The case of Apotex vs Cadila

court-case

In a case of Apotex vs Cadila, the former shares details of how the court refused to grant anti-suit injunction to Cadila and present their side of the story

The Ahmedabad District Court (Rural) recently refused to grant anti-suit injunction in favour of Cadila Pharmaceuticals Limited (Cadila) to prohibit legal proceedings against it in Canada. Singh & Associates, Advocates & Solicitors acted for the Apotex Inc. (Apotex) in successfully defending the application for the injunction against Apotex.

Background

Anti-Suit injunction is a remedy available to restrain a party from instituting or continuing with proceedings in a foreign court. The remedy is discretionary and court exercises the discretion in exceptional cases when the ends of justice requires the Court to do so. The anti-suit injunction is directed against the Defendant in personam. However, it is regarded as an indirect interference with the process of a foreign court. It is, therefore, an accepted principle that the power to grant anti-suit injunction should be exercised with caution and in exceptional cases.

Principles governing anti-suit injunction

Anti-suit injunction to restrain proceedings outside India are generally governed by the principles enunciated by the Courts in India over a period. The Supreme Court of India, in case titled 党Modi Entertainment Networks Ltd. vs. WSG Cricket Pte Ltd.・ has formulated certain aspects for the courts exercising discretion to grant Anti-suit injunction: the Defendant, against whom injunction is sought, is amenable to personal jurisdiction of the court;
if the injunction is declined, the ends of justice will be defeated and injustice will be perpetuated; principle of comity i.e. respect for the court in which the commencement or continuance of action/proceedings is sought to be restrained; in case where more forums than one are available, the court in exercise of its discretion to grant anti-suit injunction, will examine as to which is the appropriate forum (forum convenience); where the jurisdiction of a court is invoked based on jurisdiction clause of an agreement, in regard to exclusive or non-exclusive jurisdiction of the court of choice of parties, are not determinative factor but a relevant factor. Court of natural jurisdiction will not normally grant anti-suit injunction.

The burden of establishing that the forum of choice is a forum non-convenience or the proceedings therein are oppressive or vexatious would be on the party so contending to aver and prove the same.

Brief facts

Cadila entered into Quality Assurance Agreement (QAA) with Apotex with regard to supply of drug product, namely Fluoxetine Hydrochloride which is an Active Pharmaceutical Ingredient (API). Cadila had an obligation to ensure that its manufacturing process conform to the current good manufacturing practices. It was the obligation of Cadila to test drug products prior to shipment to ensure that they are fit for the purpose for which they were intended. In terms of the Quality Assurance Agreement, it was the obligation of Cadila to maintain the agreed quality standards for the drug products. However, drug products were supplied to Apotex not directly, but through a different entity.

The Quality Assurance Agreement (QAA) contains a clause that the QAA would be governed by the laws of Ontario. However, there was no exclusive or non-exclusive clause governing the jurisdiction of a particular court in the QAA.

When drug products were supplied, it was noticed that some of the drug products do not conform to the agreed quality standards. The drug products contained impurities, i.e. an organic volatile compound known as isobutyl vinyl ketone (IBVK) which is genotoxic and potentially carcinogenic and is unfit for human consumption. Cadila did not inform the presence of IBVK to Apotex for longer period about existence of impurity. Apotex had to recall the drugs from the market which caused loss to Apotex.

Thereafter, Apotex initiated legal proceedings before the Ontario Superior Court of Justice. After the receipt of the summons from the Ontario Superior Court of Justice, Cadila filed Anti-suit injunction in Ahmedabad Court seeking an injunction prohibiting Apotex from continuing the legal proceedings in Ontario.

Court’s Decision

Cadila argued that the QAA did not contain an exclusive or non-exclusive jurisdiction clause in favour of the Canadian courts over the disputes relating to the QAA, therefore, the courts at Canada has no jurisdiction and Apotex should have brought the proceedings in India where the cause of action has arisen. There was no privity of contract with Apotex. The QAA was concluded at Ahmedabad. It was argued that the drug products were supplied from Ahmedabad; the witnesses were available in Ahmedabad, the legal proceedings in Canada would cost much more than the cost incurred in India, therefore, Canadian proceedings are forum non-convenience and oppressive.

The Ahmedabad Court held that, on the facts, where Apotex received the drug products in Canada and therefore, the Ontario proceedings are maintainable as part of cause of action has arisen within the jurisdiction of Ontario court. The Court took note of the choice of law clause in the QAA and refused to grant injunction prohibiting Apotex from continuing to pursue the Ontario proceedings. The court noted that the Canadian proceedings are not vexatious. The Court accepted Apotex’s submissions that proceedings in Ontario is not forum non-convenience or oppressive or vexatious. The Court prima facie agreed and accepted Apotex submission that the suit is not maintainable.

The decision is a clear indication from the Ahmedabad courts that while the Indian Courts have discretion to grant anti-suit injunction restraining proceedings instituted outside India, it will only do so where there are obvious reasons to do so in conformity with the judicial pronouncement by the Supreme Court in several judgments including the judgment passed in the Modi Entertainment case.

Apotex successfully established that Ontario proceedings are not oppressive, vexatious or forum non-convenience. Cadila and Apotex have not agreed to the jurisdiction of a Court in the QAA, however, Apotex persuaded the Court to accept the plea that Ontario is forum convenience.

Cadila’s Appeal

Cadila filed an appeal before the High Court against the refusal of the court to grant anti-suit injunction. However, the High Court refused to stay the order passed by the Trial Court. Subsequently, parties amicably resolved their disputes.

Please Note:  Both parties amicably resolved the dispute later