Micromax willingly circumvented our orders, says Delhi High Court

The ongoing patent dispute between Micromax and Erricson saw another significant development today. The Delhi High Court held that the Indian company was in contempt of the earlier orders of the Court. .Erricson had filed a contempt petition on the grounds that Micromax along with Mercury Electronics [who is the dealer of phones manufactured by Micromax, in Delhi] had jointly disobeyed the Court’s order by selling mobile handsets ‘Yu’ and ‘Yureka’ through its wholly owned subsidiary company YU Televentures..These phones were stated to be using Erricson’s patented technology and yet Micromax did not pay royalty as per the order passed by the Court in November 2014..Today when the matter came up for hearing before a Single Bench of Justice Najmi Waziri, Senior Advocate Neeraj Kishan Kaul appearing for Erricson submitted that Micromax had set up a new company, projected it as a wholly owned subsidiary to do the “exact same thing” that the original company was doing, before it was injuncted from doing so by the Court..Kaul stressed on the relevance of deciphering the seperate legal entity of YU Televentures and also the necessity on piercing its corporate veil..“These are worldwide patents [in dispute]. Here is a situation where huge amounts are deposited in Court after numerous negotiations, a consent order is passed and they agree to pay the money. Now they state in their reply that this is a separate company so you proceed against them separately since they are not a party to the original suit. How can you do this?”.Much like Kaul, in an earlier hearing Senior Advocate CS Vaidyanathan had also stressed upon Micromax’s knowledge about the use of Erricson patents by YU phones as the directors in both the companies were the same..Responding to this, Senior Advocate AS Chandhioke who appeared for Micromax argued that they were not disputing the identity of YU Televentures as their wholly owned subsidiary. However, the fact remained that this company was a legal entity ‘duly incorporated in law’ so the Court could not proceed without hearing the Directors of YU..“If they [Erricson] are seeking an impleadment of the company, then the company needs to be heard. Let service be effected on all directors of YU and their responses be taken on record.”.Taking into account submissions made by both sides, the Bench later passed a scathing order where it held that Micromax had established YU Televentures ‘with a view to circumvent the orders of this Court’. It also issued notice to all the three Directors of YU who were impleaded as Respondents 3, 4 & 5 in the contempt petition..“This appears to be a clear case of piercing the corporate veil which needs to be done. While a corporate entity may well have a separate juristic personality, it is managed and run by human beings who give it form and substance. Respondent 1 (Micromax) and Respondent No 2 (Yu Televentures) fully knew the import of this Court’s orders and willingly circumvented it. They acted with impunity and are in contempt of this Court.”.The Bench then proceed to adjourn the matter for December 15 when the stance of Directors of the subsidiary is expected to be heard.