M/S SHINHAN APEX CORPORATION Vs. M/S EURO APEX B.V
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 4359-4360 of 2016, Judgment Date: Apr 22, 2016
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 4359-4360 OF 2016
[arising out of SLP(C) Nos.3134-3135 of 2015]
M/S. SHINHAN APEX CORPORATION …APPELLANT
VERSUS
M/S. EURO APEX B.V. …RESPONDENT
J U D G M E N T
Fakkir Mohamed Ibrahim Kalifulla, J.
Leave granted.
These appeals are directed against the order dated 29.9.2014 in Execution
Application No.643 of 2013 in Award dated 23.12.2011 with Chamber Summons
No.832 of 2014.
To briefly note the facts, there was a Licence Agreement between the
appellant and the respondent dated 22.2.1993 which provided for settlement
of disputes by way of arbitration in accordance with the Rules of the Dutch
Arbitration Institute. The said agreement was sought to be terminated by a
notice by the respondent on 12.3.2007. The termination was to take effect
from 23.02.2008. The dispute went before the Arbitral Tribunal. On
11.6.2008, the appellant filed an application for registration of Patent
Nos.10-0865115 and 100909490 in the United States as well as in India. In
the arbitral proceedings, a Partial Final Award (for short, PFA) came to be
passed by the Arbitral Trinunal on 23.12.2011. We are presently concerned
with the Indian Patents in which the appellant's rights and interest were
involved, namely, Patent Nos. 2143/MUM/2008 and 2144/MUM/2008. The relevant
part of the award (viz) paragraphs 7 and 9, of the PFA reads as under:-
“7. Respondent to, within 30 days following the notification of the
arbitration award, unconditionally and irrevocably, fully transfer all
rights and interests of Indian Patent No.2143/MUM/2008 and 2144/MUM/2008 to
Claimant, or a company designated by Claimant, and sign/execute and submit,
at the first request of Claimant, and within 3 days following such request,
all the documents that are required to effect such patent rights and
interests transfer in accordance with the requirements of the Indian Patent
Act and applicable Indian laws; and to simultaneously provide copies of all
the relevant correspondence relating to such transfer to the attorney of
Claimant by fax and registered post (fax: +31-20-6513001, HIL International
Lawyers & Advisers, PO Box 22678, 1100 DD Amsterdam, the Netherlands);
8. xxx xxx xxx
9. Respondent to pay a direct enforcement penalty in the amount of Euro
50,000 for each case in which Respondent infringes the arbitral orders sub
7 and 8 above, and Euro 5,000 for each day the infringement continues;”
The Award dated 23.12.2011 was communicated to the parties by the Arbitral
Tribunal on 27.12.2011. Therefore, the period of thirty days, fixed in
paragraph 7, was to start from 27.12.2011.
Closely followed by that, the respondent forwarded its request dated
19.1.2012 in the form of a letter communicated by the Advocate of the
respondent to the appellant by enclosing the required documents to be
executed by the appellant for the purpose of transfer of the patents. In
the opening paragraph of the draft transfer deed a reference was made to
PFA rendered on 23.12.2011 of CASE NAI 3625, in order to ascertain the
obligation of the appellant to execute the transfer of the patents. It is
not in dispute that subsequent to the said letter dated 19.1.2012 and the
enclosures, discussions were held between January and March, 2012 among the
advocates of the appellant and the respondent to finalize the draft deed of
transfer.
Thereafter, again at the instance of the respondent through a communication
dated 3.4.2012 of the respondent's lawyers addressed to the appellant a re-
draft of the deed of transfer was enclosed, which was dated 4.4.2012. In
the opening part of the said Deed, the reference to PFA, which was
mentioned in the earlier draft transfer deed, was omitted. In other
respects, the draft remained the same which contained a clause under the
caption 'Consideration' to the effect, “Pursuant to the above, the Parties
agree that the consideration for the sale and transfer of the patent and
the patent rights shall be US$ 1 (United States Dollar One), receipt of
which is hereby acknowledged”.
That apart, in clause 5.5 of the re-draft it was mentioned that arbitration
of the dispute arising out of or in connection with the deed should be
initially settled under the Rules of Singapore International Arbitration
Centre by a Sole Arbitrator appointed in accordance with the said Rules and
the proceedings should be in English and the seat of arbitration should be
Singapore. Insofar as the said clause was concerned, the same was different
than the one which was contained in the earlier draft, as per which the
arbitration was to be carried out with the Rules and provisions by
Netherlands Arbitration Institute and the venue of the arbitration as
Hague, The Netherlands and governing law was also mentioned as the laws in
force in the Netherlands and the Courts at Netherlands to have
jurisdiction. In the draft dated 4.4.2012 the governing law was to be the
laws in force in India.
The appellant received the re-draft by way of e-mail on 3.4.2012 with a
direction to the appellant to sign the document, get it legalized by the
Indian Embassy in Seoul and dispatch the same to the respondent's lawyers
in Amsterdam. The appellant executed the deed of transfer dated 4.4.2012
and thereby transferred all its rights and interests in the Indian Patents
in favour of the respondent. The appellant's lawyers sent an electronic
copy of the said document to the respondent duly notarized with an
assurance that the original would be promptly couriered to the respondent
upon confirmation. In response to the same, the lawyers of the respondent
in their e-mail dated 11.4.2012 intimated that the signature part of the
deed was correctly executed by the appellant and also wanted the original
deed to be sent by courier to their Amsterdam Office for carrying out other
additional formalities for effecting the transfer. Simultaneously, their
lawyers also on the same day informed the respondent confirming the
forwarding of the transfer deed for effecting the transfer of the patent
applications duly signed by the appellant. The original document was also
forwarded to the lawyers of the respondent on 12.4.2012.
However, it appears that the respondent had its own issue with its lawyers
as regards the draft as well as the final deed executed by the appellant in
favour of the respondent which came to light when the present proceedings
before the High Court was launched by the respondent. The same was
reflected in the communication dated 12.4.2012 addressed by the
representative of the respondent to its lawyers. Thereafter, the next
communication was dated 3.12.2012 by the respondent's lawyer addressed by
way of an e-mail to the appellant's lawyer suggesting that the transaction
can be by way of trade sale of the appellant's business. On behalf of the
appellant, its lawyer sent a reply dated 11.12.2012 taking the definite
stand that after the execution of the transfer deed dated 4.4.2012 the
requirement of the obligation to be fulfilled by the appellant was duly
complied with as per the PFA dated 23.12.2011. Thereafter, by another
communication dated 15.3.2013, the respondent's lawyers sent a fresh e-mail
to the appellant's lawyers informing that fresh steps are required to be
taken to arrive at a final settlement of disputes. The said e-mail was
also replied on behalf of the appellant on 20.3.2013 wherein the respondent
was reminded as to the confirmation of the steps taken based on the
transfer deed executed by them. For the first time, on 8.6.2013, by way of
e-mail at the instance of the respondent's lawyers it was intimated that
respondent was not willing to accept the transfer of Indian Patents based
on the language used in the draft deed as signed by the appellant. The
said e-mail was also duly replied on behalf of the appellant on 15.6.2013
pointing out that the deed was executed as per the draft forwarded to the
respondent by their lawyers and consequently the appellant was not in any
way liable for either any delay or for the terms contained in the transfer
deed.
It was in the above-stated background the present application came to be
filed by the respondent on 8.7.2013 before the High Court of Bombay for the
enforcement of paragraph 7 of the PFA dated 23.12.2011. By the impugned
order, the learned Single Judge held that there was a material alteration
in the draft deed forwarded by the respondent to the appellant when the
final deed was executed in the deed dated 4.4.2012 and consequently, the
appellant is bound to execute a transfer deed of assignment as per the
draft sent by the award holder, namely, the respondent as was originally
forwarded to the appellant.
With that view, the learned Judge directed the appellant to execute the
deed of transfer and assignment of Patent Nos. 2143/MUM/2008 and
2144/MUM/2008 in favour of the award holder in terms of Annexure P6 to the
Execution Application incorporating therein the complete recital 'B' and
the Arbitration Clause 5.5 showing the future arbitration in Netherlands
within two weeks from the date of the order. Aggrieved by the impugned
order, the appellant is before us.
We heard Mr. K.V. Vishwanathan, learned senior counsel appearing for the
appellant and Mr. Manoj K. Singh, learned counsel appearing for the
respondent.
Having drawn our attention to the above factual details which emanated
after the passing of PFA dated 23.12.2011, Mr. Vishwanathan, learned senior
counsel, contended that when the application was initially moved, the
respondent failed to bring to the notice of the Court about the extensive
correspondence which took place between 19.1.2012 and 15.6.2013, that after
the appellant in its Chamber Summons brought to the notice of the Court the
relevant information, namely, the re-draft sent by the respondent on
3.4.2012 which contained the variation in para 'B' as between the one
contained in the earlier draft of 19.1.2012 and 3.4.2012 as well as the
arbitration clause and the governing law contained in paragraphs 5.5 and
5.6, the respondent for the first time in their rejoinder referred to those
documents. The learned senior counsel pointed out that learned Judge
completely omitted to take note of such relevant factors and proceeded to
hold as though the draft sent by the respondent on 19.1.2012 alone was
material and that the changes found in the final deed dated 4.4.2012 was at
the instance of the appellant which unfortunately led to the passing of the
impugned order.
In reply, Mr. Singh, learned counsel appearing for the respondent, was not
able to controvert the factual position, namely, that the first request of
the respondent after the PFA dated 23.12.2011 was 19.1.2012, that along
with the said communication the draft deed of transfer to be executed by
the appellant was forwarded to it, that after detailed discussions between
January and March, 2012, the re-draft was forwarded by the respondent on
3.4.2012 wherein the reference to PFA in the opening paragraph of the
earlier draft was omitted and that the paragraphs relating to consideration
was specified apart from the change about the venue and the applicable
Rules of the Arbitral Tribunal was noted as Singapore instead of
Netherlands and the governing law applicable was also changed from
Netherlands to India. Learned counsel was also not able to controvert any
of the other subsequent correspondence exchanged between the appellant and
the respondent between 11.4.2012 and 15.6.2013.
Having regard to the said development which had taken place after the PFA
dated 23.12.2011 which discloses that the appellant did not commit any
default in complying with the direction of the said Award and, therefore,
the present direction of the learned Judge in the impugned order was wholly
unwarranted. If the respondent failed to act based on the final transfer
deed executed by the appellant on 4.4.4012, which was in tune with the
draft forwarded by the respondent themselves, the appellant cannot be in
any way blamed for the misfeasance committed by the respondent.
In the above-stated background, when we consider the prayer of the
respondent as claimed in the application, the prayer was for a direction to
the appellant to execute the deed of transfer and assignment of Patent Nos.
2143/MUM/2008 and 2144/MUM/2008 in favour of the respondent in terms of the
draft deed in Annexure P6, which was dated 4.4.2012. In fact the learned
Judge, as rightly pointed out by Mr. Vishwanathan, learned senior counsel
for the appellant, completely missed to note that based on the
correspondence exchanged between the respondent and the appellant between
19.1.2012 and 3.4.2012 Annexure P6 which was dated 4.4.2012 was the
ultimate transfer deed which the appellant was obliged to execute, that the
appellant duly executed the said document by signing the same on 4.4.2012
and forwarded to the respondent's lawyers on 9.4.2012 and the due execution
of which was also confirmed on behalf of the respondent by their lawyers on
11.4.2012. A further confirmation was made by the respondent's counsel to
the respondent themselves on the same day, i.e. 11.4.2012 as to the
execution of the transfer deed dated 4.4.2012. The original documents were
also forwarded by the appellant on 12.4.2012. After the above referred
sequence of events as regards Annexure P6 dated 4.4.2012 are noted, it must
be held that the direction contained in paragraph 7 of the PFA of the
Arbitral Tribunal was duly carried out by the appellant based on the first
request of the respondent themselves as made on 19.1.2012 and as per the
modified request dated 3.4.2012. If that was the real fact situation in
regard to the execution of the transfer deed, which was completely omitted
to be noted by the learned Single Judge, it must be held that there was no
occasion for the respondent to have any grievance in regard to the
execution of the transfer deed as directed in paragraph 7 of the PFA of the
Arbitral Tribunal dated 23.12.2011. The failure on the part of the learned
Judge in having noted the fact that the transfer deed dated 4.4.2012 was as
per the re-draft forwarded by the respondent themselves which was duly
executed and sent back by the appellant by 9.4.2012 and the original by
12.4.2012 unfortunately resulted in the passing of the impugned order. In
the light of the said patent illegality in the impugned order, the same is
liable to be set aside.
In the said circumstances, the impugned order of the learned Judge cannot
be sustained, the same is set aside and the appeals stand allowed.
................................J.
[Fakkir Mohamed Ibrahim Kalifulla]
................................J.
[S.A. Bobde]
New Delhi;
April 22, 2016