Choosing the right venue for resolving a dispute is crucial. But when does the established principle of ‘plaintiff’s choice’ degenerate into the much-maligned practice of ‘forum shopping’?
There is a large disparity between India’s courts in terms of their quality, speed, resources, reputations and specialist expertise. It is no surprise, therefore, that clients and their legal advisers regularly pick and choose between venues, depending on the nature of the dispute and their objectives for resolving it.
“I would go to a forum that is favourable to me, and there is nothing wrong with that,” says Huzefa Nasikwala, a partner at Juris Corp.
Such a practice, he notes, is not the same as “forum shopping” – choosing a favourable venue in which to file a suit, such as one with a reputation for granting large awards, at the cost of fairness to the opponent, or taking the same suit to multiple jurisdictions and settling on the one that schedules a preferred judge to hear the matter.
Himanshu Chahar, an associate at LexCounsel in New Delhi, explains that forum shopping involves plaintiffs picking a particular court that may have a positive impact on their case, “to the detriment of the defendant”. As such, he says, “the practice of forum shopping perceptibly goes against the very object of ‘equality before law’.”
Not all instances of selecting an appropriate venue for a dispute are classified as forum shopping. Section 20 of the Civil Procedure Code gives plaintiffs the right to choose where to file a suit, but notes that the court has to be convenient or appropriate for the defendant as well.
As Anuradha Salhotra, the managing partner at Lall Lahiri & Salhotra, explains, “the litigant’s choice of forum is not disturbed unless it can be shown that the choice is deliberately dishonest or, in other words, that the choice of forum is an abuse of the process of law,” she says.
Plaintiffs have every right to pick the court that best suits their legal needs as long as it has appropriate jurisdiction to hear the matter. By contrast, the practices of taking a suit on a cross-country tour in search of the most receptive bench, or filing a case with a court that has only marginal jurisdiction to hear the matter in the belief that this will lead to a favourable ruling, are generally considered unacceptable.
“I know of at least two Supreme Court decisions that really frown on this forum shopping practice,” says Nasikwala.
Courts voice concerns
Judges have frequently voiced their opposition to forum shopping, which Chahar calls an “abhorrent” practice. “Despite the rare use of the term ‘forum shopping’ in legal precedents in this country, it is one practice which has always been despised and frowned upon by the courts,” he says.
There is no shortage of case law on the issue. “Since time immemorial, courts have come down quite hard on forum shopping,” says Vandana Shroff, a partner at Amarchand Mangaldas in Mumbai.
In Tamiland Mercantile Bank Shareholders Welfare Association v SC Sekar & Ors, the Supreme Court said that courts must discourage forum shopping. And in 1998 it criticized forum shopping in the case of Chetak Construction v Omprakash, noting that it should be crushed with a heavy hand, recalls C Rashmikant, a partner at Federal & Rashmikant.
One of the most important decisions in relation to the issue was passed by the Supreme Court in Modi Entertainment Network v WSG Cricket PTE in 2003. Both parties had agreed to submit to the jurisdiction of English courts. With a case underway in the UK, Modi filed a suit in Bombay High Court saying that the proceedings in the English court were oppressive and vexatious. The high court dismissed the case on the grounds that it had no valid reasons to grant an anti-suit injunction. The Supreme Court upheld the decision, noting that the high court could not overrule the original contract without a strong cause. It also granted costs.
In a 2009 ruling, Delhi High Court dismissed a case filed by HB Stockholdings against DCM Shriram Industries because the plaintiff had already approached the Company Law Board and the Securities Appellate Tribunal, and the relief sought was the same in all three applications.
“Forum shopping is permissible only to the extent agreed between the parties at the time of executing a contract … subject to the provisions of the Civil Procedure Code,” says ML Bhakta, a senior partner at Kanga & Co in Mumbai.
“The courts would not normally entertain a party who seeks out a jurisdiction simply to gain a juridical advantage rather than by reason of a real and substantial connection of the case to the jurisdiction,” Bhakta continues.
At the same time, it should be noted that a plaintiff’s choice of venue cannot be overridden by a court as long as it has appropriate jurisdiction to try the suit under the Civil Procedure Code.
Multiple jurisdictions muddy the waters
The increasing preponderance of disputes between companies that have a presence in multiple jurisdictions – which gives the litigants a wider choice – has both given rise to a higher number of cases of forum shopping, and made it more difficult to identify them.
Delhi High Court recently ordered Microsoft to pay Rs800,000 (US$17,000) in costs for insisting on filing copyright violation cases there, regardless of where the violations took place. Microsoft had filed four suits against four different defendants, who carried out business in different cities.
The court said of Microsoft that “on the strength of its money power, it has the added advantage of choosing a court of its own liking which is so far away from the defendant that it becomes a problem [for the defendant] to contest the suit.”
The court also noted: “The law on appropriate forum is not settled and a difference of opinion still exists between different benches. Taking advantage of this, suits of this nature are still being filed in the court of their choice (or the choice of their advocates) by the plaintiffs. This creates a very peculiar situation in this country and shows how money power becomes important in choosing the forum and the courts become helpless in dealing with such ‘forum hiring’.”
Delhi or Mumbai? Take your pick
Although different benches have different strengths, Delhi High Court and Bombay High Court stand out in regard to many of the factors considered by parties seeking an advantageous forum for their actions.
When it comes to intellectual property matters, Delhi High Court has issued some landmark rulings and has a number of specialist judges. It is also fairly predictable in terms of enforcement because it has dedicated jurists, a luxury other courts don’t enjoy.
Delhi is quick to grant interim relief, giving plaintiffs some leverage in negotiating settlements – an important detail in a country in which the wheels of justice all too often turn slowly. The court has also accumulated a significant volume of case law, which often attracts cases from other parts of the country.
Bombay High Court stands out when it comes to matters of commercial law. Calcutta High Court and Madras High Court are also well regarded. In commercial matters, most parties prefer to file cases before a high court, as district courts typically do not grant ex parte injunctions.
The courts are distinguished by practical differences as well as by individual eccentricities. For example, Bombay High Court will take on suits valued at Rs50,000 or higher, but Delhi High Court will only handle suits worth at least Rs2 million. Akhil Anand, an associate at OP Khaitan & Co in New Delhi, notes that high courts in different states have different rules. For example, Delhi High Court has original and appellate jurisdiction in matters of intellectual property, whereas Gujarat High Court in Ahmedabad has only appellate jurisdiction. Original suits, therefore, have to be filed in the city’s civil courts.
“Courts in commercially vibrant cities tend to have more experience in commercial cases,” says Anand Desai, a partner at DSK Legal. “However, a preferred forum is often arbitration, and particularly arbitrators from industry are an increasingly attractive option.”
Glaxo v Heinz
The concept of forum shopping and the debate that surrounds it are not new. However, in recent years the subject has taken on added urgency due to the emergence of more complex legal issues and a plethora of specialist courts.
With its enviable track record of decisions on intellectual property matters, Delhi High Court is a case in point. In contrast to numerous judicial decisions that have firmly opposed forum shopping, a recent ruling by a two-judge division bench of the court appeared to endorse the practice.
The case was between the owners of two popular drinks brands: Glaxo Consumer Healthcare, which owns Horlicks, and Heinz, which owns Complan.
The dispute, which related to disparaging advertising, had rumbled on for some time. Glaxo had filed two earlier actions against Heinz in the Calcutta and Madras high courts. In both cases it had been granted interim relief.
Then Heinz sued Glaxo in Bombay High Court, which refused to grant interim relief. Heinz has appealed and the case now rests with an appeal court in the city.
In the meantime, Glaxo sued Heinz again, this time in Delhi High Court, where a single judge rejected the case on the grounds of forum non conveniens (inappropriate forum). The judge contended that since the new suit filed by Glaxo was effectively a counter to the suit pending in Mumbai, Bombay High Court would be the most appropriate forum.
Glaxo appealed, and as reported in India Business Law Journal last month, a two-judge division bench overturned the single judge’s earlier decision. As Chander Lall, a partner at Lall & Sethi, which represented Glaxo in the case, explains, the division bench “argued that courts are duty-bound to decide a dispute if none of the provisions of the Civil Procedure Code are violated.
“Courts cannot exercise any discretion in the matter,” adds Lall.
Lawyers familiar with the case say it involved two narrow legal concepts which are reflected in the appeal court’s finding. First, according to the Civil Procedure Code, a plaintiff is free to file its suit in any court with appropriate jurisdiction. A court “cannot reject a plaint except on certain specified grounds,” says Lira Goswami, a partner at Associated Law Advisers in Delhi.
The second concept is that of forum non conveniens, which the appeal court noted applies only to foreign courts and not to domestic ones. Many observers believe that this was the key point of the finding, and that the decision was unrelated to the practice of forum shopping as such.
“The terms ‘forum shopping’ and ‘forum non conveniens’ are two distinct legal terminologies,” says Salhotra, whose firm, Lall Lahiri & Salhotra, represented Heinz in the case.
“The decision cannot be said to encourage forum shopping since it does not give to a plaintiff any greater right or freedom than what is conferred by law,” says Goswami. “This judgment, like all other legal precedents in this regard, daunts and forbids the practice of forum shopping, to avoid multiplicity of proceedings and conflicting orders or judgments,” agrees Chahar at LexCounsel.
However, according to Rashmikant at Federal & Rashmikant, the final decision in this case leaves the choice of venue with the plaintiff, “and once an action is initiated, the plea being disallowed will mar a genuine defendant’s case”.
While Glaxo v Heinz does not itself constitute an example of forum shopping, the appeal court’s decision underscores the limited power of courts to address the practice when it does occur.
The story is not over yet. According to Ramni Taneja, the founding partner of Law Office of Ramni Taneja, in January the Supreme Court is scheduled to hear a special leave petition filed by Heinz challenging the ruling by Delhi High Court.
The plaintiff’s right to choose
Under Indian law the plaintiff is dominus litis, meaning it has the right to pick the court if there is more than one option. “That principle is deeply enshrined and the courts will not lightly interfere,” says Marezban Bharucha, a partner at Bharucha & Partners. “In exceptional circumstances a high court may intervene and transfer a case to another court … and the Supreme Court may transfer a case to any court in India if the interests of justice so demand. These are exceptional situations for which the legislature has expressly provided.
“In essence, I would say that forum shopping is the plaintiff’s right. If the plaintiff opts to sue in a court which has no jurisdiction, the plaintiff must fail,” Bharucha continues. “If the plaintiff, however, sues in a competent court, it is not open to the defendant to say that another court is more convenient.”
“It is not unheard of that multiple proceedings are filed in a number of courts … The defendant has the right to apply to have such cases transferred to a single court, but the facts have to be strong to warrant that,” Bharucha adds.
While most observers publicly condemn the practice of forum shopping, it would be difficult to find a lawyer worth their salt who doesn’t take the proclivities and competencies of a particular bench into consideration when deciding where to file a suit. Lawyers are quietly aware of the practical realities that result from the differences between various courts.
“Usually, if a plaintiff is seeking interlocutory orders, he will select a court which is most likely to grant such orders,” says Desai.
“From a final relief perspective, the backlog of cases is important. Also, in case of a large money claim, plaintiffs prefer courts where fees are lower. The advocates fees in a particular court would also be relevant,” Desai adds.
When asked which factors clients should consider when choosing a forum for disputes, Salhotra’s reply is circumspect. “We cannot, for obvious reasons, give any factors that parties should bear in mind,” she says, “for that would mean the party was actually seeking to find a court from which it could get a more favourable order – and that would fall into the trap of forum shopping.”