While disposing of the petition filed by UDPL, Justice Mukul Mudgal observed: ...taking into account the overall circumstances of the case and the commercial nature of the agreement, I am of the view that an interim direction in respect of securing of 10% of the commission on the sales of the products covered by the agreement should be passed.
The court has also directed the defendants to file quarterly accounts of all sales of the products covered by the the agreement dated May 9, 1987 from the date of institution of the suit.
UDPL had moved the court against Draegerwerk Aktiengesellschaft (DA) for grant of permanent injunction against selling in India, rendition of the German companys accounts of all the sales and payment of 20% commission on all such sales along with 13% interest per annum.
UDPL, a 50:50 joint venture between Usha Services & Consultants Ltd and RKKR Infotech (P) Ltd and Draegerwerk Aktiengesellschaft, on May 9, 1997 had entered into an agreement for development, manufacture and sale of medical products of the Draeger group. In February 1999, a distribution agreement was signed between Usha Drager and Draegerwerks AG, a group company for exclusive sale of products of Drager Medical AG.
According to clause 6 of the agreement, the shareholders and the directors of the JV were not allowed to compete directly or indirectly with the activities of the JV or of the Draeger group.
Due to certain dispute between Usha and Draeger groups, the agreement was terminated and Draegerwerks AG set up another company Draeger Medical India Pvt Ltd. The company started selling its medical appliances/equipment/apparatus in India, thus competing with the customers of the petitioner.
Draeger had contended that neither did any contract exist between the JV and Draeger nor did Usha Services held any shares in UDPL.
The petitioner through its counsel AM Singhvi contended, It is the defendant who is blackmailing as is evident from the email of the defendant wherein it was stated that unless UDPL is converted into a subsidiary of the Draeger group with 51% of its shares to be with Draegerwerks AG, no business plans would be presented or considered by it.
While impleading the companies, the court held that Draeger Medical AG and Draeger Medical (I) Pvt Ltd were the group companies and were integral and fundamental part of the Draeger group. There is a privity of contract between the constituents Draeger group and Usha group. If clause 6 is construed in the manner pleaded by the defendants, then it would be meaningless and all that a defaulting party has to do to get over a negative covenant such as clause 6 is to plead that the entity said to be violating the covenant, though a group company is not a signatory to the agreement and not bound by such a covenant. Such a construction would render the negative covenant totally nugatory and cannot be countenanced, Justice Mudgal said.