2009 (12) TMI 1040 - HC - Law of Competition

Issues Involved:
1. Invocation of Section 9 of the Arbitration and Conciliation Act, 1996.
2. Existence and enforcement of the arbitration clause in the Joint Venture Agreement (JVA).
3. Compliance with pre-arbitration stages.
4. Distribution rights and non-compete clauses in various agreements.
5. Alleged breach of contractual obligations and fiduciary duties.
6. Interim injunction against the respondent from distributing Verorab.
7. Application of the Indian Partnership Act, 1932 and the Indian Contract Act, 1872.
8. Conduct of the parties and its impact on equitable relief.
9. Interpretation of commercial contracts.
10. Public interest and market competition considerations.

Detailed Analysis:

1. Invocation of Section 9 of the Arbitration and Conciliation Act, 1996:
The petitioner invoked Section 9 of the Arbitration and Conciliation Act, 1996, seeking an interim measure of protection by way of an interim injunction to restrain the respondent from distributing Verorab. The court considered the urgency and granted ad interim relief in terms of prayer (a) on 16.10.2009.

2. Existence and Enforcement of the Arbitration Clause in the JVA:
The JVA dated 22nd April 1998 contained an arbitration clause stipulating that any dispute arising out of or in connection with the agreement shall be resolved through arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce, to be held in London, England.

3. Compliance with Pre-Arbitration Stages:
The court noted that the compliance with pre-arbitration stages could be examined at a later stage. The basic requirement of the existence of the arbitration agreement and the dispute between the parties arising out of the same was deemed sufficient to consider the petitioner's case for urgent relief.

4. Distribution Rights and Non-Compete Clauses in Various Agreements:
Several agreements were executed between the parties, including the JVA, Shareholders Agreement, Marketing and Distribution Agreements, and a Licence and Technical Collaboration Agreement. These agreements contained clauses related to distribution rights and non-compete obligations. The petitioner argued that the respondent's distribution of Verorab violated these clauses.

5. Alleged Breach of Contractual Obligations and Fiduciary Duties:
The petitioner alleged that the respondent's distribution of Verorab constituted a breach of the JVA and other related agreements, as well as a violation of fiduciary duties. The court emphasized the importance of trust, good faith, and cooperation in joint ventures and partnerships, and held that the respondent's actions were contrary to these principles.

6. Interim Injunction Against the Respondent from Distributing Verorab:
The court granted an interim injunction restraining the respondent from distributing Verorab, based on the prima facie case made out by the petitioner. The court held that the respondent's distribution of Verorab was a rival and competing business that affected the petitioner's business and created confusion in the market.

7. Application of the Indian Partnership Act, 1932 and the Indian Contract Act, 1872:
The court referred to various provisions of the Indian Partnership Act, 1932, including Sections 9, 11, 16, 17, 36, and 54, and Section 27 of the Indian Contract Act, 1872. The court held that partners are bound to carry on the business of the firm to the greatest common advantage and not to engage in competing business without express permission.

8. Conduct of the Parties and Its Impact on Equitable Relief:
The court considered the conduct of the parties while granting the injunction. The court held that the respondent's conduct of starting a rival business without express or implied consent from the petitioner and the company was not permissible and affected the business of the joint venture.

9. Interpretation of Commercial Contracts:
The court emphasized the need to interpret commercial contracts as a whole, considering the object and purpose of the agreements. The court held that the clauses related to distribution rights and non-compete obligations should be read in the context of the entire agreement and the relationship between the parties.

10. Public Interest and Market Competition Considerations:
The court rejected the respondent's argument that distributing Verorab was in the public interest due to a shortage of anti-rabies vaccines in the market. The court held that the dispute was a commercial transaction between the parties and did not involve public interest considerations.

Conclusion:
The court confirmed the interim injunction granted on 16.10.2009, restraining the respondent from distributing Verorab until the constitution of the Arbitral Tribunal and eight weeks thereafter. The court held that the petitioner had made out a prima facie case for the injunction and that the balance of convenience and equity tilted in favor of the petitioner. All points were kept open for further consideration by the Arbitral Tribunal.

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