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2022 Supreme(Del) 1612
IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, J.
Prium Verma - Appellant
Versus
Kedrion Biopharma India Pvt. Ltd. & Anr. - Respondents
Original Miscellaneous Petition (COMM) No. 54 of 2020 and IA Nos. 1059, 3111 of 2020
Decided On : 15-03-2022
Sameer Bhatnagar, Advocate, Sudhir Nandrajog, Advocate, Purnima Malik, Advocate, Saurabh Sharma, Advocate
Headnote:
arbitration and Conciliation act - Distribution agreement - 34 - [arbitration and Conciliation act, 1996] - [Section 34] - The court discussed the Distribution agreement dated 05.02.2016 and the disputes arising from it. The court referred to articles 22 and 20.3 of the Distribution agreement to conclude that the payment mechanism stipulated in the agreement bound the parties and crystallized the liability of the Firm. The court also held that the products supplied through PISPL were in terms of the Distribution agreement and Kedrion was entitled to raise claims pertaining to the invoices raised by PISPL. The court awarded a sum of ?14,02,67,190/- against Claim no. 1, on account of outstanding payments for goods supplied by them to the Firm under the Distribution agreement. The court also awarded simple interest at the rate of 18% per annum on the sum of ?14,02,67,190/- from 12.02.2018 till the filing of claims and further, awarded pendente lite interest at the rate of 18% per annum from the commencement of proceedings till the date of award. The court held that Ms Prium Verma and Late Ms. Vineeta Sharma would be jointly and severally liable to Kedrion for the debts of the Firm, however, the liability of Late Ms. Vineeta Sharma was restricted to the amounts due and payable prior to the date of her demise, that is, before 05.08.2017. The court rejected all other counter claims preferred by the petitioners. Additionally, a sum of ?17,87,280 on account of legal and other costs and a sum of ?15,00,000/- on account of arbitration costs was awarded to Kedrion, which was to be borne by the Firm and Ms. Prium to the extent of 80% and the balance 20% was to be borne by Late Ms. Vineeta Sharma (through her legal heir).
Fact of the Case:
The court discussed the disputes arising from a Distribution agreement dated 05.02.2016 between the parties. The court found that the Distribution agreement was a valid contract and the non-payment of goods supplied by Kedrion to the Firm would constitute a breach of the Distribution agreement. The court also addressed the counter-claims raised by the petitioners and rejected all of them except for one, where a sum of ?28,97,888/- was awarded to the Firm on account of outstanding rent, electricity, and maintenance.
Finding of the Court:
The court found that the Distribution agreement was valid and binding on the parties, and the non-payment of goods supplied by Kedrion to the Firm constituted a breach of the agreement. The court also held that Ms Prium Verma and Late Ms. Vineeta Sharma would be jointly and severally liable to Kedrion for the debts of the Firm, with the liability of Late Ms. Vineeta Sharma being restricted to the amounts due and payable prior to the date of her demise. The court rejected all other counter claims preferred by the petitioners.
Issues: The court addressed the breach of the Distribution agreement, the liability of the parties, and the counter-claims raised by the petitioners.
Ratio Decidendi: The court held that the Distribution agreement was valid and binding, and the non-payment of goods supplied by Kedrion to the Firm constituted a breach of the agreement. The court also found that Ms Prium Verma and Late Ms. Vineeta Sharma would be jointly and severally liable to Kedrion for the debts of the Firm, with the liability of Late Ms. Vineeta Sharma being restricted to the amounts due and payable prior to the date of her demise.
Final Decision: The court dismissed the petitions and found no ground to interfere with the arbitral award. The pending applications were also disposed of, and the parties were left to bear their own costs.
JUDGMENT
Vibhu Bakhru, J. - The petitioners have filed the present petition under Section 34 of the arbitration and Conciliation act, 1996 (hereafter the 'a&C act') impugning an arbitral award dated 20.09.2019 (hereafter the 'impugned award') rendered by an arbitral Tribunal comprising of a Sole arbitrator (hereafter the 'arbitral Tribunal').
2. The impugned award was rendered in respect of disputes that had arisen between the parties in connection with a Distribution agreement dated 05.02.2016 (hereafter the 'Distribution agreement').
3. In the year 2015, a partnership firm under the name and style, Qualichem Biologicals (hereafter the 'Firm') was constituted by three partners - Ms Jyoti Verma, Ms Prium Verma [the petitioner in OMP (Comm) 54/2020] and Ms Vineeta Sharma [represented through her legal representative Mr Pramod Sharma, as the petitioner in OMP (Comm) 502/2019].
4. The Firm was, inter alia, engaged in the business of distribution and sale of pharmaceutical products.
5. admittedly, Ms Jyoti Verma resigned from the Firm on 01.01.2015 and, the Firm was reconstituted with the existing partners (Ms Prium Verma and Ms Vineeta Sharma), holding equal shares in the Firm.
6. Respondent No. 1 (hereafter 'Kedrion') is a company incorporated under the Companies act, 2013 and is a fully owned Indian subsidiary of Kedrion S.p.a, a company registered under the laws of Italy. Kedrion is an exclusive distributor in India of blood derivatives including other pharmaceutical products manufactured by the Kedrion Group.
7. On 05.02.2016, the Firm and Kedrion entered into the Distribution agreement, for sale and import of pharmaceutical products manufactured by Kedrion S.p.a through the Firm as its exclusive distributor.
8. In terms of the Distribution agreement, it was agreed that the Firm would issue post-dated cheques for placement of monthly pharmaceutical orders, prior to its import; however, the said cheques would be encashed by Kedrion only on issuance of the Purchase Order.
9. Kedrion claims that the Firm (and its constituent partners) failed to discharge their obligations under the Distribution agreement and pay its dues to Kedrion. It further asserts that the Firm had tampered with the label and packaging of the drug - RhoGaM and the same was a violation of the Drugs and Cosmetic Rules, 1945 as well as the Distribution agreement.
10. On 10.02.2017, Kedrion issued a 'Cease and Desist Notice' to the Firm restraining the petitioners from sticking labels, which used the name of the Firm on Kedrion's products and, to further indemnify Kedrion, in the event, any action was taken by the concerned authorities.
11. Kedrion claims that several invoices raised by it in favour of the Firm, remain unpaid. accordingly, on 07.06.2017, Kedrion issued a notice to the Firm claiming payment of the outstanding dues amounting to ?15,99,93,880/- and further calling upon it to cure the violations of the provisions of Rule 104a of the Drugs and Cosmetic Rules, 1945.
12. Ms Vineeta Sharma expired on 05.07.2015. Ms Prium Verma [the petitioner in OMP (Comm) 54/2020] continued to manage the affairs of the Firm.
13. Kedrion states that on 18.09.2017, one Mr ashwani Verma, who claims to be the Chief Executive Officer of the Firm, sent an email to Kedrion wherein, he delineated a detailed schedule of probable dates for encashment of the post-dated cheques. However, despite the Firm and Prium Verma admitting their dues, the Firm did not act in accordance with the timeline indicated in the email dated 18.09.2017 and requested that the presentation of the cheques be postponed. aggrieved by the conduct of the petitioners, Kedrion terminated the Distribution agreement on 23.10.2017.
14. It is Kedrion's case that the Firm and its partners failed to discharge their obligations under the Distribution agreement in respect of twenty invoices raised by it amounting to ?16,69,90,615/-. Out of the twenty invoices, fourteen invoices were directly raised by Kedrion, while the re
