Delhi High Court - Orders
Sms Pharmaceuticals Limited vs M/S Fresenius Kabi Oncology Ltd on 3 July, 2025
Author: Anup Jairam Bhambhani
Bench: Anup Jairam Bhambhani
$~53
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ RFA 570/2025
SMS PHARMACEUTICALS LIMITED .....Appellant
Through: Mr. Keshav Sehgal with Mr. Shivam
Gaur, Mr. Kshitij Joshi, Mr. Aryan
Kumar, Ms. Nandita Sharma and Ms.
Rashi Singh, Advocates.
versus
M/S FRESENIUS KABI ONCOLOGY LTD .....Respondent
Through: Ms. Saumya Gupta, Advocate.
CORAM:
HON'BLE MR. JUSTICE ANUP JAIRAM BHAMBHANI
ORDER
% 03.07.2025 CM APPL. 37904/2025 Exemption allowed, subject to just exceptions. Let requisite compliances be made within 01 week. The application stands disposed-of.
CM APPL. 37903/2025By way of the present application filed under section 5 of the Limitation Act, 1963 read with section 151 Code of Civil Procedure 1908 ('CPC'), the appellant seeks condonation of about 16 days' delay in filing the regular first appeal.
2. For the reasons stated in the application, which is duly supported by affidavit, the delay is condoned.
3. The application is allowed.
4. The appeal is taken on Board.
RFA 570/2025 Page 1 of 7This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/07/2025 at 22:03:43
5. The application is disposed-of.
RFA 570/2025CM APPL. 38144/2025 (for stay)
6. By way of the present regular first appeal filed under section 96 read with Order XLI Rule 1 CPC, the appellant impugns judgment and decree dated 20.12.2024 passed by the learned District Judge, Patiala House Courts, New Delhi in CC No. 11/2019, whereby the learned trial court has been pleased to reject counterclaim dated 28.03.2019 filed by the appellant under the provisions of Order VII Rule 11(d) of the CPC, as being time-barred.
7. Counterclaim dated 28.03.2019 was filed by the appellant (being the defendant) in CS No. 871/2018 instituted by the respondent (plaintiff in the suit), in which suit the respondent had sought a money decree in the sum of Rs. 50 lacs towards money owed by the appellant under a Letter of Understanding dated 28.01.2014 ('LoU').
8. The appellant's counterclaim was also premised on the LoU, which had been signed between the parties in the context of the appellant having shut-down its manufacturing facility at Parawada, Visakhapatnam. As a consequence of the manufacturing facility having been closed, by way of the LoU, the parties had consensually terminated 03 Contract Manufacturing Agreements ('CMAs') dated 09.04.2011, 09.04.2011 and 01.11.2011 for the manufacture of anti- cancer injection molecules ('Anti-Cancer APIs'); and in the LoU the parties had agreed inter-alia as follows :
"2. Since, the said Unit of SIMS which was being utilized for manufacture of the drug that is to be supplied to FKOL, has been RFA 570/2025 Page 2 of 7 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/07/2025 at 22:03:43 sold to M/s. Mylan Laboratories Ltd., therefore parties agree to terminate above mentioned three Contract Manufacturing Agreements as SMS could not give effect to the obligation under these three Contract Manufacturing Agreements in full letter and spirit. As FKOL had already incurred some expenses in filing ANDA which was later withdrawn post sale of plant by SMS to Mylan Laboratories so SMS agrees to compensate FKOL by making a payment of 1,00,00,000/- (Rupees One Crore only) as goodwill gesture in lieu of termination of these three agreements.
"3. SMS agrees to make the payment of Rs.1,00,00,000/- (Rupees One Crore only) as per the following payment schedule and in case of any delay, SMS shall seek prior permission from FKOL.
Rs.10.00 lakhs on acceptance of this communication Rs.20.00 lakhs on or before April, 2014.
Rs.20.00 lakhs on or before August, 2014.
Rs.25.00 lakhs on or before October, 2014, Rs.25.00 lakhs on or before December, 2014.
"4. The first part payment will become due on the date of execution of this understanding. All the Contract Manufacturing Agreements executed between SMS and FKOL shall stand cancelled on receipt of Rs.1,00,00,000/- (Rupees One Crore only) from SMS to FKOL. Notwithstanding, the termination of these agreements, parties shall endeavor to work together in future."
(emphasis supplied)
9. It is contended on behalf of the appellant, that pursuant to the signing of the LoU the appellant had paid to the respondent a sum of Rs.50 lacs; however subsequently, the appellant refrained from making payment of the remaining sum of Rs.50 lacs, since the payment of the said sum of money was contingent upon the respondent furnishing to the appellant proof of having incurred expenses or losses in filing the RFA 570/2025 Page 3 of 7 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/07/2025 at 22:03:43 Abbreviated New Drug Applications ('ANDAs') and withdrawing the same, post the sale of the manufacturing facility by the appellant. It is the appellant's submission that unless the respondent showed proof of the expenses and losses incurred, the sum of Rs.1 crore was not payable under the LoU.
10. Based on the aforesaid stand, the appellant had filed counterclaim, seeking refund of the sum of Rs.50 lacs paid under the LoU; as well as praying that the LoU be declared null and void with other consequential and ancillary reliefs.
11. Disputing this position, the respondent moved before the learned trial court an application dated 29.07.2021 under Order VII Rule 11(d) read with section 151 CPC praying that the counterclaim filed by the appellant, be rejected.
12. It is in this background that impugned judgment dated 20.12.2024 has come to be passed, in which the learned trial court has proceeded on the following basis :
"4. The counter-claim has been instituted claiming that the defendant/counter-claimant was mislead into paying Rs.50 lakhs on account of alleged losses incurred by the plaintiff. It is stated that the losses, if any, incurred by the plaintiff are attributable entirely to the plaintiff. Therefore, the letter of understanding dated 28.01.2014 is liable to be declared illegal, non-est and null and void.
"5. It is further stated in the counter-claim that the defendant sought details of losses incurred by the plaintiff, however, the plaintiff did not provide any such details. It is stated that the parties agreed that the defendant will not be paying the remaining amount of Rs.50 lakhs and the plaintiff will furnish a detailed account of losses. It is submitted that since an account of losses was RFA 570/2025 Page 4 of 7 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/07/2025 at 22:03:43 not furnished, the defendant/counter-claimant is entitled to a refund of Rs.50 lakhs, for which the counter-claim has been filed.
"6. It is stated in the counter-claim that cause of action arose on the various dates of year 2014 and on 27.01.2015 when payments of Rs.50 lakhs were made by the defendant/counter- claimant to the plaintiff in installments.
"7. It is averred that cause of action further arose since the plaintiff instituted the suit on 07.09.2018 in violation of the understanding arrived at between the parties in December, 2015 that the plaintiff will not claim the balance amount of Rs.50 lakhs and that the plaintiff will provide proof of losses for the amount of Rs.50 lakhs already paid by the defendant to the plaintiff.
***** "11. The counter-claim has been instituted for a declaration that the Letter of Understanding dated 28.01.2014 is null and void, that the counter-claimant is not liable to make any payment to the plaintiff under the said document, injunction to restrain the plaintiff from claiming any amount under the Letter of Understanding, for refund of Rs.50 lakhs paid under the Letter of Understanding alongwith interest and costs of litigation.
"12. It is evident that the counter-claim has been instituted for declaration and for consequential reliefs. Article 58 of the Schedule to the Limitation Act 1953 provides that for obtaining any declaration, the period of limitation is of three years from the date when the right to sue first accrued.
***** "19. The date on which the counter-claimant discovered the fraud, mistake or misrepresentation has not been disclosed by the counter-claimant. However, in paragraph no. 12 of the counter- claim, it is stated that it was in December, 2015 that a meeting took place between the parties during which the counter-claimant sought RFA 570/2025 Page 5 of 7 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/07/2025 at 22:03:43 details of losses incurred by the plaintiff. However, these details were not provided.
***** "21. Therefore, as per the counter-claim, the cause of action to institute the counter-claim last arose in December, 2015.
"22. The counter-claim has been instituted on 30.03.2019. It has been instituted beyond the prescribed period of limitation of three years from December, 2015. In the case of Ashok Kumar Kaga Vs. Wing Commander Surendra Agnihotri in 2020 2 SCC 394, it was held that as counter-claim is treated to be a plaint, it needs to be compliant with the limitation provided under the Limitation Act 1963.
***** "25. Since it is evident from the contents of the counter- claim that the counter-claim has been filed beyond the prescribed period of limitation, the application under Order 7 Rule 11 r/w Section 151 CPC is allowed and the counter-claim is rejected.
(emphasis supplied)
13. Upon a perusal of the impugned judgment and based on a plain reading of the LoU, and after considering the submissions made by Mr. Keshav Sehgal, learned counsel appearing for the appellant, it is clear that the appellant's obligation under the LoU to pay Rs.1 crore to the respondent was not premised on the respondent showing or proving to the appellant that it had incurred any specific amount of expense or loss. This is apparent from a combined reading of paras 2, 3 and 4 of the LoU, from which it is evident that the sum of Rs.1 crore was to be paid in-lieu of the cancellation of the three CMAs signed between the parties, since those CMAs were cancelled due to the RFA 570/2025 Page 6 of 7 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/07/2025 at 22:03:43 appellant having closed its manufacturing facility at Parawada in Visakhapatnam,
14. In particular, it is observed that in that para 3 of the LoU the parties had even set-out the agreed schedule of payment of the said sum of Rs.1 crore without any qualification that the respondent had to furnish any particulars or proof of any expense or loss incurred by them.
15. In this backdrop, this court finds nothing amiss in the view taken by the learned trial court, holding that the period of limitation for filing the counterclaim under Article 58 of the Limitation Act 1963, would have started running from December 2015; and accordingly, the counterclaim which was instituted on 30.03.2019, was beyond the prescribed period of limitation.
16. In the circumstances, this court is also of the view that no ground is made-out for either extension of time or for exclusion of time in filing of the counterclaim; and that therefore the counterclaim was correctly rejected by the learned trial court under Order VII Rule 11(d) CPC.
17. Accordingly, this court finds no basis for issuing notice on the present appeal, which is dismissed at the stage of issuance of notice itself.
18. Pending applications, if any, stand disposed-of.
ANUP JAIRAM BHAMBHANI, J JULY 3, 2025 ds RFA 570/2025 Page 7 of 7 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/07/2025 at 22:03:43