By Jigyasa Pareek

In ITW GSE APS & Anr. vs Dabico Airport Solutions Pvt. Ltd. & Ors. [CS(COMM) 628/2023], the Delhi High Court dealt with an application filed by Defendant no. 3 under Order I Rule 10(2) of CPC seeking deletion from the patent infringement suit. The Plaintiffs had alleged infringement of their patent IN’145 through the manufacture and supply of Pre-Conditioned Air (PCA) units at major Indian airports, attributing roles to multiple defendants, including Defendant no. 3, primarily on the basis that it was a shareholder and allegedly exercised control over Defendant no. 1.

However, Defendant no. 3 contended that it neither manufactured nor supplied the infringing products, had no operational role, and was merely an indirect, passive investor with no day-to-day involvement in the business of the other defendants.

The Court, applying the settled principles under Order I Rule 10 CPC, reiterated the distinction between “necessary” and “proper” parties, emphasizing that a party can only be impleaded if its presence is essential for effective adjudication or for complete resolution of the dispute.

On facts, the Court found that Defendant no. 3 had no direct role in the alleged infringing acts, which were specifically attributed to Defendant no. 1 (supplier) and Defendant no. 4 (manufacturer). It further noted that the Plaintiffs’ primary basis for impleadment, that Defendant no. 3 was a shareholder in Defendant no. 1, was factually incorrect, and even otherwise insufficient.

Relying on established corporate law principles, as held by the Supreme Court in Vodafone International Holdings vs Union of India, the Court reaffirmed that a holding company or shareholder is a separate legal juristic entity and cannot be held liable for the acts of its subsidiary absent exceptional circumstances such as fraud or misuse of the corporate form.

This reasoning also aligns with the broader Indian position on indirect or multi-party infringement. While the Patents Act does not expressly recognise contributory or inducement-based infringement, Courts have, in appropriate cases, invoked common law principles such as vicarious liability and joint tortfeasance to fasten liability where parties act in concert. For instance, in Koninklijke Philips N.V. vs Maj (Retd.) Sukesh Behl & Anr. (Delhi High Court, January 2025), the Court held defendants liable where they outsourced essential steps of a patented process to a third party, treating the arrangement as a form of agency and collaborative infringement, thereby making all participants jointly accountable. However, in the present case there was no material to show that Defendant no. 3 induced, contributed to, or acted in concert with the alleged infringing acts. Its role was limited to that of a passive investor without operational control, and no principal-agent or joint enterprise relationship was established.

The Court also found that the plaint lacked specific pleadings disclosing any cause of action against Defendant no. 3 and that the Plaintiffs had attempted to shift their stance during the proceedings to justify its impleadment, including arguments relating to prior business acquisitions and alleged control.

These contentions were rejected as vague, legally untenable, and beyond the pleadings. The Court clarified that mere commercial interest, indirect ownership, or the possibility of providing information does not make a party necessary or proper.

Accordingly, the Court held that Defendant no. 3 was neither a necessary nor a proper party, as no effective relief depended on its presence and the claims for injunction and damages could be adjudicated entirely against the remaining allegedly infringing entities.

The application for deletion was therefore allowed, with the Court binding Defendant no. 3 to its statement that it had no involvement in the alleged infringing activities.