A shareholder or holding company is not a necessary or proper party in an infringement suit against its subsidiary.

The plaintiffs, ITW GSE APS & ANR., filed a suit seeking a permanent injunction against the defendants, DABICO AIRPORT SOLUTIONS PVT LTD & ORS., for alleged infringement of their Indian Patent No. 330145 ('IN'145'), rendition of accounts, and damages.

The plaintiffs alleged that the defendants were manufacturing, using, offering for sale, and selling infringing Pre-Conditioned Air units ('PCA units') at Rajiv Gandhi International Airport in Hyderabad ('Hyderabad Airport'), Manohar International Airport in Goa ('Goa Airport'), and Indira Gandhi International Airport in New Delhi ('Delhi Airport').

Defendant no. 4 was alleged to be the manufacturer, and defendant no. 1 the installer of the infringing PCA units.

Defendant no. 3 filed an application under Order I Rule 10(2) read with Section 151 of the Code of Civil Procedure, 1908 ('CPC') seeking its deletion from the array of parties, asserting it was neither making, using, offering for sale, selling, nor importing the alleged infringing PCA units.

The plaintiffs initially contended that defendant no. 3 was a proper party as it was a shareholder in defendant no. 1.

Defendant no. 3 later clarified by affidavit that it was a passive shareholder, through a chain of intermediary entities, and had no operational control or day-to-day involvement in defendant nos. 1 or 2.

Defendant nos. 1 and 2 confirmed that defendant no. 2 holds 100% shareholding in defendant no. 1, thereby clarifying that defendant no. 3 is not a direct shareholder in defendant no. 1.

The plaintiffs further argued that defendant no. 3 was liable for damages related to the supply of PCA units to Hyderabad Airport by Cavotec Middle-East, FZE, UAE ('Cavotec UAE'), as defendant no. 3 had acquired the airport business from Cavotec SA.

The court primarily applied Order I Rule 10(2) of the Code of Civil Procedure, 1908, which governs the addition or deletion of parties to a suit, distinguishing between a "necessary party" (without whom no effective order can be made) and a "proper party" (whose presence is necessary for a complete and final decision).

It relied on the Supreme Court's judgments in *Ramesh Hirachand Kundanmal v. Municipal Corporation of Greater Bombay and Others* (1992) 2 SCC 524, which established these tests.

The court also relied on *Globe Ground (India) Employees Union v. Lufthansa German Airlines* (2019) 15 SCC 273, which established these tests.

Furthermore, the court applied the principle that a subsidiary company is a separate legal entity distinct from its holding company or shareholders, and a holding company is generally not liable for the acts of its subsidiary unless corporate veil piercing is warranted for wrongful purposes, as articulated in *Vodafone International Holdings BV v. Union of India* (2012) 6 SCC 613.

The court found that the plaintiffs' initial premise for impleading defendant no. 3, i.e., that it was a shareholder in defendant no. 1, was factually incorrect based on affidavits filed by defendant no. 3 and confirmed by defendant nos. 1 and 2.

Even if defendant no. 3 were a shareholder, the court reasoned that, following *Vodafone International Holdings BV*, a holding company or shareholder is not liable for the actions of a subsidiary, as they are distinct legal entities.

The court underscored that defendant no. 3 had no direct role in the supply of PCA units at any of the three airports mentioned by the plaintiffs.

The plaint itself lacked specific pleadings regarding defendant no. 3's role in the alleged infringement, and the plaintiffs' subsequent attempts to justify its inclusion by alleging indirect managerial control or liability for Cavotec UAE's supplies were deemed "changing stances".

The court rejected the argument that defendant no. 3's presence was necessary for seeking information, citing *Ramesh Hirachand Kundanmal*, which states that a person is not a necessary party merely to give evidence or provide information.

Since the plaintiffs' claim for injunction and damages, if successful, could be adjudicated effectively against defendant nos. 1 and 4 without defendant no. 3's presence, defendant no. 3 did not meet the test for being a necessary or proper party (per *Globe Ground (India) Employees Union*).

The court also found no legal basis for holding defendant no. 3 liable for supplies made by Cavotec UAE, a distinct juristic entity.

The application for deletion filed by defendant no. 3 was allowed.

The court held that the plaintiffs could not maintain the suit against defendant no. 3 based on its passive shareholding or alleged indirect control over defendant no. 1, nor for the actions of Cavotec UAE at Hyderabad Airport.

Defendant no. 3's statement that it is not involved in manufacturing, using, offering for sale, selling, or importing infringing products was taken on record, and it was bound by this statement.

The plaintiffs were directed to file an amended memo of parties.