The main legal point established in the judgment is that a party cannot be held liable for obligations under a contract if it was not a party to the contract. Additionally, the judgment emphasizes the importance of adhering to the limitation period for claims and the scope of arbitration.

S. Muralidhar, J.

1. The challenge in this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act’) is to an Award dated 29th September 2012 whereby the Petitioner has been asked to pay the Respondents a sum of Rs. 4,16,13,361 together with interest @ 12% per annum from the date of the Award.

2. Petitioner No. 1 is Enjayes Spices & Chemical Oil Ltd. (‘ESCOIL’) and Petitioner No. 2 Mr. N.S. John. Respondent No. 1 is the National Research Development Corporation (‘NRDC’).

The licence agreement

3. NRDC acquired from the Council for Scientific & Industrial Research (‘CSIR’) the absolute ownership of the know-how for manufacture of ‘Spices Oleo Resins’ developed by the Central Food Technology Research Institute (‘CFTRI’), Mysore, Karnataka. It is stated that Petitioner No. 2 Mr. N.S. John applied to the NRDC on 31st January 1979 for grant of a licence to use the aforementioned technology and right to use, exploit and practice know-how and process of manufacture of the articles developed by CFTRI and to sell commercially, the articles so manufactured. After negotiations between NRDC and Mr. John, the NRDC by an agreement of licence dated 17th March 1980 agreed to give a non-exclusive licence to Mr. John for use of the know-how to manufacture ‘Spices Oleo Resins.’

4. In terms of the licence agreement, Mr. John was granted “the right to use the said invention for the manufacture of ‘Spices Oleo Resins’ at the grantees own factory and sell the product manufactured in accordance with the said invention.” The licence was for a minimum period of 14 years which was to be computed from the date of the commencement of manufacture. Clause 3 (1) specifies that the consideration was Rs. 5,000 to be paid by Mr. John by way of premium and royalty to be paid in the manner specified in the agreement. Clause 3(1) stated that the licence was to continue to remain in force for 14 years after the commencement of manufacture. Royalty was to be paid @ 1½% on the net ex-factory sale price of the material manufactured by Mr. John in accordance with the said invention and marketed by him. In terms of Clause 3 (ii) of the licence agreement, the licencee was to keep books of accounts relating to the royalty containing information and particulars for enabling the amount of royalty to be paid. NRDC was permitted to inspect the said record and take copies of the extracts thereof.

5. Under Clause 5(i) if the licencee failed to commence manufacturing within 12 months from the date of the licence i.e. 1st January 1980 or he was unable to set up production within 31st December 1980 due to unavoidable reasons, he could make a request to NRDC for extension of time before expiry of that date. Under Clause 5 (iii) if the arrears of royalty was not cleared within three months after becoming due, the NRDC could determine the licence forthwith. The licence agreement contained an arbitration clause.

6. Among the documents placed on record is an application dated on 27th October 1979 signed by Mr. John describing himself as Director of ESCOIL (Petitioner No. 1). However, when the licence agreement was executed it was only between Mr. John and NRDC. It did not mention the name of the licencee as ESCOIL. A letter dated 23rd February 1979 written by NRDC to Mr. John, in response to his earlier letter dated 31st January 1979, communicates that NRDC had decided to grant him licence for commercial development of ‘Spices Oleo Resins’. The letter dated 2nd January 1980 by NRDC is also addressed only to him enclosing a copy of the licence agreement typed on stamp paper for his signature. The half-yearly return filed on 30th September 1980 with the NRDC stated that the factory was still under construction. Mr. John, inter alia, stated therein that he had “not yet received the technology (complete from CFTRI)". There is another return filed for the period ending 31st September 1981 stating that the construction was not yet complete. This is dated 10th Novembe