Gujarat High Court
Ringspann vs Ringspann on 16 December, 2010
Author: S.R.Brahmbhatt
Bench: S.R.Brahmbhatt
Gujarat High Court Case Information System
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FA/3183/2010 40/ 40 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
FIRST
APPEAL No. 3183 of 2010
For
Approval and Signature:
HONOURABLE
MR.JUSTICE S.R.BRAHMBHATT
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1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
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RINGSPANN
ELECON (INDIA) LIMITED & 1 - Appellant(s)
Versus
RINGSPANN
GMBH - Defendant(s)
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Appearance
:
MR
MIHIR JOSHI, SR ADV. SANDEEP SINGHI, MAULEEN MARFATIA FOR SINGHI &
CO for
Appellant(s) : 1 - 2.
MR MIHIR THAKORE FOR MR UTKARSH B JANI for
Defendant(s) :
1,
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CORAM
:
HONOURABLE
MR.JUSTICE S.R.BRAHMBHATT
Date
: 26/10/2010
ORAL
JUDGMENT
1. The appellants, original opponent Nos.1 and 2 in Civil Misc. Application No.38 of 2010 filed by the present respondent-original applicant in the Court of District and Sessions Judge, Anand under Section 9 of the Arbitration and Conciliation Act, 1996 (for short, the "Arbitration Act") for urgent interim measures, have approached this Court under Section 37(1)(a) of the Arbitration Act challenging the judgment and order dated 23.07.2010 passed in said Civil Misc. Application under the provision of Section 9 of the Arbitration Act on the ground that the order being bad, perverse and untenable in the eye of law, the application deserves to be quashed and set aside.
2. Brief facts leading to filing of the present appeal deserve to be set out as under.
3. The present respondent is referred to hereinafter as the original applicant and the present appellant Nos.1 and 2 are referred hereinafter as opponent Nos.1 and 2 respectively for the sake of convenience. The applicant is a limited company incorporated under the laws of Germany and is engaged in the design, manufacture and distribution of Industrial Power Transmission and work holding products including in particular industrial freewheels (sprag and roller clutches), disk brakes, shaft-hub-connections, torque limiters, couplings and precision clamping fixtures as well as components thereof. The opponent No.1 is a company incorporated under the Company Act, 1956 having its registered office at Anand-Sojitra Road, Vallabh Vidhyanagar, Gujarat, India. The opponent No.1 is a Joint Venture Company formed by the applicant and opponent No.2. The opponent No.2 is also a company incorporated under the Companies Act, 1956 and is having its registered office at Anand, Gujarat, India. The applicant and opponent No.2 entered into a Memorandum of Understanding on 27.11.1997 for creating Joint Venture Company i.e. opponent No.1. The Ringspann Elcon(India) Limited was formed and created. The said company, opponent No.1, was created for manufacturing Cone Clamping Elements based upon the technology of the original applicant which is referred to in the documents as Ringspann technology. The applicant and opponent No.2 had equal equity interest and management participation rights (of 50-50 basis) in the opponent No.1 company. The Board of Directors of the opponent No.1, namely, the Ringspan consists of four members to be nominated by the applicant and remaining two to be nominated by opponent No.2. The post of Chairman was to be filled in by the nomination every two years altering between the applicant and opponent No.2 for fulfilling the objective of Joint Venture. The applicant entered into an agreement called License Agreement dated 27.10.1998 with opponent No.1 i.e. Ringspann (India) Ltd. wherein, it was inter alia provided that the technology is to be used under the license for manufacturing the aforesaid products. To put it more succinctly it would be advantageous, if averments made in paragraph no. 7 of the applicant's application are reproduced as under:-
"7. In furtherance of the objective of J.V. Agreement, the Applicant and the Opponent No.1 decided to enter into a license agreement. In this respect, approval was granted by the Reserve Bank of India ("RBI") vide its letter dated 9th September, 1998. Subsequently, the Applicant and the Opponent No.1 entered into a License Agreement on 27th October, 1998 (hereinafter referred to as "the License Agreement") whereunder the Applicant made available to the Opponent No.1 its technology in order to enable the Opponent No.1 to commence and operate the business as envisaged by the J. V. Agreement. Further, in order to adopt the terms of the approval issued by RBI, the Applicant and the Opponent No.1 entered into Supplemental Agreement dated 30th November, 1999. Under the License Agreement, the Applicant granted to the Opponent No.1 exclusive and non assignable right to manufacture / assemble, market and sell the Licensed Products. The Licensed Products initially included industrial freewheels (sprag clutches and roller clutches) and components thereof (with the exception of Ringspann Sprags). Thereafter, in or around April, 2001, the Opponent No.1 expressed a desire to obtain Ringspann Technology for 2-Part Shrink Discs also. Hence, another License Agreement was entered into between the Applicant and the Opponent No.1 on 2nd May, 2001 in respect of 2-Part Shrink Discs ("License Agreement - 2 - Part Shrink Discs"), which contained similar terms and conditions as that of the License Agreement, whereunder the Opponent No.1 was granted license to manufacture, assemble, market and sell 2-Part Shrink Discs and components thereof. The License Agreement, the Supplemental Agreement and the License Agreement - 2- Part Shrink Discs are collectively referred to as "the License Agreement" and industrial freewheels (sprag clutches and roller clutches) and components thereof together with 2-Part Shrink Discs and components thereof, are collectively referred to as "Licensed Products". Hereto annexed and marked Exhibits "C"
"D" and "E" are copies of the License Agreement dated 27th October, 1998, the Supplemental Agreement dated 30th November, 1999 and the License Agreement - 2 - Part Shrink Discs dated 2nd May, 2001 respectively."
The license was to become effective as on the date of the approval from the Government and was to remain in force uptill 31.03.2009. Thereafter, this agreement was to be renewed on mutually agreed upon terms subject to the guidelines of the Government then in force on renewal on payment of royalty thereunder. It is also required to be noted that the license was made co-terminous with joint venture agreement. In other words irrespective of license and its subsistence and its renewal, it was to have life till Joint Venture agreement was alive. This was provided in addition to the other modes of terminating the license agreement as mentioned in the agreement itself. The applicant contended in the application that the license agreement expired by efflux of time on 31.03.2009. The applicant has further averred that they received notice dated 10.04.2009 along with the agenda from opponent No.1 about the board meeting proposed to be held on 20.04.2009 at Hannover, Germany and renewal of the license agreement was one of the agenda item to be discussed between the parties in the said Board meeting. The parties attended the Board meeting. The applicant informed the Board that it was willing to renew the license agreement provided that the royalty as per Article 10 of the expired license agreement would be applicable. The Board of opponent No.1 discussed the matter of renewal of the license agreement and decided to pursue the matter. It is averred in the memo of the application that it was agreed that within the next of 45 days, the opponent No.1 as well as the applicant shall investigate if a royalty, as under
Article 10 of the expired license agreement would be applicable. Further steps were to be taken by the Board. The applicant informed the Board that in the meantime, it would continue in giving support as if the license agreement was still in force. The applicant has averred in the application that despite number of oral requests from the applicant to forward the draft minutes of the meeting, the opponent No.1 did not do so. Ultimately, it received the draft minutes on 07.10.2009. The joint venture terms were extended for consecutive three years in accordance with Article 4.1 of the joint venture agreement. The minutes also contained the willingness of the applicant to support the manufacturing of Cone Clamping (locking Assemblies) which was undertaking of the Ringspann Elecon - opponent No.1 in case if the license agreement was renewed and the license agreement for Cone Clamping elements was entered into. As no further dialogs had happened and the license agreement had expired by afflux of time on 31.03.2009 and as the opponent No.1 was in possession of the Ringspann technology under the expired license agreement, it was using the technology without authorization. The continued illegal and unauthorised use of the Ringspann Technology was a cause of grave concern to the applicant as the quality of the products did not meet with the standards of the applicant and thereby cause grate and irreparable harm and loss to the customers as well as image and reputation of the company in the market world over. On this premise, it was averred that serious dispute had arisen and the applicant was desirous to have the said disputes adjudicated in arbitration as provided under Article 15 of the License Agreement and it was essential to obtain same order for interim measures. The applicant was constrained to file application under Section 9 of the Arbitration Act. The application was heard for the first time ex-parte on 23.07.2010 wherein, the Court made order partly allowing the application. The Court, in short, allowed prayer Nos.1 and 2 and hence, observed that the present Misc. Civil Application was partly allowed and for the rest of the relief, notice was issued to the other side. No order of cost was made. It was pronounced in the open Court on 23.07.2010. The notice was made returnable on 04.08.2010.
4. Being aggrieved and dissatisfied with order dated 23.07.2010, the present appeal is preferred on the grounds mentioned in the memo of the appeal and interim relief is sought by way of civil application filed along with the appeal under Section 37(1)(a) of the Arbitration Act.
5. Learned counsel for the parties agreed and submitted that looking to the controversy involved in the matter and order impugned, the first appeal itself be disposed of at the admission stage. The paper book supplied by the appellants in support of the submissions may be taken into consideration for finally deciding the appeal itself at admission stage.
6. On agreement of the learned counsel for the parties for disposing of the matter at the admission stage, without calling for the Record and Proceedings, the matter is being disposed of by this judgment.
7. Learned senior counsel Mr.Mihir Joshi with Mr.Sandeep Singhi and Mauleen Marfatia for Singhi & Company appearing for the appellants, relying upon the provisions of Order 39 Rule 3 of the Code of Civil Procedure, 1908, submitted that the dictates of the legislature as prescribed under Rule 3 of Order 39 are essential to be observed by the Court before granting interim injunction. In the instant case, as could be seen from the operative part of the order, the Court, without even calling upon the other side, straightway allowed two prayers and injuncted the respondent, contrary to the mandate of the legislature as stated hereinabove. The learned counsel thereafter relied upon the decision of the Apex Court in case of Shiv Kumar Chadha V/s. Municipal Corporation of Delhi and others reported in (1993)3 SCC 161. The learned counsel invited attention of this Court to the direction contained in paragraph No.36 of the said judgment and submitted that the impugned order can well be said to be an order passed without following the aforesaid directions which, in submission of the learned counsel, are required to be followed by the Court while considering the application of interim injunction.
8. The learned counsel for the appellants thereafter submitted that the reading of the entire application would not disclose as to the existence of any dispute which is sought to be made basis for invoking Clause 15 of the agreement for arbitration. The learned counsel for the appellants has thereafter taken this Court through the various correspondence between the parties and exchange of e-mails to support his submission that, in fact, there existed no dispute which could possibly give rise to question of referring the matter to the arbitration. In fact, the Joint Venture Agreement is extended for further period of three years and thus, if at all, it is coming to an end, it would come to an end or rather the extended period would be over in the year 2012 and as could be seen from the terms of the Joint Venture agreement, the same is not to end in this manner. The learned counsel further submitted that looking to the terms of the Joint Venture Agreement, License Agreement and coupled with the correspondence exchanged between the parties, the parties were moving towards achieving their objective of renewing License Agreement itself, in furtherance of the Joint Venture Agreement, as the same is subsisting till date of filing of the application, no notice whatsoever had even been issued as the first notice with regard to so called breach of the terms of License Agreement came to be issued on the date when the application which has come to be filed under Section 9 of the Arbitration Act.
The said notice is nothing else except calling upon the opponent No.1 to remedy the so called breaches in performance of the agreement. This cannot be termed to be a notice for termination of the agreement. There could be absolutely non termination of the agreement also in case if the so called breaches are explained to be no breaches or remedied in time given in the notice.
Learned counsel has further relied upon the following judgments of this Court in support of his submissions:-
Tapan Joshi and others V/s. Einfochips Ltd. passed in Appeal From Order No.261 of 2007 with Civil Application No.9375 of 2007 on 18.07.2007;
Neon Laboratories Ltd.
V/s. Ornate Pharma Pvt.Ltd. passed in Appeal From Order No.378 of 2007 with Civil Application No.13272 of 2007 in Appeal From Order No.378 of 2007 on 16.10.2007 and;
Poonam Engineering Works V/s. Delux Bearing Ltd. passed in Appeal From Order No.306 of 2007 with Civil Application No.11271 of 2007 in Appeal From Order No.306 of 2007 on 30.08.2007.
9. Thus, the very action of the original applicant in proceeding with issuance of notice and filing application for interim measure invoking Section 9 of the Arbitration Act and Arbitration Clause 15 in absence of any tangible dispute, at least in absence of any dispute explained in the application, would not justify the Court in exercising its discretion and straightway allowing the prayer without affording opportunity to the other side and hence, the appeal is required to be allowed.
10. Learned senior counsel Mr.Mihir Thakore for Mr.Utkarsh B. Jani for the respondent contended that the technology which is time and again referred to in the License Agreement being, a technology developed and permitted to be used under the license only and, exclusive intellectual property, the licensor i.e. the original applicant has exclusive right in that behalf and irrespective of part of the technology being not patented, it remains to be intellectual property and any how in the domain and under the exclusive right of the licensor to be relied on the sole discretion of the licensor and the licensee has, therefore, bound itself to utilize and exercise the same in accordance with the terms of the License Agreement only. The license i.e. the License Agreement has expired by afflux of time on 31.03.2009 and thereafter, even if there was talk of renewal or mutual negotiations were going on and even if there was some agreement on the part of the licensor to keep supporting the opponent which, in itself, would not entitle the opponent Nos.1 and 2 to contend that they have right to use the technology beyond the period of License Agreement, irrespective of the permission and/or sanction for so using, from the licensor. The licensee by its conduct has shown scant regard for renewal of license, as against this the Licensor has, in all earnestness been approaching the licensee for renewal on mutual agreed terms. The licensor has, in all earnestness, extended the support for use of technology even after the expiry of the period of license and, therefore, this earnestness of the licensor cannot be construed as an entitlement of the licensee in continuing with the usage of Ringspann technology which they were not entitled to use in absence of any license nor in absence of any License Agreement. In the instant case, the License Agreement has expired on account of elapse of time and, therefore, mere continuance thereafter or even active support from the licensor in the interest of maintaining the quality of the product so produced under the name of Ringspann technology and in due deference to its markets commitments, may not be construed as permission to licensee to use the license technology and the said usage is unauthorised right after it is decided that no renewal is possible. Learned counsel for the respondent submitted that the first appeal is itself not competent inasmuch as the original opponent No.2 is not privy to the contract, namely, License Agreement dated 10.09.1998 and the reliefs which have been sought by way of interim measure are essentially against the opponent No.1 i.e. the Joint Venture Company. The second point of preliminary objection with regard to competence of the appeal was based upon lack of due authority to file the first appeal as Joint Venture Company - opponent No.1 could not have filed appeal without there being resolution of Board which is not in any manner, likely to permit filing of the first appeal. Looking to the peculiar facts that are prevalent in the present proceedings, even ratification of filing of the appeal would be certainly impossible.
Hence, from any angle, the first appeal is not competent and, therefore, it is required to be dismissed accordingly.
11. The learned counsel appearing for the respondent and original applicant thereafter invited the attention of this Court to the affidavit-in-reply filed in the stay application being Civil Application No.12481 of 2010 and submitted that the conduct of the licensee as well as the opponent No.2 is caused for filing application under Section 9 of the Arbitration Act for interim measures. The learned counsel for the respondent, relying upon the chronology of events from the affidavit-in-reply, submitted that the order impugned in this appeal came to be passed on 23.07.2010 and the first appeal with stay application came to be filed only on 14.10.2010. Prior to 15.10.2010, there were various dates mentioned in the list of events which would go to show that on these dates, there was nothing preventing the present appellants from moving the concerned Court for modifying, vacating the order impugned in the present first appeal. The inaction on the part of the appellants have dis-entitled them to challenge the order dated 23.07.2010 in the month of October, 2010, especially when it is viewed with the fact that the reply to the application under Section 9 of the Arbitration Act had been filed only recently and after filing of the reply, the first appeal is moved. When the Court is not therefore, seized with the matter and when the matter is at the stage of hearing or the matter is likely to be heard, the First Appeal may not be entertained so as to have impact upon adjudication which is pending before the Court on the application under Section 9 of the Arbitration Act.
12. The learned counsel appearing for the respondent, hereinabove original applicant, also contended that the License Agreement and Clauses 11.1 and 11.2 under the head "terms of agreement default termination" would unequivocally go to show that the agreement did not have any compulsion upon either party for renewing the same. In other words, Clause 11.1 of the License Agreement cannot be construed to have incorporated any compulsion or lack of discretion in either party so as to make it compulsory renewal. The expression "mutually agreed upon terms" would go to show that the agreement was to end on 31.03.2009 and thereafter, renewal was solely based upon mutually agreed terms by the parties meaning, thereby in case if a party to the agreement is not inclined to go for renewal, it would be treated as an end of the relationship subsisting under the agreement and thereafter, the usage of the Ringspann technology would be unauthorised and not permissible. The learned counsel for the respondent thereafter, while elaborating the same submission, drew attention of this Court to Clause 11.2 and submitted that in any event, even if the License Agreement was renewed or permission as envisaged under Clause 11.1, then also, it is expressly made co-terminous with the Joint Venture agreement, meaning thereby, the Joint Venture agreement to be taken into consideration and this will also strengthen his submission that renewal was purely dependent upon mutual agreement and volition of the parties.
13. The learned counsel appearing for the respondent, original applicant, thereafter invited attention of this Court to the exchange of the correspondence of the parties and tried to canvass submission that there was sincere attempt on the part of the original applicant to see to it that the things may work properly but, unfortunately, there was evasive and illusive approach on the part of the opponent No.2 which created impasse and hence, renewal of license became impossible that the renewal itself was not possible as there was no mutual agreement between the parties. The perpetuation of usage of Ringspann technology at the end of opponent No.1 would be absolutely illegal, unauthorised and cannot be permitted to, for ever. Therefore, the License Agreement which has expired on afflux of time and which has thereafter no legal life, cannot be permitted to be revived by staying the order or quashing the order impugned in this appeal.
14. The learned counsel for the respondent in furtherance of the aforesaid submission, contended that this Court, if stays the order of the trial Court impugned in this appeal and quashes the same, then the appeal have effect of virtually reviving the License Agreement and permitting the opponent Nos.1 and 2 to carry on with their usage of Ringspann technology which legally, they are not entitled or authorized to do so. The learned counsel drew analogy from the provision of Specific Relief Act to strengthen his submission, namely, that even as per the provisions of Section 14(1)(e) of the Specific Relief Act, the relief in such a nature is prohibited in the instant case if the Court at the first instance, had not granted stay order or injunction allowing or partly allowing the prayers made in the application and if this Court vacates the same or quash the same, it would amount to compelling the parties to go for specific performance which is expressly prohibited under the provisions of Specific Relief Act. The learned counsel submitted that the date when the License Agreement has expired, i.e. on 31.03.2009 and till the application is filed and notice for ratifying breaches came to be issued and the support in the interregnum period coming forward from the original applicant, could be of no avail to the opponent Nos.1 and 2 as it was merely on account of, at the best mere sufferance, or even if construed to be express concession to use the technology but that in itself, cannot be equated with any right to use the technology as if the License Agreement is subsisting till date. The conduct and so called mutual agreement to continue support after the expiry of the agreement i.e. from 31.03.2009, would also be of no avail on a specious plea of industry coming to grinding halt, on account of stoppage of permission to use the Ringspann technology, what is not permissible in law, cannot be pleaded and prayed on the ground of equity. Relying upon the English decision in case of Sport International Bussum B.V. And others V/s. Inter-Footwear Ltd., the learned counsel submitted that in a matter of contract, the commercial interest and rights would oust the equitable considerations and, therefore, heavily relied upon this judgment, the learned counsel submitted that when the Court has injuncted the party on the basis of the legal proposition of law that once, the agreement has come to an end, the subsequent continuation of usage of technology even on account of sufferance or express permission is required to be stopped when such permission is withdrawn or the sufferance has ended. The issuance of notice for rectifying the breaches and seeking interim measures under Section 9 would, therefore, be sufficient to show that the technology cannot be permitted to be utilised by the opponent and the appellant hereinabove. The learned counsel thereafter relied upon the decision of the Division Bench of the Delhi High Court in case of Akbar Sekh and others Vs. M/s. Mousumi Factory Agency and others reported in AIR 2005 DELGHI 73 and submitted that there cannot be absolute proposition of law that in all the matters, the Court while considering the application under Order 39 of temporary injunction, the injunction and/or relief in the nature of mandatory relief cannot be granted. The learned counsel for the respondent also relied upon similar decision of the apex court in case of Deoraj Vs. State of Maharashtra which has also been extensively relied upon by the trial court while partly allowing the application were time and again cited before this Court to support the contention that the order impugned cannot be said to be in any manner perverse or warranting quashment. The learned counsel, at this stage, submitted that the expression partly allowed employed in the impugned order are required to be considered in light of proposition of law and peculiar facts and in this case, he submitted that at the best, the Court may clarify in respect thereof that the matter may also be heard so far as those prayers and reliefs are concerned but the Court in this appeal, may not either stay the order or quash the same then, in that case, let there be a hearing of the entire application but without vacating the stay. In substance, the submission could be summarised as under:-
That let there be a hearing on the application from this stage onwards on the prayers including, those prayers which said to have been allowed but the Court at this stage, may not quash the order or vacate the interim relief which has already granted, meaning thereby the applicant may enjoy the interim relief and the present appellant may be heard on the point of prayer as if those prayers have not been granted. He submitted that thereafter he has relied upon the authorities which are as under:-
1. Akbar Sekh and others V/s. Mousuni Factory Agency and others reported in AIR 2005 Delhi 73;
2. Indian Oil Corporation Ltd. V/s. Amritsar Gas Service and others reported in (1991)1 SCC 533;
3. Rajasthan Breweries Limited V/s. Stroh Brewery Company reported in AIR 2000 Delhi 450;
15. This Court has heard learned counsel for the parties and perused the order impugned as well as paper book supplied along with the appeal. Few undisputed aspects emerging from the perusal deserve to be enlisted as under:-
The applicant and the original opponent No.2 have joined hands and executed an agreement called Joint Venture Agreement dated 27.03.1998 whereunder, the opponent No.1 has been formed and created the opponent. This is a creature of these two. The terms of the Joint Venture, therefore, cannot be overlooked by any one in order to appreciate the rival contentions between the parties.
Clause 3 in the preamble provides for forming of Joint Venture in India by Ringspann Elecon i.e. the original applicant and opponent No.2 for manufacture, assembly and marketing of industrial freewheels and related products in India using Ringspann technology furnished by Ringspann i.e. the original applicant and Ringspann shall supply to the Joint Venture the separate assemble constituting the essential components of freewheels. It further provides that Ringspann shall supply to Joint Venture components parts for freewheels for furthering objective of forming the Joint Venture which includes right and obligation of the party as set out in the Joint Venture Agreement dated 27.03.1998. The Joint Venture Agreement envisages equal partnership and participation between the Ringspann i.e. the applicant and Elecon i.e. the original opponent No.2. The method of sharing, constitution of Board of Directors, the procedure of meeting and management everything is provided under the Joint Venture Agreement. The redemption of share is also provided.
Clause 4.1 of the Joint Venture provides for an indefinite period of time. The term needs to be set out so as to have easy reference thereto.
"4.1. Term of Joint Venture:
This Agreement shall be entered into for an indefinite period of time and may at the earliest be terminated by other party by 12 months' prior written notice effective at March 31, 2009. From April 1, 2009, the term of this Agreement shall be extended for three consecutive years each provided that neither party terminates the Agreement by the end of each consecutive period by twelve months' prior written notice."
Thus, the very opening of the term, go to show that what is the function of the Joint Venture and how it is to operate. The period from 1st April 2009 is to be extended for three consecutive years if neither party terminates the same. In other words, it was clearly provided a tenure to facilitate the designing, production etc., based upon the Ringspann technology.
The Clause 4.2 provides for termination which envisages issuance of notice on occurrence default. The notice under Sub-Clause 1 Clause 4.2 came to be issued first time along with filing of application under Section 9 of the Arbitration Act. In other words, there was no notice at all in terms of the License Agreement under which the relationship of licensor and licensee existing between the applicant and original opponent No.1.
Clause 4.3 is required to be set out as under:-
"4.3. Event of default.
In the event of a default by any one party in the performance of any material obligation under this Agreement or any other agreement concluded between either party and the JVC, the other party shall be entitled to terminate this Agreement. The party claiming that the other party is in default, shall give such party written notice specifying the nature of the default. The defaulting party hall be granted the opportunity to remedy the default within ninety (90) days upon receipt of such notice. If the default should not be remedied within such period, this Agreement may thereafter be terminated forthwith by written notice issued by the non-defaulting party."
Clause 4.4 of the Joint Venture provides for respective party's obligation upon termination.
Clause 10 provides for arbitration.
It is at this stage, required to be noted that the arbitration is not even contemplated by the applicant under Clause 10 of the Joint Venture agreement.
The License Agreement is executed between the applicant and Joint Venture Company- opponent No.1. The opponent No.2 is signatory to that agreement in its capacity as confirming party, meaning thereby though the counsel for the applicant and respondent hereinabove, did make submission with regard to lack privity of contract between the applicant and original opponent No.2, the fact remains to be noted that the License Agreement which is under consideration bears signature of the original opponent No.2 as per the say of the learned advocate for the applicant, though signed as a confirming party to this agreement.
The License Agreement contains Clause 1.3 which talks about the terms and their product.
Clause 3.3 talks about the nature of technology being handed over for use of the same by the Joint Venture.
Clause 4.2 talk about the maintenance of security.
Article 11 provide terms and agreement and default in termination.
11.1 and 11.2 discussed hereinabove need not detain the Court further except citing them out for hearing for ready reference.
"11.1. This Agreement shall become effective as of the date of Government approval and shall remain in force until March 31, 2009. Thereafter this Agreement shall be renewed on mutually agreed upon terms subject to the guidelines of the Government then in force on renewal and payment of royalties thereunder.
11.2.Notwithstanding the ordinary termination rights as set forth in Section 11.1 hereof, this Agreement shall automatically terminate simultaneously with the effective termination date of the Joint Venture Agreement entered into between Licensor and Elecon Engineering Co.Ltd. Unsell otherwise agreed upon."
(xvi) Clause 11.4, 11.5 and 11.6 are as under:-
"11.4.In the event of a default by one party with respect to the performance of any material obligation under this Agreement, the other party shall be entitled to terminate this Agreement. The party claiming that the other party is in default, shall give such party written notice specifying the nature of the default. The defaulting party shall be granted the opportunity to remedy the default within ninety (90) days upon receipt of such notice. If the default should not be remedied within such period, this Agreement may thereafter be terminated forthwith by written notice issued by the non-defaulting party.
11.5.Upon termination of this Agreement for whatever reasons, the obligations of Licensor shall immediately cease License shall
(a) refrain from using any of the Ringspann Technology and technical and marketing assistance obtained from Licensor;
(b) refrain from manufacturing /assembling, using, selling, offering for sale or trading with the Licensed Products including Ringspann SPRAGS and other component parts pertaining to the Licensed Products except as specifically provided in Section 11.6 hereof.
(c) to the extent that any of the Rengspann Technology and/or practical experience and technical and marketing assistance obtained from Licensor, including any translations or conversions thereof, has been reduced to writing or other tangible record or form, immediately return to Licensor all papers, documents, drawings, copies and other tangible records incorporating the same.
11.6.In the event that Licensee upon termination of this Agreement should have any of the Licensed Products on stock or in the process of being manufactured. Licensee may complete the manufacture/assembly thereof and may sell the same provided that the manufacture/assembly and sale of such products is completed within ninety (90) days from the effective termination date."
(xvii) The License Agreement provides Article 15 for arbitration wherein Clause 15.5 needs to be set out as under:- page 110 15.5 take.
16. These Clauses need to be borne in mind, the real intention of the parties that even while the dispute is under arbitration except the matter under dispute the parties shall continue to exercise the respective rights and fulfilling the respective obligation under this agreement.
17. An attempt was made to say that this Clause would be of no avail as the agreement itself has come to an end by afflux of time and on account of it being not renewed on mutual terms.
18. Against the aforesaid peculiar indisputable backdrop of factual aspects, the Court is to examine as to whether the impugned order requires to be interfered with. The Court also needs to be mindful of the fact the Ex Parte injunction order is challenged in this appeal when the parties are yet to make their entire submissions before the Trial Court hence any this Court need not go into examinations of fine contentions or else it would affect the parties' stand before the Trial Court. The Court bearing this limitation in mind decides the tenability of the impugned order. The reading of paper book as well as the order impugned and the application go to show that till the application under Section 9 of the Arbitration Act came to be filed, the parties were in all their earnestness, negotiating the terms for renewal which was not, in fact, the subject matter of any dispute. As it transpired during the course of hearing and as its reflected on the record of this matter the royalty for the period after the so called expiry has also been provided for in the books of accounts of the Original Opponent No. 1 and whose business is to be transacted in equal participation by both the applicants' as well as the respondents in the Board of Opponent No. 1.
19. The applicant prima facie appears to have chosen this time to file application under Section 9 of the Arbitration Act without articulating or even making out any real dispute between the parties. The fact of filing of application under Section 9 of the Arbitration Act presupposes existence of some dispute between parties requiring intervention of Arbitrators for adjudication thereof. The reading of the entire application made by the original applicant did not clearly indicate any point of disagreement between the parties giving rise to arbitration. It is not clearly spelt out as to what was the point of disagreement or dispute between the parties. The Court has not to add hear that if it was the understanding of the applicant that the License Agreement has come to an end and they have a right to restrain the opponent from using the same any more, then there was nothing to prevent the licensor from effecting the same by merely issuing appropriate notice calling upon the original opponent no. 1 and 2 from using the technology,in absence of any such notice and when the provision for making the royalty, after 31.03.1009 and providing for it in the books of account for opponent No.1 to which the applicant and opponent No.2 are equal partners, it can be termed to be dispute pertaining to payment of royalty. In fact, as it transpires from the record of this proceedings the parties were awaiting legal expert's opinion thereon. It was also not the case of the applicant that in the meantime it requested the opponent no. 1 and 2 not to use the technology on the contrary the record indicate otherwise that the uninterrupted support was to come from the applicant while terms for renewal were being discussed. Therefore, in my view, when there was no dispute with regard to any aspect, at least no dispute which could be said to have been dispute as for dispute also one party needs to be in disagreement with the other party and, therefore, one party needs to put its case or its demand and other party needs to decline for the reasons applicable then there is a scope of raising of the dispute. In the instant case, condition of raising demand or making request is not anywhere seen or coming forward. When the parties were in fact negotiating mutual terms and conditions, it was not proper for the Trial Court to ex parte without affording an opportunity to the other side and without complying with the mandatory provisions of O.39 R. 3 partly allowing the application which had effect of shutting off the opponent no. 1 and 2 from putting forward their versions and protest against prayers no. 1 and 2 as the operative part of the impugned order clearly says notice for remaining prayers only.
20. The section 9 of the Arbitration Act contemplates granting of interim measures pending Arbitration Proceedings or during the time the Arbitration proceedings are to commence. In the instant case, the applicant has, in my view, not indicated the point of difference between the two. Mere inaction or deliberate inaction may amount to rejection or denial of demand. But in absence of any specific request to the opposite party from doing a thing or from restraining them from using technology the applicant could not straight way filed the application in anticipation that the opponent no. 1 and 2 are not going to be restrained from using the technology after the agreement has come to an end on account of afflux of time. Of course it was surely open the applicant to make it's specific request to the opponent no. 1 and 2 and put to them to clear notice and if thereafter the opponent no. 1 and 2 had continued to used the technology than in such an eventuality there was scope for seeking such relief and even in that case a question arises as to whether can a court grant ex parte relief which has effect of partly allowing application itself.
21. It is also required to be noted that When the relationship of the licensor or licensee were in subsistence for the last 10 years and when it was agreed between the parties that the licence agreement is to be renewed and when negotiations are under its way and when experts' advise to come forward with regard to quantum of royalty and when provisions are made in the books of accounts, it was expected from the applicant to at least articulate its demand or disagreement with the opponent Nos.1 and 2 and specifically mentioned the same in application which they moved for seeking interim measure when they were contemplated to seek arbitration. It is at this stage very important to note that Clause 15 of the License Agreement had not been invoked till October 18, 2010 i.e. after the present appeal is filed for the first time an attempt is made to invoke the arbitration clause. Reading of the said documents, in my view, also does not spell out the real dispute on which the arbitration is sought. In other words, at least it is expected from the applicant who is invoking Clause 15 to specify the point of disagreement and prescribes proposed terms of reference on which the arbitration could be requested. In the instant case, the appeal is made to injunct the respondent Nos.1 and 2 from using Ringspann Technology under the plea that the License Agreement has come to an end. The Court hastened to add here that by entertaining and allowing this application, it would not be construed that the License Agreement is revived by this Court. The usage of technology needs to be strictly governed by the License Agreement only and the the parties are governed in terms of those agreement and fact of allowing this appeal, may not be construed as having effect of reviving the License Agreement, if under the License Agreement the parties are ceased to have any right and obligations then that shall be the subject matter of adjudication.
22. The Court is unable to agree with learned Counsel for the respondent that the Appeal itself is not maintainable on account of Opponent no. 2 being not party to the License Agreement. The Court as stated herein above is deciding this matter only on the point of propriety of the order impugned order arising from the application of the present respondent No. 9 made under Section 9 of the Arbitration Act where the appellants are parties and as such they have right to file appeal.
23. The Judgment and authorities sited at the bar are of no avail to the respondents. It needs to be borne in mind that scope of the present appeal is very limited and in fact Court is called upon to view and examine ex parte order wherein the Trial Court has partly allowed the application without even inviting the opponents no. 1 and 2 to show the cause as to why such relief should not be granted.
24. It is also required to be noted at this stage that the applicant has not pointed out any special circumstance or ground which would be treated as valid and appropriate ground for straight way granting interim relief which in the present case in fact has gone to the extent of allowing the application partly. The mere pleadings with regards to License Agreement coming to an end on account of it being not renewed and manufacturing or producing substandard material jeopardizing applicant's reputation in market and its clientèle, in my view were not sufficient to straight way granting those prayers without even affording an opportunity to the opponent no. 1 and 2 to put forward their version before the Court.
25. The Court, in my view, was not precluded to grant those relief to the applicant but it was certainly not a case made out so as to compelled any court to straight way grant prayers and partly allowing the very application without even ascertaining the possible objection from the effected parties who were required to be heard before any order against them was being passed.
26. The Trial Court ought to have at least issued short notice to the opponent no. 1 and 2 even if it was convinced about the case of the applicant. The Trial Court ought to have taken care to have the version of the opponent Nos.1 and 2 before issuing any order affecting them in the matter. In the instant case the trial court has not only issued ex-parte mandatory injunction but in fact has partly allowed the injunction application ex parte qua the prayer Nos.1 and 2, which in my view, is nor sustainable in the eye of law and hence, the order impugned deserves to be quashed and set aside.
27. By allowing this appeal on a limited ground that whether the trial court ought to have straightaway allowed the injunction application even partly in respect of two prayers and issued notice only in respect of other prayers would be justified in peculiar facts and circumstances of the case. It is sufficient to say here that the application under Section 9 of the Arbitration Act and plain reading thereof could not have persuaded the Court to exercise extraordinary power ex-parte so as to accept the application straightway without issuance of notice. The Court has to make the aforesaid observations in light of the submissions made by the parties. Those observations shall not be of any avail to anyone, nor are they in any way influence the trial Court. The trial Court has to decide the application afresh as if those interim orders have not been passed. The order impugned is, therefore, quashed and set aside and the trial Court is directed to hear the application afresh without being influenced by the observations made in the order and after giving an opportunity of hearing to both the sides. The Court hasten to add here that vacating and quashing of the impugned order would not be construed as permission to use of technology by the opponent Nos.1 and 2, if they are not to be utilized, it would not affect the rights of the parties to press the same into service at the relevant time. The appellant is also at liberty to take out appropriate proceedings against the opponents, if so advised.
28. At this stage, Shri Jani is requesting for staying this order for 4 weeks. The Court is of the view that the Court does not propose to countenance passing order ex-parte perpetuating the same for further 4 weeks which would not be in the interest of justice. At the same time, the clarification at the end of the order would go to show that by quashing the order, the Court has not permitted even the applicant Nos.1 and 2 to use the technology if they are otherwise not entitled to use the same though they are using at their peril.
(S.R.BRAHMBHATT, J.) Hitesh Top