Case: M/s. Gujarat Bottling Company Limited &amp; Others Vs. Coca Cola Company &amp; Others

so far as loss that may be caused to GBC as a result of grant of interim injunction, we are of the view that the loss that may be sustained by GBC can be assessed and GBC can be compensated by award of damages which can be recovered from Coca Cola in view of the undertaking that Coca Cola is required to give under rule 148 of the Bombay High Court (Original Side) Rules, 1980. It has not been suggested that Coca Cola does not have the financial capacity to pay the amount that is found payable. 49. The interim injunction granted by the High Court has been assailed by the appellants on the ground that as a result of refusal by Coca Cola to continue with the supply of essence/syrup and/or materials the bottling plants of GBC at Ahmedabad and Rajkot would remain idle and a large number of workmen who were employed in the said plants would be rendered unemployed. We cannot lose sight of the fact that this complaint is being made by Pepsi through the mouth of the appellants. It is difficult to appreciate how Pepsi can ask Coca Cola to part with its trade secrets to its business rival by supplying the essence/syrup, etc., for which Coca Cola holds the trade marks to GBC which is under the effective control of Pepsi. Pepsi took a deliberate decision to take over GBC with the full knowledge of the terms of the 1993 agreement. It did so with a view to paralyse the operations of Coca Cola in that region and promote its products. In view of the negative stipulation contained in paragraph 14 of the 1993 agreement hich has been enforced by the High Court, Pepsi has not succeeded in this effort. It must suffer the consequences of the failure of the effort and it cannot assail the interim injunction granted by the High Court by invoking the plight of the workmen who are employed in the bottling plants of GBC. 50. In this context, it would be relevant to mention that in the instant case GBC had approached the High Court for the injunction order, granted earlier, to be vacated. Under Order 39 of the Code of Civil Procedure, the jurisdiction of the court to interfere with an order of interlocutory or temporary injunction is purely equitable and, therefore, the court, on being approached, will, apart from other considerations, also look to the conduct of the party invoking the jurisdiction of the court, and may refuse to interfere unless his conduct was free from blame. Since the relief is wholly equitable in nature, the party invoking the jurisdiction of the court has to show that he himself was not at fault and that he himself was not responsible for bringing about the state of things complained of and that he was not unfair or inequitable in his dealings with the party against whom he was seeking relief. His conduct should be fair and honest. These considerations will arise not only in respect of the person who seeks n order of injunction under Order 39, rule 1 or rule 2 of the Code of Civil Procedure, but also in respect of the party approaching the court for vacating the ad interim or temporary injunction order already granted in the pending suit or proceedings. 51. Analysing the conduct of GBC in the light of the above principles, it will be seen that GBC, who was a party to the 1993 agreement, has not acted in conformity with the terms set out in the said agreement. It was itself, prima facie, responsible for the breach of the agreement, as would be evident from the facts set out earlier. Neither was the consent of Coca Cola obtained for transfer of shares of GBC nor was Coca Cola informed of the names of persons to whom the shares were proposed to be transferred. Coca Cola, therefore, had the right to terminate the agreement but it did not do so. On the contrary, GBC itself issued the notice for terminating the agreements by giving three months notice. 52.It is contended by Shri Nariman and, in our opinion, rightly, that GBC, having itself acted in violation of the terms of agreement and having breached the contract, cannot legally claim that the order of injunction be vacated, particularly as GBC itself is primarily responsible for having brought about the state of things complained of by it. Since GBC has acted in an unfair and inequitable manner in its dealings with Coca Cola, there was hardly any occasion to vacate the injunction order and the order passed by the Bombay High Court cannot be interfered with not even on the ground of closure of factory, as the party responsible, prima facie, for breach of contract cannot be permitted to raise this grievance. 53. Shri Shanti Bhushan has lastly urged that the interim injunction granted by the High Court is in very wide terms because not only GBC but also those to whom the shares have been sold and also subsequent transferees, their servants, agents, nominees, employees, subsidiary companies, controlled companies, affiliates or associate companies or any person acting for and on their behalf are restrained by the interim injunction from using the plants of GBC. It is no doubt true that the interim injunction is widely worded to cover the persons aforementioned but in its operation the order only restrains them from using the plants of GBC at Ahmedabad and Rajkot for manufacturing, bottling or selling or dealing with or being concerned in any manner whatsoever with the beverages of any person till January 25, 1996, the expiry of the period of one year from the date of notice dated January 25, 1995. The interim injunction is thus confined to the use of the plants at Ahmedabad and Rajkot by any of these persons and it is in consonance with the negative stipulation contained in paragraph 14 of the agreement dated September 20, 1993.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]17. A perusal of the provisions contained in the 1994 Agreement, more particularly paragraphs 2 and 8, indicates that the said agreement has been executed with a view to comply with the requirements of the Act and the Rules for registration of GBC as the registered user of the trade marks specified in the schedule to the agreement which had been acquired by Coca Cola. This agreement has been executed as per the requirements of Rule 83 of the Rules read withs (a) to (d) of clause (ii) ofn (1) of Section 49. This is evident from paragraphs 1, 3, 4, 5 and 6 which contain particulars referable tos (a), (b) and (c) and paragraph 7 which contains particulars referable toe (d) of clause (ii) ofn (1) of Section 49. The 1994 Agreement must, therefore, be treated as an agreement for registration of GBC as a registered user as contemplated by Section 49 of the Act. In other words, 1994 Agreement is a statutory agreement which is required to be executed under Section 49 of the Act read with Rule 83 of the Rules for registration of GBC as a registered user of the trade marks held by Coca Cola. It is true that provisions similar to these contained in 1994 Agreement are also contained in the 1993 Agreement. But that is so because a licence to use a trade mark in common law can only be granted subject to certain limitations which are akin to the requirements for an agreement for registered user under the Act. But, at the same time, the 1993 Agreement is much wider in its amplitude than the 1994 Agreement in the sense that the 1993 Agreement includes various terms regulating the exercise of the right of franchise that has been granted by Coca Cola to GBC in the matter of manufacturing, bottling and selling of the beverages which provisions are not found in the 1994 Agreement. The 1994 Agreement cannot be construed as wiping out the said terms and conditions regarding exercise of franchise granted by Coca Cola to GBC as contained in the 1993 Agreement. In this context, reference may also be made to paragraph 25 of the 1993 Agreement which contains an express provision for superseding all prior contracts/agreements or commitments either written or oral. No similar provision regarding the supersession of the 1993 Agreement is contained in the 1994 Agreement. We are, therefore, of the opinion that the 1994 Agreement cannot be construed as superseding the 1993 Agreement and the learned Single Judge and the Division Bench of the High Court have rightly rejected the contention urged on behalf of GBC that 1993 Agreement was superseded by the 1994 AgreementSince we are of the view that the nature and scope of the two agreements, i.e., 1993 Agreement and 1994 Agreement, are not the same and that while the 1993 Agreement is an agreement for grant of licence in common law and the 1994 Agreement is executed as per the requirements of the Act and the Rules for the purpose of registration of user, GBC as registered user of the trade marks under the Act, clause 7 of the 1994 Agreement has to be confined in its application to that agreement only and it cannot be construed as having modified the termination period contained in paragraph 21 of the 1993 Agreement. Moreover, paragraph 2l of the 1993 Agreement requires that reduction of the termination period has to be by mutual consent of both the parties, viz., Coca Cola and GBC. Mutual consent postulates consensus ad idem between the parties. There is no material on record to show that there was such a consensus ad idem between Coca Cola and GBC regarding reducing the termination period for the notice under paragraph 21 of the 1993 Agreement. The notice dated5 that was given by GBC to Coca Cola does not lend support to the case of the appellants.19. In the said notice, it is not stated that the parties had mutually agreed to reduce the termination period from one year to 90 days by the 1994 Agreement. What is stated in the notice is the contention of GBC that the 1993 Agreement is replaced by the 1994 Agreement and that in any event the limitation period had been reduced to 90 days. If it was mutually agreed by Coca Cola and GBC that the termination period for notice under paragraph 21 of the 1993 Agreement is being reduced from one year to 90 days by the 1994 Agreement, there was no reason why GBC would not have mentioned about the said mutual understanding in the notice dated. The fact that there is no mention about such mutual understanding in the notice dated5 and what is stated in the said notice about reduction of the termination period of the notice is by way of contention of GBC negatives the case put forward by the appellants that the termination period for the notice under paragraph 21 of the 1993 Agreement had been reduced from one year to 90 days. It must, therefore, be held that the 1993 Agreement can be terminated only by giving a notice of one year as required by paragraph 21 of the said agreement. The question whether the notice dated20. We may now examine the submission of Shri Shanti Bhushan that the negative stipulation contained in paragraph 14 of the 1993 Agreement, being in restraint of trade, is void in view of the provisions of Section 27 of the Indian Contract Act, 1872. For that purpose, it is necessary to consider whether and, if so, to what extent the law in India differs from the common law in England36. Shri Shanti Bhushan has submitted that these observations must be confined only to contracts of employment and that this principle does not apply to othercontracts.We are unable to agree. We find no rational basis for confining this principle to a contract for employment and excluding its application to othercontracts.The underlying principle governing contracts in restraint of trade is the same and as a matter of fact the courts take a more restricted and less favourable view in respect of a covenant entered into between an employer and an employee as compared to a covenant between a vendor and a purchaser or partnership agreementsWe are in agreement with the said submission of Shri Andhyarujina. In our opinion, the negative stipulation contained at the end of paragraph 14 must be read as applicable to all thes of paragraph 14 preceding the said stipulation and, if it is thus read, it is apparent that the purpose of the negative stipulation in paragraph 14 is that GBC will work vigorously and diligently to promote and solicit the sale of the products/beverages produced under the trade marks ofCoca Cola as mentioned in the firsth of paragraph 14. This would not be possible if GBC were to manufacture, bottle, sell, deal or otherwise be concerned with the products, beverages or any other brands or trade marks/trade names41. We are, therefore, unable to agree with Shri Shanti Bhushan that the negative stipulation contained in paragraph 14 of the 1993 agreement must be confined in its application to the immediately precedingh of paragraph 14 of the 1993 agreement45. In the matter of grant of injunction, the practice in England is that where a contract is negative in nature, or contains an express negative stipulation, breach of it may be restrained by injunction and injunction is normally granted as a matter of course, even though the remedy is equitable and thus in principle a discretionary one and a defendant cannot resist an injunction simply on the ground that observance of the contract is burdensome to him and its breach would cause little or no prejudice to the plaintiff and that breach of an express negative stipulation can be restrained even though the plaintiff cannot show that the breach will cause him any loss. (see Chitty on Contracts,h edition, volume 1, General Principles, para0 at page 1310 ; Halsburys Laws of England, fourth edition, volume 24, para 992). In India section 42 of the Specific Relief Act, 1963, prescribes that notwithstanding anything contained in clause (e) of section 41, where a contract comprises an affirmative agreemnt to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the circumstance that the court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement. This is subject to the proviso that the plaintiff has not failed to perform the contract so far as it is binding on him. The court is, however, not bound to grant an injunction in every case and an injunction to enforce a negative covenant would be refused if it would indirectly compel the employee either to idleness or to serve the employer. (see Ehrman v. Bartholomew 1898 (1) Ch 671, Niranjan Shankar Goliharis case 1967 (2) SCR 378 , 389)46. The grant of an interlocutory injunction during the pendency of legal proceedings is a matter requiring the exercise of discretion of the court. While exercising the discretion the court applies the following tests (i) whether the plaintiff has a prima facie case ; (ii) whether the balance of convenience is in favour of the plaintiff ; and (iii) whether the plaintiff would suffer an irreparable injury if his prayer for interlocutory injunction is disallowed. The decision whether or not to grant an interlocutory injunction has to be taken at a time when the existence of the legal right assailed by the plaintiff and its alleged violation are both contested and uncertain and remain uncertain till they are established at the trial on evidence. Relief by way of interlocutory injunction is granted to mitigate the risk of injustice to the plaintiff during the period before that uncertainty could be resolved. The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his riht for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial. The need for such protection has, however, to be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated. The court must weigh one need against another and determine where the " balance of convenience " lies. (see Wander Ltd. v. Antox India P. Ltd. 1990 Supp(SCC) 727 at pages. In order to protect the defendant while granting an interlocutory injunction in his favour the court can require the plaintiff to furnish an undertaking so that the defendant can be adequately compensated if the uncertainty were resolved in his favour at the trial48. We are inclined to agree with the submission of Shri Nariman and Shri Andhyarujina. Having regard to the negative covenant contained in paragraph 14 of the 1993 agreement which is subsisting, Coca Cola has made out a prima facie case for grant of an injunction. As regards the other two requirements for grant of interlocutory injunction, viz., balance of convenience and irreparable injury, we find that as a result of the transfer of shares of GBC and respondent No. 7 in favour of appellants Nos. 2 to 5, the plants of GBC at Ahmedabad and Rajkot are now under the control of Pepsi. The 1993 agreements were entered into by Coca Cola to ensure that the plants of GBC at Ahmedabad and Rajkot are available for manufacture of the beverages bearing the trade marks that were acquired by Coca Cola. The negative stipulation in paragraph 14 was inserted in order to preclude the said plants being used for the manufacture of products of other manufacturers during the period the 1993 agreements were subsisting. Pepsi by takig control over GBC sought to achieve a dual purpose, viz., reduce the production capacity of beverages bearing the trade marks held by Coca Cola by denying use of the plants of GBC at Ahmedabad and Rajkot for manufacture of those products and to increase the production capacity of Pepsi products by making available these plants for manufacture of Pepsi products. As a result of the interim injunction granted by the High Court, the two plants of GBC cannot be used for manufacture of Pepsi products till January 25, 1996, and the effort of Pepsi to gain an advantage over Coca Cola by reducing the availability of products of Coca Cola and increasing the availability of Pepsi products in the areas covered by the 1993 agreements has been frustrated to a certain extent inasmuch as the increase in the availability of Pepsi products has been prevented. In the absence of such an order Pepsi would have been free to use the plants of GBC at Ahmedabad and Rajkot for the manufacture of their products. This could have resultd in reduction of the share of Coca Cola in the beverages market and the resultant loss in goodwill and profits could not be adequately compensated by damages. In so far as loss that may be caused to GBC as a result of grant of interim injunction, we are of the view that the loss that may be sustained by GBC can be assessed and GBC can be compensated by award of damages which can be recovered from Coca Cola in view of the undertaking that Coca Cola is required to give under rule 148 of the Bombay High Court (Original Side) Rules, 1980. It has not been suggested that Coca Cola does not have the financial capacity to pay the amount that is found payable49. The interim injunction granted by the High Court has been assailed by the appellants on the ground that as a result of refusal by Coca Cola to continue with the supply of essence/syrup and/or materials the bottling plants of GBC at Ahmedabad and Rajkot would remain idle and a large number of workmen who were employed in the said plants would be rendered unemployed. We cannot lose sight of the fact that this complaint is being made by Pepsi through the mouth of the appellants. It is difficult to appreciate how Pepsi can ask Coca Cola to part with its trade secrets to its business rival by supplying the essence/syrup, etc., for which Coca Cola holds the trade marks to GBC which is under the effective control of Pepsi. Pepsi took a deliberate decision to take over GBC with the full knowledge of the terms of the 1993 agreement. It did so with a view to paralyse the operations of Coca Cola in that region and promote its products. In view of the negative stipulation contained in paragraph 14 of the 1993 agreement hich has been enforced by the High Court, Pepsi has not succeeded in this effort. It must suffer the consequences of the failure of the effort and it cannot assail the interim injunction granted by the High Court by invoking the plight of the workmen who are employed in the bottling plants of GBC50. In this context, it would be relevant to mention that in the instant case GBC had approached the High Court for the injunction order, granted earlier, to be vacated. Under Order 39 of the Code of Civil Procedure, the jurisdiction of the court to interfere with an order of interlocutory or temporary injunction is purely equitable and, therefore, the court, on being approached, will, apart from other considerations, also look to the conduct of the party invoking the jurisdiction of the court, and may refuse to interfere unless his conduct was free from blame. Since the relief is wholly equitable in nature, the party invoking the jurisdiction of the court has to show that he himself was not at fault and that he himself was not responsible for bringing about the state of things complained of and that he was not unfair or inequitable in his dealings with the party against whom he was seeking relief. His conduct should be fair and honest. These considerations will arise not only in respect of the person who seeks n order of injunction under Order 39, rule 1 or rule 2 of the Code of Civil Procedure, but also in respect of the party approaching the court for vacating the ad interim or temporary injunction order already granted in the pending suit or proceedings51. Analysing the conduct of GBC in the light of the above principles, it will be seen that GBC, who was a party to the 1993 agreement, has not acted in conformity with the terms set out in the said agreement. It was itself, prima facie, responsible for the breach of the agreement, as would be evident from the facts set out earlier. Neither was the consent of Coca Cola obtained for transfer of shares of GBC nor was Coca Cola informed of the names of persons to whom the shares were proposed to be transferred. Coca Cola, therefore, had the right to terminate the agreement but it did not do so. On the contrary, GBC itself issued the notice for terminating the agreements by giving three months notice52.It is contended by Shri Nariman and, in our opinion, rightly, that GBC, having itself acted in violation of the terms of agreement and having breached the contract, cannot legally claim that the order of injunction be vacated, particularly as GBC itself is primarily responsible for having brought about the state of things complained of by it. Since GBC has acted in an unfair and inequitable manner in its dealings with Coca Cola, there was hardly any occasion to vacate the injunction order and the order passed by the Bombay High Court cannot be interfered with not even on the ground of closure of factory, as the party responsible, prima facie, for breach of contract cannot be permitted to raise this grievance53. Shri Shanti Bhushan has lastly urged that the interim injunction granted by the High Court is in very wide terms because not only GBC but also those to whom the shares have been sold and also subsequent transferees, their servants, agents, nominees, employees, subsidiary companies, controlled companies, affiliates or associate companies or any person acting for and on their behalf are restrained by the interim injunction from using the plants of GBC. It is no doubt true that the interim injunction is widely worded to cover the persons aforementioned but in its operation the order only restrains them from using the plants of GBC at Ahmedabad and Rajkot for manufacturing, bottling or selling or dealing with or being concerned in any manner whatsoever with the beverages of any person till January 25, 1996, the expiry of the period of one year from the date of notice dated January 25, 1995. The interim injunction is thus confined to the use of the plants at Ahmedabad and Rajkot by any of these persons and it isn consonance with the negative stipulation contained in paragraph 14 of the agreement dated September 20, 1993.