On 29 March 2019 the Delhi High Court recognised, for the first time, the merit of applying Section 20 of the Evidence Act 1872 in technical IP matters (Campus EAI India Pvt Ltd v Neeraj Tiwari). Section 20 of the act treats statements by any person to whom a party in a suit refers as an admission by the party to the suit.
The plaintiff, a software company, sued its former employees for breach of a trade secret and confidential information after they devised a competing software which allegedly plagiarised the plaintiff's product. When the defendants appeared in front of the court, they denied the plaintiff's allegations and suggested that the court engage an Indian Institute of Technology (IIT) expert to analyse the source code of both software programs and advise whether the defendants' software plagiarised that of the plaintiff. The plaintiff initially agreed to this suggestion; however, it subsequently objected to the expert's findings upon a 'clean chit' being given to the defendants' software.
The plaintiff's objections focused primarily on the manner in which the expert had undertaken the enquiry. This gave rise to the interesting legal question of whether a party is entitled to object to the opinion of a referee under Section 20 of the Evidence Act after agreeing to refer the disputed matter to such referee. The court ultimately held that since the plaintiff had agreed to refer the matter to the IIT expert, it was subsequently estopped from challenging the expert's opinion.
In this type of dispute, both parties generally rely on their respective experts and submit substantial amounts of evidence. This not only results in a considerable delay, but also requires the court to sift through complicated evidence. However, as the parties in the case at hand had jointly agreed to engage the IIT expert, the court was able to adjudicate the matter early by:
- applying the principle enshrined in Section 20 of the Evidence Act; and
- binding both parties to the expert's opinion.
The key questions that arose in this case centred on:
- when Section 20 of the Evidence Act can be applied; and
- how it affects the adjudication of a matter.
Section 20 of the Evidence Act applies only when both parties to a suit jointly agree to seek the opinion of a third party on a disputed matter. In so doing, both parties automatically agree to be bound by the opinion of such third person. Thus, Section 20 can be an effective tool for enabling a party to call the other's bluff without the need for a protracted trial. The Supreme Court discussed the rationale behind Section 20 in Hirachand Kothari vs State of Rajasthan (1985 (Supp) SCC 17) as follows:
7. Section 20 of the Evidence Act reads as follows: '20. Admissions by persons expressly referred to by party to suit. —Statements made by persons to whom a party to the suit CS(OS) 482/2016 Page 19 of 31 has expressly referred for information in reference to a matter in dispute are admissions. Section 20 is the second exception to the general rule laid down in Section 18. It deals with one class of vicarious admissions that demand of persons other than the parties. Where a party refers to a third person for some information or an opinion on a matter in dispute, the statements made by the third person are receivable as admissions against the person referring. The reason is that when a party refers to another person for a statement of his views, the party approves of his utterance in anticipation and adopts that as his own. The principle is the same as that of reference to arbitration. The reference may be by express words or by conduct, but in any case, there must be a clear admission to refer and such admissions are generally conclusive. (Emphasis added.)
In light of Campus EAI, the following considerations should be kept in mind by parties which want to refer to a third party under Section 20 of the Evidence Act:
- Once the parties to a suit agree to refer to a third party, they are bound by the opinion of such referee. Thus, parties are effectively estopped from raising any objections to an opinion rendered by a referee unless they were cautious at the outset of the case.
- Prior to referring to a third party, parties should be mindful of specifying their preferred mode or scope of the enquiry to be undertaken by the referee, as the courts will not entertain objections made subsequent to the referral.
- Parties should make a referral under Section 20 at the first instance in order to benefit from a summary decision under Order 13A of the amended Code of Civil Procedure 1908 and avoid the hassle and expense of engaging in an unnecessary trial.
Campus EAI may have far-reaching consequences in the IP world, as it could eliminate the controversy surrounding infringement suits which involve complex technical questions and help the courts to reach a finding by relying on the opinion of an expert agreed on by both parties. Given that the courts are aware of the strict timelines which apply to commercial matters, referrals under Section 20 of the Evidence Act are likely to become increasingly common.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.