ISSAR PHARMACEUTICALS PVT. LTD Vs. A. RAMAIAH

JUDGEMENT

(1.) This Arbitration Application is filed under Sec. 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 dtd. 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 02 -07 -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 "MELGIN" and acquired 50% of the rights in the patent along with 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 - 05- 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 02 -07 -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. Both the suits were dismissed by the trial Court by a common order dtd. 9/11/2004. Assailing the common order, respondent filed appeal being CMA No.115 of 2005. This Court passed interim order dtd. 28/4/2005 wherein applicant herein was directed to deposit an amount of Rs.25.00 Lacs. 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 dtd. 19/9/2005, with liberty to respondent to withdraw the amount of Rs.25.00 Lacs, 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 08 -10 -2006, incorporating the agreed terms of settlement by the parties, was passed by the Arbitrator.