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Tuesday, April 26, 2016

Licence Agreement between the appellant and the respondent dated 22.2.1993 which provided for settlement of disputes by way of arbitration in accordance with the Rules of the Dutch Arbitration Institute = the prayer was for a direction to the appellant to execute the deed of transfer and assignment of Patent Nos. 2143/MUM/2008 and 2144/MUM/2008 in favour of the respondent in terms of the draft deed in Annexure P6, which was dated 4.4.2012.= Annexure P6 which was dated 4.4.2012 was the ultimate transfer deed which the appellant was obliged to execute= it must be held that there was no occasion for the respondent to have any grievance in regard to the execution of the transfer deed as directed in paragraph 7 of the PFA of the Arbitral Tribunal dated 23.12.2011. The failure on the part of the learned Judge in having noted the fact that the transfer deed dated 4.4.2012 was as per the re-draft forwarded by the respondent themselves which was duly executed and sent back by the appellant by 9.4.2012 and the original by 12.4.2012 unfortunately resulted in the passing of the impugned order. In the light of the said patent illegality in the impugned order, the same is liable to be set aside.


                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                    CIVIL APPEAL NOS. 4359-4360  OF  2016
                [arising out of SLP(C) Nos.3134-3135 of 2015]

M/S. SHINHAN APEX CORPORATION             …APPELLANT

                                   VERSUS

M/S. EURO APEX B.V.                 …RESPONDENT




                         J   U  D  G   M   E   N   T


Fakkir Mohamed Ibrahim Kalifulla, J.

Leave granted.

These appeals are directed against the order dated  29.9.2014  in  Execution
Application No.643 of 2013 in Award dated 23.12.2011  with  Chamber  Summons
No.832 of 2014.

To briefly note the  facts,  there  was  a  Licence  Agreement  between  the
appellant and the respondent dated 22.2.1993 which provided  for  settlement
of disputes by way of arbitration in accordance with the Rules of the  Dutch
Arbitration Institute. The said agreement was sought to be terminated  by  a
notice by the respondent on 12.3.2007. The termination was  to  take  effect
from  23.02.2008.  The  dispute  went  before  the  Arbitral  Tribunal.   On
11.6.2008, the appellant filed an application  for  registration  of  Patent
Nos.10-0865115 and 100909490 in the United States as well as  in  India.  In
the arbitral proceedings, a Partial Final Award (for short, PFA) came to  be
passed by the Arbitral Trinunal on 23.12.2011. We  are  presently  concerned
with the Indian Patents in which the appellant's rights  and  interest  were
involved, namely, Patent Nos. 2143/MUM/2008 and 2144/MUM/2008. The  relevant
part of the award (viz) paragraphs 7 and 9, of the PFA reads as under:-

“7. Respondent  to,  within  30  days  following  the  notification  of  the
arbitration award,  unconditionally  and  irrevocably,  fully  transfer  all
rights and interests of Indian Patent No.2143/MUM/2008 and 2144/MUM/2008  to
Claimant, or a company designated by Claimant, and sign/execute and  submit,
at the first request of Claimant, and within 3 days following such  request,
all the documents that  are  required  to  effect  such  patent  rights  and
interests transfer in accordance with the requirements of the Indian  Patent
Act and applicable Indian laws; and to simultaneously provide copies of  all
the relevant correspondence relating to such transfer  to  the  attorney  of
Claimant by fax and registered post (fax: +31-20-6513001, HIL  International
Lawyers & Advisers, PO Box 22678, 1100 DD Amsterdam, the Netherlands);

8.          xxx        xxx        xxx

9. Respondent to pay a direct enforcement penalty  in  the  amount  of  Euro
50,000 for each case in which Respondent infringes the arbitral  orders  sub
7 and 8 above, and Euro 5,000 for each day the infringement continues;”



The Award dated 23.12.2011 was communicated to the parties by  the  Arbitral
Tribunal on 27.12.2011.  Therefore, the period  of  thirty  days,  fixed  in
paragraph 7, was to start from 27.12.2011.

Closely followed  by  that,  the  respondent  forwarded  its  request  dated
19.1.2012 in the form of a  letter  communicated  by  the  Advocate  of  the
respondent to the appellant  by  enclosing  the  required  documents  to  be
executed by the appellant for the purpose of transfer of  the  patents.   In
the opening paragraph of the draft transfer deed a  reference  was  made  to
PFA rendered on 23.12.2011 of CASE NAI  3625,  in  order  to  ascertain  the
obligation of the appellant to execute the transfer of the  patents.  It  is
not in dispute that subsequent to the said letter dated  19.1.2012  and  the
enclosures, discussions were held between January and March, 2012 among  the
advocates of the appellant and the respondent to finalize the draft deed  of
transfer.

Thereafter, again at the instance of the respondent through a  communication
dated 3.4.2012 of the respondent's lawyers addressed to the appellant a  re-
draft of the deed of transfer was enclosed, which  was  dated  4.4.2012.  In
the opening part  of  the  said  Deed,  the  reference  to  PFA,  which  was
mentioned in  the  earlier  draft  transfer  deed,  was  omitted.  In  other
respects, the draft remained the same which contained  a  clause  under  the
caption 'Consideration' to the effect, “Pursuant to the above,  the  Parties
agree that the consideration for the sale and transfer  of  the  patent  and
the patent rights shall be US$ 1 (United  States  Dollar  One),  receipt  of
which is hereby acknowledged”.

That apart, in clause 5.5 of the re-draft it was mentioned that  arbitration
of the dispute arising out of or in  connection  with  the  deed  should  be
initially settled under the Rules  of  Singapore  International  Arbitration
Centre by a Sole Arbitrator appointed in accordance with the said Rules  and
the proceedings should be in English and the seat of arbitration  should  be
Singapore. Insofar as the said clause was concerned, the same was  different
than the one which was contained in the earlier  draft,  as  per  which  the
arbitration was  to  be  carried  out  with  the  Rules  and  provisions  by
Netherlands Arbitration Institute  and  the  venue  of  the  arbitration  as
Hague, The Netherlands and governing law was also mentioned as the  laws  in
force  in  the  Netherlands  and  the  Courts   at   Netherlands   to   have
jurisdiction. In the draft dated 4.4.2012 the governing law was  to  be  the
laws in force in India.

The appellant received the re-draft by way of  e-mail  on  3.4.2012  with  a
direction to the appellant to sign the document, get  it  legalized  by  the
Indian Embassy in Seoul and dispatch the same to  the  respondent's  lawyers
in Amsterdam.  The appellant executed the deed of  transfer  dated  4.4.2012
and thereby transferred all its rights and interests in the  Indian  Patents
in favour of the respondent. The  appellant's  lawyers  sent  an  electronic
copy of  the  said  document  to  the  respondent  duly  notarized  with  an
assurance that the original would be promptly couriered  to  the  respondent
upon confirmation.  In response to the same, the lawyers of  the  respondent
in their e-mail dated 11.4.2012 intimated that the  signature  part  of  the
deed was correctly executed by the appellant and also  wanted  the  original
deed to be sent by courier to their Amsterdam Office for carrying out  other
additional formalities for effecting  the  transfer.  Simultaneously,  their
lawyers also  on  the  same  day  informed  the  respondent  confirming  the
forwarding of the transfer deed for effecting the  transfer  of  the  patent
applications duly signed by the appellant.  The original document  was  also
forwarded to the lawyers of the respondent on 12.4.2012.

However, it appears that the respondent had its own issue with  its  lawyers
as regards the draft as well as the final deed executed by the appellant  in
favour of the respondent which came to light when  the  present  proceedings
before the High  Court  was  launched  by  the  respondent.   The  same  was
reflected  in  the  communication   dated   12.4.2012   addressed   by   the
representative of the respondent  to  its  lawyers.   Thereafter,  the  next
communication was dated 3.12.2012 by the respondent's  lawyer  addressed  by
way of an e-mail to the appellant's lawyer suggesting that  the  transaction
can be by way of trade sale of the appellant's business. On  behalf  of  the
appellant, its lawyer sent a reply  dated  11.12.2012  taking  the  definite
stand that after the execution of  the  transfer  deed  dated  4.4.2012  the
requirement of the obligation to be fulfilled  by  the  appellant  was  duly
complied with as per the  PFA  dated  23.12.2011.   Thereafter,  by  another
communication dated 15.3.2013, the respondent's lawyers sent a fresh  e-mail
to the appellant's lawyers informing that fresh steps  are  required  to  be
taken to arrive at a final settlement of  disputes.   The  said  e-mail  was
also replied on behalf of the appellant on 20.3.2013 wherein the  respondent
was reminded as to  the  confirmation  of  the  steps  taken  based  on  the
transfer deed executed by them.  For the first time, on 8.6.2013, by way  of
e-mail at the instance of the respondent's lawyers  it  was  intimated  that
respondent was not willing to accept the transfer of  Indian  Patents  based
on the language used in the draft deed as  signed  by  the  appellant.   The
said e-mail was also duly replied on behalf of the  appellant  on  15.6.2013
pointing out that the deed was executed as per the draft  forwarded  to  the
respondent by their lawyers and consequently the appellant was  not  in  any
way liable for either any delay or for the terms contained in  the  transfer
deed.

It was in the above-stated background the present  application  came  to  be
filed by the respondent on 8.7.2013 before the High Court of Bombay for  the
enforcement of paragraph 7 of the PFA dated  23.12.2011.   By  the  impugned
order, the learned Single Judge held that there was  a  material  alteration
in the draft deed forwarded by the respondent  to  the  appellant  when  the
final deed was executed in the deed dated  4.4.2012  and  consequently,  the
appellant is bound to execute a transfer  deed  of  assignment  as  per  the
draft sent by the award holder, namely, the  respondent  as  was  originally
forwarded to the appellant.

With that view, the learned Judge directed  the  appellant  to  execute  the
deed  of  transfer  and  assignment  of  Patent   Nos.   2143/MUM/2008   and
2144/MUM/2008 in favour of the award holder in terms of Annexure P6  to  the
Execution Application incorporating therein the  complete  recital  'B'  and
the Arbitration Clause 5.5 showing the  future  arbitration  in  Netherlands
within two weeks from the date of the  order.   Aggrieved  by  the  impugned
order, the appellant is before us.

We heard Mr. K.V. Vishwanathan, learned senior  counsel  appearing  for  the
appellant and  Mr.  Manoj  K.  Singh,  learned  counsel  appearing  for  the
respondent.

Having drawn our attention to  the  above  factual  details  which  emanated
after the passing of PFA dated 23.12.2011, Mr. Vishwanathan, learned  senior
counsel, contended that  when  the  application  was  initially  moved,  the
respondent failed to bring to the notice of the Court  about  the  extensive
correspondence which took place between 19.1.2012 and 15.6.2013, that  after
the appellant in its Chamber Summons brought to the notice of the Court  the
relevant information,  namely,  the  re-draft  sent  by  the  respondent  on
3.4.2012 which contained the variation  in  para  'B'  as  between  the  one
contained in the earlier draft of 19.1.2012 and  3.4.2012  as  well  as  the
arbitration clause and the governing law contained  in  paragraphs  5.5  and
5.6, the respondent for the first time in their rejoinder referred to  those
documents.  The learned  senior  counsel  pointed  out  that  learned  Judge
completely omitted to take note of such relevant factors  and  proceeded  to
hold as though the draft sent by  the  respondent  on  19.1.2012  alone  was
material and that the changes found in the final deed dated 4.4.2012 was  at
the instance of the appellant which unfortunately led to the passing of  the
impugned order.

In reply, Mr. Singh, learned counsel appearing for the respondent,  was  not
able to controvert the factual position, namely, that the first  request  of
the respondent after the PFA dated  23.12.2011  was  19.1.2012,  that  along
with the said communication the draft deed of transfer  to  be  executed  by
the appellant was forwarded to it, that after detailed  discussions  between
January and March, 2012, the re-draft was forwarded  by  the  respondent  on
3.4.2012 wherein the reference to  PFA  in  the  opening  paragraph  of  the
earlier draft was omitted and that the paragraphs relating to  consideration
was specified apart from the change  about  the  venue  and  the  applicable
Rules  of  the  Arbitral  Tribunal  was  noted  as  Singapore   instead   of
Netherlands  and  the  governing  law  applicable  was  also  changed   from
Netherlands to India.  Learned counsel was also not able to  controvert  any
of the other subsequent correspondence exchanged between the  appellant  and
the respondent between 11.4.2012 and 15.6.2013.

Having regard to the said development which had taken place  after  the  PFA
dated 23.12.2011 which discloses that  the  appellant  did  not  commit  any
default in complying with the direction of the said  Award  and,  therefore,
the present direction of the learned Judge in the impugned order was  wholly
unwarranted.  If the respondent failed to act based on  the  final  transfer
deed executed by the appellant on 4.4.4012,  which  was  in  tune  with  the
draft forwarded by the respondent themselves, the  appellant  cannot  be  in
any way blamed for the misfeasance committed by the respondent.

In  the  above-stated  background,  when  we  consider  the  prayer  of  the
respondent as claimed in the application, the prayer was for a direction  to
the appellant to execute the deed of transfer and assignment of Patent  Nos.
2143/MUM/2008 and 2144/MUM/2008 in favour of the respondent in terms of  the
draft deed in Annexure P6, which was dated 4.4.2012.  In  fact  the  learned
Judge,  as rightly pointed out by Mr. Vishwanathan, learned  senior  counsel
for  the  appellant,  completely  missed  to  note   that   based   on   the
correspondence exchanged between the respondent and  the  appellant  between
19.1.2012 and  3.4.2012  Annexure  P6  which  was  dated  4.4.2012  was  the
ultimate transfer deed which the appellant was obliged to execute, that  the
appellant duly executed the said document by signing the  same  on  4.4.2012
and forwarded to the respondent's lawyers on 9.4.2012 and the due  execution
of which was also confirmed on behalf of the respondent by their lawyers  on
11.4.2012.  A further confirmation was made by the respondent's  counsel  to
the respondent themselves  on  the  same  day,  i.e.  11.4.2012  as  to  the
execution of the transfer deed dated 4.4.2012.  The original documents  were
also forwarded by the appellant  on  12.4.2012.  After  the  above  referred
sequence of events as regards Annexure P6 dated 4.4.2012 are noted, it  must
be held that the direction contained in  paragraph  7  of  the  PFA  of  the
Arbitral Tribunal was duly carried out by the appellant based on  the  first
request of the respondent themselves as made on 19.1.2012  and  as  per  the
modified request dated 3.4.2012. If that was  the  real  fact  situation  in
regard to the execution of the transfer deed, which was  completely  omitted
to be noted by the learned Single Judge, it must be held that there  was  no
occasion for  the  respondent  to  have  any  grievance  in  regard  to  the
execution of the transfer deed as directed in paragraph 7 of the PFA of  the
Arbitral Tribunal dated 23.12.2011. The failure on the part of  the  learned
Judge in having noted the fact that the transfer deed dated 4.4.2012 was  as
per the re-draft forwarded by  the  respondent  themselves  which  was  duly
executed and sent back by the appellant by  9.4.2012  and  the  original  by
12.4.2012 unfortunately resulted in the passing of the  impugned  order.  In
the light of the said patent illegality in the impugned order, the  same  is
liable to be set aside.

In the said circumstances, the impugned order of the  learned  Judge  cannot
be sustained, the same is set aside and the appeals stand allowed.



                                          ................................J.
                                          [Fakkir Mohamed Ibrahim Kalifulla]


                                          ................................J.
                                                                [S.A. Bobde]
New Delhi;
April 22, 2016

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