Calcutta High Court
Ori-Plast Limited vs Molecor Tecnologia S.L on 17 December, 2024
Author: Shampa Sarkar
Bench: Shampa Sarkar
OCD-18
ORDER SHEET
AP-COM/1043/2024
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL DIVISION
ORIGINAL SIDE
ORI-PLAST LIMITED
VS
MOLECOR TECNOLOGIA S.L.
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 17thDecember, 2024.
Appearance:
Mr. Jishnu Saha, Sr. Adv.
Mr. Kuldip Mallick, Adv.
Mr. Arun Kumar Upadhyay, Adv.
Mr. Diptomoy Talukder, Adv.
...for the petitioner
Mr. Siddhartha Datta, Adv.
Ms. Suhani Dwvedi, Adv.
Ms. Trisha Mukherjee, Adv.
Mr. Chetan Kr. Kabra, Adv.
...for the respondent
The Court: Affidavit of service filed in Court is taken on record. This is an application under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the said Act). The petitioner prays for an injunction restraining the respondent from interfering with the use or operation of the machine (the Molecor PVC-O System) which was sold to the petitioner and also from interfering with the license granted to the petitioner in connection with the operation of the said machine. The petitioner apprehends that the services to which the petitioner is entitled to under the Sale and 2 Purchase Agreement and the Licence Agreement dated April 27, 2017 will be withdrawn by the respondent on the basis of the termination notice dated November 4, 2024. If such action is taken by the respondent, the machine will become inoperative. This will cause huge loss to the petitioner. The petitioner submits that the respondent has a remote control mechanism. The Sale and Purchase Agreement provides that Molecor will provide to the customer continuous remote assistance in order to connect the customer's facility with Molecor's Technical Department via the internet. With such apprehension, the application has been filed, seeking an injunction against the respondent from withdrawing the remote control assistance and from interfering with the use and operation of the machine.
According to the petitioner, the notice of termination dated November 4, 2024 was nothing but a backlash, as the petitioner had purchased a similar machine from the Chinese manufacturer when the second purchase order placed by the petitioner to the respondent did not mature. The petitioner was not able to pay up 35% of the advance as demanded by the respondent. According to Mr. Saha, learned senior advocate for the petitioner, this High Court has the jurisdiction to entertain the application as the notice of termination was served within the Ordinary Original Civil Jurisdiction of this Court. Part of the cause of action had arisen within the jurisdiction of this Court. Reference is made to Section 2(1)(e)(ii) of the said Act. On, prima facie, case Mr. Saha submits that clause 10 of the License Agreement provides a termination clause, but the termination is conditional. The clause does not 3 allow either of the parties to terminate by issuing a notice. Only if one party commits a breach of the agreement, the other party can send a notice of termination, giving the party committing the breach 30 days to cure the same. In the present case, the respondent did not allege that the petitioner had made any disclosure of the technological and secrets of the manufacturer during the continuation of the agreement since 2017, but abruptly came up with the notice dated November 4, 2024, after the second purchase did not go through. The Court has been taken through the provisions of the purchase agreement as also the license agreement. Mr. Saha emphasizes that the representative of the respondent can at any time enter into the manufacturing facility of the petitioner to inspect the machine and ascertain how the facility has been functioning. While doing so, the representative of the respondent is also in a position to ascertain whether any breach of reverse engineering or replication is committed or attempted.
With regard to the issue of balance of convenience and inconvenience, Mr. Saha submits that if the respondent interferes with the functioning of the machine, and withdraws the remote control assistance, the petitioner will suffer irreparable loss and injury. The petitioner will not be able to supply the orders placed by its customers and may face consequential legal action at the hands of those customers. Such loss will be very difficult to quantify. Whereas, the respondent's remedy is available even if the machine continues to operate. The license agreement provides that the respondent can buy back the Molecor system at its then book value less fifty percent as 4 liquidated damages, owing to any breach committed by the customer. The damages to which the respondent is entitled if the breach is proved, has been quantified. Referring to the reply dated November 30, 2024, Mr. Saha submits that the fact that the allegations were baseless and unsubstantiated had been informed to the respondent. The petitioner categorically stated in the said letter that there was no attempt at reverse engineering and disclosure of the secrets of Molecor's technology. The allegations were not based on any cogent findings. It was further contended by the petitioner in the said letter that the fact that the petitioner had become a leading manufacturer of PVC pipes was a cause of concern for other competitors who were also the clients or customers of Molecor. Such unfounded allegations were made in order to put the petitioner out of business. Accordingly, a prayer is made for an injunction restraining the respondent from causing any interference with the functioning of the machine.
Mr. Datta, learned Advocate appearing on behalf of the respondent submits that only because of the registered office of the petitioner is situated within the Ordinary Original Civil Jurisdiction of this Court, the same will not confer jurisdiction on this court, enabling the petitioner to approach this Court under Section 9 of the said Act. Mr. Datta submits that the agreement was entered into in Spain and the Spanish law will govern the terms and conditions of the agreement, including the arbitration clause. Next submission is that the Purchase Agreement will clearly indicate that the purchase was not an outright sale. The purchase was conditional and the license agreement was a connected agreement to the Sale and Purchase Agreement. One of the conditions imposed 5 by the purchase agreement is that the petitioner will not commit any breach thereby causing a disclosure of the secrets of the manufacturer or disclosure of the technological knowhow of the manufacturer. Allowing a period of 30 days for curing the breach is not a mandatory provision. If Molecor is of the view that providing a 30 days period to cure the breach will be a futile exercise and immediate termination is necessary considering the gravity of the breach, Molecor can terminate without allowing any time to cure the breach. Moreover, the agreement reserves the right to Molecor to buy back the Molecor system at its then book value less fifty percent as liquidated damages. The liquidated damage is quantified. Apart from the same, Molecor can also claim damages for default/breach.
Referring to clause 10 of the purchase agreement, Mr. Datta submits that the knowhow, patent, trade mark etc. was the property of Molecor. The customer is required to use the Molecor system in a manner which is fully respectful of Molecor's technology and must also refrain from investigating reverse engineering or copying the Molecor technology. The customer is bound by the agreement to keep the technology confidential and not disclose the same to any third party. The customer is further required to take appropriate practical and legal measures to protect the technology and ensure that all persons involved in the operation and maintenance were made aware of Molecor's exclusive proprietary right over the said machine. On breach of such condition, Molecor has the right to terminate the purchase agreement without giving any time to cure the breach. If the Court interferes with the termination, 6 in that event, the Court will be rewriting the terms and conditions of the contract.
Heard the learned Advocates for the respective parties.
With regard to the issue of jurisdiction, this Court, prima facie, finds that part of the cause of action arose within the Ordinary Original Civil Jurisdiction of this Court as the notice of termination of the contract was served upon the petitioner in the office which is at Strand Road. With regard to the issue of termination, this Court finds that the license agreement at clause 10 provides that termination is permissible only if there is a breach of the Sale and Purchase Agreement and the party alleging breach is required to send an intimation/notice to that effect, giving the breaching party a reasonable time of 30 days to cure the breach. Such provision can be waived if the nature of breach is such that the exercise will be futile. Thus, in my, prima facie, view, unless there is a breach, termination cannot be effected. Here, the respondent alleges a breach. The allegation is that the respondent had come to know from credible sources that the petitioner is attempting to replicate or reverse engineer the Molecor system or Molecor technology by engaging with other manufacturers. Such allegation came only in November 4, 2024. Although the agreements were entered into in April, 2017, no allegation of such nature had ever been raised by the representative of Molecor who were continuously visiting the petitioner's facility or had a right to visit the facility at any time, as per clause 8 of the License Agreement. Secondly, in the notice of termination, the respondent has neither mentioned the name of the manufacturers with 7 whom the petitioner was engaging and to whom the petitioner had disclosed the secrets of the Molecor technology. The allegation that the petitioner was attempting to replicate or reverse engineer Molecor system or Molecor technology is rather vague and omnibus in nature. In my, prima facie, view, before taking such a drastic step to terminate the contract and before attempting to put an end to the business of the petitioner which is considerably dependent on the machine, specific instances should have been pointed out by the respondent to the petitioner to substantiate such serious allegation. Moreover, the respondent is aware of the location of the machine. The respondent's representative can enter into the manufacturing facility of the petitioner and can take periodical inspections to ascertain whether any replication or reverse engineering has been going on. On the other hand, if the machine stops operating, the petitioner will suffer huge losses. The petitioner will not be able to meet the requirements of the customers and the same may have serious consequences. Moreover, the reputation of the petitioner as a leading manufacturer of PVC Pipes will also suffer.
Under such circumstances, the petitioner has made out a, prima facie, case for grant of an injunction restraining the respondent from interfering with the functioning of the machine for a period of three months from the date of communication of the order.
Let affidavit-in-opposition be filed within a week after reopening of the Court after the Christmas Vacation; reply thereto, if any, within a week thereafter. Let this matter appear in the monthly list of February, 2025. 8
It is made clear that the petitioner shall not cause any obstruction to the representative of the respondent from entering the manufacturing facility and taking regular inspection of the machine.
The petitioner shall take necessary steps in terms of the Arbitration and Conciliation Act, 1996.
(SHAMPA SARKAR, J.) TR/