TMI Blog2009 (12) TMI 1040X X X X Extracts X X X X X X X X Extracts X X X X ..... uch controversy by providing to the other Parties a brief and concise statement of the initiating Party's claims, together with relevant facts supporting them, and referring to this Section 13.10(a). For a period of sixty (60) days from the date of such statement, or such longer period as the Parties may agree in writing, the Parties shall make good faith efforts to settle the dispute. Such efforts shall include without limitation, full presentation of the Parties' respective positions before the respective chief executive officers of their respective companies. Any Party may in its sole discretion elect to be assisted by counsel in such presentation. (b) In the event the Parties are unable to reach accord using the procedures specified in paragraph (a) above, such dispute shall be finally settled without recourse to the courts, in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce, by one or more arbitrators designated in conformity with those Rules. Arbitration shall be held in London, England. Either Party may ask the competent tribunal to confirm an arbitration award or otherwise provide that it shall be enforceable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehring GmbH Company, Germany, executed the following documents: i) A secrecy Agreement dated 5th February, 1997. ii) A Registered User Agreement dated 30th April, 1997 for the Respondent to continue as registered user in relation to the manufacture of Rabipur vaccine in India. iii) An agreement dated 5th May, 1997 for the supply of Seed Virus ( a raw material for the manufacture of Rabipur) iv) A Licence and Technical Collaboration Agreement dated 6th May, 1997 in relation to technical information for manufacture of Rabipur. 8. On 07/10/1997, the Company, known as Chiron Behring Vaccines Private Limited (hereinafter the Company ), was incorporated. 9. On 22/04/1998, A Joint Venture Agreement was executed between Petitioner and the Respondent. This agreement recognized the Respondents rights to continue to market and distribute Rabipur in the HMR Territories. The aforesaid agreement provides as under: Article 5 Distribution of JVC Products in the HMRL Territories 5.3 Provided that the JVC can meet HMRL's requirements, HMRL shall not sell in the HMRL Territories any vaccine products that complete with the JVC Products. Article 7 Distribution of Ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Corporation, USA and Chiron Behring GmbH Co., in the Company. 17. On 27/09/2006, at a meeting of its Board of Directors the Company resolved not to renew the Marketing Distribution Agreement entered into with the Petitioner, for marketing and distribution of Rabipur in the HMR Territory, from 1st May, 2008 onwards. Based on the aforesaid resolution a notice was sent to the Respondent by the Company in this regard. 18. On 03/07/2007, suit No. 1847 of 2007 filed by the Respondent, inter alia, to challenge the minutes of the meeting held on 27th September, 2006, and the subsequent notice of nonrenewal issued by the Company to the Petitioner. The Respondent filed Notice of Motion No. 2490 of 2007 for certain interim reliefs in the abovementioned suit. 19. On 31/07/2007, the Petitioner filed an affidavit in reply to Notice of Motion No. 2490 of 2007 in the abovementioned suit. 20. On 26/03/2008, the Petitioner preferred a request for arbitration to the International Court of Arbitration of the International Chamber of Commerce. 21. On 23/04/2008, the consent terms were filed before the Hon'ble Supreme Court by which parties agreed to refer all disputes and diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is or the petitioner ) is a part of the Novartis Group of Companies. The respondent ( Aventis or the Respondent ) is a part of the Sanofi Aventis Group of Companies. Both the Novartis Group of Companies, as well as, the Sanofi Aventis Group of Companies are large multinational organizations engaged in the business of manufacturing and selling pharmaceutical products having worldwide operations. 25. The petitioner (51%) and the Respondent (49%) are shareholders in a Joint Venture Company known as Chiron Behring Vaccines Private Limited (hereinafter referred to as CBVPL ). 26. The relationship between the parties is governed by a Joint Venture Agreement dated 22nd April 1998 ( the JVA ) along with the Shareholders Agreement and the Articles of Association of CBVPL. 27. Both the petitioner and the respondent are entitled to nominate an equal number of Directors to the Board of CBVPL. The Petitioner is however entitled to appoint the Chairman of the Board, who has a casting vote. 28. As per the material terms of the JVA, the purpose of the joint venture was: (i) CB VPL was to manufacture an anti rabies vaccine known as Rabipur; (ii) The Respondent was entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the firm to any partner or his legal representative. 10. Duty to indemnify for loss caused by fraud. Every partners shall indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm. 11. Determination of rights and duties of partners by contract between the partners. (1) Subject to the provisions of this Act, the mutual rights and duties of the partners of a firm may be determined by contract between the partners, and such contract may be expressed or may be implied by a course of dealing. Such contract may be varied by consent of all the partners, and such consent may be expressed or may be implied by a course of dealing. Agreements in restraint of trade. (2) Notwithstanding anything contained in Section 27 of the Indian Contract Act, 1872 such contracts may provide that a partner shall not carry on any business other than that of the firm while he is a partner. 16. Personal profits earned by partners. Subject to contract between the partners. (a) if a partner derives any profit for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to that of the firm within a specified period or within specified local limits; and notwithstanding anything contained in Section 27 of the Indian Contract Act, 1872 (9 of 1872), such agreement shall be valid if the restrictions imposed are reasonable. 37. Section 27 of the Indian Contract Act, 1872 is also reproduced as under: 27 Agreement in restraint of trade, void. Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. Exception 1. Saving of agreement not to carry on business of which goodwill is sold. One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business. 38. Where parties enter into any kind of Joint Venture and/or partnership to do particular business and/or to establish particular business or company and, accordingly, enter into various contracts/agreements, it is always on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon submissions to me by counsel, which I had approved, in the recent case of Reilly v. National Insurance * Guarantee Corporation Ltd (2008) EWHC 722 (Comm) at (13) : (2008) 2 All ER (Comm) 612 at (13) was again the subject matter of agreement, and I repeat and incorporate it: (a) Ordinary Meaning. There is a presumption that the words to be construed should be construed in their ordinary and popular sense, since the parties to the contract must be taken to have intended, as reasonable men, to use words and phrases in their commonly understood and accepted sense. (See also para (7) (i)( iii) in the judgment of Longmore LJ and in particular: The object of the inquiry is not necessarily to probe the 'real' intention of the parties, but to ascertain what the language they used in the document would signify to a properly informed observer.) (b) Businesslike Interpretation. It is an accepted canon of construction that a commercial document, such as an insurance policy, should be construed in accordance with sound commercial principles and good business sense, so that its provisions receive a fair and sensible application. (See also the words of Lord Diplock in Antaios ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that itself is not sufficient to permit other partners to do rival or competing business of the same nature. Section 9 of the Partnership Act provides that the partners are bound to carry on business of the firm to the greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the firm. It is partner's general duty to be just and faithful to the firm/company. The mutual rights and duties of the partners of the firm or the company need to be determined by the contract between the partners. Such contract may be express or may be implied by a course of dealing as contemplated under Section 11 of the Partnership Act. Section 11(2) of the Partnership Act specifies and permit that such contracts may be providing that a partner shall not carry on any business other than that of the firm while he is a partner. This itself means knowing fully the effect and the purpose of Section 27 of the Indian Contract Act, it is permitted to such partners to agree by express or by implication not to permit other partners to do any business other than that of the firm while he is a partner. This does not, according to me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 995 (1) SCC 478 at page 494. 2. A Joint Venture partner cannot engage in any operation harmful to the business in which partners are engaged as the relationship of joint venture partner is a relationship of trust and confidence and subject to the duty of good faith and loyalty from partners. Corpus Juris Secundum paragraph 22. 3. Basis of the relationship. Ordinary partnerships are presumed by the law to be based on the mutual trust and confidence of each partner in the integrity of every other partner. The utmost good faith is requisite in the relations between partners. See Halsbury on Partnership Vol. 35 paragraph 94, page 52. A. Joint Venture being in the nature of a partnership, a partner has a duty of carrying on business to the greatest common advantage, to be just and faithful to each other as in the case of a commercial partnership. This is reflected in Section 9 of the Indian Partnership Act, 1932 and in standard text books on Law of Partnership. 4. A partner cannot without the consent of a his copartners lawfully carry on for his own benefit either openly or secretly any business in rivalry with the firm to which he belongs . This is an obligation which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from engaging any other business contrary to a clause in the partnership or, if the business is a rival business even though there be no such clause . (b) Kerr on Injunctions Page 513514 to the same effect Where a partnership term had not expired one of the partners who entered into a new partnership for carrying on business of the same character and nature was restrained from carrying on such business . (c) The Law of Partnership in India by S.T. Desai, 7th Edition, 2009 at page 146 and page 505. (d) Halsbury's on Partnership Vol. 35 paragraph 156 it is stated The Court may grant injunction whenever it appears just or convenient; and will do so, at the instance of a partner to restrain any other partner from acting contrary to the obligations imposed upon him by the partnership relationship whether such acts are in actual breach of express relations or breach of good faith which is the implied duty of every partner. 47. It is settled law that Section 9 of the Arbitration Act need to be read with Order 39, Rules 1 and 2 of Code of Civil Procedure (CPC) and the provisions of the Specific Relief Act while considering to grant interim measure/protection pending Arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmission or consent by a course of dealing. There is no question of using or not using the company/firm's assets or properties or secrets. Such party may or may not use company's assets. It is not necessary to do so. The submission with regard to the using of assets or properties or secrets are immaterial. 52. The submission that it is not the business of CBVPL (the company/partnership) to distribute an antirabies vaccine and, therefore, there is no competition or rivalry between the two. The manufacture of Rabipur by the petitioner and the distribution of verorab by the respondent, in my view, itself sufficient to hold it is a rival or competitive business considering the whole purpose and object of formation of the petitioner/company read with their nature of business, distribution and marketing of the products in the same field. I am not convinced that there is also a contract permitting the respondent to distribute a competing product. Clause 5.3 as strongly relied cannot be read to mean that there is a contract permitting the respondent to distribute a competing product. Permitting to distribute products in restricted or particular territories that does not mean tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issible for the partners to enter into partnership with such negative covenant/clauses. This also cannot be read and refer to mean that in the absence of any negative covenant/clause, other partner is free to do any business other than that of the firm while he is a partner. In my view, as not specifically agreed, it is the obligation and duty of a partner to carry on business only of the firm while he is a partner, unless contracted or agreed between the parties otherwise. But this also subject to Sections 16(b), 36 and 54 of the Partnership Act. In the present case, there is no such case of dissolution of firm or partnership. The respondent is still a partner/Director of the company having 49% of shares. There is no doubt, therefore, he has a duty of good faith, trust, cooperation to continue to achieve the purpose and object of the Joint Venture. 53. Assuming for a moment that there are cases and counter cases or allegations or counter allegations are made by the parties, with regard to their respective conduct, but in view of the fact that the firm/company is still in existence and they are doing the business jointly, therefore, merely because there are breaches of various r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the interest of public at large to permit the respondent to do the business for want of shortage of the product in question in the market. I have already observed in the interim order as under: g) I am not denying the right of the main company/ manufacturer or other distributors to distribute Verorab in the market. At present only the question is whether the Respondent can distribute the same rival product in the market. This also in my view, is not in the interest of commercial agreement entered into between the parties. This is not a case of conflict between public or private interest. It is a pure commercial transaction. 56. The Authorities/citation, therefore, so relied to content that there should be no injunction to prevent such production of anti rabies vaccines in the domestic market, in the present facts and circumstances, are also of no assistance. Novartis AG v. Mehar Pharma (2005) 3 Bom.C.R. 191 and F. Hoffman La Roche v. Cipla Ltd. 148 (2008) DLT 598 . It is a clear commercial contract between the parties. There is no private interest involved in this dispute and not the public. The petitioner's case is only against the respondent to distribute the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tedly, the Respondent has started distributing the rival products called Verorab , which are not manufactured and or distributed and or permitted to be distributed by the Petitioner and or JVA. The distribution has been started since 16th September, 2009 i.e. definitely after the award. 61 Considering the rival submissions so raised including the pleadings and the material placed on record, at this prima facie stage, I have granted ad interim injunction on 16.10.2009 in terms of prayer Clause (a) by observing as under, which is also undisturbed till this date . (a) A partner who has 49% of the share capital in a JVA, is doing the business of distribution on rival product Verorab though the said JVA is in existence. It also means the JVA is still manufacturing and doing the business of Rabipur . Therefore, in a way the partner who is contributing in all respect in JVA, doing other parallel business of distributing the rival products which in my view, is in complete breach of the basic purpose and object of the JVA. When the parties decide and join to do particular business in the present case, as recorded, in my view, either of the partner should do no business rival to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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