FAO(OS)206/09,FAO(OS) 207/09 & FAO(OS)211/09 Page 1 * IN THE HIGH COURT OF DELHI AT NEW DELHI + FAO(OS) 206/2009, FAO(OS) 207/2009 & FAO(OS) 211/2009 Reserved on : May 22, 2009 Date of decision : August 07, 2009 1. FAO (OS) 206/2009 & CM No. 7554-7555/2009 Mr. M. Sivasamy ...Appellant. Through: Mr. Chinmoy Pradip Sharma, Advocate VERSUS M/s. Vestergaard Frandsen A/S & Ors. ....Respondents Through: Mr. Sudhir Chandra, Sr. Advocate with Ms. Swathi Sukuman and Ms. Tusha Malhotra, Advocates for R-1 and R-3. 2. FAO (OS) 207/2009 & CM Nos. 7557-7559/2009 M/s. Best Net Europe Ltd. & Ors. ......Appellants. Through: Mr. S.K.Dholakia, Sr. Advocate with Mr. Vivek Singh, Advocate. VERSUS M/s. Vestergaard Frandsen A/S & Ors. .....Respondents Through: Mr. Sudhir Chandra, Sr. Advocate with Ms. Swathi Sukuman and Ms. Tusha Malhotra, Advocates for R-1 and R-3. FAO(OS)206/09,FAO(OS) 207/09 & FAO(OS)211/09 Page 2 3. FAO (OS) 211/2009 & CM Nos. 7594-7597/2009 Alok Masterbatches Ltd ......Appellant Through: Harish Malhotra, Sr. Advocate with Ms. Shiva Lakshmi Singh, Advocate. VERSUS M/s Vestegaard Frandsen A/S and others. ..........Respondents. Through: Mr. Sudhir Chandra, Sr. Advocate with Ms. Swathi Sukuman and Ms. Tusha Malhotra, Advocates for R-1 and R-3 CORAM: HON’BLE MR. JUSTICE MUKUL MUDGAL HON’BLE MR. JUSTICE VALMIKI J.MEHTA 1. Whether the Reporters of local papers may be allowed to see the judgment? yes 2. To be referred to the Reporter or not? yes 3. Whether the judgment should be reported in the Digest? yes % JUDGMENT VALMIKI J.MEHTA, J. 1. By this common order the connected appeals FAO(OS) No.205/2009, FAO(OS) No.206/2009 and FAO(OS) No.211/2009 are being FAO(OS)206/09,FAO(OS) 207/09 & FAO(OS)211/09 Page 3 decided. Since the facts of all the appeals are common, being referable to the suit CS(OS) 599/07 pending in the original side of this court, for the purpose of convenience, reference is being made to facts and parties appearing in the appeal FAO (S) No.207/2009. 2. The issue which requires to be addressed in these appeals is : where two parties are claiming exclusive ownership rights in a product and its confidential/proprietary information along with related copyright material, then in such a case whether one party is entitled to seek production of documents with respect to the product of the other party under the provisions of Order 11 Rules 12 and 14 of the Code of Civil Procedure (CPC), 1908. The related issue is if the production of the documents is to be allowed, then, what precautions are to be observed to protect the rights of the party against whom production of documents is ordered. The learned Single Judge by the impugned order has allowed the applications of the plaintiffs and directed the defendants to „discover‟ in a sealed cover the documents as stated in the order by a direction for 'production' of said documents. 3. The respective cases of the parties are as follows: The plaintiffs (respondents No. 1 to 3 before this Court) claim to be exclusive owners of the trade secrets and confidential information alongwith copyright in the data base, recepies and the other test data which result in a product “FENCE”, which is an insecticidal netting (disease control textiles) FAO(OS)206/09,FAO(OS) 207/09 & FAO(OS)211/09 Page 4 used in agriculture to surround livestock or crops. The plaintiffs contend that the mosquitoe nets are made from polyester and polyethylene and that the production of yarn and manufacture involves a two step process in which masterbatch recepies are first formed and later mixed with pre-determined number of pure PE pallets and extrusion process of such mixture, through a nozzle of appropriate size, to produce yarn. The plaintiffs claim to have developed this product „FENCE‟ in September, 2001 and first sale of the product was claimed in mid 2003. The plaintiffs also claim to have developed two other products ZEROFLY (developed in 1996 and sold for the first time in 2001) and PE BED NET (developed in 2001, presently not in sale). The plaintiffs state that the defendant Nos. 4 and 5( appellants No. 4 and 2 before this Court ) were the employees of plaintiff No.1 (respondent No.1) being the Sales Manager and Chief of Production of the plaintiff No.1. The plaintiffs further state that these employees left the employment of the plaintiff No.1 and incorporated in Denmark a company M/s Intection A/S (Danish Intection) which has now been declared bankrupt on 30.01.2006. The plaintiffs further state that the said defendants No.4 and 5 illegally took away the confidential information and trade secrets, proprietary data, etc of the plaintiffs with respect to its products including the product „FENCE‟ and formed Danish Intection. Since the suits were filed against this company in Denmark, the plaintiffs state that the defendants No.4 to 6 shifted operations to Great Britain and the companies defendants No.7 to 10 (Appellants No.5,1,6 and 7) were formed to FAO(OS)206/09,FAO(OS) 207/09 & FAO(OS)211/09 Page 5 further the purpose of Danish Intection and the defendants No.4 and 5. A company was also incorporated in France and which company is defendant No.11(Appellant No.7) and suits were also filed inter alia against this company in France. The plaintiffs claim that defendants No.1 to 3 in India are now carrying out the operations of manufacture and sale of the disputed products in league with the other defendants. The plaintiffs further state that the Local Commissioners were appointed by the Learned Single Judge and cooperation was denied to these Local Commissioners. It is also stated that in the proceedings in U.K., the defendants No.5 and 6 were made to disclose the data of developing and testing of the products through documents and which was however subject to a confidentiality agreement, so that only the plaintiff's Danish lawyer, one expert and one plaintiff‟s English lawyer were allowed to see such documents, however, the plaintiffs are not permitted to access such documents which are relevant for the purposes of the suit before the Learned Single Judge. The plaintiffs have further placed reliance on the orders of the English Court directing disclosure of various classes of documents. 4. On the other hand, the case of the defendants is that defendant No.6 (Appellant No.3) is the inventor of this product and he is a scientist. It is stated that he was only working as a Consultant and an independent contractor giving consultation to the plaintiffs. The product of the plaintiffs as also of the defendants has been developed on the advice of Ciba which is a leading FAO(OS)206/09,FAO(OS) 207/09 & FAO(OS)211/09 Page 6 producer of additives which are to be added to PE products to protect them from degradation by ultraviolet light. Being an independent contractor, the defendant No.6 claims that the plaintiffs are not the owners of the proprietary/confidentiality information with respect to the product in question and it is claimed that the plaintiffs‟ claim that they first came upon knowledge or that it was their trade secret is false, misleading and untrue. It is stated that the product Fence of the plaintiff and Netprotect of the defendants were different and that the defendant No.6 using Ciba‟s recommendation took a different route to develop „NETPROTECT‟ (product of the defendants) which was done in 18 months and that there has been no copy of the confidential information of the plaintiffs. All the defendants have basically taken up a common stand that there is no misappropriation of the plaintiffs‟ confidential information nor any attempt to base the product of the defendants on the plaintiff's product or that the two products are the same. Reference to the defendants hereafter will mean reference to the relevant defendant/defendants. 5. We may state that before the Learned Single Judge, and as reflected from the impugned order, reference has been made by the parties to proceedings between the parties in Courts of U.K., Denmark and France and help sought from such proceedings for the disposal of the subject application. However, according to us, with respect to the litigation in India, the Courts in this country would be guided by the provisions of the Laws as applicable in this country and FAO(OS)206/09,FAO(OS) 207/09 & FAO(OS)211/09 Page 7 the pleadings in the suit in this court and not by any orders or decisions of the foreign court, unless, the decision of the foreign Court becomes final and so that it can operate as res judicata between the parties and operate in the parameters of Section 13 and Section 44-A of the Code of Civil Procedure, 1908. No useful purpose will be served in making reference to various orders of the Courts in the different countries as one does not know what are the ingredients/requirements of causes of action of the different laws of those countries and what were the pleadings of the cases in the foreign courts. In fact, we do feel that none of the parties can contend or plead on the basis of orders of the Courts in foreign jurisdiction (particularly interim orders) as there is no finality(including by disposal of appeals) with respect to findings in such orders/judgments, especially in regard to whether the plaintiffs or the concerned defendants are the owners of the product or whether the products are same or different and so on. The orders/judgements in such proceedings having not achieved finality, according to us are not relevant and cannot be relied upon by either of the parties, particularly so where some orders (or portion thereof) are said to be in favour of one party and some in favour of the other. For example, the defendants state that no interim injunction order has been passed in favour of the plaintiffs in the Courts in U.K. or France and similarly the plaintiffs claim that orders of the discovery and production have been passed in their favour in the said Courts. Similarly reference is made to different portions of the judgment/order dated 3.4.2009 of the High Court of Justice, Chancery FAO(OS)206/09,FAO(OS) 207/09 & FAO(OS)211/09 Page 8 Division, each portion holding one or the other aspect in favour of one or the other party. Some such references are to paras 49, 660, 672, and 673 and the same are reproduced below : “49: On 30 March 2007 VF commenced proceedings in the Delhi High Court against all the present Defendants, IIC, Dr Skovmand, Mr M. Sivasamy trading as Siva Enterprises/Sivalakshmi Plastics (Bestnet‟s net manufacturer), Alok Masterbatches Ltd (Bestnet‟s masterbatch producer, which appears also to trade as Alok Industries, “Alok”) and Biotech International. On 2 April 2007 VF obtained a search and seizure order against the three Indian defendants. VF claim that Mr Sivasamy and Alok failed to comply with this order and have commenced proceedings for contempt of court against them. On 15 May 2007 VF obtained an interim injunction against all the defendants in the Indian proceedings. VF claim that the Defendants have breached the injunction and have commenced proceedings for contempt of court against them as well. The Indian defendants have applied to discharge the injunction and that application is pending, although VF have settled with Biotech International.” 660: Conclusion. All of these factors point more or less strongly towards the conclusion that the information contained in the Fence database, and in particular the recipes contained in that database, constituted VF‟s trade secrets. 672: Accordingly, at this stage I will merely observe that it is not obvious to me that an injunction is an appropriate remedy or, if it is, that it should extend to preventing the manufacture and sale of the Defendants‟ current product. Although I have concluded that Dr Skovmand misused VF‟s trade secrets, he did not simply copy any particular recipes. Moreover, the misuse of VF‟s trade secrets I have found was merely the starting point for a substantial program of further development which resulted in a formulation which is different from any of VF‟s recipes in a number of respects, and in particular (i) the polymer composition (at least in the case of the sample submitted for WHOPES II evaluation), (ii) the inclusion of [Additive L] and (iii) the inclusion of [Additive M]. In addition, a substantial period of time has elapsed since then. 673: I conclude that the Defendants are liable for breach of confidence, but that the question of what remedies VF are entitled to should be the subject of further argument.” Nothing further therefore needs to be said on this aspect as the same cannot be said to be final one way or the other and the litigation is continuing. FAO(OS)206/09,FAO(OS) 207/09 & FAO(OS)211/09 Page 9 6. Let us now refer to provisions of Order 11 Rules 12 to 14 of the CPC which read as under: “12. Application for discovery of documents Any party may, without filing any affidavit, apply to the Court for an order directing any other party to any suit to make discovery on oath of the documents which are or have been in his possession or power, relating to any matter in question therein. On the hearing of such application the Court may either refuse or adjourn the same, if satisfied that such discovery is not necessary, or not necessary at that stage of the suit, or make such order, either generally or limited to certain classes of documents, as may, in its discretion be thought fit: Provides that discovery shall not be ordered when and so far as the Court shall be of opinion that it is not necessary either for disposing fairly of the suit or for saving costs. 13. Affidavit of documents The affidavit to be made by a party against whom such order as is mentioned in the last preceding rule has been made, shall specify which (if any) of the documents therein mentioned he objects to produce, and it shall be in Form No.5 in Appendix C, with such variations as circumstances may require. 14. Production of documents It shall be lawful for the Court, at any time during the pendency of any suit, to order the production by any party thereto, upon oath of such of the documents in his possession or power, relating to any matter in question in such suit, as the Court shall think right; and the Court may deal with such documents, when produced, in such manner as shall appear just” 7. A reference to the aforesaid provisions show that the first step is the discovery of documents and after discovery of documents there is a second step, and this is again a material step, which is of production of documents. However, the two steps are necessarily distinct and separate in as much as ordinarily there is no production till the affidavit is filed in the Court discovering FAO(OS)206/09,FAO(OS) 207/09 & FAO(OS)211/09 Page 10 the documents in the appropriate form as prescribed in the CPC. Of course, when the particulars of documents are known, a party can straightaway invoke Order 11 Rule 14 because the particular documents are known to be in the power and possession of the opposite party. A reading of the aforesaid provisions of Order 11 Rules 12 and 14 bring out certain salient features as under: (i) The documents sought to be discovered and produced have to be relevant to the matter in controversy viz matters in question. (ii) The documents have to be in the possession and power of the person against whom discovery and production is sought. (iii) Discovery and production of the documents which are sought for are necessary at that stage of the suit; (iv) The discovery and production is necessary for fairly disposing of the suit or for saving costs. (v) The discovery and production may be general or limited to certain classes of documents as the Court in its discretion deems fit and the production will only be ordered if the Court considers it just. 8. The decision of the Supreme Court, and the leading one with respect to these provisions, is the judgment in M.L.Sethi Vs. R.P.Kapoor, AIR 1972 SC 2379. Two other judgments on the issue are also referred to by the FAO(OS)206/09,FAO(OS) 207/09 & FAO(OS)211/09 Page 11 Learned Single Judge namely Sasanandgouda Vs. Amarkhed, AIR 1992 SC 1163 and Rajesh Bhatia Vs. G.Parimala, 2006 (3) ALD 415 in his judgment and we propose to reproduce such portions of the judgment of the Learned Single Judge which reproduces relevant paras of those judgments. These portions are :- “30. In M.L. Sethis’s case (Supra) the Supreme Court held that: “Generally speaking, a party is entitled to inspection of all documents which do not themselves constitute exclusively the other party‟s evidence of his case or title. If a party wants inspection of documents in the possession of the opposition party, he cannot inspect them unless the other party produces them, The party wanting inspection must, therefore, call upon the opposite party to produce the document. And how can a party do this unless he knows what documents are in the possession or power of the opposite party? In other words, unless the party seeking discovery knows what are the documents in the possession or custody of the opposite party which would throw light upon the question in controversy, how is it possible for him to ask for discovery of specific documents?...” The Court, speaking about Order 11, Rule 12 CPC, held that: “When the Court makes an order for discovery under the rule, the opposite party is bound to make an affidavit of documents and if he fails to do so, he will be subject to the penalties specified in Rule 21 of Order 11. An affidavit of documents shall set forth all the documents, which are, or have been in his possession or power relating to the matter in question in the proceedings. And as to the documents which are not, but have been in his possession or power, he must state what has become of them and in whose possession they are, in order that the opposite party may be enabled to get production from the persons who have possession of them (see Form No.5 in Appendix C of the Civil Procedure Code). After he has disclosed the documents by the affidavit, he may be required to produce for inspection such of the documents as he is in possession of and as are relevant”. “31. The Court also held that the documents sought to be discovered and not be admissible in evidence in the enquiry of the proceedings and it is sufficient that the documents would be relevant for the purpose of throwing light on the matter in controversy. In a subsequent decision, dealing with an election dispute, Sasanagouda V. S.B. Amarkhed AIR 1992 SC 1163, the position vis-a-vis production of documents on discovery and inspection was explained, in the following terms: FAO(OS)206/09,FAO(OS) 207/09 & FAO(OS)211/09 Page 12 “The court, therefore, is clearly empowered and it shall be lawful for it to order the production, by any party to the suit, such documents in his possession or power relate to any matter in question in the suit provided the Court shall think right that the production of the documents are necessary to decide the matter in question. The Court also has been given power to deal with the documents when produced in such manner as shall appear just. Therefore, the power to order production of documents is coupled with discretion to examine the expediency, justness and the relevancy of the documents to the matter in question. These are relevant considerations, which the Court shall have to advert to and weigh before deciding to summoning the documents in possession of the party to the election petition” 34. Now, while considering an application under Order 11, Rule 12, CPC, the Supreme Court has ruled that relevance, justness and expediency to product documents are germane consideration which weigh with courts, while making orders. It was also held that admissibility of documents is not a relevant consideration while deciding whether to direct discovery. In the decision relied on by the defendants, i.e. Rajesh Bhatia’s case (supra) it was held that: “In Halsbury‟s Laws of England, fourth edition, Volume 13 in para 1, the nature and extent of discovery has been considered thus: The term “discovery” in this title is used to describe the process by which the parties to civil cause or matter are enabled to obtain, within certain defined limits, full information of existence and the content of all relevant documents relating to the matters in question between them. The process of the discovery of documents operators generally in three successive stages, namely (1) the disclosure in writing by one party to the other of all the documents which he has or has had in his possession custody or power relating to matters in question in the proceedings,(2) the inspection of the documents disclosed, other than those for which privilege from or other objection to production is properly claimed or raised; and (3) the production of the documents disclosed either for inspection by the opposite party or to the court. The function of the discovery of documents is the provide the parties with the relevant documentary material before the trial so as to assist them in appraising the strength or weakness of their respective cases, and thus to provide the basis for the fair disposal of the proceedings before or at the trial. Each party is thereby enabled to use before the trial or to adduce in evidence at the trial relevant documentary material to support or rebut the case made by or against him to eliminate surprise at or before the relating to documentary evidence and to reduce the costs of the litigation. [Emphasis is mine] FAO(OS)206/09,FAO(OS) 207/09 & FAO(OS)211/09 Page 13 At page 33 in para 37 it has been further dealt as under. The obligation to disclose the existence of relevant documents is now coextensive with the obligation to produce documents for inspection. The fact that a document is privileged or otherwise protected from inspection is no reason for not disclosing its existence. In determining whether a document should be disclosed by a party two tests should be applied: (1) whether it is relevant: (2) whether it is or was in the possession, custody or power of the party or his agent: and in any case when the order directing disclosure has limited discovery or relates to particular documents only the terms of that order must be applied. [Emphasis is mine] The court later summarized the law in the following manner: “40. From the above discussion it appears that the rules of procedure envisaged under Order 11 of the Code and the rules of evidence contained in Chapter 10 of the Act operate in different spheres. They may appear to be analogous in certain areas, but the purpose or object behind these provisions would clearly tell us that the former rules are meant to shorten the litigation at the initial stage before the trial and the latter rules of evidence are meant to discover the truth at the stage of trial or giving evidence. Not only that discovery of facts or discovery of documents can be allowed only with the leave of the court, discovery by means of interrogatories can be objected on the ground that it is scandalous, Irrelevant, mala fide and on the ground of privilege. The answer to the interrogatory shall be by means of an affidavit. Similarly, discovery of documents can be objected on the ground of legal or professional privilege; that they may tend to criminate a party or expose him to forfeiture; that they are protected by public policy; that they are not in the sole possession of the party; that they solely relate to the case of the party; that they are in the possession of the party as an agent or a representative of another; and that they disclose evidence of party‟s own case. Again the discovery of documents shall be made upon oath. Non-compliance with the order of discovery of documents entails if it is by the plaintiff the dismissal of his suit and if it is by the defendant the striking down of his defence, whereas, under the rules of evidence