Bombay High Court
Deepak Nitrite Limited vs Sara Chemicals And Consultants on 7 January, 2020
Author: G.S. Patel
Bench: G.S. Patel
7-CARBPL-1463-19.DOC
Ashwini
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMM ARBITRATION PETITION (l) NO. 1463 OF 2019
Deepak Nitrite Ltd ...Petitioner
Versus
Sara Chemicals & Consultants ...Respondent
Dr Birendra Saraf,with A Gupte, Sachin Mahadik, P Jain i/b
Abhishek Adke, for the Petitioner.
CORAM: G.S. PATEL, J.
DATED: 7th January 2020 PC:-
1. Dr Saraf for the Petitioner seeks to move for a time-limited urgent ad-interim relief without notice. The reason for moving ex parte is set out in paragraph 42 of the petition. I am satisfed that there is an adequate reason for so moving and for the purpose for limited injunction sought today will be defeated, or, at any rate, imperilled by any delay in giving notice. The prayers pressed in this ex parte ad-interim injunction are as follows:
Page 1 of 87th January 2020 ::: Uploaded on - 07/01/2020 ::: Downloaded on - 08/01/2020 03:14:55 ::: 7-CARBPL-1463-19.DOC "i. Restraining the Respondent from utilising, dealing with, selling, marketing, removing, copying, or destroying-
a. Equipment belonging to the Petitioner (as defned in Paragraph No. 11 hereinabove);
b. Data generated in the course of execution of the Project (as defned in paragraph No. 20 hereinabove) including the Process Docket with all Decoders:
c. Samples generated during the course of execution of the Project (as defned in Paragraph No. 22 hereinabove) or otherwise lying in the custody of the Respondent in course of the execution of the Project."
2. The agreement is complex and requires some explanation. The petition itself is under Section 9 of the Arbitration and Conciliation Act 1996. The parties had, between them, a Technology Development and Services Agreement dated 8th December 2017. Clause 19 of that agreement has the dispute resolution clause. It reads thus:
"19. Governing Laws and Dispute Resolution 19.1 This Agreement will be governed by and construed in accordance with the laws of India, excluding any choice of law provisions that may direct the application of any laws of any other jurisdiction.
19.2 In the event of any dispute arising between the Parties out of or in relation to this Agreement the Parties shall use their commercially reasonable Page 2 of 8 7th January 2020 ::: Uploaded on - 07/01/2020 ::: Downloaded on - 08/01/2020 03:14:55 ::: 7-CARBPL-1463-19.DOC efforts to settle such dispute amicably. In the event that no resolution is achieved, the dispute shall be settled under the Rules of Arbitration of the Indian arbitration and reconciliation act, 1996, by at least one arbitrator appointed in accordance with such Rules. The place of the arbitration shall be Mumbai. The arbitration and all proceedings related thereto shall be carried out in the English language.
19.3 The arbitral award shall be fnal and binding on all parties, and shall be rendered in a written decision which shall state the reasons upon which the award is based, including all the elements involved in the calculation of any award of damages. The award may be entered and enforced in any court of competent jurisdiction."
3. The place of arbitration is Mumbai.
4. The Respondent, Sara Chemicals Consultant is a proprietorship enterprise of one Dr Sunil M Arora, who is in the business of process development and consultancy. Dr Arora has a research and development laboratory and facility for pilot trials at Rabale, Navi Mumbai.
5. The Petitioner, Deepak Nitrite Limited, is a well known Public Limited Company that manufactures various chemical intermediates for diverse application. It has a signifcant market share. The relevant process is described in paragraphs 4 and 5 of the Page 3 of 8 7th January 2020 ::: Uploaded on - 07/01/2020 ::: Downloaded on - 08/01/2020 03:14:55 ::: 7-CARBPL-1463-19.DOC petition which I will proceed to set out below (without the accompanying fow chart at page 5 ).
"4. The Petitioner at its facility in Hyderabad manufactures Disodium 4, 4'-dinitrostilbene-2,2'- disulfonate (DNS), an organic salt with the formula (O2NC6H3(SO3Na)CH)2. This DNS is then converted into 4, 4'-diaminostilbene-2,2'-disulphonic acid (DAS)by a water-based process since 2006. The DNS which is obtained in this process is converted to DAS, which is the commercially saleable end-product. DAS is an important raw material, used to produce optical brightening agents, having applications in the manufacturing of paper, detergents and textiles. The Petitioner developed a cost- effective, environment-friendly technology with a higher throughput for DNS from para-Nitrotoluene (PNT) by an Ammonia based (Ammonia route). This process was a batch process, therefore time and space consuming. In the year 2013, the petitioner conceptualised a continuous process fro the manufacture of DNS (hereinafter referred to as the "Project") with continuous recovery and reuse of Ammonia and a Catalyst, which are part of the raw materials required in the process of manufacturing of DNS.
5. The process of manufacturing DNS involves two major steps (hereinafter referred to as the "Process"):
i. Sulphonation;
ii. Oxidation
In the frst step, PNT is converted into para-Nitro Toluene Ortho Sulphonic Acid (PNTSA). In the second Page 4 of 8 7th January 2020 ::: Uploaded on - 07/01/2020 ::: Downloaded on - 08/01/2020 03:14:55 ::: 7-CARBPL-1463-19.DOC step, PNTSA is oxidized to DNS. A fowchart explaining the manufacturing process is detailed hereinabove."
6. Since Deepak Nitrite wanted to develop a continuous manufacturing process as opposed to a batch manufacturing process by the ammonia route, continuous processing being more cost efficient, it desired to identify a suitable chemical process consultant with sufficient facilities. Sara Chemicals represented that it had the necessary qualifcations, technical skills and know-how to undertake a pilot project to develop such a cost effective and eco-friendly technology within Deepak Nitrite's timelines and in accordance with its specifcation. The parties entered into negotiations that ultimately culminated in the agreement referred to above.
7. For the present purposes today I need not referr to the clauses of the agreement in detail. I will address them at an appropriate time once notice has been given to the respondent and it has been heard. What is material is that under the agreement, between January and July 2018, Sara Chemicals was required to demonstrate pilot trials. There was a delay on Sara Chemicals' part of almost six months. In light of this, the parties then executed a frst Addendum dated 29th October 2018 to undertake a fresh or re-pilot with some modifcations. This was designed to address certain concerns and the petitioner made an advance payment of Rs. 26,00,000/- to Sara Chemicals for this re-piloting. The process involved two steps. According to Deepak Nitrites Sara Chemicals insisted that it would do the re-pilot for any one of the two steps of the required process. I will pass over the averments that Deepak Nitrite was "coerced", but the fact remains that whatever the reason the parties did enter into a Page 5 of 8 7th January 2020 ::: Uploaded on - 07/01/2020 ::: Downloaded on - 08/01/2020 03:14:55 ::: 7-CARBPL-1463-19.DOC second Addendum of 26th December 2018 to include both the steps of the process for re-piloting. Deepak Nitrite paid an additional amount of Rs. 11,00,000/- for this re-piloting.
8. Sara Chemicals began re-piloting on 17th January 2019. This was already delayed. It seems that the resultant products DNS and DAS generated failed to meet the require specifcations.
9. It was in that month that Sara Chemicals apparently indicated the need to patent the process. Deepak Nitrites says that the draft patent was agreed to be fled along with the patentability report but this was to be shared for consideration and review, evidently for the purposes of technical compliance and accuracy. Sara Chemicals did not actually do this. In February 2019 Sara Chemicals carried out the re-piloting for two remaining batches of sulphonation. In the months that followed, Sara Chemicals developed a modifed process for DNS to DAS reduction. This was apparently in deviation of the Agreement and its two Addenda. Sara Chemicals demonstrated the modifed process to Deepak Nitrite in June 2019 but before that demanded an additional amount of Rs. 55,00,000/-. In June 2019 Sara Chemicals told Deepak Nitrite that it had on its own fled fve patent applications with respect to the project. This is really the heart of the present dispute. According to Deepak Nitrite, no draft of these patent applications or specifcations were shared or communicated with Deepak Nitrite although the entire process was that of Deepak Nitrite, and Sara Chemicals was only the implementing agency with the responsibility to suggest necessary modifcations to Deepak Nitrite's proprietary process. I am not for Page 6 of 8 7th January 2020 ::: Uploaded on - 07/01/2020 ::: Downloaded on - 08/01/2020 03:14:55 ::: 7-CARBPL-1463-19.DOC the present concerned with the monetary demands except to note that as a result of its engagement in the process under the Agreement and Addenda, it was Sara Chemicals that had possession of the relevant data, including the data for the failed trials. Dr Saraf points out that all this data is extremely valuable including the date regarding the failures, because it is this data that will enable Deepak Nitrite to modify, improve and fnalise the necessary process. He also points out it was never Sara Chemicals who had the process to begin with. The process emanated from Deepak Nitrite and Sara Chemicals was engaged for the purpose of implementation, execution and suggesting any modifcations or course corrections as required. The apprehension that Dr Saraf expresses today, and in my view with some justifcation, is that since Sara Chemicals has now unilaterally gone and applied for a patent there is a very real and present danger that it will share the data with third parties. This data, Dr Saraf points out, is entirely proprietary to Deepak Nitrite. It pertains only to Deepak Nitrite's process and to no one else. The entire process was that of Deepak Nitrite and, consequently, any resultant data generated by the implementation of that process (with or without modifcations) applies only to and belongs to Deepak Nitrite. It is for this reason that he presses for a time limited order in terms of the prayers set out above.
10. I believe that there is an ample prima facie case. The balance of convenience is also with the Petitioner and there is no question that if relief is denied irretrievable prejudice will be caused to Deepak Nitrite. I will, therefore, grant an ex parte ad-interim injunction in terms of prayer clause (i) set out above, operative until Page 7 of 8 7th January 2020 ::: Uploaded on - 07/01/2020 ::: Downloaded on - 08/01/2020 03:14:55 ::: 7-CARBPL-1463-19.DOC Monday, 13th January 2020. This order will be uploaded in the course of the day today.
11. The Petitioner will serve the Respondent at its address at Rabale by Thursday, 9th January 2020. That notice will be accompanied by an ordinary copy of this order and will state that the matter will be listed high on the Supplementary Board on 10th January 2020.
(G. S. PATEL, J) Page 8 of 8 7th January 2020 ::: Uploaded on - 07/01/2020 ::: Downloaded on - 08/01/2020 03:14:55 :::