Nuziveedu Seeds Moves Bombay High Court Challenging Rs 138-Crore Arbitral Award To Mahyco Monsanto

Nuziveedu Seeds Ltd. moved the Bombay High Court against Mahyco Monsanto Biotech India Pvt. Ltd., challenging an arbitral award that had directed the Indian company to pay Rs 138 crore to Mahyco.

Nuziveedu Seeds owed this amount to Mahyco, a sister concern of Monsanto India Ltd., towards “trait value”, or technology fee, on revenue generated from sale of seeds and other products under a “sub-licence agreement” between April to November 2015.

Mahyco, in January, sought interim orders from the court for expeditious enforcement of the arbitral award. The high court upheld the award and directed Nuziveedu Seeds to deposit the amount. It also prevented the company from claiming any third-party rights over its unencumbered assets.

Nuziveedu Seeds today challenged the validity and propriety of the award on various grounds, including the fact that the award violated India law and was against public policy.

Here are its key arguments.

Darius Khambata, counsel for Nuziveedu Seeds, challenged the arbitral award on the following grounds:

Jurisdiction Of The Arbitration Tribunal

The dispute between Nuziveedu Seeds and Mahyco was of a technical nature. The law requires an arbitral tribunal to examine if it has jurisdiction before passing an award or direction. The law states disputes relating to patents cannot be referred to arbitration, which was upheld by the Supreme Court in a patent case involving Ericsson AB.

The tribunal ignored bona-fide objections made by Nuziveedu Seeds, and passed the award only over the penalty clauses in the agreement. The counsel said an arbitration cannot be enforced in a bifurcated manner. That meant it lacked validity and must be set aside.

Void Contract Cannot Be Enforced

Earlier this year, certain seed companies, including Nuziveedu Seeds and farmer associations had moved the Competition Commission of India against Mahyco, alleging it abused its dominant position by overcharging farmers for BT cotton seeds.

CCI, in June, launched a probe against Mahyco and conducted a detailed investigation. Despite the ongoing case at the CCI, the tribunal passed an award in Mahyco’s favor.

To be sure, any agreement that adversely affects competition in India is not legally valid or enforceable, according to the Competition Act, 2002. A contract is rendered completely void if it goes against the Competition Law of India.

Award Went Against Public Policy

A contract is void under the Indian Contract Act, 1872, if it’s made for any unlawful purpose or goes against the country’s public policy.

Seeds, which are central to the dispute between Mahyco and NSL, are covered under the Plant Varieties Act, 2001, which doesn’t confer monopoly status to any party. The Act also prevents a person from waiving his/her statutory legal rights in favour of a party.

This was affirmed in case of other laws in previous orders of the Supreme Court. However, the tribunal accepted Mahyco’s arguments that a party can waive its legal rights under the act.

The court will hear Mahyco’s arguments in December.