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Delhi High Court Rules that the Infraction of Right Coupled with the Right itself Constitutes the ‘Cause of Action’

In a recent judgment delivered in the case of Music Broadcast Limited v. Axis Bank & anr, the Division Bench of the Delhi High Court ruled with respect to the exclusive jurisdictional clauses contemplated in voluntary license agreements and entailed the circumstances in which such jurisdictional clauses came into play vis-à-vis “cause of action”.

Brief Facts of the Case –

In this case, Music Broadcast Limited (hereinafter referred to as the Plaintiff) filed an appeal against the order of a Single Judge of the Delhi High Court dated February 09, 2016. The learned Single Judge held that the matter fell under the jurisdiction of the High Court of Bombay only, and ordered the case to be transferred to the aforesaid Court.

The Plaintiff operates FM radio stations in several cities like Mumbai, Delhi, Bengaluru, Pune etc. Axis Bank is listed as Defendant no. 1 as the bank had furnished guarantees on the request of the Plaintiff in favor of Phonographic Performances Limited, who is listed as Defendant No. 2.

Background of the case- The Defendant No. 2 had granted a non- exclusive and non- transferable voluntary license to the Plaintiff to broadcast sound recordings (over which the Defendant had control) from radio stations of various cities. One of the clauses of the voluntary license agreement stated that "this licence shall be governed by and construed in accordance with the laws of India and the High Court of Judicature at Bombay shall have exclusive jurisdiction." The cause of action in the matter arose when the Defendants cancelled all the compulsory licenses granted to the Plaintiff vide a cancellation notice pursuant to an order passed by the Copyright Board.

The suit was filed in respect of the compulsory licenses granted on September 3, 2010, and the cancellation thereof. The infraction of rights as claimed in the suit flow from the aforesaid compulsory licenses, and not the voluntary licenses. Furthermore, the compulsory licences were issued by the Registrar of Copyrights at New Delhi and they did not contain any jurisdiction clause.

Aggrieved by the aforesaid, the Plaintiff sought to stay the operation of the impugned cancellation notice. When the matter came before the Single Judge of the Delhi High Court, the Court stayed the operation of cancellation notice, however did not make any final observation with respect to the issue of jurisdiction in the case.

Aggrieved by the order of Single Judge, the Defendant preferred an Appeal before the Division Bench of the Court, however, the Division Bench refrained from making any observations with respect to the issue of jurisdiction on the ground that Single Judge of the Court had not conclusively decided the issue of jurisdiction.

Pursuant to the aforesaid, the Single Judge of the Court vide its impugned order pronounced that the High Court of Delhi did not have territorial jurisdiction to entertain the suit.

Plaintiff's Submissions

The Plaintiffs submitted that the clause in the voluntary license agreement pertaining to the exclusive jurisdiction of the High Court of Bombay has no applicability to the present suit in the High Court of Delhi, as the present suit is regarding the cancellation of the compulsory licences only.

Furthermore, the suit filed at the High Court of Bombay was related to adjustments under the voluntary licence agreements and related to the period prior to the compulsory licences, whereas the present suit is concerned with the compulsory licences and the alleged illegal conduct on the part of the Defendant No.2 in cancelling the said compulsory licences by virtue of the impugned notice dated June 21, 2013.

In support of the jurisdiction of the High Court of Delhi, they also put for the averment that the Copyright Board had its office in New Delhi and all the proceedings, which preceded the issuance of the compulsory licences, had taken place in New Delhi. They also pointed out that the Plaintiff was also carrying on business from its office in New Delhi.

The Plaintiff also advanced arguments regarding the "cause of action". The Plaintiff submitted that the term "cause of action" can be said to include not only the infraction of the right, but also the infraction coupled with the right itself. The Plaintiff relied on the case of Om Prakash Srivastava v. Union of India and Another^[1] to substantiate this contention. This was to reiterate that the license was granted in Delhi, therefore, it can be said that the cause of action arose in Delhi.

Submissions of the Defendants

The Defendants contended that the compulsory licences were nothing but a continuation of the arrangement under the voluntary licence agreements and, therefore, the exclusive jurisdiction clause would apply to the compulsory licences also.

They also submitted that the issuance of a compulsory licence was not a part of the cause of action. And that the cancellation of the said compulsory licences could be a part of the cause of action. They also contended that no part of the cause of action, in any event, arose in Delhi, inasmuch as both the Plaintiff and the Defendant No.2 have their registered offices in Mumbai, the cancellation notice dated June 21, 2013 was issued by the Defendant No.2 at Mumbai and the same was received by the Plaintiff at its office in Mumbai.

It was submitted that the Defendant No.2 does not carry on business in Delhi and that it only has a subordinate office and since no cause of action has accrued in Delhi, it cannot be considered that the Defendant No.2 carries on business in Delhi.

Issue involved and the Division Bench’s Judgment and Observation:

Whether the Delhi High Court had the territorial jurisdiction to entertain the suit?

The Division Bench noted that the learned Single Judge had erred in holding that the exclusive jurisdictional clause of the voluntary license will be applicable to the present case.

The Division Bench of the Court opined that as both the issuance of the compulsory licences and the cancellation of compulsory license was done by the Registrar of Copyrights at Delhi, the same can be referred to as the 'cause of action'. Hence, the fact that the compulsory licences were issued in Delhi necessarily entails that a part of the cause of action arose in Delhi. Hence, the Court at Delhi had the territorial jurisdiction to entertain the instant suit.

That the exclusive jurisdiction clause in the voluntary licence agreement, does not come into play in the case as the case pertained to the cancellation of compulsory license which was issued by the Registrar of Copyrights at Delhi. The Court further observed in the case, that the licences did not contain any exclusive jurisdiction clause and in such cases it has to be seen as to where the cause of action occurred.

In view of the aforesaid observations, the Division Bench of the Delhi High Court dismissed the impugned order passed by the Single Judge.

^[1]2006 (6) SCC 207