. This would be directly interdictedby Section 8, which clearly provides that notwithstanding anythingcontained in Section 6 or in any contract, no banking company shalldirectly or indirectly deal in the selling of goods, except in connectionwith the realisation of security given to or held by it. Also, grantingpermission to third parties to use the trademark “Eenadu” and earn royaltyupon the same would clearly be outside Section 6(1) and would beinterdicted by Section 6(2) which states that no bank shall engage in anyform of business other than those referred to in sub-section (1).

41. Shri Shanthakumar Mahale, however, exhorted us to readSections 6(1)(f) and (g) as permitting the sale of goods under thetrademark and/or earning royalty from a sub-assignment thereto. Weare of the view that the trademark cannot be said to be property whichhas come into the possession of the bank in satisfaction or part satisfactionof any of the claims of the bank. We are further of the view that thetrademarks are not part of any security for loans or advances that havebeen made to the first respondent, or connected with the same. It isthus clear that the assignment deed dated 8.10.2003 is clearly hit bySection 6(2) and Section 8 read with the penalty provision contained inSection 46(4) of the Banking Regulation Act.

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926SUPREME COURT REPORTS

[2018] 3 S.C.R.

A42. The appeal is allowed and the judgment of the trial Court andthe first appellate Court are set aside. Consequently, O.S. No.495 of2008 filed by respondent No.1 will stand dismissed.

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