TaxTMI 
TaxTMI 
2009 (12) TMI 1040
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....shall be resolved by the Parties in the following manner: (a) Any Party may initiate resolution of such 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 m....
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....Rabipur vaccine in the HMR Territory. 7. In the year 1997, the Respondent and the company then known as Chiron Behring 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....
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....ke certain remediation measures at their plant. 16. In the month of April, 2006, the Novartis Group took over the Petitioner and its subsidiaries and affiliates, and succeeded to the rights and obligations of Chiron 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 Int....
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.... Sanofi Aventis owned both Aventis, which distributes Rabipur, and Sanofi Pasteur, which manufactures Verorab and sells Verorab, another antirabies vaccine, which is Rabipur's main competitor, in India pursuant to a distribution agreement. 24. The petitioner ("Novartis" 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 Petit....
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....in force since then. 36. The parties have strongly relied on the provisions of Sections 9 - 11, 16, 17, 36 and 54 of the Indian Partnership Act, 1932 (the Partnership Act) which is reproduced as under: 9. General duties of partners. Partners are bound to carry on the 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 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....
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....pecified period or within specified local limits; and, notwithstanding anything contained in Section 27 of the Indian Contract Act, 1872, such agreement shall be valid if the restrictions imposed are reasonable. 54. Agreements in restraint of trade. Partners may, upon or in anticipation of the dissolution of the firm, make an agreement that some or all of them will not carry on a business similar 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 ....
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....her cases, (2009) 2 All ER 26 the Queen's Bench Division while dealing with the construction of wordings in a commercial contract by referring to various other English Judgments has observed as under: (203)A summary of helpful principles, drawn largely from the words of Longmore LJ in Absalom (on behalf Lloyd's Syndicate 957) v. TCRU Ltd. (2005) EWCA Civ 1586 at (7) : (2006) 1 All ER (Comm) 375 at (7) : (2006) 2 Lloyd's Rep 129 and based 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&....
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....ting business specially in the absence of an express negative covenant which is based upon the policy of the law as provided under Section 11(2) of the Partnership Act read with Section 27 of the Contract Act, is not acceptable. 42. Considering the scope and purpose and object of Partnership and/or of Joint Ventures, in my view, there is equitable duty of a partner or other person not to compete with the business of the Partnership/Company. Merely because there is no negative covenant, 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. S....
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....llows: 1091. Each partner will normally agree not only that he will devote his whole time to the partnership business but also that he will not engage in any other business, whether or not competing with the firm's business. 44. The purpose and object of Partnership and/or Joint Venture is quite clear and as elaborated in the following words: 1. A Joint Venture to produce and market a particular product is in the nature of partnership. New Horizons Limited v. Union of India 1995 (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 th....
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....doing such rival business without written permission and/or consent from the other partner, the Company/firm or the affected partner is entitled to seek injunction/relief or interim measure. 46. Some Authorities are as under: (a) Snell's Principles of 28th Edition, Page 654 which states "In many cases the Court will enforce by injunction the due observance of the terms of the partnership and of the duties which under the general law the partners owes to each other. An injunction may be granted to prevent a partner 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 conv....
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....titioner to buy out the respondent at reasonable price with negotiation and/or the petitioner is not in a position to manufacture sufficient products and as there is shortage in the market that itself also cannot be the reason to permit the respondent to do the rival or the competing business in such fashion. 51. To allow to do business in other territories of the company or demarcation of area for the distribution that itself cannot be read to mean an express or implied permission or consent to do any rival business. This also no way amounts to implied permission 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 h....
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....rival business by such partner definitely will cause harm generally or individually, if he works not exclusively for the company. The proviso to Section 11(2) is very clear thereby it is permitted inspite of Section 27 of the Contract Act that the partners may provide that a partner shall not carry on any business other than that of the firm while he is a partner. But for this such negative covenant or clauses could not have been agreed or permitted to the parties even for entering into such partnership business/Joint Venture. Now, in view of this, it is permissible 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.....
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....dy passed and/or suppression of facts or the statements and/or incomplete documents, and that the product of Rabipur was drastically reduced between June 2009 and August 2009 and the products of Rabipur has given complete stand still and further that the quantity of anti rabies vaccines available in the domestic market is not enough to reach this large number of dog bite victims, that itself cannot be the reason to accept the case of the respondent and to permit him to do the rival and competitive business. It is also difficult to accept the case that it is in 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 tra....
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.... of the parties to the contract through the words they have used, which are key to open the mind of the makers. It is seldom that any technical or pedantic rule of construction can be brought to bear on their construction. The guiding rule really is to ascertain the natural and ordinary sensible meaning to the language through which the parties have expressed themselves, unless the meaning leads to absurdity. 60. Admittedly, the said JVA is in existence; the company is still doing the business of manufacturing the product called "Rabipur", an antirabies vaccine. Admittedly, 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 cap....