THE HIGH COURT OF DELHI AT NEW DELHI. % Judgment delivered on: PIRAMAL HEALTHCARE LIMITED (Formerly Known as Nicholas Piramal India Ltd. - PDF

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THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: CS(OS) No. 275/2010 PIRAMAL HEALTHCARE LIMITED (Formerly Known as Nicholas Piramal India Ltd.)... PLAINTIFF Vs DiaSorin S.p.A....
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THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: CS(OS) No. 275/2010 PIRAMAL HEALTHCARE LIMITED (Formerly Known as Nicholas Piramal India Ltd.)... PLAINTIFF Vs DiaSorin S.p.A.... DEFENDANT Advocates who appeared in this case: For the Plaintiff : For the Defendant: Mr Rajiv Nayyar, Sr. Advocate with Mr Arunabh Chowdhury, Mr Abhay Jadeja, Mr Raktim Gogoi & Mr Gainilung Panmei, Advocates Mr Neeraj Kishan Kaul, Sr. Advocate with Mr R.N. Karanjawala, Mr Akhil Sibal, Ms Jasmine Damkewala, Ms Simran Brar, Ms Abhiruchi Mengi, Mr Akhil Sachar & Mr Saurabh Seth, Advocates CORAM :- HON'BLE MR JUSTICE RAJIV SHAKDHER 1. Whether the Reporters of local papers may be allowed to see the judgment? Yes 2. To be referred to Reporters or not? Yes 3. Whether the judgment should be reported in the Digest? RAJIV SHAKDHER, J 1. I may indicate by way of a prefatory note to the present judgment that while arguments in respect of plaintiff s two applications under Order 39 Rule 1 and 2 were being heard, one of the issues which arose for consideration was: as to whether this Court had jurisdiction to entertain and try the suit. Arguments in regard to the plaintiff s interlocutory applications were heard on 01 st June, The matter was part heard. It was posted for hearing on 02 nd June, On the said date, the defendant formerly filed an application bearing IA No.7759/2010 under Order XIV Sub Rule 2 read with Section 151 of Code of Civil Procedure, 1908 (hereinafter referred to as CPC ). As a measure of abundant caution, the court treated the issue pertaining to jurisdiction as a preliminary issue. Since arguments were already being heard on the question of jurisdiction, the learned counsel for the plaintiff fairly conceded that application can be allowed. CS(OS) 275/2010 Page 1 of 37 Yes Accordingly, I directed that the issue pertaining to jurisdiction may be treated as a preliminary issue. On the said issue, the arguments were heard both on the 2 nd and 3 rd June, Mr.Nayyar appearing for the plaintiff required more time to address the arguments. The matter was posted for hearing post lunch on 09 th July, 2010, with the consent of the parties. Formally, the following issue was framed:- Whether the court had jurisdiction to entertain and try the instant suit? OPP 1.1 Both counsels have stated before me that the said preliminary issue can be decided based on the documents already on record. Accordingly, I proceed to decide the said issue. 2. In order to adjudicate upon the said issue, the following facts required to be noticed. 2.1 The plaintiff entered into a distributorship agreement dated (hereinafter referred to as distributorship agreement) with the defendant. The defendant is a company formed and incorporated under the laws of Italy. Defendant s principal place of business is in Italy. Under the aforementioned distributorship agreement, the plaintiff was appointed as a distributor for sale of diagnostic products, which included instruments, generically knows liaisons; as also reagents, and consumables within the territory of India (hereinafter collectively referred to as diagnostic products). The agreement had an initial tenure of three years i.e., till 31 st December, 2009 with an option for an automatic renewal for a period of one year. In the event, either party was desirous of discontinuing the arrangement, it was obliged to send a notice in writing, through registered mail, to the other party at least three months prior to the expiration of the initial term or the renewed term (See Article IX of the distributorship agreement ). 2.2 There is no dispute with regard to the fact that the defendant has terminated the distributorship agreement vide its notice dated 25 th January, Briefly, the grounds for termination being: the inability of plaintiff to establish defendant s brand in the Indian CS(OS) 275/2010 Page 2 of 37 market; inability on the part of plaintiff to achieve the prescribed sales volume under the distributorship agreement; the alleged delay in payment of outstanding dues; and lastly, plaintiff s engagement with the competitor of the defendant. 2.3 For the purpose of adjudication of the issue of jurisdiction, I need not dwell upon the merits, or the reasons articulated by the defendant in its notice of termination. Suffice it to state, that the plaintiff stood aggrieved by such unilateral termination of the arrangement by the defendant when, the arrangement ought to have lasted in its usual course till 31 st December, The plaintiff being aggrieved by the fact that the termination of the arrangement had been both abrupt and unfair; since it is required to fulfill its counter obligations to the end use customers, which are essentially institutional consumers, such as major hospitals in India; it decided to institute the present action, in this court. 2.5 The suit filed by the plaintiff is to seek reliefs of declaration and injunction. The declarations sought are broadly to the effect that the termination notice dated 25 th January, 2010 is non est and bad in law; and that Article XIII (10) of the distributorship agreement, which ousts jurisdiction of Indian Courts is illegal, arbitrary, null and void and, contrary to public policy. In addition, the plaintiff has sought the following injunctions: a mandatory injunction against the defendant to specifically perform its obligation under the distributorship agreement; injunction against the defendant against appointment of another distributor in respect of diagnostic products in India; and lastly, a restraint against the defendant to act in breach of a negative covenant, preventing thereby the defendant from appointing or entering into any business within the territory of India, in respect of matter, which is the subject matter of the distributorship in India. 2.6 Defendant, on the other hand, refuted the allegations made in the plaint. It is averred in the written statement that the plaintiff is aware of the fact that even prior to the filing of the suit (as a matter of fact, before issuance of termination notice) another CS(OS) 275/2010 Page 3 of 37 distributor has been appointed for the territory of India. Defendant on merits, has given its own version of breaches committed by the plaintiff. As regards the issue of jurisdiction, the defendant has taken an objection in the form of a preliminary submissions which alludes to the fact that in terms of Article XIII(10) of the distributorship agreement it has been agreed between the parties that any dispute, claim or controversy arising including that which relates to the validity, interpretation, performance or even termination would be addressed before a Italian Court in Milan; which shall have exclusive jurisdiction in regard to these matters. The stand being that the impugned action of termination of the distributorship agreement, by which, the plaintiff stand s aggrieved is specifically referred to in the said Article of the distributorship agreement. This aspect, it is averred, has been prominently stressed in the distributorship agreement by providing, in addition to what is stated in Article XIII(10), the following: For any legal effects, the Parties declare to expressly accept the provisions set forth in art.viin.2,8 and 9 and in art.xiii n.9 and n The defendant have also taken a preliminary objection, with regard to maintainability of the suit, on the ground that governing law, as provided in Article XIII(9), is: as agreed to between the parties the laws of Italy. The Defendant, therefore, contended that if this court were to entertain the present suit, it will have to apply the Italian Law to decide inter-se dispute between the parties. Therefore, for this purpose, plaintiff ought to have filed, at least an affidavit of an expert in respect of laws of the Italian courts, in respect of the issue which arises in the present action. Preliminary objections have also been taken by the defendant with regard to contract being determinable in nature, and hence not specifically enforceable; suppression of material facts and documents; as also, with regard to deficiency of court fee. 3. In the background of aforesaid contours of its action, Mr. Nayyar in support of what is stated in the plaint, has made the following submissions: CS(OS) 275/2010 Page 4 of 37 3.1 That the action is maintainable, before this court as everything concerning distributorship occurred in India: the distributorship agreement was signed in India; the defendant was appointed as a distributor for India; the supplies of the diagnostic products was received in India. In other words, Mr. Nayyar contended that since everything which was related or connected with arrangement obtaining between the parties, which is reflected in the distributorship agreement, occurred in India the provision in the distributorship agreement dealing with the jurisdiction would have to be ignored by the court. It was, therefore, the submission of Mr.Nayyar that in line with the well settled principles of law, parties by contract cannot confer jurisdiction on a court if, otherwise none exists in law. This court would have to examine the issue of jurisdiction by taking recourse to provisions of Section 20 of the Code of Civil Procedure, 1908 (hereinafter referred to as CPC). According to Mr.Nayyar, since Article XIII(10) of the distributorship agreement was contrary to public policy (as reflected in the CPC), the said provision could not impede the court in exercise of its jurisdiction over the defendant. In support of his submissions, Mr.Nayyar also took recourse to, what he claimed was intrinsic evidence in the distributorship agreement, which diluted, according to him, the exclusive jurisdiction clause provided in the distributorship agreement. For this purpose reference was made to Article XIII(13) of the distributorship agreement. Mr.Nayyar submitted that Article XIII (13) clearly states that without prejudice to what is expressly provided by the distributorship agreement by way of rights and remedies, these shall be in addition to any other right or remedy provided by law, or otherwise arising in connection with any breach of the representations, warranties and obligations of the parties contained in the agreement. In support of his submissions Mr.Nayyar relied upon the following judgments:- Cargo Lately Laden on Board the Fehmaran (Owners) Vs. Fehmarn (Owners) 1958 (1) WLR; Se Se Oil Vs. Gorakhram Gokalachand 1962 (64) BOMLR 113; A.B.C. Laminart (P) Ltd. Vs. A.P.Agencies, Salem 1989 (2) SCC 163; Rajendra Sethia Vs. Punjab National Bank 1991 AIR Delhi 285; Control Print (India) Limited Vs. Cab Machines S.A (2) ALLMR 351; Bhatia International Vs. Bulk Trading S.A (4) SCC 105; Modi Entertainment Network V. W.S.G. Cricket Pte.Ltd. 2003(4) SCC 341 and Laxman Prasad Vs. Prodigy Electronics Ltd (1) SCC 618 CS(OS) 275/2010 Page 5 of 37 3.2 In rebuttal, Mr. Kaul who appeared for the defendant; apart from reiterating the stand taken in the written statement, laid stress on the following: (i) A combined reading of Article XIII(10), and the provisions at the foot of distributorship agreement (to which I made reference hereinabove) would show that parties have agreed to the exclusive jurisdiction of a Italian Court in Milan. (ii) In respect of such like contracts, the parties can agree to even a neutral court or forum which has nothing to do with the transaction or arrangement made by the parties. In the instant case, there is no denying that defendant s principal place of business is in Italy, and that supplies were made from Italy. (iii) In ascertaining as to whether this court would have jurisdiction, the principles of CPC have no applicability. In this regard, reliance was placed on paragraphs 8 and 9 of Modi Entertainment (supra). (iv) The judgment cited by the plaintiff, Rajendra Sethia vs Punjab National Bank AIR 1991 Delhi 285 has been expressly overruled by the Supreme Court in Man Rolan Druckmachinen Vs. Multi Colour Offset (2004) 7 SCC 447. A particular stress was laid with regard to observations made in paragraph 9 of the said judgment. (v) The principle of forum non-conveniens would apply only if the defendant had instituted a suit in Italy or proposed to do so and this court were called upon to decide as to which was the more convenient forum. In the instant case, the parties by contract have ousted the jurisdiction of courts in India and vested the same in a Italian court in Milan; which is permissible in law. 3.3 Apart from above, Mr.Kaul also laid stress with respect to the provisions contained in Article XIII (9) of the distributorship agreements; as regards the governing law obtaining between the parties being the laws of Italy. Mr.Kaul submits that there is neither any challenge to the Article XIII(9) of the distributorship agreement, nor are there any pleadings to that effect. The suit, according to him was thus not maintainable in view CS(OS) 275/2010 Page 6 of 37 of the fact that the defendant failed to file an affidavit in respect what is the Italian law. In support of this submission the reliance was placed, specifically, on the judgment of Supreme Court in Hari ShankarJain Vs. Sonia Gandhi 2001(8) SCC 233. In addition, in support of the submissions made above, the following judgments were relied upon:- Modi Entertainment Network Vs. W.S.G. Cricket (2003) 4 SCC 341; Max India Limited Vs. General Binding Corporation FAO(OS) No. 193/2009; Man Rolan Druckmachinen Vs. Multi Colour Offset (2004) 7 SCC 447; New Moga Transport Co. Vs. United India Insurance Co. Ltd. (2004) 4 SCC 677; Angile Insulations Vs. Davy Ashmore India Ltd & Anr. (1995) 4 SCC 153; A.B.C. Laminart Pvt. Ltd. Vs. A.P.Agencies; and Moser Baer India Ltd. Vs. Koninklijke Philips Electronics NV. & Ors. 151 (2008) DLT In rejoinder, Mr.Nayyar, apart from reiterating the submissions made, has laid stress upon the fact that the dispute essentially relates to the illegal termination of the distributorship agreement, and the appointment of another distributor by the defendant. The cause of action, according to him, with respect to the same, arose in India and, therefore, this court was natural forum for adjudication of disputes obtaining between the parties. With respect to governing law, Mr.Nayyar submitted that the objection taken by the defendant cannot be examined at this stage as the defendant cannot be non-suited on this ground at the very threshold. In support of his submissions, in this regard, reliance was placed by Mr.Nayyar on the judgment of the Supreme Court in 2008(1) SCC 618 Laxman Prasad Vs. Prodigy Electronics Ltd. 4. I have heard learned counsel for the parties and considered the documents on record. In order to adjudicate upon this issue, it would be necessary first to quote the relevant provisions with regard to jurisdiction, and governing laws obtaining between the parties, under the distributorship agreement, to which reference was made during the course of agreements. Article XIII (1). (2). (3) (4) (5) (6) CS(OS) 275/2010 Page 7 of 37 (7).. (8). (9) This Agreement shall be governed by and construed in accordance with the laws of Italy. The provisions of the 1980 United Nations Convention on Contracts for the International sale of Goods shall not apply. All trade terms used in this Agreement or Appendices hereto shall have the meaning and definition of INCOTERMS applicable on the date hereof, except as specifically provided herein. All communications concerning this Agreement, the provisions and Appendices hereto and the subject matter hereof shall be conducted in the English language. (10) Any dispute, claim or controversy arising out of the present Agreement, including those concerning its validity, interpretation, performance and termination, the Italian Court of Milan shall have exclusive jurisdiction. (11). (12). (13) Without prejudice of what expressly provided by this Agreement, the rights and remedies provided by this Agreement shall be in addition to any other right or remedy provided by law or directly in the activities of sales and promotion of the Products in the Territory in co-operation with Distributor. 5. A perusal of clause 10 of Article XIII unambiguously demonstrates that the parties had intended to agree to the exclusive jurisdiction of the Italian Court in Milan with regard to any dispute, claim or controversy arising with respect to the distributorship agreement. What is made express is also that such dispute, claim or controversy would not only include issues concerning validity, interpretation and performance but would also include those which relate to the termination of the distributorship agreement. Since the provision is unambiguous, there is no scope for interpretation. The intention of parties is determined by the words and expression used in the agreement. If the provision is clear and unambiguous the courts cannot arrive at a conclusion contrary to that. 5.1 Mr.Nayyar has, however, contended that despite the expression in the Clause which vests exclusive jurisdiction on the Italian Courts in Milan, this court should give it a go by. His contention is based primarily on the observations made in paragraph 24 of the Modi Entertainment. In my view, the observations made in paragraph 24 in Modi Entertainment have to be read along with the observations made in other paragraphs of the judgment, to which I will advert to immediately hereafter. This is not to say that CS(OS) 275/2010 Page 8 of 37 other judgments were not pressed into service I shall deal with those in the latter part of my judgment. 5.2 But first it would be important to deduce the ratio of Modi Entertainment Network & Anr. vs W.S.G. Cricket Pte. Ltd. (2003) 4 SCC 341, more so since both counsels (as indicated above) referred to it. Briefly, the appeal in the Supreme Court pertained to a challenge to the order of the Division Bench of the Bombay High Court which had allowed the appeal against the order of the learned Single Judge of that court whereby, he had granted an anti-suit injunction against defendant/respondent. The issue arose in the context of non-exclusive jurisdictional clause appearing in the contract entered into between the parties. The Supreme Court was called upon to examine whether an anti-suit injunction could be granted by Court of Natural Jurisdiction against a party to a suit, thereby restraining it from instituting or prosecuting a suit between the same parties in a foreign court or a neutral court which had nothing to do with respect to the disputes which had arisen between the parties to the contract. I must state, at the very outset, that Mr.Nayyar, who appears for the respondent herein did attempt to persuade me to read a foreign court in the judgment of the Supreme Court as the court of the foreign party to the contract and not as a neutral court or a court of choice referred to in the contract. This particular aspect, according to Mr.Nayyar, was the most crucial and distinguishable aspect of the judgment. I am afraid that a careful reading of the judgment would show to the contrary. As a matter of fact, the appellant before the Supreme Court, had argued, though unsuccessfully, that an anti-suit injunction could be granted by a court of a natural jurisdiction against a party to the contract where the contract provided for adjudication of the disputes by a foreign court, i.e., a court of choice or a neutral court which had no nexus whatsoever either with the parties or the subject matter. Therefore, in this context, it would be important to straight way refer to the pertinent portions of the judgment which would belie any doubt whatsoever as to what was the issue raised before the Supreme Court, and the manner in which it was dealt CS(OS) 275/2010 Page 9 of 37 by the court. In this context, the following portions of the judgment are extracted below for the sake of convenience: ISSUE INVOLVED 4 It involves examination of the principles governing grant of an anti-suit in
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