Suits by Foreign Plaintiffs and the Mandate of Security for Costs: Law, Limits, and Interpretations
Introduction: This case revolves around the interpretation of the proviso to Order XXV Rule 1(1) of the Code of Civil Procedure, 1908 (CPC), particularly in the context of whether courts are mandatorily required to direct a foreign-residing plaintiff without sufficient immovable property in India to furnish security for costs. The issue arose in a commercial suit concerning intellectual property rights, and the matter was referred to a Division Bench of the Delhi High Court to reconcile conflicting decisions by Coordinate Benches on the interpretation of this provision.
Factual Background:The plaintiff, Communication Components Antenna Inc., a company based outside India, filed a suit for protection of intellectual property rights against ACE Technologies Corp. and others. During the course of proceedings, the defendants filed an application under Order XXV Rule 1(1) CPC, seeking a direction for the plaintiff to furnish a security of ₹8 crores towards the costs likely to be incurred by the defendants.
The plaintiff did not possess any immovable property in India apart from the property in suit. This triggered the proviso to Order XXV Rule 1(1) CPC. However, due to diverging judicial interpretations on whether this proviso was mandatory or discretionary, the learned Single Judge referred the matter to a larger bench for authoritative adjudication.
Procedural Background:The Single Judge of the Delhi High Court, upon being confronted with conflicting judgments on the nature of the proviso to Order XXV Rule 1(1) CPC, referred the matter to the Division Bench on 10.01.2023.
Legal Issue: The primary issues for determination before the Division Bench were: Whether it is mandatory for the court to direct a plaintiff residing outside India and not possessing sufficient immovable property in India to furnish security for costs under the proviso to Order XXV Rule 1(1) CPC.?Whether the proviso to Order XXV Rule 1(1) CPC applies only to suits relating to immovable property?
Discussion on Judgments: The parties referred to a number of judgments in support of their positions:
S.A. Brothers & Co. v. John Bartholomow & Sons Ltd., 2000 SCC OnLine Del 854 Cited by the defendants, this case supported the view that the proviso to Order XXV Rule 1(1) is mandatory where the plaintiff resides outside India and lacks sufficient immovable property.
Kiran Shoes Manufacturers v. Welcome Shoes Pvt. Ltd., 2017 SCC OnLine Del 6590 Also relied on by the defendants, the Court held that the proviso is couched in mandatory terms and applicable in cases involving a foreign-residing plaintiff with insufficient property in India.
Alberto-Culver USA Inc. v. Nexus Health & Home Care (P) Ltd., 2009 SCC OnLine Del 2818 Cited by the plaintiff to argue that the proviso is discretionary. The Court in that case had held that the provision does not mandate security for costs in every case involving a foreign plaintiff.
Millennium & Copthorne International Ltd. v. Aryans Plaza Services Pvt. Ltd., 2018 SCC OnLine Del 8260 Relied upon to argue that the proviso only applies to suits involving immovable property, as it mentions “immovable property within India other than the property in suit.”
Iridium India Telecom Ltd. v. Motorola Inc., (2005) 2 SCC 145 Used by the plaintiff to argue that High Court rules framed under Section 129 CPC would override CPC provisions if inconsistent. However, the Division Bench found no such inconsistency.
Shailesh Dhairyawan v. Mohan Balkrishna Lulla, (2016) 3 SCC 619 Cited to argue that the word “shall” may be construed as “may” in context and does not always indicate a mandatory provision.
Vijay Dhanuka v. Najima Mantaj, (2014) 14 SCC 638 and Deewan Singh v. Rajendra Pd. Ardevi, (2007) 10 SCC 528 Cited by the Bench to affirm the mandatory nature of the term “shall” when used in a statutory provision unless clearly stated otherwise.
Revlon Inc. v. Kemco Chemicals, 1987 SCC OnLine Cal 39, Hearst Corporation v. Dalal Street Communications Ltd., 1995 SCC OnLine Cal 231, and Gotham Entertainment Group LLC v. Diamond Comics (P) Ltd., 2009 SCC OnLine Del 4383 These supported the mandatory reading of the proviso to protect Indian defendants from vexatious litigation by foreign plaintiffs.
Reasoning and Analysis of the Judge:The Division Bench conducted a comprehensive analysis of Order XXV Rule 1(1) and its proviso. It held that the main clause uses the word “may”, granting discretion to the Court. However, the proviso is expressed in mandatory terms using the word “shall”, which indicates that the Court must order security for costs in cases where a foreign-residing plaintiff does not possess sufficient immovable property in India, apart from the property in suit.
The Bench rejected the argument that the proviso became obsolete due to the Delhi High Court (Original Side) Rules, 2018. It held that there was no repugnancy between those Rules and the CPC. It also rejected the argument that the proviso violated obligations under the TRIPS Agreement, noting that the domestic provision continues to apply unless repealed or amended by the legislature.
Importantly, the Court interpreted the phrase “immovable property within India other than the property in suit” to mean that the proviso applies only to suits involving immovable property. Accordingly, the Court clarified that in suits not involving immovable property—such as intellectual property disputes—the proviso does not apply. Finally, the Court concluded that even when the proviso applies, the quantum of security remains at the Court’s discretion based on the facts and circumstances of the case.
Final Decision: The Division Bench answered the reference as follows: The proviso to Order XXV Rule 1(1) CPC is mandatory where the plaintiff resides outside India and does not possess sufficient immovable property in India other than the property in suit. The proviso applies only to suits involving immovable property. The court retains discretion regarding the quantum of security for costs. The matter was directed to be listed before the Roster Bench for further proceedings in accordance with this authoritative pronouncement.
Law Settled in This Case:This case authoritatively settles the following propositions:The proviso to Order XXV Rule 1(1) CPC is mandatory in cases involving a foreign-residing plaintiff who lacks sufficient immovable property in India, but only in suits relating to immovable property. The Court retains discretion regarding the amount of security for costs, even when the proviso applies. There is no repugnancy between the CPC and the Delhi High Court (Original Side) Rules, 2018 on this subject. International treaty obligations, such as those under TRIPS, do not override clear statutory provisions unless implemented through legislative amendment.
Case Title: Communication Components Antenna Inc. Vs. ACE Technologies Corp. and Ors.: Date of Order: 01 July 2025:Case Number: CS (COMM) 1222/2018:Neutral Citation: 2025:DHC:5139-DB:Name of Court: High Court of Delhi:Name of Judges: Hon’ble Mr. Justice Navin Chawla and Hon’ble Ms. Justice Shalinder Kaur
Disclaimer: The information shared here is intended to serve the public interest by offering insights and perspectives. However, readers are advised to exercise their own discretion when interpreting and applying this information. The content herein is subjective and may contain errors in perception, interpretation, and presentation.
Written By: Advocate Ajay Amitabh Suman, IP Adjutor [Patent and Trademark Attorney], High Court of Delhir Kaur
