Morepen Laboratories Ltd v. Phafag Ag and Ors

judgment under Appeal.

¶15The result of the above discussion is that the appeal necessarily fails; it is accordingly dismissed, without any order as to costs.

S. RAVINDRA BHAT

(JUDGE)

SUDERSHAN KUMAR MISRA (JUDGE) FEBRUARY 28, 2013

FAO (OS) 7/2013 Page 1 * IN THE HIGH COURT OF DELHI AT NEW DELHI % DECIDED ON: 28.02.2013 + FAO(OS) 7/2013 MOREPEN LABORATORIES LTD ..... Appellant Through: Mr. Arvind Nigam, Sr. Advocate with Mr. Manish Gandhi and Mr. P.K. Singh, Advocates. versus PHAFAG AG AND ORS ..... Respondents Through: Mr. Dhruv Mehta, Sr. Advocate with Mr. Karan Luthra, Ms. Noomi Chandra and Mr. Sameer Abhyankar, Advocates for respondent nos.1&2. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE SUDERSHAN KUMAR MISRA MR. JUSTICE S.RAVINDRA BHAT (OPEN COURT) 1. This appeal, under Section 37(1) of the Arbitration and Conciliation Act, 1996 ("the Act") challenges the judgment and order of a learned Single Judge of this Court dated 29.08.2012, dismissing the appellant's objections under Section 34 of the said Act, to an Award. 2. The brief facts are that the respondents (collectively known as "Phafag" in arbitral proceedings, and in the impugned judgment, and referred to as such) entered into two agreements with the appellant (hereafter "Morepen") on 01.07.2002. The first was a Technical Know-how/License FAO (OS) 7/2013 Page 2 Agreement ("TKHL agreement") and the second was a Market Services Agreement (MSA). Article 1.9 of the TKHL agreement defined "Products" as the "medical formulation containing the active ingredient Caroverine……………..conforming to the specifications as prescribed by the authorities concerned and such other like items as may be mutually agreed upon between the parties to the agreement". The "Technical Know-how" was defined as in Article 1.12 as follows: "1.12 "Technical Know-how" shall mean the technology techniques drawings, and designs, know-how procedures, process system and other value addition provided by Phafag to Morepen for carrying on the business, such as designs, data, drawing, models, methods, process and material specifications, operational and manufacturing date, machinery specifications." 3. Article 2 of the TKHL agreement, to the extent it is relevant dealt with the scope of the contract, is extracted below: "Article 2 Scope of the Agreement 2.1 The object of this agreement is to provide basic know- how to Morepen to carry on the registration of the Products, and the business. Phafag shall license its technology relating to the manufacture of the products. 2.2 The scope of this agreement shall inter alia, include provisions of Technical Know-how, advice and support for: (i) Registration of the Products; (ii) Manufacture of the Products in bulk; (iii) Packaging, marketing and sale of the products; (iv) Manufacture and production of the relevant packaging FAO (OS) 7/2013 Page 3 material." 4. The conditions with regard to consideration were elaborately dealt within Article 6 which is extracted in full as under:- "CONSIDERATION 6.1 In consideration of the Technical Know-how and grant of licence. Morepen agrees to pay Phafag a turnover royalty of 5% (five per cent) of the Net Sales Price total revenue of the Products for the manufacture and the marketing of the Products. The payment of royalty shall be valid for a period of 7 years from the date of commencement of production of the product. The royalty shall be subject to Indian Income-tax and such tax withholding as may be applicable at the time of remittance. 6.2 The royalties payable pursuant to Article 6.1 shall be paid from the Commencement of Commercial Production as follows: (a) the turnover royalty shall be paid to Phafag on a quarterly basis within forty five (45) days of the closing of the preceding quarter and should be transferred to the designated account of Phafag in Swiss Francs Currency ("CHF") at the Reserve Bank of India recognized exchange rate prevailing on the day on which the royalty is remitted. (b) Within 45 days following the end of the period stated above (b) during the time royalties are payable under this Agreement. Morepen shall send to Phafag/Geyer production and sales report of the Products as well as the royalty account duly audite