REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4233  OF 2018 (ARISING OUT OF SLP (C) NO.25649 OF 2017)

CANARA BANK           …APPELLANT

VERSUS

N.G. SUBBARAYA SETTY & ANR. ...RESPONDENTS

J U D G M E N T  

R.F. Nariman, J.

1. Leave granted.

2. Roma locuta est; causa finita est. Rome has spoken, the

cause is ended.  Rome spoke through her laws.  One of the

pillars of Roman law is contained in the maxim res judicata pro

veritate accipitur  (a thing adjudicated is received as the truth).

This maxim of Roman law is based upon two other fundamental

maxims of Roman law, namely, interest reipublicae ut sit finis

litium (it concerns the State that there be an end to law suits)

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and  nemo debet bis vexari pro una at eadem causa (no man

should be vexed twice over for the same cause).  Indeed, that

this  maxim  is  almost  universal  in  all  ancient  laws,  including

ancient Hindu texts, was discussed by Sir Lawrence Jenkins in

Sheoparsan Singh v. Ramnandan Singh, AIR 1916 PC 78 at

80-81 as follows:

“There has been much discussion at the Bar as to the application of the plea of res judicata as a bar to this suit. In the view their Lordships take, the case has not reached the stage at which an examination  of  this  plea  and  this  discussion would  become  relevant.  But  in  view  of  the arguments  addressed  to  them,  their  Lordships desire to emphasise that the rule of res judicata, while founded on ancient precedent, is dictated by a wisdom which is for all time. “It has been well  said,”  declared  Lord  Coke,  “interest reipublicae  ut  sit  finis  litium,  otherwise  great oppression  might  be  done  under  colour  and pretence of law”: (6 Coke, 9a). Though, the rule of the Code may be traced to an English source, it embodies a doctrine in no way opposed to the spirit  of  the  law  as  expounded  by  the  Hindu commentators.  Vijnanesvara  and  Nilakantha include  the  plea  of  a  former  judgment  among those allowed by law, each citing for this purpose the text  of  Katyayana,  who describes the plea thus:  “If  a  person  though defeated  at  law sue again  he  should  be  answered,  ‘You  were defeated  formerly’.  This  is  called  the  plea  of former  judgment.”  (See  “The  Mitakshara (Vyavahara)”  Bk.  II,  ch.  i,  edited  by  J.R.

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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  be  influenced  by  no  technical considerations  of  form,  but  by  matter  of 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  inevitably  harks  back  to  the judgment  of  Sir  William  De  Grey  (afterwards Lord  Walsingham)  in  the  leading  Duchess  of Kingston’s case [2 Smith Lead. Cas. 13th Ed. pp. 644,  645].  Said  William  De  Grey,  (afterwards Lord  Walsingham)  “from  the  variety  of  cases relative to judgments being given in evidence in civil  suits, these two deductions seem to follow as generally true:  First,  that  the judgment of  a court of concurrent jurisdiction, directly upon the point,  is  as  a  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 upon the point, is in like manner conclusive upon the same matter, between the same parties, coming incidentally in question in another court for a different purpose”. As has been observed by Halsbury, “the doctrine of  res  judicata  is  not  a  technical  doctrine applicable  only  to  records;  it  is  a  fundamental doctrine of all courts that there must be an end of litigation  [Halsbury’s  Laws  of  England,  3rd Ed.,

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Vol. 15, para. 357, p. 185]”. Halsbury also adds that the doctrine applies equally in all courts, and it  is  immaterial  in  what  court  the  former proceeding was taken, provided only that it was a Court of 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 universal law pervading every well regulated system of  jurisprudence,  and  is  put  upon  two grounds,  embodied  in  various  maxims  of  the common  law;  the  one,  public  policy  and necessity, which makes it  to the interest of the State that there should be an end to litigation — interest republicae ut sit finis litium; the other, the hardship  on  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  res judicata is different from that of technical estoppel. “Estoppel rests on equitable principles  and  res  judicata  rests  on  maxims which are taken from the Roman Law” [Ibid p. 745]. Therefore, the argument that res judicata is a  technical  rule  and  as  such  is  irrelevant  in dealing with petitions under Article 32 cannot be accepted.”

4. The  link  between  the  doctrine  of  res  judicata  and  the

prevention  of  abuse  of  process  is  very  felicitously  stated  in

Virgin Atlantic Airways Ltd. v. Zodiac Seats UK Ltd. [2013] 4

All ER 715 (at 730-731) as follows:

“The  principle  in  Henderson  v  Henderson has always been thought to be directed against the

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abuse of process involved in seeking to raise in subsequent  litigation  points  which  could  and should  have  been  raised  before.  There  was nothing  controversial  or  new  about  this  notion when it was expressed by Lord Kilbrandon in the Yat  Tung case  [1975]  AC  581.  The  point  has been taken up in a large number of subsequent decisions, but for present purposes it is enough to refer to the most important of them, Johnson v Gore-Wood & Co [2002]  2 AC 1,  in  which the House  of  Lords  considered  their  effect.  This appeal arose out of an application to strike out proceedings  on  the  ground  that  the  plaintiffs claim should have been made in an earlier action on  the  same  subject  matter  brought  by  a company  under  his  control.  Lord  Bingham  of Cornhill  took up the earlier  suggestion of  Lord Hailsham  of  St  Marylebone  LC  in  Vervaeke (formerly Messina) v Smith [1983] 1 AC 145, 157 that the principle in Henderson v Henderson was “both a rule of public policy and an application of the law of res judicata”. He expressed his own view of the relationship between the two at p. 31 as  follows:  “Henderson  v  Henderson abuse  of process, as now understood, although separate and distinct  from cause of  action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there  should  be  finality  in  litigation  and  that  a party  should  not  be  twice  vexed  in  the  same matter.  This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of  litigation,  in the interests of  the parties and the public as a whole”.”  

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5. Res  judicata  is,  thus,  a  doctrine  of  fundamental

importance in our legal system, though it is stated to belong to

the  realm  of  procedural  law,  being  statutorily  embodied  in

Section 11 of the Code of Civil Procedure, 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, this being the public

policy of Indian law. The obverse side of this doctrine is that,

when applicable,  if  it  is  not  given full  effect  to,  an abuse of

process of the Court takes place. However, there are certain

notable exceptions to the application of the doctrine. One well

known exception is that the doctrine cannot impart finality to an

erroneous decision on the jurisdiction of a Court. Likewise, an

erroneous  judgment  on  a  question  of  law,  which  sanctions

something that is illegal, also cannot be allowed to operate as

res judicata. This case is concerned with the application of the

last mentioned exception to the rule of res judicata. The brief

facts  necessary  to  appreciate  the  applicability  of  the  said

exception to the doctrine of res judicata are as follows. In the

present case, respondent No.1 availed a credit facility from the

petitioner bank sometime in 2001.  Respondent No.2, his son,

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stood  as  a  guarantor  for  repayment  of  the  said  facility.  As

respondent  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  the  dues  of  the  bank,

signed  an  assignment  deed  dated  8.10.2003  with  the  Chief

Manager, Basavanagudi Branch, Bangalore for assignment of

the  trademark  “EENADU”  in  respect  of  agarbathies  (incense

sticks) on certain terms and conditions. Clauses 1 to 7 of the

aforesaid assignment are set out hereunder:

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

1. The  Assignor  hereby  grant,  transfer  and assign upon the Assignee 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 period TEN 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  (Rupees  seventy  six  thousand  only) per  month  payable  for  the  period  of  first  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 the Assignor every month and (ii) the balance  of  Rs.36,000.00  (Rupees  thirty  six

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thousand  only)  to  be  paid  to  the Assignor/permitted to be drawn by him until the expiry  of  first  six  years i.e.  1.10.03 to 30.9.09; and  

3. The  Assignee  shall  pay  the  sum  of Rs.83,600.00 (Rupees Eighty three thousand six hundred only) per month payable for the period of 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 Assignor every month and (ii) the balance  of  Rs.43,600.00  (Rupees  forty  three thousand  six  hundred  only)  to  be  paid  to  the Assignor/permitted to be drawn by him until the expiry  of  next  four  years  i.e.  from  1.10.09  to 30.9.13.

4. The  aforesaid  payments  shall  be unconditionally  made  by  the  Assignee continuously and uninterruptedly for the aforesaid period of TEN years.

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 third party/parties to  use  the  same,  subject  to  the  said  parties agreeing  to  maintain  the  good  quality  and reputation of the trade mark “Eenadu” during the period of validity of assignment (the above said ten years i.e. 1.10.03 to 30.9.13).

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

7. The period of assignment granted under this deed shall come to an end on the expiry of the period  of  ten  years  from  the  date  of  this agreement  i.e.  on  30.9.13  and  the  agreement shall  stand  terminated  without  any  notice  in relation  thereto  and  the  licences,  permissions,

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etc. granted  by the Assignee to the third parties in  respect  of  the  trade  mark  of  the  Assignor “Eenadu”  shall  also  come  to  an  end simultaneously, without  such notice.”

6. By a  letter dated 27.1.2004, the Chief Manager wrote to

respondent No.1 stating that:

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

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

7. On  15.4.2004,  respondent No.1  filed  O.S.  No.2832  of

2004 against the bank challenging the cancellation of the said

assignment deed and for recovery of Rs.2,16,000/- with interest

thereon for the period 1.10.2003 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  into  between  it  and

respondent  No.1 is  vitiated by mistake,  undue influence and

fraud and that, therefore, the said deed is unenforceable in the

eye of law.   

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8. Meanwhile,  the  Chief  Manager  who  signed  the

assignment  deed  on  behalf  of  the  bank,  namely,  one  N.V.

Narayana  Rao,  was  dismissed  from  service  pursuant  to

disciplinary proceedings taken against him on 26.5.2005.   

9. The  two  suits  as  aforestated  were  consolidated  and

disposed  of  by  a  common  judgment.   Issues  were  framed

separately in both suits and it was found that the assignment

deed  was  not  vitiated  by  fraud,  misrepresentation  or  undue

influence.  Consequently,  the bank had no right  to cancel or

rescind  the  aforesaid  assignment  deed.   Respondent  No.1’s

claim for a money decree for Rs.2,16,000/- was dismissed.  It

was also held that the Civil Court had jurisdiction to entertain

the  suits,  despite  the  pendency  of  DRT  proceedings.   The

bank’s suit came to be dismissed.  The ultimate order passed in

the two suits is as follows:

“O.S.  2832/2004  is  hereby  decreed  in  part, granting  a  relief  in  favour  of  the  plaintiff  as against  the  1st  defendant/bank,  declaring  that the  unilateral  cancellation  of  the  assignment agreement dated 8.10.2003 by the 1st defendant bank  vide  letter  No.  LPD/SSI/1034/2004 dated 27.1.2004, is illegal and unsustainable.   

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

O.S. 7018/2004 is hereby dismissed, thereby the prayer  of  the  plaintiff/bank  to  declare  that  the assignment agreement dated 8.10.2003 entered into between the bank and the 1st defendant, as vitiated by virtue of undue influence, fraud and misrepresentation,  practiced  by  the  1st defendant on the bank, is hereby rejected.”  

10. Respondent  No.1  filed  a  review  petition,  being

miscellaneous petition No.324 of 2013, seeking review of the

aforesaid judgment to the extent that his prayer for payment of

Rs.2,16,000/-  was rejected.   On 16.3.2015,  this  petition  was

allowed, and O.S. No.2832 of 2004 filed by respondent No.1

was fully  decreed against  the  bank,  including  the  prayer  for

payment.   Against  the  aforesaid  review  judgment  dated

16.3.2015, an appeal was filed by the bank on 4.1.2016 with an

application  for  condoning  the  delay  of  175  days.   We  are

informed  that  this  appeal  is  still  pending.  Meanwhile,

respondent No.1,  on the basis of  the assignment deed, filed

another suit, being O.S. No.495 of 2008, against the bank for

recovery of a sum of Rs.17,89,915/- with interest for the period

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1.4.2004 to 30.4.2007. By a judgment dated 30.10.2015, this

suit was decreed on the footing that the earlier judgment dated

27.4.2013, not having been appealed against, was res judicata

between the parties.  An appeal filed against this judgment met

with the same fate in that,  by the impugned judgment dated

31.7.2017, the High Court of Karnataka dismissed the appeal

filed by the bank on the self-same ground of res judicata.  It

may be noted that  on 14.7.2017,  the hearing of  the appeal,

which  culminated in  the  impugned judgment,  was  concluded

and judgment  was reserved.   It  was  only  after  this  that  the

petitioner bank, for the first time on 26.7.2017, filed a review

petition  against  the  judgment  dated  27.4.2013  with  a

condonation of  delay  application  of  1548 days.   This  review

petition is also stated to be pending.  

11.   Shri Dhruv Mehta, learned senior advocate appearing on

behalf  of  the petitioner  bank,  has  argued that  no  issue was

struck as to res judicata as the same had not specifically been

pleaded in the plaint of the suit of 2008.  Indeed, the judgment

dated 27.4.2013 came long after  the pleading in  the second

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suit,  and  no  amendment  of  the  plaint  was  sought  so  as  to

incorporate  the  plea  of  res  judicata.   No  issue  having  been

raised,  it  was impermissible,  according to the learned senior

advocate, to have gone into this plea at all.  It was also argued

that on the assumption that the said plea could be gone into,

there were two statutory bars to relief, namely, Section 45 of the

Trade Marks Act, 1999 and Sections 6 and 8 read with Section

46(4) of the Banking Regulation Act, 1949.  The first statutory

bar  made  it  clear  that  unless  the  assignment  deed  was

registered, it could not be received in evidence by any Court.

Sections 6 and 8 of the Banking Regulation Act interdicted the

bank from doing any business other than banking business and

that, therefore, the assignment deed which enabled the bank to

trade in goods and to earn royalty from an assignment of the

trademark  would  be  hit  by  the  aforestated  provisions  and,

therefore,  would  be  void  in  law.  For  this  purpose,  he

relied  strongly  upon  the  judgment  of  this  Court  in

Mathura  Prasad  Bajoo  Jaiswal  &  Ors  v.  Dossibai  N.  B.

Jeejeebhoy, (1970) 1 SCC 613, and various other judgments

which  have  followed   the  law  laid  down  by  the  aforesaid

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judgment.  According  to  him,  therefore,  these  two  statutory

prohibitions being pure questions of law, which are unrelated to

facts which give rise to a right, cannot be res judicata between

the parties.   According to  the learned senior  advocate,  both

points  had  been  raised  before  the  Courts  below  with  no

success.  Indeed, the very letter dated 27.1.2004 cancelling the

assignment  deed  would  itself  show  that  the  plea  of  the

assignment deed being contrary to the Banking Regulation Act

was the very reason for cancelling the aforesaid  deed.  He also

referred  to  and  relied  upon the  fact  that  the  Bank  Manager

responsible for signing the said deed had been dismissed from

service by an order dated 26.5.2005. Shri Mehta also strongly

relied upon a judgment dated 29.1.2011, by the Sessions Court

in Bangalore, by which the Chief Manager, one A. Sheshagiri

Rao, who was made accused No.1 in a special criminal case

filed by the CBI and respondent Nos. 1 and 2, who were made

accused nos. 2 and 3 respectively, were each sentenced to 6

months, three years and two years respectively by the learned

Sessions Judge, having been convicted under Sections 120B

and 420 of  the  Indian  Penal  Code.  Accused No.1  was also

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convicted of an offence under Section 13 of the Prevention of

Corruption  Act,  1988.   According  to  the  learned  senior

advocate,  therefore,  the  doctrine  of  res  judicata  cannot  be

stretched to allow perpetuation of a fraud committed upon the

bank.  

12. Shri Shanthakumar Mahale, learned advocate appearing

for respondent nos. 1 and 2, on the other hand, defended the

judgments  of  the  Courts  below.   According  to  the  learned

counsel, the judgment dated 27.4.2013 was delivered long after

the  Chief  Manager  was  dismissed  and  after  the  Sessions

Judge’s judgment dated 29.1.2011 convicting respondent Nos.

1 and 2.  This judgment specifically held that there was no fraud

played,  that  the  bank  itself  sought  the  assignment  from

respondent  Nos.  1  and  2,  and  that  since  there  was  no

misrepresentation, undue influence etc., the assignment deed

was valid in law, the cancellation of the said deed being illegal.

This judgment is final between the parties and has never been

challenged, except by way of a review which was filed belatedly

after  hearing  both  parties  in  the  appeal.   The  said  review 15

petition,  which  is  obviously  an  abuse  of  process  with  huge

delay,  could not  possibly  render  the res sub judice so as to

affect  the  judgments  of  the  Courts  below.   According  to  the

learned counsel, neither Section 45 of the Trade Marks Act nor

Sections 6 and 8 of the Banking Regulation Act are capable of

only one obvious interpretation so that, on their application, the

assignment deed becomes illegal in law.  

13. We had appointed Shri K.V. Viswanathan, learned senior

counsel, as Amicus Curiae to guide us in this matter.  He has

referred  to  a  large  number  of  judgments  and  has  rendered

invaluable assistance to this Court in order that we arrive at a

proper and just conclusion in this matter.  He has argued that

the review petition that is filed belatedly against the judgment

dated  27.4.2013,  being  grossly  belated  with  no  chance  of

success,  would  not  take  away  the  res  judicata  effect  of  the

judgment  dated  27.4.2013.   According  to  the  learned senior

counsel, the case law makes it clear that if an appeal is filed

within limitation, the res never becomes judicata. In fact, until

the limitation for filing an appeal is over, the res remains sub 16

judice.  It is only also when the limitation period is over that the

res can  be considered  to  be judicata.   Depending upon the

length of time for which delay is sought to be condoned, the

Court can either proceed with the matter and consider the case

on the  footing  of  res  judicata  or  stay  further  proceedings  in

order to await the outcome of the proceedings in the appeal in

the  other  case.  The  test,  according  to  the  learned  senior

counsel,  is  whether  the  delay  in  filing  the  appeal  can  be

considered  by  the  Court  to  be  without  sufficient  cause  and,

therefore, an abuse of process.  It is also important to find out

whether third party rights have arisen in the meanwhile.  He has

cited  a  large  number  of  judgments  before  us,  including  the

position in the U.K. and U.S.  Interestingly, he cited judgments

to  show that  in  the  United  States,  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 Shri

Mehta.  He pressed into service the judgment in V. Rajeshwari

v. T.C. Saravanabava,  (2004) 1 SCC 551 for the proposition 17

that a plea of res judicata not properly raised in the pleadings or

put in issue at the stage of trial could not be permitted to be

taken.  A  closer  look  at  the  said  judgment  shows  that  the

judgment  dealt  with  such  a  plea  not  being  permitted  to  be

raised 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 judgment contained in the two suits of

2004.  It is only after full arguments on both sides that the trial

Court  in  the  judgment  dated  30.10.2015  accepted  the

respondent’s plea of res judicata.  Even before the appellate

Court,  the  point  of  res  judicata  was  argued  by  both  parties

without  adverting  to  the  aforesaid  objection.  It  is  obvious,

therefore, that this ground raised for the first time before this

Court, cannot non-suit the respondents.  

15. The doctrine of res judicata is contained in Section 11 of

the  Code  of  Civil  Procedure,  1908,  which,  though  not

exhaustive  of  all  the  facets  of  the  doctrine,  delineates  what

18

exactly  the  doctrine  of  res  judicata  is  in  the  Indian  context.

Section 11 reads as under:

“11. Res judicata - No Court shall try any suit or issue  in  which  the  matter  directly  and substantially  in  issue  has  been  directly  and substantially in issue in a former suit between the same  parties,  or  between  parties  under  whom they  or  any  of  them claim,  litigating  under  the same  title,  in  a  Court  competent  to  try  such subsequent suit 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 suit which has been decided prior to the suit  in question whether or not it  was instituted prior thereto.  

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

Explanation  III.—The  matter  above  referred  to must in the former suit 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 been made ground of defence or attack  in  such  former  suit  shall  be  deemed to have been a matter directly and substantially in issue in such suit.  

Explanation V.—Any relief claimed in the plaint, which  is  not  expressly  granted  by  the  decree, shall, for the purposes of this section, be deemed to have been refused.  

19

Explanation  VI.—Where  persons  litigate  bona fide in respect of public right or of a private right claimed in common for  themselves and others, all persons interested in such right shall, for the purposes  of  this  section,  be  deemed  to  claim under the persons so litigating.  

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

Explanation  VIII.—An  issue  heard  and  finally decided  by  a  Court  of  limited  jurisdiction, competent to decide such issue, shall operate as res judicata in a subsequent suit, notwithstanding that  such  Court  of  limited  jurisdiction  was  not competent to try such subsequent suit or the suit in  which  such  issue  has  been  subsequently raised.”

16. This Court in Sheodan Singh v. Daryao Kunwar, (1966)

3  SCR  300  (at  304-305)  has  stated  with  some  felicity  the

conditions  that  need  to  be  satisfied  in  order  to  constitute  a

matter as res judicata. This Court held:

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

(i) The matter directly and substantially in issue in the subsequent suit or issue must be the same

20

matter  which  was  directly  and  substantially  in issue in the former suit;

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

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

(iv) The court which decided the former suit must be a court competent to try the subsequent suit or the suit in which such issue is subsequently raised; and

(v) The matter directly and substantially in issue in  the  subsequent  suit  must  have  been  heard and finally decided by the court in the first suit. Further Explanation I shows that it is not the date on which the suit is filed that matters but the date on which the suit is decided, so that even if a suit was filed later,  it  will  be a former suit  if  it  has been decided earlier. In order therefore that the decision in the earlier two appeals dismissed by the  High  Court  operates  as  res  judicata it  will have to be seen whether all the five conditions mentioned above have been satisfied.”

17. As  to  what  happens when an  appeal  is  filed  against  a

judgment in the first proceeding,  a Full Bench of the Allahabad

High Court in Balkishan v. Kishan Lal, (1888) ILR 11 All 148 (at

159-161),  is most instructive.   Mahmood, J.,  speaking for  the

Full Bench, referred to Explanation IV to Section 13 of the Code

21

of Civil Procedure, as it then stood. The learned Judge referred

to the said explanation in the following terms:  

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

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

The language of the section is silent as to what happens  when  an  appeal  has  been  preferred; and  no  doubt  much  depends  upon  the interpretation  of  two  vague  words  “may”  and “until” as they occur in the sentence which I have just  quoted.  I  may perhaps say that  more has been  aimed  at  by  that  sentence  than  the  few words  of  which  that  sentence  consists  could convey.  What  has  been  left  unsettled  by  that sentence is the difficulty pointed out by a juristic Judge of such eminence as Mr. Justice Holloway of  Madras  in  Sri  Raja  Kakarlapudi Suriyanarayanarazu  Garu v.  Chellamkuri Chellamma [5 M.H.C.R. 176] when that learned Judge said:

“In  the  lower  Court  it  seems  to  have been taken for granted that the former judgment  could  not  be  conclusive because an appeal was pending. This is not in accordance with English law, as the judgment on the rejoinder in Doe v.  Wright [10  A.  &  E.  763]  shows.  It would,  however,  be  perfectly  sound doctrine  in  the  view  of  other  jurists (Unger  Oct.  Priv.  Recht,  II,  603,  Sav. Syst., 297, Seq. Waihier, II, 549). As an Englishman I should be sorry to invite a

22

comparison between the reasons given by these great jurists for their and those embodied in the English cases for the contrary doctrine.”

     xxx xxx xxx

I hold that the views thus expressed by Pothier and,  as  Mr.  Justice  Holloway  has  indicated, adopted  by  other  continental  jurists  as  to  the doctrine of  res judicata,  are consistent with the interpretation which I place upon Explanation IV of s. 13 of the Code of Civil Procedure in relation to the authority of judgments still liable to appeal. Such judgments are not  definitive adjudications. They  are  only  provisional,  and  not  being  final cannot  operate  as  res  judicata.  Such  indeed seems to  be the view adopted by the learned Judges  of  the  Bombay  High  Court  when  they said, in Nilvaru v. Nilvaru [ILR 6 Bom. 110.], “We consider that when the judgment of a Court of first instance upon a particular issue is appealed against, that judgment ceases to be res judicata and becomes res sub judice.”

In  this  case,  therefore,  both  the  Courts  below were wrong in law in holding that the previous judgment of the 10th March, 1886, which at the date of the institution of this suit was still liable to appeal, and which at the date of the decision of this suit by the first Court, as also at the date of the decision by the lower appellate Court,  was the subject of a second appeal pending in this Court (S.A. No. 973 of 1886) could operate as res judicata in favour of 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.

Annamalay Chetty v. B.A. Thornhill AIR 1931 PC 263 (at 264),

was faced with the question as to whether the filing of an appeal

would by itself take away the res judicata effect or whether a

matter  heard  and  finally  decided  by  the  first  Court  was  res

judicata until it was set aside on appeal.  The Privy Council held:

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

“All decrees passed by the Court shall, subject  to  appeal,  when  an  appeal  is allowed,  be  final  between the  parties; and no plaintiff 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 final between the parties  so  as  to  form  res  judicata,  while  the respondent contended that  such a decree was final  between  the  parties  and  formed  res adjudicata  until  it  was set  aside on appeal.  In their  Lordships’ opinion  the  former  view is  the correct one, and where an 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 sense that  it  will  form res adjudicata as between  the  same parties.  The  opinion  of  the learned  Judges  of  the  Supreme  Court  clearly inclined to  the same view,  and their  Lordships have a difficulty in appreciating why the learned

24

Judges found it unnecessary to decide this point, for this view still leaves it  open to the Court to see that the appellant does not get decree twice over for the same sum, and it is inconsistent with the  other  ground  expressed  by  them  for  their decision that the appellant’s cause of action had been merged into the decree in Action No. 4122, since, according to this view, that decree was not final.  Their  Lordships  regret  that  the  second action was not adjourned pending the decision of the appeal in the first action, as that would have simplified procedure and saved expense.”

19. Our law, therefore, is different from the American law – a

decree from which an appeal  lies and has in  fact  been filed

would render the res sub judice and not judicata.  This judgment

of the Privy Council has 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  para  2,  Satyanarayan

Prosad Gooptu  v.  Diana Engineering  Company  AIR 1952

Calcutta  124  at  para  10  and  Venkateswarlu  v.  Venkata

Narasimham AIR 1957 Andhra Pradesh 557 at para 3.

20. In  Chengalavala  Gurraju  v.  Madapathy Venkateswara

Row  Pantulu  Garu AIR  1917  Madras  597  at  599-600,  a

25

Division Bench of 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  1882 which enacted that  a decision liable to appeal may be final within the meaning of the Section until the appeal is made has been omitted in the present Code (of 1908) and  the  omission  (which  was  in  all  probability made in  view of  the decision in  Bal  Kishan v. Kishan  Lal (1889)  11  All  148)  removes  any doubts or difficulties in dealing with the question and it is not necessary to speculate on the class of cases to which this explanation can be applied if a judgment liable to appeal is only held to be provisional and not operative as res judicata.

In  dealing  with  Section  52  of  the  Transfer  of Property Act it has been held that a person who purchases  property  between  the  date  of  the disposal of the suit and the filing of the appeal would  be  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)  31  Mad.  268.  If  the appeal  is  only  a  continuation  of  the  original proceedings and the suit is,  for the purpose of Section  52  of  the  Transfer  of  Property  Act, regarded  as  pending  between  the  date  of  the decree and that of the filing of an appeal,  it  is difficult  to  see  why  the  same  rule  should  not apply when dealing with Section 11 of the Civil Procedure Code.  

xxx xxx xxx

26

As regards appeals  filed  out  of  time and after independent  rights  between  the  parties  have ripened,  it  is  unlikely that  courts  would excuse the delay, if during the interval other rights come into existence, which would render it inequitable that questions disposed of should be re-opened at  the  instance  of  a  party  who  seeks  the indulgence of the court: Esdaile v. Payne (1889) 40  Ch.  D.  520.  Following  the  decision  in  Bal Kishen v. Kishen Lal, we are of opinion that the Sub-Collector  was  wrong  in  holding  that  the decision  passed  by  him  in  Suits  Nos.  466  of 1909  and  276  of  1910  had  the  force  of  res judicata during the interval between the date of 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

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 matters where the

hearing in the second case is shortly after the limitation period

for  filing  an appeal  in  the first  case has ended.  At  least  two

judgments,  one of  the Privy  Council  and one of  the Bombay 27

High Court, have referred to the fact that, in appropriate cases,

the hearing in the second case may be adjourned or may be

stayed in order to await the outcome of the appeal in the first

case. See, Chandra Singh 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

expired  or  has  just  expired,  the  Court  hearing  the  second

proceeding can very well  ask the party who has lost  the first

round whether he intends to appeal the aforesaid judgment. If

the answer is yes, then it would be prudent to first adjourn the

second  proceeding  and  then  stay  the  aforesaid  proceedings,

after  the appeal  has been filed,  to  await  the  outcome of  the

appeal in the first  proceeding.  If,  however, a sufficiently long

period has elapsed after limitation has expired, and no appeal

has yet been filed in the first proceeding, the Court hearing the

second  proceeding  would  be  justified  in  treating  the  first

proceeding  as  res  judicata.   No  hard  and  fast  rule  can  be

applied.   The entire  fact  circumstance in  each case must  be

28

looked at before deciding whether to proceed with the second

proceeding on the basis of res judicata or to adjourn and/or stay

the  second  proceeding  to  await  the  outcome  in  the  first

proceeding.   Many  factors  have  to  be  considered  before

exercising this discretion – for example, the fact that the appeal

against  the first  judgment  is  grossly  belated;  or  that  the said

appeal would, in the ordinary course, be heard after many years

in the first  proceeding; or, the fact that third party rights have

intervened,  thereby  making  it  unlikely  that  delay  would  be

condoned in the appeal in the first  proceeding.  As has been

stated, the judicious use of the weapon of stay would, in many

cases, obviate a Court of first instance in the second proceeding

treating a matter as res judicata only to find that by the time the

appeal has reached the hearing stage against the said judgment

in the second proceeding,  the res becomes sub judice again

because of condonation of delay and the consequent hearing of

the appeal in the first proceeding. This would result in setting

aside the trial Court judgment in the second proceeding, and a

de  novo  hearing  on  merits  in  the  second  proceeding

commencing on remand, thereby wasting the Court’s time and

29

dragging  the  parties  into  a  second  round  of  litigation  on  the

merits of the case.

24. In  the present  case,  a belated review petition was filed

after  arguments  were  heard  and  judgment  reserved  by  the

appellate Court.  Would this Court have to await the outcome of

the said review petition before deciding whether the judgment

dated 27.4.2013 is res judicata?  Obviously not.  It is clear that a

review petition  filed long after  the judgment  dated 27.4.2013,

with a condonation application for a delay of over four years,

could not possibly be held to be anything but an abuse of the

process of the Court.  This being so, we proceed to examine

whether the judgment dated 27.4.2013 can be considered to be

res judicata in the second proceeding in this case, namely the

suit  of  2008 filed by respondent No.1.   We now come to the

argument of Shri Dhruv Mehta based on the application of the

principles contained in Mathura Prasad (supra).  

25. In  Mathura  Prasad (supra),  a  question  arose  as  to

whether an erroneous judgment on the jurisdiction of the Small

Causes  Court  in  relation  to  a  proceeding  arising  out  of  the

30

Bombay Rents,  Hotel  and Lodging House Rates Control  Act,

1947 would be res judicata.  The view 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 an application

filed by the appellant for an order determining standard rent of

the premises. This Court laid down:

“5. But the doctrine of res judicata belongs to the domain of procedure: it cannot be exalted to the status  of  a  legislative  direction  between  the parties so as to determine the question relating to  the interpretation of  enactment  affecting the jurisdiction of a Court finally between them, even though no question of fact or mixed question of law and fact and relating to the right in dispute between  the  parties  has  been  determined thereby.  A decision of  a competent Court on a matter in issue may be res judicata in another proceeding  between  the  same  parties:  the “matter  in  issue”  may  be  an  issue  of  fact,  an issue of law, or one of mixed law and fact.  An issue of fact or an issue of mixed law and fact decided  by  a  competent  Court  is  finally determined between the parties and cannot be re-opened between them in another proceeding. The previous decision on a matter in issue alone is res judicata: the reasons for the decision are not res judicata. A matter in issue between the parties  is  the  right  claimed  by  one  party  and denied by the other, and the claim of right from its very nature depends upon proof of facts and application  of  the  relevant  law thereto.  A pure question of law unrelated to facts which give rise

31

to a right, cannot be deemed to be a matter in issue. When it is said that a previous decision is res judicata, it is meant that the right claimed has been  adjudicated  upon  and  cannot  again  be placed in contest between the same parties.  A previous decision of a competent Court on facts which  are  the  foundation  of  the  right  and  the relevant  law applicable  to  the determination of the transaction which is the source of the right is res judicata. A previous decision on a matter in issue is  a composite decision:  the decision on law cannot be dissociated 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 subsequent  proceeding  between  the  same parties, if the cause of action of the subsequent proceeding  be  the  same  as  in  the  previous proceeding, but not when the cause of action is different, nor when the law has since the earlier decision been altered by a competent authority, nor when the decision relates to the jurisdiction of  the  Court  to  try  the  earlier  proceeding,  nor when  the  earlier  decision  declares  valid  a transaction which is prohibited by law.

xxx xxx xxx

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

8.  In  a case relating to  levy of  tax  a  decision valuing property or determining liability to tax in a different taxable period or event is binding only in that  period or  event,  and is  not  binding in  the

32

subsequent years, and therefore the rule of res judicata  has  no  application:  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 a pure question of law unrelated to the right of the parties to a previous 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  upon  parties  special principles  of  law as applicable  to  them inter se, but to ascertain their rights and the facts upon which these rights directly and substantially depend; and to prevent this  ascertainment  from  becoming nugatory by precluding the parties from reopening or recontesting that which has been finally decided.”

10.  A question  relating  to  the  jurisdiction  of  a Court  cannot  be  deemed to  have  been  finally determined  by  an  erroneous  decision  of  the Court.  If  by  an  erroneous interpretation  of  the statute the Court holds that it has no jurisdiction, the question would not, in our judgment, operate as  res  judicata.  Similarly  by  an  erroneous decision if the Court assumes jurisdiction which it does not possess under the statute, the question cannot  operate  as  res  judicata  between  the same parties, whether the cause of action in the subsequent litigation is the same or otherwise.

11. It is true that in determining the application of the  rule  of  res  judicata  the  Court  is  not concerned with the correctness or otherwise of the earlier judgment. The matter in issue, if it is one  purely  of  fact,  decided  in  the  earlier

33

proceeding  by  a  competent  Court  must  in  a subsequent litigation between the same parties be  regarded as  finally  decided  and cannot  be reopened.  A  mixed  question  of  law  and  fact determined in the earlier proceeding between the same parties may not, for the same reason, be questioned in a subsequent proceeding between the same parties. But, where the decision is on a question of law i.e. the interpretation of a statute, it will be res judicata in a subsequent proceeding between 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 parties i.e. the facts on which the right is claimed or  denied  and  the  law  applicable  to  the determination of that issue. Where, however, the question is one purely of law and it relates to the jurisdiction of the Court or a decision of the Court sanctioning something which is illegal, by resort to the rule of res judicata a party affected by the decision will  not be precluded from challenging the validity  of  that  order  under  the rule  of  res judicata,  for  a  rule  of  procedure  cannot supersede the law of the land.”

[Emphasis Supplied] (at pages 617-619)

26. Ultimately,  the Court  held that  since the decision of  the

Civil Judge that he had no jurisdiction to entertain the application

of standard rent, 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, 34

allowed and the orders passed by the High Court and the Court

of  Small  Causes  were  set  aside  and  the  proceedings  were

remanded to the Court of first instance.  

27. This judgment has been followed in a number of cases.  In

Sushil  Kumar Mehta v.  Gobind Ram Bohra (1990)  1  SCC

193, the aforesaid judgment was referred to in paragraphs 20

and 21 and followed, holding that where there is an inherent lack

of jurisdiction, which depends upon a wrong decision, the earlier

wrong  decision  cannot  be  res  judicata.  Similarly,  in  Isabella

Johnson (Smt.) v. M.A. Susai  (1991) 1 SCC 494, this Court,

after setting out the law contained in  Mathura Prasad (supra),

stated that a Court which has no jurisdiction in law cannot be

conferred  with  jurisdiction  by  applying  the  principle  of  res

judicata, as it is well settled that there is no estoppel on a pure

question of law which relates to jurisdiction.  

28. An  instructive  Full  Bench  decision  of  the  Punjab  and

Haryana High Court was cited before us by Shri Viswanathan,

State of Punjab v. Nand Kishore, AIR 1974 Punjab & Haryana

303 at  308-309, which further  explained the ratio of  Mathura 35

Prasad (supra). What troubled the Full Bench, after referring to

Mathura Prasad (supra),  was as to whether  an issue of  law

decided  inter  parties  could  be  held  to  be  res  judicata  in  a

subsequent  proceeding  between  the  same  parties.  After

referring to  Mohanlal  Goenka v. Benoy Krishna Mukherjee,

(1953) SCR 377,  which held that even an erroneous decision

on a question of law operates as res judicata between parties,

and various other Supreme Court 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’s  case? It  is  manifest  that  the sole issue in the appeal was as to the jurisdiction of the Court of Small Causes for determining the standard  rent  of  premises  constructed  in pursuance of  a  building lease of  an open site. Therefore, the authority is a precedent primarily on the limited issue of the jurisdiction of a Court. What directly arose for determination therein and what  has  been  specifically  laid  down  by  their Lordships is  that  a patently  erroneous decision (directly contrary to a Supreme Court judgment) in  a  previous  proceeding  in  regard  to  the jurisdiction  of  a  Court  could  not  becomes  res judicata between the parties. The weighty reason for so holding was that such a result would create a special rule of law applicable to the parties in

36

relation to the jurisdiction of the Court in violation of  rule  of  law declared  by  the  legislature.  It  is manifest that this enunciation was an engrafted exception to the general principle noticed in the judgment itself,  i.e.,  a question of law including the  interpretation  of  a  statute  would  be  res judicata  between  the  same  parties  where  the cause of action is the same.

I am inclined to the view that it is unprofitable and indeed  unwarranted  to  extract  an  observation and  a  sentence  here  and  there  from  the judgment and to build upon it on the ground that certain results logically follow therefrom. Such a use of precedent was disapproved by the Earl of Halsbury L. C. in Quinn v. Leathem 1901 AC 405. Approving  that  view  and  quoting  extensively therefrom their Lordships of the Supreme Court in State of Orissa v. Sudhansu Sekhar Misra AIR 1968  SC  647  have  categorically  observed  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  every  observation  found  therein nor  what  logically  follows  from  the various observations made in it.”

18. In strictness, therefore, the ratio decidendi of Mathura Prasad’s case is confined to the issue of jurisdiction of the Court but is equally well-settled that the obiter dicta of their Lordships is entitled to the greatest respect and weight and is indeed binding if it can be found that they intended to lay down a principle of law. The issue, therefore, is as to what else, apart from the ratio, was sought to  be  laid  down by  the  Supreme Court  in  this case.  The very closely guarded language used by their  Lordships in  the body of  the judgment

37

leads me to conclude that they wished to confine their observations within the narrowest limits. The expression used (which is sought to be extended on behalf of the respondent) is “a pure question of law unrelated to the right of the parties to a previous  suit.”  It  is  very  significant  that  their Lordships,  with  their  meticulous  precision  of language,  have  no  where  laid  down  in  the judgment that a pure question of law can never be res judicata between the parties. Indeed it has been said to the contrary in terms. The emphasis, therefore, in the expression abovesaid is on the 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 Court on a question of law cannot be absolutely dissociated from the decision  on  the  facts  on  which  the  right  is founded.  Consequently  what  was exactly  to  be connoted by the expression “a pure question of law unrelated  to  the  rights  of  the  parties”  was itself expounded upon by their Lordships. Without intending  to  be  exhaustive,  the  Court  has indicated  specifically  the  exceptional  cases  in which special considerations apply for excluding them from the ambit of the general principle of res  judicata.  The  principle  of  law  which  their Lordships herein have reiterated is  that  a pure question of law including the interpretation of a statute  will  be  res  judicata  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,  the  rule  of  res judicata would not be attracted. Secondly, where the  law  has,  since  the  earlier  decision,  been altered by a competent authority. Thirdly, where the earlier decision between the parties related to the  jurisdiction  of  the  Court  to  try  the earlier  proceedings,  the  same  would  not  be allowed      to assume the status of a special rule

38

of law applicable to the parties and therefore, the matter would not be res judicata. Fourthly, where the earlier decision declared 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 the

earlier  decision inter  parties  was res judicata  as it  was on a

question  of  law which  was not  unrelated to  the rights  of  the

parties.  Sharma, J. dissented with this view, and held that the

decision rendered in the earlier case was erroneous and related

to the jurisdiction of the Court. Since a wrong 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

the  Full  Bench  decision  resulted  in  the  decision  in  Nand

Kishore v. State of Punjab, (1995) 6 SCC 614. A brief resume

of  the  facts  show  that  the  appellant  had  been  compulsorily

retired,  having completed only ten years’ qualifying service in

pursuance of Rule 5.32(b) of the Punjab Civil  Services Rules,

Volume  II.   A writ  petition  that  was  moved  by  the  appellant

39

against  the  compulsory  retirement  order  was  dismissed  on

2.2.1962.  The appellant had not questioned the validity of Rule

5.32(b)  in  the  aforesaid  writ  petition.  However,  in  Moti  Ram

Deka v. General Manager, N.E. Frontier Railways, (1964) 5

SCR 683, this Court held that if the compulsory retirement rule

permitted an authority to retire a public servant at a very early

stage of his career, such rule might be constitutionally invalid.

The  appellant,  spurred  by  the  decision  in  Moti  Ram  Deka

(supra), filed a suit in 1964 for a declaration that Rule 5.32 of the

aforesaid rules was constitutionally invalid. A pari materia rule to

that  of  Rule  5.32  was  struck  down by  this  Court  in  Gurdev

Singh Sidhu v. State of Punjab, (1964) 7 SCR 587.  However,

since a writ petition had been filed by the appellant earlier, the

State of Punjab, in its written statement to the suit filed by the

appellant,  took up the plea of  constructive res judicata.   This

plea  found  favour  with  the  Full  Bench  of  the  High  Court  on

8.5.1974, following which a Division Bench allowed the appeal

of the State of Punjab on 13.8.1974.  It is from this judgment that

an appeal landed up before this Court, as is stated hereinabove.

This Court, on 6.12.1990, advised the appellant to file a special

40

leave petition from the order of the High Court dismissing his

writ petition dated 5.2.1962, with an appropriate application for

condonation of delay.  The delay was condoned by this Court in

the interest of justice in the special circumstances of this case

under  Article  142,  and  the  said  belated  appeal  was  allowed

following Gurdev Singh (supra) and striking down the order of

compulsory  retirement  of  the  appellant.  Despite  having  so

decided,  this  Court  went  into  the doctrine of  constructive  res

judicata and decided that the constitutionality of a provision of

law stands on a different footing from other questions of law.  As

there  is  a  presumption  of  constitutionality  of  all  statutes,  the

“might  and ought”  rule  of  constructive  res judicata  cannot  be

applied.  Instead what was applied by this Court was that part of

the decision in Mathura Prasad (supra) which stated that when

the law has,  since  the  earlier  decision in  the appellant’s  writ

petition,  been  altered  by  a  competent  authority,  res  judicata

cannot apply.   The Full  Bench of the Punjab High Court  was

expressly overruled on the point that a “competent authority” can

also be a Court.  Hence, a changed declaration of law would

also fall within an earlier decision being altered by a competent

41

authority.  This Court, therefore, held that since this Court itself

had altered the law when it  declared the  pari materia rule as

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 found to be erroneous on its face, such judgment

cannot  operate  as  res  judicata,  as  to  give  effect  to  such

judgment would be to counter a statutory prohibition.  On the

facts of that case, it  was held that in a land acquisition case,

after vesting has taken place in favour of the State, obviously,

the  lapse  of  a  notification  under  Section  6  of  the  Land

Acquisition Act, 1894 could not possibly arise.

31. In Shakuntla Devi v. Kamla (2005) 5 SCC 390, this Court

held that in view of the changed position in law consequent to a

contrary  interpretation  put  on  Section  14  of  the  Hindu

Succession  Act,  1956  by  V.Tulasamma  vs.  V.Sesha  Reddy

(1977) 3 SCC 99, the earlier decree based on judgments that

were  overruled  cannot  operate  as  res  judicata.  This  is  in

42

consonance  with  the  law  laid  down  by  this  Court  in  Nand

Kishore (supra).

32. Since  Mathura  Prasad  (supra) followed the Full  Bench

judgment  of  the  Calcutta  High  Court  in  Tarini  Charan

Bhattacharjee  and 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  the question  posed by  it  –  namely,

whether  an  erroneous  decision  on  a  pure  question  of  law

operates as res judicata in a subsequent suit where the same

question is raised.  The answer given by the Full Bench is in four

propositions set out hereinbelow:

“(1) The question whether the decision is correct or erroneous has no bearing upon the question whether it  operates or does not operate as res judicata.  The  doctrine  is  that  in  certain circumstances, the Court  shall  not  try  a suit  or issue,  but  shall  deal  with  the  matter  on  the footing  that  it  is  a  matter  no  longer  open  to contest  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 previous decision is right and give effect to it or not  accordingly,  as  it  conceives  the  previous decision to be right or wrong. To say as a result

43

of  such  disorderly  procedure  that  the  previous decision was wrong and that it was wrong on a point of law, or on a pure point of law, and that, therefore,  it  may  be  disregarded,  is  an indefensible form of reasoning. For this purpose, it is not true that a point of law is always open to a party.

(2)  In India,  at  all  events,  a party who takes a plea of res judicata has to show that the matter directly  and  substantially  in  issue  has  been directly and substantially  in issue in  the former suit and also that it  has been heard and finally decided.  This  phrase  “matter  directly  and substantially in issue” has to be given a sensible and businesslike meaning, particularly in view of Ex.  4,Section 11, Civil  P.C., which contains the expression  “grounds  of  defence  or  attack”. Section  11  of  the  Code  says  nothing  about causes of action, a phrase which always requires careful  handling.  Nor  does  the  section  say anything about  points or  points of  law,  or  pure points of law. As a rule parties do not join issue upon academic  or  abstract  questions but  upon matters of importance to themselves. The section requires that the doctrine be restricted to matters in issue and of these to matters which are directly as well as substantially in issue.

(3) Questions of law are of all kinds and cannot be dealt with as though they were all the same. Questions  of  procedure,  questions  affecting jurisdiction,  questions  of  limitation,  may  all  be questions of law. In such questions the rights of parties are not the only matter 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.

44

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

33. Given  the  conspectus  of  authorities  that  have  been

referred to by us hereinabove, the law on the subject may be

stated as follows:

(1) The general rule is that all issues that arise directly

and substantially in a former suit or proceeding between the

same  parties  are  res  judicata  in  a  subsequent  suit  or

proceeding between the same parties.  These would include

45

issues of fact, mixed questions of fact and law, and issues of

law.

(2) To this general proposition of law, there are certain

exceptions when it comes to issues of law:

(i) Where an issue of law decided between the same

parties  in  a  former  suit  or  proceeding  relates  to  the

jurisdiction of the Court, an erroneous decision in the former

suit or proceeding is not res judicata in a subsequent suit or

proceeding between the same parties, even where the issue

raised  in  the  second  suit  or  proceeding  is  directly  and

substantially the same as that raised in the former suit or

proceeding.  This follows from a reading of Section 11 of the

Code of Civil Procedure itself, for the Court which decides

the suit has to be a Court competent to try such suit.  When

read with Explanation (I)  to Section 11,  it  is  obvious that

both the former as well as the subsequent suit need to be

decided  in  Courts  competent  to  try  such  suits,  for  the

“former suit” can be a suit instituted after the first suit, but

which  has  been  decided  prior  to  the  suit  which  was

instituted  earlier.   An  erroneous  decision  as  to  the 46

jurisdiction  of  a  Court  cannot  clothe  that  Court  with

jurisdiction  where  it  has  none.   Obviously,  a  Civil  Court

cannot send a person to jail for an offence committed under

the Indian Penal Code.  If it does so, such a judgment would

not  bind  a  Magistrate  and/or  Sessions  Court  in  a

subsequent  proceeding between the same parties,  where

the  Magistrate  sentences  the  same person  for  the  same

offence under the Penal Code.  Equally, a Civil Court cannot

decide a suit between a landlord and a tenant arising out of

the rights claimed under a Rent Act,  where the Rent  Act

clothes a special Court with jurisdiction to decide such suits.

As an example, under Section 28 of the Bombay Rent Act,

1947, the Small Causes Court has exclusive jurisdiction to

hear  and  decide  proceedings  between  a  landlord  and  a

tenant in respect of rights which arise out of the Bombay

Rent  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 statutory bar created by the Rent Act,

would  have  jurisdiction  to  decide  such  suits,  it  is  the

statutory bar created by the Rent Act  that  must be given

47

effect to as a matter of public policy. (See, Natraj Studios

(P) Ltd. v. Navrang Studios & Anr., (1981) 2 SCR 466 at

482).  An erroneous decision clothing the Civil  Court with

jurisdiction to embark upon a suit filed by a landlord against

a  tenant,  in  respect  of  rights  claimed under  the  Bombay

Rent Act, would, therefore, not operate as res judicata in a

subsequent  suit  filed  before  the  Small  Causes  Court

between the same parties  in  respect  of  the same matter

directly and substantially in issue in the former suit.

(ii) An  issue  of  law  which  arises  between  the  same

parties in a subsequent suit or proceeding is not res judicata

if, by an erroneous decision given on a statutory prohibition in

the former suit or proceeding, the statutory prohibition is not

given effect  to.   This is despite the fact  that  the matter  in

issue between the parties may be the same as that directly

and substantially in issue in the previous suit or proceeding.

This is for the reason that in such cases, the rights of the

parties are not the only matter  for consideration (as is the

case of an erroneous interpretation of a statute inter parties),

as  the  public  policy  contained  in  the  statutory  prohibition

48

cannot be set at naught. This is for the same reason as that

contained in matters which pertain to issues of law that raise

jurisdictional  questions.  We  have  seen  how,  in  Natraj

Studios (supra),  it  is  the  public  policy  of  the  statutory

prohibition contained in Section 28 of the Bombay Rent Act

that  has to be given effect  to.   Likewise,  the public  policy

contained  in  other  statutory  prohibitions,  which  need  not

necessarily  go  to  jurisdiction  of  a  Court,  must  equally  be

given  effect  to,  as  otherwise  special  principles  of  law  are

fastened upon parties when special considerations relating to

public policy mandate that this cannot be done.

(iii) Another exception to this general rule follows from

the matter in issue being an issue of law different from that in

the previous suit or proceeding. This can happen when the

issue of  law in the second suit  or proceeding is based on

different  facts  from the  matter  directly  and  substantially  in

issue in the first suit or proceeding. Equally, where the law is

altered by a competent authority since the earlier decision,

the matter in issue in the subsequent suit or proceeding is

49

not the same as in the previous suit or proceeding, because

the law to be interpreted is different.

34. On the facts of this case, Shri Mehta referred us to the

statutory prohibition contained in the Trade Marks Act and the

Banking Regulation Act.  The relevant provisions are Section 45

of the Trade Marks Act  and Sections 6 and 8 of the Banking

Regulation Act read with Section 46(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 transmission to a registered trade mark, he shall apply in the prescribed manner to the  Registrar  to  register  his  title,  and  the Registrar shall, on receipt of the application and on proof of title to his satisfaction, register him as the proprietor of the trade mark in respect of the goods  or  services  in  respect  of  which  the assignment or transmission has effect, and shall cause  particulars  of  the  assignment  or transmission  to  be  entered  on  the  register. Provided that where the validity of an assignment or transmission is in dispute between the parties, the  Registrar  may  refuse  to  register  the assignment or transmission until the rights of the parties  have  been  determined  by  a  competent court.

50

(2)  Except  for  the  purpose  of  an  application before the Registrar under sub-section (1) or an appeal from an order thereon, or an application under  section  57  or  an  appeal  from  an  order thereon, a document or instrument in respect of which no entry has been made in the register in accordance  with  sub-section  (1),  shall  not  be admitted  in  evidence  by  the  Registrar  or  the Appellate Board or any court in proof of title to the  trade  mark  by  assignment  or  transmission unless the Registrar or the Appellate Board or the Court, as the case may be, otherwise directs.

xxx xxx xxx

BANKING REGULATION ACT, 1949

6.  Forms  of  business  in  which  banking companies may engage  

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

(a) the borrowing, raising, or taking up of money; the lending or advancing of money either upon or without security; the drawing, making, accepting, discounting,  buying,  selling,  collecting  and dealing in bills of exchange, hundies, promissory notes,  coupons,  drafts,  bills  of  lading,  railway receipts,  warrants,  debentures,  certificates, scrips  and  other  instruments  and  securities whether  transferable  or  negotiable  or  not;  the granting and issuing of letters of credit, traveller’s cheques and circular  notes;  the buying,  selling and dealing in bullion and specie; the buying and selling  of  foreign  exchange  including  foreign bank  notes;  the  acquiring,  holding,  issuing  on commission,  underwriting  and  dealing  in  stock,

51

funds,  shares,  debentures,  debenture  stock, bonds, obligations, securities and investments of all  kinds;  the  purchasing  and  selling  of  bonds, scrips or  other  forms of  securities on behalf  of constituents  or  others,  the  negotiating of  loans and advances; the receiving of all kinds of bonds, scrips or valuables on deposit or for safe custody or otherwise; the providing of safe deposit vaults; the  collecting  and  transmitting  of  money  and securities;  

(b) acting as agents for any Government or local authority  or  any  other  person  or  persons;  the carrying  on  of  agency  business  of  any description including the clearing and forwarding of goods, giving of receipts and discharges and otherwise  acting  as  an  attorney  on  behalf  of customers,  but  excluding  the  business  of  a Managing Agent or Secretary and Treasurer of a company;  

(c)  contracting for  public and private loans and negotiating and issuing the same;  

(d)  the  effecting,  insuring,  guaranteeing, underwriting,  participating  in  Managing  and carrying  out  of  any  issue,  public  or  private,  of State,  municipal  or  other  loans  or  of  shares, stock,  debentures,  or  debenture  stock  of  any company,  corporation  or  association  and  the lending of  money for  the purpose of  any such issue;  

(e)  carrying  on  and  transacting  every  kind  of guarantee and indemnity business;  

(f)  Managing, selling and realising any property which  may  come  into  the  possession  of  the company in satisfaction or part satisfaction of any of its claims;  

52

(g) acquiring and holding and generally dealing with any property or any right, title or interest in any such property which may form the security or part of the security for any loans or advances or which may be connected with any such security;  

(h) undertaking and executing trusts;  

(i)  undertaking the administration of  estates as executor, trustee or otherwise;  

(j)  establishing  and  supporting  or  aiding  in  the establishment  and  support  of  associations, institutions,  funds,  trusts  and  conveniences calculated to benefit employees or ex-employees of  the  company  or  the  dependents  or connections of such persons; granting pensions and allowances and making payments  towards insurance;  subscribing  to  or  guaranteeing moneys for  charitable  or  benevolent  objects  or for  any  exhibition  or  for  any public,  general  or useful object;  

(k)  the  acquisition,  construction,  maintenance and alteration of any building or works necessary or convenient for the purposes of the company;  

(l)  selling,  improving,  managing,  developing, exchanging, leasing, mortgaging, disposing of or turning into account or otherwise dealing with all or  any  part  of  the  property  and  rights  of  the company;  

(m) acquiring and undertaking the whole or any part of the business of any person or company, when such business is of a nature enumerated or described in this sub-section;  

(n) doing all such other things as are incidental or conducive to  the promotion or  advancement  of the business of the company;  

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

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

xxx xxx xxx

8. Prohibition of trading Notwithstanding anything contained in section 6 or  in  any  contract,  no  banking  company  shall directly or indirectly deal in the buying or selling or bartering of goods, except in connection with the realisation of security given to or held by it, or engage in any trade, or buy, sell or barter goods for others otherwise than in connection with bills of exchange received for collection or negotiation 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 business as is specified in pursuance of clause (o) of sub-section (1) of section 6.

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

xxx xxx xxx

46. Penalties (1) – (3) xxx xxx xxx

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

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(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  scheme sanctioned under  sub-section (7)  of  section  45,  by  any  person,  such person shall be punishable with fine which may extend to one crore rupees or twice the amount involved in  such  contravention  or  default  where  such amount  is  quantifiable,  whichever  is  more,  and where a contravention or default is a continuing one, with a further 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,

it  is  clear  that  this  plea  was  raised  throughout  both  the

proceedings.  Insofar as the suits of 2004 were concerned, the

judgment dated 27.4.2013 expressly recorded the aforesaid plea

taken on behalf of the bank, but turned it down in paragraphs 44

and 56 as follows:

“44.  The bank has also taken further  steps by virtue of  the assignment deed dated 8.10.2003 obtained  by  them  from  N.G.  Subbaraya  Setty and  filed  an  application  to  the  Trademark Registry as per Ex.D2, seeking for registration of the  assignment  of  the  trademark  obtained  by them  from  N.  Subbaraya  Setty,  the  registered owner of the trademark, and the bank has also paid  Rs.5,000-00  towards  the  registration  fee. But  the  Trademark  Registry  returned  the  said

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application  contending  that,  deficit  registration fee  is  payable  by  the  assignee  and  the assignor/registered owner of the trademark has to file an affidavit  confirming the assignment of the  trademark  in  favour  of  the  bank. Subsequently,  it  appears no further steps have been  taken  by  the  bank  to  comply  with  the objections raised by the Trademark Registry, and hence the said assignment of  the trademark in favour of the bank, could not be registered with the Trademark Registry.  

xxx xxx xxx

56.  So far  as  issue no.1  and 2  raised in  O.S. No.7018/2004  is  concerned,  since  the  plaintiff bank,  has  miserably  failed  to  establish  the allegations  of  misrepresentation,  fraud  and undue influence alleged to have been played, by N.G. Subbaraya Setty on the bank, the plaintiff bank  cannot  escape  from  the  legal consequences of assignment deed obtained by them dated 8.10.2003 and it cannot be held that the assignment deed obtained, by the bank from N.G.  Subbaraya  Setty  is  unenforceable. Therefore,  I  answer  both  the  issues  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:  Whether

plaintiff  proves  that  the  deed  of  assignment  of  trademark,

entered  into  between  plaintiff  and  1st defendant  is  not

enforceable in law?)

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36. Equally, insofar as the trial Court judgment in the second

suit of 2008 is concerned, the said plea was expressly raised

and turned down in the following manner:

“…The defendant No.1 himself has produced the original  Assignment  Deed  and  in  this  case defendant  No.1  himself  has  taken  up  the contention  that  said  Assignment  Deed  is  not registered as per Trade Mark Act and as such, the said document cannot be considered.  There are  certain  procedures  that  within  5  days  the Assignor  file  an  affidavit  to  the  Trade  Mark Authority  in  respect  of  change  of  user  of  the Trade  Mark  and  defendant  No.1  himself  has moved application by paying Rs.5,000/- D.D. for registering  the  document.   Inspite  of  that,  the Trade Mark Authorities  have not  registered the Trade Mark and as such, the learned counsel for 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 is  contended that  the  Assignment  Deed  is  not registered in  accordance with  laws.   But  when the Assignment Deed has been relied upon in the earlier judgments and parties have accepted the execution of the document, then defendant No.1 cannot again contend that said Assignment Deed is not  registered and cannot  be considered for any of the purposes, does not hold good.  It is nothing  but  res  judicata  as  contended  by  the plaintiff in the decisions cited above.”

37. The impugned judgment dated 31.7.2017 also records the

aforesaid submission and turns it down stating:

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“…Indisputably,  the  grounds  regarding insufficiently  stamped  assignment   deed  and non-registration of  the trade mark were argued by  the  Bank  which  were  considered  and addressed  by  the  trial  Court  in  O.S. No.2832/2004 and O.S. No.7018/2004. In such circumstances, raising the very same grounds in the second round of  proceedings,  the issue  in which  the  matter  directly  and  substantially  has been heard and finally decided in a former suit between  the  same  parties,  litigating  under  the same title  amounts to res judicata.   Defendant No.1-Bank  is  precluded  from raising  the  same objection  in  the  present  proceedings  which  is finally decided holding the assignment deed as legal and binding on the defendant No.1-Bank…”

38. We are of the opinion that both the trial Court and the first

appellate  Court  were  entirely  wrong  in  treating  the  statutory

prohibition contained in Section 45(2) of the Trade Marks Act as

res judicata.  It is obvious that neither Court has bothered to

advert to Section 45 and/or interpret the same.  The second

proceeding  contained  in  O.S.  No.495  of  2008  prayed  for

payment of a sum of Rs.17,89,915/- along with interest thereon

for the period 1.4.2004 to 30.4.2007. Paragraph 8 of the plaint

in the said suit reads as under:

“8.The plaintiff  has already filed  a  suit  in  O.S. No.2832/2004 against  the 1st defendant  for  the

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recovery of the amount payable 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  by  then  as  the  amount  had  not become  payable  by  then  i.e.  for  the  period 1.4.2004 to 30.4.2007.”

39. Clearly, therefore, the subsequent suit of 2008 raises an

issue which is different from that contained in the earlier suit

filed by the same party in 2004.  Also, the earlier decision in the

judgment  dated  27.4.2013  has  declared  valid  a  transaction

which is prohibited by law.  A cursory reading of Section 45(2)

of  the  Trade  Marks  Act  makes  it  clear  that  the  assignment

deed, if unregistered, cannot be admitted in evidence by any

Court  in  proof  of  title  to  the  trademark  by  the  assignment,

unless the Court itself directs otherwise.  It is clear, therefore,

that any reliance upon the assignment deed dated 8.10.2003

by the earlier judgment cannot be sanctified by the plea of res

judicata, when reliance upon the assignment deed is prohibited

by law.

40. Equally,  a  reference to  Sections  6,  8  and 46(4)  of  the

Banking Regulation Act would also make it clear that a bank

cannot  use the trademark “Eenadu” to sell  agarbathies.  This

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would  be  directly  interdicted  by  Section  8,  which  clearly

provides that notwithstanding anything contained in Section 6

or  in  any  contract,  no  banking  company  shall  directly  or

indirectly deal in the selling of goods, except in connection with

the realisation of security given to or held by it.  Also, granting

permission to third parties to use the trademark “Eenadu” and

earn royalty upon the same would clearly be outside Section

6(1) and would be interdicted by Section 6(2) which states that

no bank shall engage in any form of business other than those

referred to in sub-section (1).  

41. Shri Shanthakumar Mahale, however, exhorted us to read

Sections 6(1)(f) and (g) as permitting the sale of goods under

the  trademark  and/or  earning  royalty  from a  sub-assignment

thereto.  We are of the view that the trademark cannot be said

to be property which has come into the possession of the bank

in satisfaction or part satisfaction of any of the claims of the

bank.  We are further of the view that the trademarks are not

part of any security for loans or advances that have been made

to the first respondent, or connected with the same.  It is thus

clear that the assignment deed dated 8.10.2003 is clearly hit by

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Section  6(2)  and  Section  8  read  with  the  penalty  provision

contained in Section 46(4) of the Banking Regulation Act.   

42. The appeal is allowed and the judgment of the trial Court

and the first appellate Court are set aside.  Consequently, O.S.

No.495 of 2008 filed by respondent No.1 will stand dismissed.  

………………………..J. (Adarsh Kumar Goel)

………………………..J. (R.F. Nariman)

New Delhi; April 20, 2018.  

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