Dismissed

M/S Pharmatree Corporation v. Rajya Vokkaligara Sangha

Karnataka HC1 Mar 2021COMAP/21/2021

Case brief

AI extract

What is this about?

Appeal against Commercial Court order dismissing Section 9 application for temporary injunction in commercial contract dispute. Court dismissed appeal holding no error in impugned discretionary order regarding termination of agreement due to unpaid licence fees.

What did the court decide?

Temporary injunction application set aside; relief under Section 9 denied; appeal dismissed with costs.

M/S Pharmatree Corporation Vs Rajya Vokkaligara Sangha — Arbitration | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 1^ST DAY OF MARCH, 2021 PRESENT

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THE HON’BLE MR.ABHAY S. OKA, CHIEF JUSTICE

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AND

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THE HON’BLE MR.JUSTICE S.VISHWAJITH SHETTY

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COMAP NO.21 OF 2021

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BETWEEN: M/S. PHARMATREE CORPORATION A PARTNERSHIP FIRM HAVING ITS OFFICE AT No.7/999 12^TH MAIN ROAD, WEAVERS COLONY BRUNDAVAN NAGAR, SRINAGAR BENGALURU – 560 050, REP. BY ITS PARTNERS DR. DILEEP M AND DR. NIRUPAMA SHIVARAIKUMAR.

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... APPELLANT

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(BY SHRI MURALIDHAR H.M., ADVOCATE)

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AND:

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RAJYA VOKKALIGARA SANGHA No.148, “NADAPRABHU BHAVANA” KRISHNA RAJENDRA ROAD VISVESWARAPURAM BENGALURU – 560 004 REP. BY ITS CHIEF EXECUTIVE OFFICER/ ADMINISTRATOR.

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... RESPONDENT

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(BY SHRI ANIL KUMAR R., ADVOCATE FOR C/R)

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THIS COMAP IS FILED UNDER SECTION 13(1-A) OF COMMERCIAL COURTS ACT, READ WITH SECTION 37 OF ARBITRATION AND CONCILIATION ACT, 1996, PRAYING THAT THIS HON’BLE COURT MAY BE PLEASED THAT AFTER CALLING FOR THE RECORDS MAY BE PLEASED ALLOW THE APPEAL AND SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED LXXXII ADDL. CITY CIVIL AND SESSIONS JUDGE (CCH-83) BENGALURU IN COM. A.A.NO.136/2020 DATED

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23/01/2021, CONSEQUENTLY, GRANT INTERIM MEASURE AS PRAYED FOR, OR IN THE ALTERNATIVE, PASS SUCH OTHER ORDER/S AS THIS HON’BLE COURT MAY DEEMS FIT TO PASS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND ETC.

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THIS COMAP COMING ON FOR ORDERS THIS DAY, CHIEF JUSTICE MADE THE FOLLOWING:

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JUDGMENT

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The appellant who is an applicant in an application filed under Section 9 of the Arbitration and Conciliation Act, 1996 (for short, “the said Act of 1996”) has taken an exception to the order dated 23^rd January 2021 passed by the learned Judge of the Commercial Court.

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With a view to appreciate the submissions made across the Bar, it will be necessary to make a reference to the facts of the case in brief.

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An agreement was executed by the respondent in favour of the appellant on 5^th February 2018 under which the respondent agreed to provide to the appellant, a premises having the area mentioned in clause 1 of the said agreement in the hospital run by the respondent. The area was agreed to be given to the appellant to run a pharmacy. Security deposit of Rs.2,00,00,000/- was paid by the appellant. Under clause 5 of the said agreement, the appellant, being a licensee, was liable to pay a sum of Rs.42,00,000/- per month as a licence fee for

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the first three years and the enhanced licence fee for the last two years of the period of the licence. As stated in clause 2 of the agreement, the period of agreement is up to January 2023.

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In the application filed by the appellant under Section 9 of the said Act of 1996, a prayer was made for grant of temporary injunction restraining the respondent from terminating the agreement. On 5^th December 2020, during the pendency of the said application under Section 9 of the said Act of 1996, a notice/order of termination was issued by the respondent terminating the said agreement with effect from 15^th December 2020. Prior to that, there was a correspondence exchanged between the parties in which it is pointed out by the respondent that the appellant was in arrears of licence fee plus GST to extent of Rs.3,75,90,000/-.

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By the impugned judgment and order, the learned Judge of the Commercial Court has held that firstly, the appellant has not approached the Court with clean hands as the appellant has not paid the arrears of licence fee payable under the said agreement. Secondly, the learned Judge of the Commercial Court held that in view of the notice of termination of the agreement, the appellant was not entitled to relief in view of the principles laid down in clause (h) of Section 41 of the Specific

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Relief Act, 1963 inasmuch as more efficacious relief could have been claimed by the appellant but the same has not been claimed.

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The submission of the learned counsel appearing for the appellant is that though a notice of termination was issued by the respondent on 5^th December 2020 which was to be effective from 15^th December 2020, on 11^th December 2020 an order of status quo was passed by the Commercial Court and, therefore, the termination has not come into effect. His submission is that even the respondent failed to make reimbursement of the bills of the appellant for having supplied the medicines to the patients. It is submitted that the reimbursement ought to have been made within the stipulated time. His submission is that though the respondent was bound to purchase the required medicines and operation theatre and ICU consumables from the appellant, it failed to do so. He submitted that the claim of the appellant for reimbursement has to be adjusted against the arrears of licence fee. He would, therefore, submit that the learned Judge of the Commercial Court has committed an error by rejecting the application under

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Section 9 of the said Act of 1996. He submitted that the

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respondent did not come forward to convene the meeting for reconciliation of the accounts.

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We have considered the submissions. The only limited prayer made in the application under Section 9 of the said Act of 1996 was for restraining the respondent from terminating the agreement dated 5^th February 2018. The learned Judge of the Commercial Court relied upon a decision of the Apex Court in the case of ADHUNIK STEELS LTD. vs. ORISSA MANGANESE

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AND MINERALS (P) LTD.¹ The learned Judge of the Commercial Court referred to the relevant clauses in the agreement and especially clause 21 of the agreement under which either of the party was entitled to terminate the agreement. Moreover, the learned Judge has also considered the conduct of the appellant of not paying the licence fee as per the said agreement. We may note here that after the termination was effected on 5^th December 2020, amendment to the application under Section 9 of the said Act of 1996 was not sought for claiming any additional relief.

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