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2025 DIGILAW 1892 (TS)

Effectronic Technology Private Limited v. Skyquad Electronics & Appliances Private Limited

2025-12-22

RENUKA YARA

body2025
ORDER : 1. Heard Mr. M.V.Pratap Kumar, learned counsel for the petitioner in C.R.P.No.3988 of 2024 and respondent No.3 in C.R.P.No.1 of 2025, Mr. Avinash Desai, learned senior counsel representing Mr. Harshavardhan Abburi, learned counsel for the petitioner in C.R.P.No.1 of 2025 and respondent No.2 in C.R.P.No.3988 of 2024 and Mr. Aman Srivastava, learned counsel representing Mr. Prem Kumar Pothina, learned counsel for the respondent No.1 in both the Civil Revision Petitions. 2. Since both the Civil Revision Petitions are filed challenging the dismissal orders in petitions filed for rejection of plaint under Order VII Rule 11 of CPC on similar findings and the grounds raised in both the revision petitions are one and the same, both of them are heard together and disposed of by way of this common order. 3. The present Civil Revision Petitions are preferred aggrieved by the Orders dated 06.11.2024 passed by the learned II Additional District and Sessions Judge, Medchal-Malkajgiri District at Medchal in I.A.Nos.280 of 2024 and 958 of 2024 respectively, both in O.S.No.119 of 2023, wherein, petitions filed by the revision petitioners/defendant Nos.3 and 1 under Order VII Rule 11 of CPC to reject the plaint, have been dismissed. 4. For the sake of convenience, the parties are referred as they are referred in the main suit. 5. The brief facts of the case are that the plaintiff/respondent No.1 filed suit for recovery of damages against the defendant Nos.1, 3/revision petitioners and the respondents/defendant Nos.2 and 4 for an amount of Rs.17,49,77,814.03Ps., with interest at 18% per annum. 6. The defendant Nos.1 and 3 filed Interlocutory applications for rejection of the plaint alleging that the plaintiff instituted suit for damages on the ground that the defendant No.1 company approached the plaintiff for manufacture and supply of LED bulbs and batons and executed a Manufacturing Agreement dated 01.11.2017 for the manufacture of LED lighting products for the brand ‘Eveready’. The plaintiff claimed that the manufacturing process developed is its own intellectual property created through its research and development and therefore constitutes its trade secrets and practices. In order to support production requirements of the defendant No.1 company, plaintiff company entered into an exclusive agreement with defendant No.2 company - M/s. Vidhata Plastics Pvt. Ltd., through whom the plaintiff’s management designed and developed variety of exclusive plastic components required in manufacturing of various electronic products. In order to support production requirements of the defendant No.1 company, plaintiff company entered into an exclusive agreement with defendant No.2 company - M/s. Vidhata Plastics Pvt. Ltd., through whom the plaintiff’s management designed and developed variety of exclusive plastic components required in manufacturing of various electronic products. The plaintiff pleaded that defendant No.4 was employed at plaintiff’s factory since the year 1998 and was assigned the duty of production head exclusively to monitor the executions of orders placed by defendant No.1 company. While so, defendant No.1 conspired with defendant No.4 and defendant No.2 to set up a parallel production unit under the name of defendant No.3 company. The intention was to steal the intellectual property of plaintiff by way of industrial espionage, with nexus of technical team of plaintiff and defendant No.2. 7. According to defendant Nos.1 and 3/revision petitioners, the allegations made constitute commercial dispute as defined under Section 2 (c) (xvii) of Commercial Courts Act, 2015, as said provision concerns with intellectual property rights of plaintiff, therefore, the suit ought to have been filed in a Commercial Court. On account of operation of Section 6 of Commercial Courts Act, the learned Trial Court does not have jurisdiction to try the suit. It is pleaded that a Civil Court lacked subject matter jurisdiction over a commercial dispute which is arising from Manufacturing Agreement dated 01.11.2017 and the specified value of the suit is more than Rs.17.00 Crore. The damages claimed are more than Rs.7.00 Crores and therefore, the dispute qualifies as a commercial dispute as defined under Commercial Courts Act. It is pleaded that with an intention to avoid adjudication of the dispute by a Commercial Court, the suit is camouflaged with clever drafting in order to harass the defendant Nos.1 and 3/revision petitioners and other defendants. As such, petitions were filed to reject the plaint as not maintainable. 8. The plaintiff/respondent No.1 opposed the petitions by filing written counter alleging that the grounds cited for rejection of plaint are false and not maintainable. It is pleaded that the Commercial Court has jurisdiction to try suit and applications relating to commercial disputes of a specified value out of the entire territory of the State. 8. The plaintiff/respondent No.1 opposed the petitions by filing written counter alleging that the grounds cited for rejection of plaint are false and not maintainable. It is pleaded that the Commercial Court has jurisdiction to try suit and applications relating to commercial disputes of a specified value out of the entire territory of the State. The Agreement dated 01.11.2017 entered between the plaintiff and defendant No.1 shows that the Manufacturing Agreement has the role of plaintiff as a job worker and does not come under the scope of commercial dispute. Reference is made to the cases of Dahiben v. Arvinbhai Kalyanji Bhansai [2020 SCC Online 563], Gunaseelan v. Valarmathi and 2 others [ 2009 (5) CTC 693 , Liver pool and London SP&I Association v. M.V.Sea success I and another [ (2004) 9 SCC 512 ], M. Chinnaiyah v. Naina Mohammed [(2012) 3 MWN (Civil) 817], Central Govt. Employees Welfare Housing Organisation v. Consolidated Civil Construction Ltd. [2012 (1) MWN (civil) 633] and Yrooj Ahamed Lords Enterprises v. Preeti Kitchen appliances Pvt. Ltd. [(2013) (0) CTC 247] to contend that the suit filed by the plaintiff does not fall under the Commercial Courts Act. It is pleaded that the plea of defendant Nos.1 and 3/revision petitioners is not supported by any evidence and only contains false allegations to prevent the plaintiff from taking real recourse to recover the losses incurred. As such, the plaintiff opposed rejection of plaint. 9. The learned Trial Court upon considering the case of the defendant Nos.1 and 3 for rejection of plaint, held that the plaintiff is merely a job worker engaged to manufacture the products with the components provided by defendant No.1’s company for its brand ‘Eveready’. The total value of supply to the defendant No.1’s company between 19.06.2016 to 11.08.2021 was Rs.4,78,20,08,229/- and there is balance of Rs.3,10,93,228/-. The defendant No.4 was employed in the plaintiff’s company from the year 1998. A conspiracy was hatched with defendant No.4, who was the technical in-charge of defendant No.1 company. Therefore, defendant No.3 company was set up with an intention to steal the intellectual property of plaintiff. The intellectual property included sensitive paperwork such as costings, technical information by way of industrial espionage with nexus of technical team of the company. A conspiracy was hatched with defendant No.4, who was the technical in-charge of defendant No.1 company. Therefore, defendant No.3 company was set up with an intention to steal the intellectual property of plaintiff. The intellectual property included sensitive paperwork such as costings, technical information by way of industrial espionage with nexus of technical team of the company. It is held that the it is the suspicion of plaintiff company that defendant No.1 company through its team would indulge in industrial espionage by theft of intellectual property and therefore, filed suit for damages. Finally, it is held that the plaintiff did not plead violation of intellectual property rights relating to trademarks. Therefore, the dispute does not fall under Section 2 (c) (xvii) of Commercial Courts Act. It is held that according to the plaint, the plaintiff pleaded that the defendants cheated him and caused loss by creating parallel production and therefore, a suit for damages is filed. Therefore, it is held that there are no grounds to reject the plaint and dismissed the petitions. Aggrieved by the same, the present revision petitions are filed. 10. In revisions, the defendant Nos.1 and 3/revision petitioners have set out the brief facts of the case referring to Annexures-P1 to P13 and all said details are not necessary for adjudication of the Civil Revision Petitions, therefore, not recounted. In grounds of revisions, it is pleaded that a grave error is committed by the learned Trial Court in holding that the suit is not barred by law when the dispute is arising out of a Manufacturing Agreement, dated 01.11.2017 and the value of the suit is more than Rs.1.00 Crore. It is pleaded that the learned Trial Court did not place any weightage on the statements made in the plaint. A petition filed under Order VII Rule 11 of CPC has to be decided on the basis of the statements made in the plaint or material which is filed along with the plaint. The court has to consider the pleadings as a whole, but not in isolation. The allegations in the plaint for damages arose due to a Manufacturing Agreement entered between the plaintiff and defendant No.1 for alleged theft of intellectual property of the plaintiff company. Said pleadings confirmed with the commercial nature and therefore, has to be dealt by the Commercial Court Act. 11. The allegations in the plaint for damages arose due to a Manufacturing Agreement entered between the plaintiff and defendant No.1 for alleged theft of intellectual property of the plaintiff company. Said pleadings confirmed with the commercial nature and therefore, has to be dealt by the Commercial Court Act. 11. A reference is made to the cause of action paragraph in the plaint which shows that there is theft of intellectual property belonging to plaintiff company, whereas, the Trial Court has failed to appreciate the pleadings of the plaint with respect to theft of intellectual property of the plaintiff company and Section 6 of Commercial Courts Act, which determines the nature of commercial disputes with specified value. The dismissal of the petitions has caused grave injustice. As such, pray that the impugned orders be set aside. 12. During arguments, the learned counsel for revision petitioners vehemently contended that the learned Trial Court has not examined the true nature of allegations made in the plaint with respect to a dispute which is arising out of a Manufacturing Agreement dated 01.11.2017 between the plaintiff and defendant No.1. According to the plaintiff, the manufacturing process was developed with its intellectual property by its R & D Department and there are several trade secrets and practices including technical processes with Surface-Mount technology and said technology costs about Rs.5.00 Crores. There are Trade secrets and practices of the plaintiff company, which are allegedly stolen by defendant No.1. A reference is made to the clauses of the Manufacturing Agreement at clauses 15, 15.2, 15.3, 1, 2.3, 3, 4 and 16 for claiming damages. Reference is made to the contents of paragraphs 18, 24, 28 and 31 of the plaint, Paragraph (B) under the caption of ‘Computation of damages’ and the cause of action paragraph to contend that the nature of dispute is one of violation of intellectual rights and the damages arising there from and therefore, the dispute squarely falls under the Commercial Disputes Act. In view of the aforementioned, the learned counsel for revision petitioners prayed that the impugned orders be set aside and the I.As under Order VII to 11 of CPC be allowed and to reject the plaint. 13. In response, the learned counsel for the plaintiff/respondent No.1 argued that the suit is filed seeking damages and therefore, the same does not fall under the purview of a Commercial Courts Act. 13. In response, the learned counsel for the plaintiff/respondent No.1 argued that the suit is filed seeking damages and therefore, the same does not fall under the purview of a Commercial Courts Act. It is submitted that in the Manufacturing Agreement, the plaintiff company is only a job worker and therefore, the dispute does not come under the scope of commercial dispute as defined under Section 2 (c) of Commercial Disputes Act, 2015. Reference is made to various judgments of the Hon'ble Supreme Court of India to contend that rejection of the plaint would result in miscarriage of justice. It is submitted that no grounds are made out for rejection of the plaint and that the suit cannot be thrown out on the threshold. It is submitted that the cause of action is stated and the same arises due to the loss caused by the defendants by engaging in parallel production of the products manufactured by the plaintiff company and therefore, a suit for damages is filed and said suit is not commercial in nature. Therefore, the learned counsel for the plaintiff company alleged that there is misinterpretation and falsification of the pleadings, as such, prayed that the revision petitions be dismissed. 14. For rejection of the plaint, as per Order VII Rule 11 of CPC, the pleadings of the plaint and the documents relied upon by the plaintiff have to be considered. The pleadings of the written statement or any other documents filed by the defendants cannot be considered. As such, when the pleadings of the plaint alone are perused, it is seen that there is a pleading about the plaintiff/respondent No.1 entering into a Manufacturing Agreement with defendant No.1 by employing manufacturing process developed by the plaintiff consisting of Surface-Mount technology to facilitate production of ‘Eveready’ with a cost of Rs.5.00 Crores and relevant pleadings are extracted and produced below: “3. It is stated that, in the year 2016 the Defendant No.1 Company M/s Eveready, approached the Plaintiff Company through its Manager, one Mr. It is stated that, in the year 2016 the Defendant No.1 Company M/s Eveready, approached the Plaintiff Company through its Manager, one Mr. Suddajit Sinha, for the manufacture and supply of LED Bulbs and Batons, to be produced by the Plaintiff Company, for its brand 'Eveready' The Manager of Defendant No.1 Company along with his technical team meticulously inspected the manufacturing processes followed at the factory of the Plaintiff and was extremely satisfied with the operational excellence with respect to the cycle- time calculations of products being manufactured and other practices designed by the Plaintiff Company for the LED products which they found to be unique with the highest quality standards. 4. After the above due diligence, the Defendant No.1 Company even placed order for trial production from 19.03.2016 to 31.10.2017 (Exhibit-7), where almost 2,42,29,729 units were manufactured by the Plaintiff during the trial production. Subsequently, after having satisfied with the strengths of the Plaintiff Company, the Defendant No.1 entered into an Agreement with the Plaintiff Company on 01.11.2017 (Exhibit-8) for the manufacture of LED Lighting products for the brand 'Eveready' as per its design and specification, agreeing to the terms with regard to the scope and modalities along with other conditions such as execution of orders that are to be forecasted through its Manager from time to time. 5. It is stated that, the manufacturing process developed and established by the Plaintiff Company are nothing but its own intellectual property achieved with Research and Development which are its trade secrets and practices including the technical processes with Surface-Mount Technology (SMF) which was further upgraded as described hereunder by the Plaintiff Company to facilitate the production of 'Eveready' with an additional cost of more than Rs.5.00 Crores.” 15. The plaintiff alleged that defendant No.1 conspired with defendant Nos.2 and 4 to create defendant No.3 company with an intention to steal intellectual property of the plaintiff company. Relevant pleadings are extracted and produced below: “18. The Defendant No.1 Company hatched a conspiracy along with Defendant No.4 Mr. The plaintiff alleged that defendant No.1 conspired with defendant Nos.2 and 4 to create defendant No.3 company with an intention to steal intellectual property of the plaintiff company. Relevant pleadings are extracted and produced below: “18. The Defendant No.1 Company hatched a conspiracy along with Defendant No.4 Mr. Praveen Rawle, the Technical Head in-charge of the Defendant No.1 Company at the Plaintiff factory, and also the plastic moulds vendor Defendant No.2 M/s. Vidhata Plastics India Pvt. Limited to set up a parallel production unit under the name of Defendant No.3 M/s.Effectronic Technology Private Limited with an unlawful intent to steal the intellectual property of the Plaintiff Company which include sensitive paper work such as Costings, Technical information of software and hardware belonging to the Plaintiff Company by way of industrial espionage all with the nexus of technical team of the Plaintiff Company and the Defendant No.2. Resultantly it was conspicuous that the forecast of the order from Defendant No.2 Company came to a screeching halt in the year in the month of July 2021, when it instructed to transfer the additional Final Assembly Line provided to Plaintiff Company prior to pandemic. Little did the Plaintiff Company suspect that the Defendant No. I Company through its team would indulge in 'Industrial Espionage' by theft of its intellectual property both of technology as well as its technical team by poaching, with a criminal intent to put the Plaintiff Company out-of-business.” 16. In view of commercial dispute with respect to parallel production of products produced by plaintiff company, the plaintiff company issued a legal notice dated 06.09.2021 claiming Rs.50.00 Crores towards theft of intellectual property. Relevant pleading is perused and extracted below: “24. To the Notice issued by the Plaintiff Company on 06.09.2021 for a claim of Rs.50.00 Crores which included theft of intellectual property abrupt stalling of production without notice, and for the loss and damage caused to its business….” 17. The theft of intellectual property is reiterated again at paragraph 28 of the plaint as follows: “28. To the Notice issued by the Plaintiff Company on 06.09.2021 for a claim of Rs.50.00 Crores which included theft of intellectual property abrupt stalling of production without notice, and for the loss and damage caused to its business….” 17. The theft of intellectual property is reiterated again at paragraph 28 of the plaint as follows: “28. … The Defendant No.1 hatched a conspiracy premeditatedly along with the other Defendants not only in the theft of the technical know how, software, vital data and other documents with regard to costings etc; but also conspired in poaching the entire technical team of the Plaintiff Company with an intent to make the Plaintiff Company incapable and remediless continuing their production and thereby making them reel under losses.” 18. In the sub heading under computation of damages, there are damages claimed for loss of business opportunity with intellectual property theft allegation as follows: “B) LOSS OF BUSINESS OPPORTUNITY ………….. (iv) Theft of Technology and the technologists gave the Defendants to advantage of nothing less than Rs 3.18 Crores per annum and the same was not disputed by the Indian Institute of Technology in its report date 17.08.2022. The wrongful gain is indirectly the opportunity lost by the Plaintiff Company.” 19. Further, there are damages claimed towards margins earned by the plaintiff company prior to the agreement, loss of margin caused to the plaintiff on account of criminal conspiracy hatched by defendants consisting of direct loss to the plaintiff company and total loss of opportunity at Rs.6,51,73,936/-. Lastly, the cause of action paragraph has the following narration: “ ………….. Further, there are damages claimed towards margins earned by the plaintiff company prior to the agreement, loss of margin caused to the plaintiff on account of criminal conspiracy hatched by defendants consisting of direct loss to the plaintiff company and total loss of opportunity at Rs.6,51,73,936/-. Lastly, the cause of action paragraph has the following narration: “ ………….. the cause continued further with the manufacture and sale of Eveready products of Rs.4,78,20,08,929/- by the Plaintiff Company from 19.03.2016 until 11.08.2021, and the cause continued when the Defendant No.1 hatched a conspiracy along with the Defendant No.2 & 4 and illegally stolen the technology and technical team of the Plaintiff Company and set up a parallel manufacturing under the name and style of Effectronic Technology Private Ltd. the Defendant No.3, and the cause continued after the theft of technology and the technical team when the Plaintiff Company through its Counsel issued a Notice for damages and recovery on 06.09.2021, whereafter the cause continued with the reply of notices by the Defendant No.1 on 24.09.2021 (Exhibit-22), the Defendant No.2 on 23.09.2021 (Exhibit-20), Defendant No.3 on 23.09.2021 (Exhibit-21) and Defendant No.4 on 24.09.2021 (Exhibit-23); and the cause continued hen the Plaintiff had lodged a Complaint before Commissioner of Cyberabad on 25.11. 2021 thereafter lodged another Complaint on 19.01.2022, and the cause continued when the SHO of Medchal Police station filed FIR No.207/2022 on 10.03 2022, and the cause continued when the SHO, Medchal invited the inspection and opinion of Indian Institute of Technology, Hyderabad whereafter the IIT Professors along with the SHO, Medchal visited the Defendant No 3 Company on 13.07.2022 (Exhibit-32), and the cause continued when the IIT, Hyderabad forwarded its Report on 17.08.2022 confirming that the manufacturing process implemented by the Defendant No.3 is exactly the same as was originally in the Plaintiff Company for which the R&D process has been originally conceived and invested at the Plaintiff Company were being practiced and implemented at Defendant No.3, and the cause continued when the Report clearly stated that the statement of Plaintiff that production facility of the Defendant No.3 saved not less than Rs 3.18 Crores cannot be disputed, and the cause continues even as of now for the Defendant No.1 was instrumental in not just relocation of its production to the Defendant No.3 but also for theft of technology and poaching of technical personnel of the Plaintiff Company inducing them to leave their jobs at the Plaintiff Company and join with the Defendant No.3 Company; ……..” 20. The above-mentioned extracts taken from the plaint clearly show that the entire dispute between the plaintiff and defendant Nos.1 and 3/revision petitioners is with respect to theft of intellectual property rights, technology and production processes. In that context, the plaintiff alleges to have incurred losses and therefore, seeking damages from the defendant Nos.1 and 3/revision petitioners and defendant Nos.2 and 4. The suit cannot be adjudicated without referring to the rights of the parties under the Manufacturing Agreement dated 01.11.2017 and the events following said agreement. 21. In the circumstances, this Court is of the considered opinion that the learned Trial Court has committed error in perusing the facts narrated in the plaint while holding that the case does not involve intellectual property rights relating to trademarks or their violation. The said finding is blatantly incorrect and therefore, the suit is liable to be rejected under Order 7, Rule 11 of CPC, as not maintainable in a civil court. 22. The said finding is blatantly incorrect and therefore, the suit is liable to be rejected under Order 7, Rule 11 of CPC, as not maintainable in a civil court. 22. In the result, the Civil Revision petitions are allowed setting aside the Orders dated 06.11.2024 passed by the learned II Additional District and Sessions Judge, Medchal-Malkajgiri District at Medchal in I.A.No.280 of 2024 and 958 of 2024, both in O.S.No.119 of 2023. Consequently, I.A.Nos.280 of 2024 and 958 of 2024 stand allowed. The respondent No.1 is granted liberty to present the suit before proper forum. Pending miscellaneous applications, if any, shall stand closed. No costs.