Actual legal costs must be awarded in commercial disputes where the underlying design registration is cancelled.

The Plaintiff filed a suit for permanent injunction against the Defendants, alleging infringement of its registered Design No. 197685 and passing off regarding footwear

In 2014, an ex-parte ad-interim injunction was granted, and Local Commissioners seized the Defendants' goods

On 8th February 2018, a Single Judge vacated the injunction, finding the design lacked novelty and was in the public domain, a decision subsequently affirmed by the Division Bench and the Supreme Court

During the pendency of the suit, the Deputy Controller of Patents & Designs cancelled the Plaintiff's design on 9th May 2019 due to prior publication

Following the cancellation and the expiration of the design term, the suit was disposed of on 12th July 2023, leaving the issue of costs open

The Defendants subsequently filed I.A. 25948/2023 seeking actual legal costs

1. Whether the Defendants are entitled to actual legal costs under the Commercial Courts Act following the disposal of a design infringement suit where the design was subsequently cancelled

2. Whether the award of costs is mandatory in commercial disputes where an interim injunction caused adverse business impact and the plaintiff’s claims were found to be unsubstantiated

The court applied Sections 35 and 35A of the Code of Civil Procedure (CPC), 1908, as amended by the Commercial Courts Act, 2015, which mandates that costs should generally follow the event in commercial disputes

Chapter XXIII Rule 5 of the Delhi High Court (Original Side) Rules, 2018, which defines the contents of a "Bill of Costs," including advocate fees and incidental expenses

Precedent set by the Supreme Court in Uflex Ltd. v. Government of Tamil Nadu & Ors. (2021), which established that in commercial matters, courts must award "actual" or "realistic" costs to deter vexatious or luxury litigation and indemnify the successful party

The Court reasoned that in commercial litigation, the principle of "costs following the event" must be strictly applied

The Court observed that the Defendants were subjected to a long-drawn legal battle since 2014, involving an ex-parte injunction that adversely affected their business and required them to defend the matter across the District Court, High Court, and Supreme Court

The Court noted that the Plaintiff's design was repeatedly found to lack novelty and was eventually cancelled by the Controller, rendering the substratum of the suit non-existent

Applying the Uflex principles, the Court determined that the Plaintiff's pursuit of a design registration that was prior-published justified the imposition of actual costs. The Court verified the Defendants' bill of costs against the criteria in the Delhi High Court Rules and found the claim of Rs. 24,63,400/- to be supported by documentation and not disputed by the Plaintiff

The Court directed the Plaintiff to pay the Defendants a sum of Rs. 24,63,400/- within three months and ordered the pending execution petition (Ex. P. 64/2022) to stand disposed of upon receipt of the said payment