# CANARA BANK v. N. G. SUBBARAYA SETTY & ANR

- **Citation:** [2018] 3 S.C.R. 884
- **Court:** Supreme Court of India
- **Decided:** 2018-04-20
- **Case number:** Civil Appeal No. 4233 of 2018
- **Bench:** Adarsh Kumar Goel, R. F. Nariman
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/canara-bank-v-n-g-subbaraya-setty-anr-32714
- **Pages:** 43

## Headnote

Code of Civil Procedure, 1908 - s.11 - Res judicata - General
rule and its exceptions - Erroneous decision given on a statutory
prohibition in former suit - Statutory prohibition not given effect to
- Plea of res judicata in subsequent suit - Held: 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 - On facts, respondent in order to
repay dues of the bank, signed assignment deed with Bank Manager
for assignment of the trademark and after several months bank
cancelled the assignment deed - Litigations between the parties,
first proceeding, second proceeding - Trial court and first appellate
court treating the statutory prohibition contained in s.45(2) of the
Trade Marks Act as res judicata, was erroneous - Neither of the
court adverted to and/or interpreted s.45, which 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 - Thus, any reliance upon
the assignment deed by the earlier judgment cannot be sanctified
by the plea of res judicata, when reliance upon the assignment deed
is prohibited by law - Furthermore, 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 -
Trademarks are not part of any security for loans or advances that
have been made to the first respondent, or connected with the same
- Thus, the assignment deed clearly hit by ss.6(2) and 8 read with
s.46(4) - Judgment of the trial court and first appellate court set
aside - Trade Marks Act, 1999 - s.45(2) - Banking Regulation Act,
1949 - ss.6(2), 8 and 46(4).
[2018] 3 S.C.R. 884
884
A
B
C
D
E
F
G
H
885
Allowing the appeal, the Court
HELD: 1.1 Res judicata is 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. [Para 5][894-H;
895-A-B]
1.2 Until the limitation period for filing of an appeal is over,
the res remains sub judice. After the limitation period is over,
the res decided by the first Court would then become judicata.
However, questions arise as to what is to be done in 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, of the Privy Council and the 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. [Para 22][906-G-H; 907A]
1.3 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 af

## Text

_Characters 0–39,813 of 99,354. This is a partial read: ask again with offset=39813 for what follows._

A
B
C
D
E
F
G
H
884
SUPREME COURT REPORTS
[2018] 3 S.C.R.
CANARA BANK
v.
N. G. SUBBARAYA SETTY & ANR.
(Civil Appeal No. 4233 of 2018)
APRIL 20, 2018
[ADARSH KUMAR GOEL AND R. F. NARIMAN, JJ.]
Code of Civil Procedure, 1908 - s.11 - Res judicata - General
rule and its exceptions - Erroneous decision given on a statutory
prohibition in former suit - Statutory prohibition not given effect to
- Plea of res judicata in subsequent suit - Held: 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 - On facts, respondent in order to
repay dues of the bank, signed assignment deed with Bank Manager
for assignment of the trademark and after several months bank
cancelled the assignment deed - Litigations between the parties,
first proceeding, second proceeding - Trial court and first appellate
court treating the statutory prohibition contained in s.45(2) of the
Trade Marks Act as res judicata, was erroneous - Neither of the
court adverted to and/or interpreted s.45, which 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 - Thus, any reliance upon
the assignment deed by the earlier judgment cannot be sanctified
by the plea of res judicata, when reliance upon the assignment deed
is prohibited by law - Furthermore, 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 -
Trademarks are not part of any security for loans or advances that
have been made to the first respondent, or connected with the same
- Thus, the assignment deed clearly hit by ss.6(2) and 8 read with
s.46(4) - Judgment of the trial court and first appellate court set
aside - Trade Marks Act, 1999 - s.45(2) - Banking Regulation Act,
1949 - ss.6(2), 8 and 46(4).
[2018] 3 S.C.R. 884
884
A
B
C
D
E
F
G
H
885
Allowing the appeal, the Court
HELD: 1.1 Res judicata is 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. [Para 5][894-H;
895-A-B]
1.2 Until the limitation period for filing of an appeal is over,
the res remains sub judice. After the limitation period is over,
the res decided by the first Court would then become judicata.
However, questions arise as to what is to be done in 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, of the Privy Council and the 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. [Para 22][906-G-H; 907A]
1.3 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
CANARA BANK v. N. G. SUBBARAYA SETTY
A
B
C
D
E
F
G
H
886
SUPREME COURT REPORTS
[2018] 3 S.C.R.
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 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. 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 dragging the parties into a second round of litigation on
the merits of the case. [Para 23][907-B-G]
1.4 In the instant case, a belated review petition was filed
after arguments were heard and judgment reserved by the
appellate Court. This Court would not have to await the outcome
of the said review petition before deciding whether the judgment
dated 27.4.2013 is res judicata. 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, it is examined 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. [Para 24][907-H; 908-A-B]
1.5 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 issues of fact,
mixed questions of fact and law, and issues of law. To this, 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
A
B
C
D
E
F
G
H
887
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 CPC
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 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 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;
(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 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. The public policy
contained in other statutory prohibitions, which need not
CANARA BANK v. N. G. SUBBARAYA SETTY
A
B
C
D
E
F
G
H
888
SUPREME COURT REPORTS
[2018] 3 S.C.R.
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 not the same as in the previous suit or
proceeding, because the law to be interpreted is different.
[Para 33][917-B, C-F; 918-C-E, F-G]
1.6 Insofar as Section 45 of the Trade Marks Act 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 said plea
taken on behalf of the bank, but turned it down. Equally, insofar
as the trial court judgment in the second suit of 2008 is concerned,
the said plea was expressly raised and turned down. The impugned
judgment dated 31.7.2017 also records the submission and turns
it down. 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. Neither of
the court 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. 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
A
B
C
D
E
F
G
H
889
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. [Para 35- 39][922-G; 923-F; 924-C, G; 925-BC]
1.7 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
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). 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. 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 Section
6(2) and Section 8 read with the penalty provision contained in
Section 46(4) of the Banking Regulation Act. The judgment of
the trial court and the first appellate court are set aside. [Para
40-42][925-D-E, G-H; 926-A]
Natraj Studios (P) Ltd. v. Navrang Studios & Anr. (1981)
2 SCR 466 - relied on.
Sheoparsan Singh v. Ramnandan Singh AIR 1916
PC 78; Daryao and others v. State of U.P. and others,
[1962] 1 SCR 574; Mathura Prasad Bajoo Jaiswal &
Ors v. Dossibai N. B. Jeejeebhoy (1970) 1 SCC 613 :
[1970] 3 SCR 830; V. Rajeshwari v. T.C. Saravanabava
(2004) 1 SCC 551 : [2003] 6 Suppl. SCR 927; Sheodan
Singh v. Daryao Kunwar (1966) 3 SCR 300; Balkishan
v. Kishan Lal (1888) ILR 11 All 148; S.P.A. Annamalay
Chetty v. B.A. Thornhill AIR 1931 PC 263; Parshotam
CANARA BANK v. N. G. SUBBARAYA SETTY
A
B
C
D
E
F
G
H
890
SUPREME COURT REPORTS
[2018] 3 S.C.R.
Parbhudas v. Bai Moti AIR 1963 Gujarat 30; Bhavani
Amma v. Narayana Acharya AIR 1963 Mysore 120;
Satyanarayan Prosad Gooptu v. Diana Engineering
Company AIR 1952 Calcutta 124; Venkateswarlu v.
Venkata Narasimham AIR 1957 Andhra Pradesh 557;
Chengalavala Gurraju v. Madapathy Venkateswara
Row Pantulu Garu AIR 1917 Madras 597; Baijnath
Karnani v. Vallabhdas Damani AIR 1933 Madras 511;
Chandra Singh Dudhoria v. Midnapore Zemindary Co.
Ltd. (1941) 69 IA 51 (PC); Indra Singh and Sons Ltd.
v. Shiavax. C. Cambata ILR 1948 Bom 346; Sushil
Kumar Mehta v. Gobind Ram Bohra (1990) 1 SCC 193
: [1989] 2 Suppl. SCR 149; Isabella Johnson (Smt.) v.
M.A. Susai (1991) 1 SCC 494 : [1990] 2 Suppl. SCR
213; State of Punjab v. Nand Kishore AIR 1974 Punjab
& Haryana 303; Mohanlal Goenka v. Benoy Krishna
Mukherjee [1953] SCR 377; Nand Kishore v. State of
Punjab (1995) 6 SCC 614 : [1995] 4 Suppl. SCR 16;
Moti Ram Deka v. General Manager, N.E. Frontier
Railways [1964] 5 SCR 683; Gurdev Singh Sidhu v.
State of Punjab [1964] 7 SCR 587; Allahabad
Development Authority v. Nasiruzzaman (1996) 6 SCC
424 : [1996] 5 Suppl. SCR 435; Shakuntla Devi v.
Kamla (2005) 5 SCC 390; V. Tulasamma v. V.Sesha
Reddy (1977) 3 SCC 99 : [1977] 3 SCR 261; Tarini
Charan Bhattacharjee and others v. Kedar Nath Haldar
AIR 1928 Calcutta 777 - referred to.
Virgin Atlantic Airways Ltd. v. Zodiac Seats UK Ltd.
[2013] 4 All ER 715 - referred to.
Case Law Reference
AIR 1916 PC 78
referred to
Para 2
[1962] 1 SCR 574
referred to
Para 3
[1970] 3 SCR 830
referred to
Para 11
[2003] 6 Suppl. SCR 927
referred to
Para 14
[1966] 3 SCR 300
referred to
Para 16
(1888) ILR 11 All 148
referred to
Para 17
A
B
C
D
E
F
G
H
891
AIR 1931 PC 263
referred to
Para 1
AIR 1963 Gujarat 30
referred to
Para 19
AIR 1963 Mysore 120
referred to
Para 19
AIR 1952 Calcutta 124
referred to
Para 19
AIR 1957 Andhra Pradesh 557
referred to
Para 19
AIR 1917 Madras 597
referred to
Para 20
AIR 1933 Madras 511
referred to
Para 21
(1941) 69 IA 51 (PC)
referred to
Para 22
ILR 1948 Bom 346
referred to
Para 22
[1989] 2 Suppl. SCR 149
referred to
Para 27
[1990] 2 Suppl. SCR 213
referred to
Para 27
AIR 1974 Punjab & Haryana 303
referred to
Para 28
[1953] SCR 377
referred to
Para 28
[1995] 4 Suppl. SCR 16
referred to
Para 29
[1964] 5 SCR 683
referred to
Para 29
[1964] 7 SCR 587
referred to
Para 29
[1996] 5 Suppl. SCR 435
referred to
Para 30
(2005) 5 SCC 390
referred to
Para 31
[1977] 3 SCR 261
referred to
Para 31
AIR 1928 Calcutta 777
referred to
Para 32
[1981] 2 SCR 466
relied on
Para 33
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4233
of 2018.
From the Judgment and Order dated 31.07.2017 of the High Court
of Karnataka at Bengaluru in First Appeal (RFA) No. 818 of 2016.
K. V. Viswanathan (AC), Dhruv Mehta, Sr.Advs., Abhishek
Kaushik, Srigesh M.K., Ravi Raghunath, Dhananjay B. Ray, Siddhant
Busy, Ms. Vrinda Bhandari, Mukunda Rao, Jaishree Vishwanathan,
Rajesh Kumar - I, Gaurav Singh, Anant Gautam, Aakash Sehrawat,
CANARA BANK v. N. G. SUBBARAYA SETTY
A
B
C
D
E
F
G
H
892
SUPREME COURT REPORTS
[2018] 3 S.C.R.
V. Govinda Ramanan, Soumu Palit, Shanthkumar V. Mahale,
R. P. Kulkarni, Rajesh Mahale, Advs. for the appearing parties.
The Judgment of the Court was delivered by
R. F. NARIMAN, J. 1. Leave granted.
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) 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. Gharpure, p. 14, and "The Mayuka,"
Ch. I., sec. 1, p. 11 of Mandlik's edition.)
A
B
C
D
E
F
G
H
893
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., 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
CANARA BANK v. N. G. SUBBARAYA SETTY
[R. F. NARIMAN, J.]
A
B
C
D
E
F
G
H
894
SUPREME COURT REPORTS
[2018] 3 S.C.R.
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 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"."
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
A
B
C
D
E
F
G
H
895
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, 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 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
CANARA BANK v. N. G. SUBBARAYA SETTY
[R. F. NARIMAN, J.]
A
B
C
D
E
F
G
H
896
SUPREME COURT REPORTS
[2018] 3 S.C.R.
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, 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."
A
B
C
D
E
F
G
H
897
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.
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.
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
CANARA BANK v. N. G. SUBBARAYA SETTY
[R. F. NARIMAN, J.]
A
B
C
D
E
F
G
H
898
SUPREME COURT REPORTS
[2018] 3 S.C.R.
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 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 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
A
B
C
D
E
F
G
H
899
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
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 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
petition, which is obviously an abuse of process with huge delay, could
CANARA BANK v. N. G. SUBBARAYA SETTY
[R. F. NARIMAN, J.]
A
B
C
D
E
F
G
H
900
SUPREME COURT REPORTS
[2018] 3 S.C.R.
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 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 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
A
B
C
D
E
F
G
H
901
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.