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2020 DIGILAW 717 (TS)

Issar Pharmaceuticals Pvt. Ltd. v. A. Ramaiah

2020-10-01

A.RAJASEKHAR REDDY

body2020
ORDER : 1. This arbitration application is filed under Section 15 of the Arbitration and Conciliation Act, 1996 (for short ‘the Act’) for appointment of a substitute Arbitrator in view of recusal of Sri. Justice T.N.C. Rangarajan, Arbitrator nominated by the parties to adjudicate disputes arising from out of the terms of the consent award dated 8.10.2006. 2. This case has a checkered career. The case of the applicant is it is a research based Company, engaged in business of research and manufacture of pharmaceutical compositions and in its pursuit, researched a composition known as “MELGAIN” useful for treatment of skin disorders, especially Leucoderma. Respondent reportedly a reputed Scientist, after negotiation with applicant as to a research project useful to cure Vitiligo, a skin disorder, entered into an agreement dated 2.7.1997. That in lieu of investing funds by applicant for the said research project, respondent consented, under Clause 7 of the agreement to allow applicant to have sole right to manufacture, distribute, market and sell the products in India after successful clinical trial and also any further products, that may be discovered or any modification or improvement thereof, under joint partnership of the parties and applicant has also been assigned 50% of rights in the Indian Patent Nos. 186437, 185703 and 185613 filed by respondent. That as part of its research, applicant developed a composition known as “MELGAIN” and acquired 50% of the rights in the patent alongwith exclusive right to manufacture, distribute and sell the same in India. That during the course of development of the said product, respondent did not contribute his skills or knowledge, as a result the research and product development was delayed, compelling applicant to hire experts from USA to complete the research trial and to get necessary approval from the Regulatory authorities. After approval for manufacture and sale by the Indian FDA vide License No. 24/RR/AP/2004/F/G, dated 21.5.2004, applicant started to manufacture the product from the year 2004. 3. As disputes arose between parties in relation to the conditions of the agreement dated 2.7.1997, respondent filed suit OS No. 1389 of 2004 for injunction against applicant from interfering in the manufacture of the drug to treat Vitiligo. The applicant has also filed OP No. 1626 of 2004 for the same relief restraining respondent from interfering with the manufacturing of drug to treat Vitiligo. The applicant has also filed OP No. 1626 of 2004 for the same relief restraining respondent from interfering with the manufacturing of drug to treat Vitiligo. Both the suits were dismissed by the Trial Court by a common order dated 9.11.2004. Assailing the common order, respondent filed appeal being CMA No. 115 of 2005. This Court passed interim order dated 28.4.2005 wherein applicant herein was directed to deposit an amount of Rs. 25 lakhs. However, this Court confirmed the interim order and directed that the dispute to be referred to Arbitrator since the agreement provides for such a resolution mechanism, and accordingly the appeal CMA No. 115 of 2005 was disposed of by judgment dated 19.9.2005, with liberty to respondent to withdraw the amount of Rs. 25 lakhs, upon furnishing personal security before the Arbitrator. Thereafter, applicant addressed letter to respondent nominating Sri. Justice T.N.C. Rangarajan as Sole Arbitrator; respondent also expressed his willingness for the said nomination. During arbitration proceedings, optimism prevailed upon the parties, which led to settlement of disputes among them and accordingly the parties requested the Arbitrator to pass a consent award in terms of the settlement of terms agreed to by them. A consent award dated 8.10.2006, incorporating the agreed terms of settlement by the parties, was passed by the Arbitrator. 4. Under the consent award, in view of the exclusive rights granted to applicant to manufacture and sale of the product in India, applicant entered into marketing and distribution agreement with M/s. Alkem Laboratories Ltd. on 21.2.2007 and started marketing and distribution of the product through the said Company. That in terms of the award, the parties entered into an assignment agreement on 15.9.2007 assigning 50% of the patent to applicant including renewal, re-issue and prolongations and that they shall hold and enjoy the said patents with all the rights, powers, privileges and advantages thereof. 5. But, respondent alleging that terms of agreement and consent award has been violated by applicant, filed EP No. 35 of 2007 for enforcement of the terms of the award. In the EP, applicant finally gave an undertaking to comply with the terms of the award, un-fulfilled if any and in view of the said undertaking, the EP was closed. 5. But, respondent alleging that terms of agreement and consent award has been violated by applicant, filed EP No. 35 of 2007 for enforcement of the terms of the award. In the EP, applicant finally gave an undertaking to comply with the terms of the award, un-fulfilled if any and in view of the said undertaking, the EP was closed. Alleging that applicant committed breach of the undertaking given to the Court, respondent filed EA No. 13 of 2011 in EP No. 35 of 2007 under Sections 2(b) and 12(d) of Contempt of Courts Act, 1971, read with Section 151 CPC for disobedience of the orders of the Court and for attachment of the articles of the applicant-Company. By order dated 12.10.2011, the Court below, on evidence, came to the conclusion that applicant did not abide by the terms of the award, as per the undertaking given by him to the Court and, therefore, applicant committed civil contempt and liable for punishment. Accordingly, the matter was referred to this Court for imposing appropriate punishment on applicant, and the said reference is pending. Thereafter, respondent filed another EP No. 51 of 2010 for recovery of amount of Rs. 7,00,000/- by attaching the movable properties of applicant, against which applicant filed CRP No. 4691 of 2012, which was allowed by this Court and while remanding the matter to Trial Court observed that respondent need not file separate execution petition every time for collection of the royalty amount @ 5% on the net sales of the drug till 2016 which is validity period of the patents. Pursuant to remand, as per the directions therein, respondent filed fresh calculation memo depicting arrears due and payable to him by applicant aggregating to Rs. 10,95,199/-. The said amount was ordered to be paid by order dated 4.6.2014 by the Trial Court. Aggrieved by the same, the applicant filed revision being CRP No. 1867 of 2014, wherein this Court granted interim stay on condition applicant depositing 50% of the decretal amount within six weeks and in compliance thereof, the applicant deposited an amount of Rs. 43,17,600/- and the CRP was disposed of by referring the dispute to Justice T.N.C. Rangarajan, named Arbitrator, in terms of Clause 6(8) of the consent award dated 8.10.2006. But, the learned Arbitrator who passed the consent award dated 8.10.2006 expressed unwillingness to undertake the work and accordingly requested to appoint someone else. 43,17,600/- and the CRP was disposed of by referring the dispute to Justice T.N.C. Rangarajan, named Arbitrator, in terms of Clause 6(8) of the consent award dated 8.10.2006. But, the learned Arbitrator who passed the consent award dated 8.10.2006 expressed unwillingness to undertake the work and accordingly requested to appoint someone else. Thereafter, the matter was placed before the Court upon such an endorsement made by the learned Arbitrator. On 29.6.2016, when the matter came-up for hearing, respondent in order to defeat the rights and claims of applicant stated that he was willing to forego claim for interest payable and; in view of the said submission, the CRP was closed as no cause survives in the matter to be again sent to substitute Arbitrator and there ended the claims of respondent against applicant under the award dated 8.10.2006 in those proceedings. 6. Seemingly claims of applicant started to emerge against the respondent arising under the consent award dated 8.10.2006 when applicant came across certain products i.e. MELSWIFT and MELBILD with similar molecules and composition that are used for treatment of Vitiligo, which is covered under the patent in which applicant has exclusive rights to manufacture, distribute and sell in India, but are being manufactured and marketed by two different companies viz. EMDSWIFT Technology Private Limited and M/s. Alkem-Laboratories Private Limited, without having any right, license or otherwise any permission from the concerned authorities. The said two Companies are manufacturing the same product by infringing the rights of applicant and causing financial loss to him. 7. That applicant also made an application before the Intellectual Property Appellate Board seeking revocation of the Indian Patent No. 239632 granted in favour of respondent on the ground that the patent was obtained wrongfully by fraud and misrepresentation in contravention of the rights of applicant and the same is pending adjudication before the Appellate Board. That applicant has also initiated criminal proceedings against respondent and the same has been registered as FIR No. 538 of 2015 on the file of P.S. Jubilee Hills, Hyderabad, for the offences punishable under Sections 408 and 420 IPC and charge-sheet has also been filed and the same is pending adjudication. 8. That applicant got issued legal notice dated 6.2.2015 to respondent invoking arbitration clause to refer the dispute to Arbitrator, for payment of advance amount of Rs. 8. That applicant got issued legal notice dated 6.2.2015 to respondent invoking arbitration clause to refer the dispute to Arbitrator, for payment of advance amount of Rs. 3 crores towards damages and loss sustained due to the felony committed by respondent. That inspite of receipt of legal notice, respondent failed to reply. Hence, this application to refer the matter to Arbitrator as agreed and postulated under Clause 6(8) of the consent award dated 8.10.2006. 9. The respondent filed counter-affidavit wherein inter-alia he stated that in 1975, he applied for research grants to the Department of Science and Technology, Government of India, New Delhi, for the purpose of conducting research towards treatment for the disease Vitiligo. He obtained research grants from other agencies like the Indian Council for Medical Research (ICMR) and financial assistance for conducting the clinical research. That he developed a novel potential drug for the treatment of Vitiligo and applied for patents in Indian patent office and was granted patents in India, US and Australia viz. Indian Patent Nos. 185703, 185613 and 186437, US Patent No. 6143723 and Australia Patent No. 722626. It is denied by the respondent that the applicant company had invested huge amounts for research and development of pharmaceutical products that can be used for skin disorders especially Leucoderma. That the applicant-Company existed only in name till the respondent helped the applicant get a loan of about Rs. 4 crores from Technology Development Board (TDB) with which the applicant brought the peripherals and equipment to manufacture the drug and till then, the respondent used his own resources to find facilities in CCMB and IICT. The respondent does not dispute scribing of agreement dated 2.7.1997 with the applicant. There is also no denial on the part of the respondent as to the off-shoot disputes with the applicant pursuant to the agreement dated 2.7.1997 and the parties filing the suits for injunction against the each other from interfering in the manufacture of the drug to treat Vitiligo and other proceedings, the last being the order passed by the Division Bench of this Court in CRP No. 1867 of 2014 to refer the matter to the Arbitrator in view of Clause 6(8) of the consent award. The endorsement expressing disinclination to take up the arbitration proceedings by the named Arbitrator, and to appoint someone else, was placed before the Bench for further orders, at that stage, a submission was made on behalf of respondent that his claim as to the issues of interest and deductions is being given up. As no cause survives for adjudication, the matter was closed. 10. The claim of applicant is opposed by respondent on the ground that agreement dated 2.7.1997 is no longer in existence as it was superseded by settlement of terms by way of consent award dated 8.10.2006 and the claims now made by applicant are outside the scope of terms of the award dated 8.10.2006 and hence there is no arbitrable dispute, muchless the need for appointment of a substitute Arbitrator. That applicant filed suit CS (Comm.) No. 345 of 2016 against M/s. Alkem Laboratories including the respondent and in case the present application is allowed and the dispute adjudicated, the decision thereon will affect M/s. Alkem Laboratories Private Limited, which is not a party to the award dated 8.10.2006. The respondent, therefore seeks for dismissal of the arbitration application. 11. Sri. G.R. Sudhakar, learned Counsel for the applicant contended that Clause 6(8) of the award dated 8.10.2006 reserves right to both the parties, in case any dispute arises with reference to the implementation of any clause of the terms, and such dispute will be referred back to the named Arbitrator for resolution, who refused to conduct proceedings and now that applicant has a dispute arising under the terms of the award with respondent, for breach of the terms of the award, this application is made for appointment of substitute Arbitrator for resolution of dispute. In the award, the parties themselves agreed to take recourse to arbitration in case of any dispute with reference to the implementation of any of the terms. Clause 6(8) itself is an arbitration clause, therefore respondent cannot refuse to submit himself to the forum mentioned therein. When once applicant has a dispute with reference to the implementation of the terms of the award, he cannot be left remediless and denied a forum to redress, in the light of the earlier named Arbitrator expressing disinclination to conduct the proceedings, in all fairness, equity and good conscience, a substitute Arbitrator is to be appointed to adjudicate dispute of applicant. The decision of respondent to give up his claim against applicant, has nothing to do with the independent claim of applicant with regard to damages for breach of the terms of the award. The applicant invoked the arbitration clause stipulated in the award and issued legal notice dated 6.2.2015 and; having received notice, respondent did not give any reply notice and maintained static silence, which goes to show that he is not disputing the arbitration clause contained under Clause 6(8) of the award dated 8.10.2006. 12. Sri. Ramesh B. Vishwanathula, learned Counsel for the respondent, on the other hand, contended that present application has been filed without any basis, with mala-fide intent only to harass respondent. The Arbitrator has no jurisdiction to arbitrate as agreement dated 2.7.1997, which contains arbitration clause, is no longer in force and it has been superseded by award dated 8.10.2006. Clause 6(2) of the award, relied upon by applicant provides for exclusive' right given to applicant to manufacture and sell the product, but the said clause further state that exclusive right of applicant cannot be interfered with by respondent only till the tenure of the three Indian patents viz. IN 186437; IN 185703 and IN 185613 and the period of patents expired on 7.3.2017 and 20.5.2016 respectively, they are no more in force, there is no arbitral dispute, the arbitration application is not maintainable. Identical subject-matter is pending between the parties in Civil Suit CS (OS) No. 547 of 2015, now re-numbered as CS (Comm.) No. 345 of 2016 filed before the High Court of Delhi for permanent injunction restraining infringement of Patent Nos. IN 186437; IN 185703 and IN 185613, passing off, damages and rendition of accounts; application filed by applicant under Section 64 of the Patents Act, 1970, before the Intellectual Property Appellate Board, that IN Patent No. 239632 has been wrongfully obtained and inter-alia sought a relief to include applicant alongwith respondent as co-patentees is pending. That applicant lodged a complaint under Section 156(3) of Cr.P.C. before the designated Criminal Court at Hyderabad, under Sections 408 and 420 IPC for criminal breach of trust and cheating respectively and the same has been registered as FIR No. 538 of 2015 by the Police Jubilee Hills P.S. and charge-sheet is also filed and the same is pending. That applicant lodged a complaint under Section 156(3) of Cr.P.C. before the designated Criminal Court at Hyderabad, under Sections 408 and 420 IPC for criminal breach of trust and cheating respectively and the same has been registered as FIR No. 538 of 2015 by the Police Jubilee Hills P.S. and charge-sheet is also filed and the same is pending. Applicant cannot be permitted to bifurcate and split the cause which is subject-matter of pending suit CS (Comm.) No. 345 of 2016, the revocation of patent filed before the Intellectual Property Appellate Board and; the criminal proceedings before the Court at Hyderabad, to raise the same subject-matter for adjudication to arbitration. Since the issues raised in the arbitration application are already pending before different forums, applicant cannot be permitted to re-agitate the same issues in the present application, as the contrary would cause harassment to respondent and also lead to conflicting judgments on the same issue and it would be abuse of process of law. The basic objective of arbitration is to provide speedy remedy to the parties and the same has been devised as an alternate dispute resolution mechanism and not as an additional dispute resolution mechanism. That arbitration application filed under Section 15 of the Act is not maintainable as the earlier named Arbitrator is not appointed under Section 11 of the Act. 13. Having adverted to the pleadings and having considered the submissions made by the learned Counsel on either side, point that arises for consideration is whether there exists arbitration clause; and if so whether it is capable of referring for arbitration by appointment of a substitute Arbitrator. 14. This Court has undertaken the exercise of noting the pleadings of the parties to ascertain whether there is an arbitration clause in the award dated 8.10.2006 and whether there is an arbitrable dispute between the parties arising under the settlement of terms reduced into writing under award dated 8.10.2006 for appointment of a substitute Arbitrator. Until and unless it is concluded that there is arbitration clause and there exists a claim requiring adjudication arising from the terms of the award dated 8.10.2006, no useful purpose would be served in appointing a substitute Arbitrator. Until and unless it is concluded that there is arbitration clause and there exists a claim requiring adjudication arising from the terms of the award dated 8.10.2006, no useful purpose would be served in appointing a substitute Arbitrator. As per the dicta laid down in National Insurance Company Limited vs. Boghara Polyfab Pvt. Ltd. AIR 2009 SC 170 , the first category of issues relating to territorial jurisdiction and existence of arbitration agreement that have to be decided by the Court deciding the application under Section 11 of the Act. The second category of issues viz. whether there is a live claim and bar of limitation or estoppels, the Court deciding the application may choose to decide itself or leave them to the decision of the Arbitrator. Third category comprises of issues that should be left exclusively for determination by the Arbitrator and includes issues as to arbitrability of claims and merits of the claims. The Apex Court in the said decision at Para 17 held as follows: “...17.1 The issues (first category) which Chief Justice/his designate will have to decide are:- (a) Whether the party making the application has approached the appropriate High Court. (b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement. 17.2 The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the arbitral Tribunal) are:- (a) Whether the claim is a dead (long barred) claim or a live claim. (b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection. 17.3 The issues (third category) which the Chief Justice/his designate should leave exclusively to the arbitral Tribunal are:- (i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration......” 15. 17.3 The issues (third category) which the Chief Justice/his designate should leave exclusively to the arbitral Tribunal are:- (i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration......” 15. After Arbitration and Conciliation (Amendment) Act, 2015, a 3-Judges Bench of the Hon'ble Supreme Court in M/s. Mayavati Trading Pvt. Ltd. vs. Pradyuat Deb Barman, (2019) 8 SCC 714 , reiterated that scope of Section 11 (6-A) is to be confined to examination of existence of an arbitration clause and nothing more and nothing less, and all other preliminary issues must be left to the Arbitrator. But the instant case arose prior to 2015 Amendment Act and is governed by the parameters laid down in Boghara Polyfab Pvt. Ltd. Case (supra). 16. Section 7 of the Act provides what an arbitration agreement means, its essential conditions to be a valid agreement. It reads as follows: “7. Arbitration agreement: (1) In this Part “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in: (a) a document signed by the parties. (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement. (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.” Relevant to the case are sub-sections (3) and (4) of Section 7 of the Act. While Section 7(3) mandates that an arbitration agreement shall be in writing, Section 7(4), clauses (a), (b) and (c) prescribes how a written agreement should be. While Section 7(3) mandates that an arbitration agreement shall be in writing, Section 7(4), clauses (a), (b) and (c) prescribes how a written agreement should be. A reading of clauses (a) to (c) it is understood that a document signed by the parties, an agreement by exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement have been held to be an agreement in writing. Under sub-section (5) there is no prescription of form of agreement, but what is required is reference in a contract to a document of arbitration clause and the reference is such as to make that arbitration clause part of the contract. To constitute an arbitration agreement, at first, there should be an agreement, consensus ad idem i.e. meeting of minds. An arbitration agreement like all other contracts must satisfy all the essential requirements of Section 10 of the Indian Contract Act, 1872, i.e. the parties to the arbitration agreement must be competent to enter into a contract and the agreement should be made by free consent of the parties. 17. It is also worthwhile to refer to the settlement of terms under the award dated 8.10.2006 where under Clause 6(8) speaks of arbitration as a forum for resolution of disputes, the settlement of terms reads as under: “6. Settlement Terms: Consequently, the parties have agreed to settle the dispute in the following terms:- 1. There are two patents, US Patent No. 6143723 and Australian Patent No. 722626 granted jointly in the name of Dr. Ramaiah (respondent herein) and Issar/Ram Isanaka (Applicant Company). Similarly, an application for joint patent has been made for Europe. There are Indian Patent Nos. 185703, 185613 and 186437 in the name of Dr. Ramaiah alone. Ram Isanaka and Issar shall transfer and assign their interest in US, Australian and European patents to Dr. Ramaiah. In turn, Dr. Ramaiah shall assign 50% share in the Indian patents in favour of Ram Isanaka/Issar. Both parties will sign necessary documents to effect the transfers before 31st October, 2006. 2. Dr. Ramaiah has already granted exclusive right to manufacture and sell the product in India to Issar. Dr. Ramaiah affirms that he will not do anything to interfere with the exercise of that right by Issar during the tenure of the Indian patent. Both parties will sign necessary documents to effect the transfers before 31st October, 2006. 2. Dr. Ramaiah has already granted exclusive right to manufacture and sell the product in India to Issar. Dr. Ramaiah affirms that he will not do anything to interfere with the exercise of that right by Issar during the tenure of the Indian patent. Issar likewise affirms that in consideration for the right to manufacture and sell the product, loyalty calculated at 5% of the net sales be paid to Dr. Ramaiah or his heirs on or before 30th June of each year. Issar will permit Dr. Ramaiah to inspect the accounts to verify the correctness of the calculation of the loyalty. If any discrepancy is found Issar shall rectify the same within 30 days of Dr. Ramaiah notifying the same to Issar. If at any point of time, Issar permanently stops the manufacture of the product, Dr. Ramaiah will be at liberty to grant license to manufacture the product to anyone else. Dr. Ramaiah agrees that any assignment of the share in the Indian patent by Dr. Ramaiah will be subject to the conditions. The other conditions will continue to bind the parties inspite of any such assignment. 3. Issar agrees to return all the original patent documents, slides, photographs, reports, data collected for clinical trials standing in the name of Dr. Ramaiah to Dr. Ramaiah by keeping a copy, if Issar so desires. Issar can keep all the original documents addressed to it and give certified copies of the same to Dr. Ramaiah. This shall be done before 15th of December, 2016. 4. Issar agrees to acknowledge Dr. Ramaiah as the Inventor in the website of Issar and the product. Issar and also agrees to remove the reference to patents in other countries in the website and state that the Indian patent is jointly owned by Issar and Dr. Ramaiah and exclusive right to manufacture and sell the product in India is given by Dr. Ramaiah to Issar. Issar shall make these changes before 15.12.2006. 5. Issar agrees to give standing instructions to the bank in which a sum of Rs. 22 lakhs is deposited, to transfer the interest thereon to Dr. Ramaiah regularly, every half-year, as long as the manufacture is not permanently stopped by Issar. This shall be done before 15.12.2006 and intimated to Dr. Ramaiah. 6. 5. Issar agrees to give standing instructions to the bank in which a sum of Rs. 22 lakhs is deposited, to transfer the interest thereon to Dr. Ramaiah regularly, every half-year, as long as the manufacture is not permanently stopped by Issar. This shall be done before 15.12.2006 and intimated to Dr. Ramaiah. 6. Issar agrees that there is no objection to Dr. Ramaiah getting Peptide manufactured in India for the purpose of exploiting the patents in other countries and for research purposes. Dr. Ramaiah agrees that he will not allow, assist and/or be a parry to any scheme to import any product of the same molecule and/or formulation in any shape or form to India for the purpose of marketing and/or selling. 7. Both parties hereby agreed to withdraw all other claims against each other. 8. It is further agreed that every effort will be made by both the parties to implement the terms set out herein and if any dispute arise with reference to the implementation of any clause in these terms, such a dispute will be referred back to Justice T.N.C. Rangarajan for resolution. 9. Both parties agree that these terms supersede the agreement dated 2.7.1997, which no longer be in force.” (Emphasis supplied) 18. A perusal of the settlement of terms, particularly Clause 6(9) goes to show that with the consent of both parties, the agreement dated 2.7.1997 was superseded and it is no longer in force. However, under Clause 6(8), the parties once again chosen the forum of arbitration and reserved liberty to take recourse to arbitration proceedings, if any dispute arises with reference to the implementation of any clause in the terms and the matter be referred back to the named Arbitrator for resolution. The phraseology in Clause 6(8) of the consent award state that “if any dispute arise with reference to the implementation of any clause in these terms such a dispute will be referred back...” though the words “at any time” are not used, but the words “if any dispute arise” means that the arbitration clause will survive as long as disputes exist between them with reference to the implementation of any clause of the terms of settlement in the award irrespective of the fact that the named Arbitrator adjudicates any of such disputes or by a substitute Arbitrator in his place. Hence, there exists arbitration clause in the award dated 8.10.2006. Hence, there exists arbitration clause in the award dated 8.10.2006. The applicant has invoked the said arbitration clause by issuing legal notice dated 6.2.2015 and the respondent having received the notice, did not move in the matter. 19. The next issue that falls for consideration is whether there exists a dispute between the parties as the rights and obligations under the agreements seized with the expiry of the Indian patents in the years 2017 and 2016 respectively. 20. It is the case of respondent that under Clause 6(2) of the award, which provide the applicant with exclusive right to manufacture and sell the agreed product, but the said clause further state that exclusive right of applicant cannot be interfered with by respondent only till the tenure of the three Indian patents viz. IN 186437; IN 185703 and IN 185613 and the period of patents have been expired on 7.3.2017 and 20.5.2016 respectively, they are no more in force, there is no live dispute muchless arbitral dispute. But, the case of applicant is that on market research by it, it was noticed that respondent filed an application for patent and got registered vide Patent No. 239632 on 18.3.2010, which is existing in the name of respondent and the rights over the same have been granted to M/s. Alkem. Laboratories Private Limited, by virtue of an agreement dated 11.2.2010, which is subsequent to the assignment of the exclusive rights and 50% patent to applicant. It is his further case that respondent played fraud and obtained award by concealment, suppression and received loyalty and also committed breach of the consent award and though respondent has been continuously receiving the royalty on the sales made by applicant, in accordance with the terms of the consent award, fraudulently without having any right, title or interest over the Patent Application No. 239632 and in violation of the terms of the consent award and other agreements, assigned its rights to M/s. Samastha Laboratories Private Limited, Hyderabad, which is owned indirectly by the wife of respondent and relatives of respondent and the said Company is passing on confidential information to the competitors of applicant for valuable consideration, due to which applicant suffered huge financial loss, hardship and mental agony. That the conduct of respondent, in breach of the terms of the consent award and other agreements, helped third parties develop similar/identical product having same composition and property as that of the product of applicant-Company. The parties to whom the respondent has shared the composition, clinical trial information and other data, in violation of the terms of the award and sold the products causing loss to the applicant and such an assertion on the part of the applicant shows disputes exist. But whether the applicant is entitled for damages or not is on the merits of the claim which is to be necessarily decided by the Arbitrator. [See Boghara Polyfab Pvt. Ltd. Case (supra)]. 21. The applicant, no doubt filed CS (OS) No. 547 of 2015, re-numbered as CS (Comm.) No. 345 of 2016 before the High Court of Delhi for permanent injunction restraining infringement of Patent Nos. IN 186437; IN 185703 and IN 185613, passing off, damages and rendition of accounts and application under Section 64 of the Patents Act, 1970, before the Intellectual Property Appellate Board, that IN Patent No. 239632 and inter-alia sought a relief to include him alongwith respondent as co-patentees and the criminal proceedings for alleged fraud by respondent, the scope of these proceedings initiated by applicant are different and distinct with that of arbitration proceedings and even if those proceedings are allowed in favour of applicant, they cannot compensate applicant in terms of damages, which is the relief sought in this application and hence, the proceedings initiated by the applicant cannot be termed as parallel proceedings. The cause of action for filing the suit is on account of violation of terms agreed to by the respondent and for alleged transfer of patent rights to the competitors of the applicant. The cause of action as stated in the suit filed by the applicant is stated in Para 32 of the plaint, which is as follows: “The cause of action for institution of the present suit arose on 16th August, 2014 when the plaintiff No. 2, when the plaintiffs stumbled upon the product under the trade mark MELBILD being marketed by defendant No. 1. The said cause of action further arose on when further investigation was carried out into defendant No. 1's activities. The said cause of action further arose on when further investigation was carried out into defendant No. 1's activities. In the course of such investigation a search through the electronic records of the Indian Patent Office was carried out on to ascertain if Dr. Ramaiah herein, who is also a Co-patentee of the said Indian Patent Nos. 186437, 185703 and 185613 had illegally authorized or granted to defendant No. 1 any rights in the said patents. While, the plaintiffs could not locate any pertinent information in respect of the said, Indian Patent Nos. 186437, 185703 and 185613, they discovered to their further shock another Patent No. 239632 in the name of Dr. Aburi Ramaiah which was filed by Dr. Ramaiah contrary to the agreement dated 2.7.1997. The said cause of action further arose when the defendant No. 1's infringing product was purchased by the plaintiffs vide Bill No. SAE5247999, dated 24.2.2015 at Delhi. It is submitted that the said cause of action is continuous one and continues to subsist till the defendant Nos. 1 and 2 are injuncted from manufacturing, using, offering to sell, selling, or importing the infringing pharmaceutical products by this Hon'ble Court.” 22. In this case, applicant is seeking for damages for the loss caused to him due to the acts of the respondent committed contrary to what has been agreed to by him in the consent award dated 8.10.2006. Whether applicant is entitled for damages or not and respondent is at fault for alleged violation of the settlement of terms of the award dated 8.10.2006 or not are all on merits of the case, but from an analysis of the case, it is to be observed that there exists dispute. The civil suit filed by the applicant are for permanent injunction restraining infringement of Patent Nos. IN 186437; IN 185703 and IN 185613, passing off, damages and rendition of accounts is against the respondent and others, the defendant Nos. 1 and 2 are not parties to the consent award and the outcome of those proceedings will not compensate the independent claim of the applicant which is being based on the terms of consent award. IN 186437; IN 185703 and IN 185613, passing off, damages and rendition of accounts is against the respondent and others, the defendant Nos. 1 and 2 are not parties to the consent award and the outcome of those proceedings will not compensate the independent claim of the applicant which is being based on the terms of consent award. Likewise, the application filed by the applicant before the Intellectual Property Appellate Board in respect of Patent IN No. 239632 seeking to include it as co-patentee alongwith the respondent is also different and distinct and not concerned to the claim of the applicant in these proceedings. Criminal proceedings initiated against the respondent allegedly relates to criminal breach of trust and cheating which subject-matter of evidence and proof and to be substantiated by the parties. In view of the existence of the arbitration clause and there is an actionable claim, the respondent has to answer the same. The parties themselves have taken the things like a silver folio beaten to its maximum thinness. 23. In Swiss Timing Ltd. vs. Commonwealth Games 2010 Organising Committee, (2014) 6 SCC 677 , the Supreme Court held that it is mandatory for the Courts to refer disputes to arbitration if the agreement between the parties provides for reference to arbitration and registration of criminal case in relation to violation of the contract is not an absolute bar to refer the disputes to arbitration. At Paras 27 and 28 it was held thus: “27. However, it would not be possible to shut out arbitration even in cases where the defence taken is that the contract is voidable. These would be cases which are covered under the circumstances narrated in Section 12 unsoundness of mind; Section 14 absence of free consent i.e. where the consent is said to be vitiated as it was obtained by coercion (Section 15), undue influence (Section 16), fraud (Section 17) or misrepresentation (Section 18). Such a contract will only become void when the party claiming lack of free consent is able to prove the same and thus rendering the contract void. This indeed is the provision contained in Section 2(j) of the Contract Act. Such a contract will only become void when the party claiming lack of free consent is able to prove the same and thus rendering the contract void. This indeed is the provision contained in Section 2(j) of the Contract Act. In exercising powers under Section 11(6) of the Arbitration Act, the Court has to keep in view the provisions contained in Section 8 of the Arbitration Act, which provides that a reference to arbitration shall be made if a party applies not later than when submitting his first statement on the substance of the dispute. In contrast, Section 45 of the aforesaid Act permits the Court to decline reference to arbitration in case the Court finds that the agreement is null and void, inoperative or incapable of being performed. 28. To shut out arbitration at the initial stage would destroy the very purpose for which the parties had entered into arbitration. Furthermore, there is no inherent risk of prejudice to any of the parties in permitting arbitration to proceed simultaneously to the criminal proceedings. In an eventuality where ultimately an award is rendered by the arbitral Tribunal, and the criminal proceedings result in conviction rendering the underlying contract void, necessary plea can be taken on the basis of the conviction to resist the execution/enforcement of the award. Conversely, if the matter is not referred to arbitration and the criminal proceedings result in an acquittal and thus leaving little or no ground for claiming that the underlying contract is void or voidable, it would have the wholly undesirable result of delaying the arbitration. Therefore, I am of the opinion that the Court ought to act with caution and circumspection whilst examining the plea that the main contract is void or voidable. The Court ought to decline reference to arbitration only where the Court can reach the conclusion that the contract is void on a meaningful reading of the contract document itself without the requirement of any further proof.” 24. The Court ought to decline reference to arbitration only where the Court can reach the conclusion that the contract is void on a meaningful reading of the contract document itself without the requirement of any further proof.” 24. So far as the issue pertaining to appointment of substitute Arbitrator, in place of the named Arbitrator, who refused to take up the adjudication, the Supreme Court in Shailesh Dhairyawan vs. Mohan Balkrishna Lulla, 2016 (2) ALD 1 (SC) : (2016) 3 SCC 619 , with reference, to Section 15(2) of the Act held that the procedure agreed upon by the parties for the appointment of the original Arbitrator is equally applicable to the appointment of a substitute Arbitrator, and even if the agreement does not specifically say so, it is the mandate of Section 15(2) of the Act. That agreement between parties shall be treated as “the rules” that govern the field and appointing authority shall appoint substitute Arbitrator according to terms of arbitration agreement. Thus, when mandate of Arbitrator terminates, appointment of substitute Arbitrator shall be made in accordance with arbitration agreement unless agreement either expressly or by necessary implication excludes substitution of an Arbitrator, whether named or otherwise. In the instant case, the earlier named Arbitrator was appointed by consent of the parties and the said consent is treated as “the rules” for appointment of Arbitrator it does not exclude substitution of Arbitrator, when the named Arbitrator is expressing unwillingness to conduct arbitration proceedings. The applicant issued notice dated 6.2.2015 invoking arbitration clause in the award dated 8.10.2006, as was the procedure followed earlier for appointment of named Arbitrator, but as there was no response from respondent, he availed statutory remedy which is provided under Section 15 of the Act. Section 15 of the Act reads as under: “15. Termination of mandate and substitution of Arbitrator: (1) In addition, to the circumstances referred to in Section 13 or Section 14, the mandate of an Arbitrator shall terminate: (a) where he withdraws from office for any reason. (b) by or pursuant to agreement of the parties. (2) Where the mandate of an Arbitrator terminates, a substitute Arbitrator shall be appointed according to the rules that were applicable to the appointment of the Arbitrator being replaced. (b) by or pursuant to agreement of the parties. (2) Where the mandate of an Arbitrator terminates, a substitute Arbitrator shall be appointed according to the rules that were applicable to the appointment of the Arbitrator being replaced. (3) Unless otherwise agreed by the parties, where an Arbitrator is replaced under sub-section (2), any hearings previously held may be repeated at the discretion of the arbitral Tribunal. (4) Unless otherwise agreed by the parties, an order or ruling of the arbitral Tribunal made prior to the replacement of an Arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral Tribunal.” 25. It is understood from a reading of sub-sections (1) and (2) of Section 15 of the Act, that where the mandate of an Arbitrator terminates, a substitute Arbitrator has to be appointed according to the rules that were applicable to the appointment of the Arbitrator being replaced. There is no distinction made under this sub-section where the mandate of an Arbitrator terminates, whether he is an Arbitrator appointed under Section 11 of the Act or the named Arbitrator with the consent of the parties for application of Section 15(2). The only requirement discernable is substitute Arbitrator has to be appointed according to the rules that were applicable to the appointment of the Arbitrator or named Arbitrator being replaced. In this case named Arbitrator withdrawn on his own accord and the applicant adopting the procedure as was applicable to the appointment of the earlier Arbitrator issued legal notice invoking the arbitration clause, but the same was not acted upon by respondent. 26. From the above analysis, it is deduced that there exists arbitration clause in the award dated 8.10.2006 which is validly invoked by applicant by issuance of notice dated 6.2.2015 to respondent. The other contentious issues raised by the learned Counsel for respondent have a bearing on the merits of the matters, which requires leading of evidence and counter evidence by the parties and is left to be decided by the learned Arbitrator. 27. In the circumstances arbitration application is allowed. Sri. Justice V. Bhaskara Rao, former High Court Judge is nominated as substitute Arbitrator in place of the named Arbitrator to resolve the claim of the applicant. Miscellaneous petitions, if any, pending shall stand closed. There shall be no order as to costs.