Case: Suresh Dhanuka Vs. Sunita Mohapatra

the negative covenant contained in the Deed of Assignment, was contrary to the provisions of Section 27 of the Indian Contract Act, 1872, or not, we are inclined to accept Mr. Ghoshs submissions that the injunction sought for by the Appellant was not to restrain the Respondent from carrying on trade or business, but from using the Trade Mark which was the subject matter of dispute. Accordingly, the provisions of Section 27 of the Indian Contract Act, 1872, would not be attracted to the facts in this case. For the sake of reference, Section 27 of the above Act is reproduced hereinbelow :- 27. Agreement in restraint of trade, void.- Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. Exception 1.- Saving of agreement not to carry on business of which goodwill is sold.- One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business. It is obvious that what is declared to be void by virtue of Section 27 is any Agreement to restrain any person from exercising his right to carry on a profession or trade or business and any restraint thereupon by an Agreement would be void. 34. As will be seen from the materials on record, the Appellant did not ask for any injunction against the Respondent from carrying on any trade or business, but he objected to the use by the Respondent of the Trade Mark, in which he had acquired a 50% interest, while selling her products. 35. The conditions in the Deed of Assignment clearly stipulate that all the goods manufactured by the Respondent under the Trade Mark Naturoma would be marketed solely by the Appellant. It was also submitted that the said Trade Mark would be used only in relation to goods connected in the course of trade with both the parties. One of the other conditions of the Deed of Assignment was that both the parties would be entitled to assign their respective shares in the Trade Mark subject to prior written consent of the other party, which presupposes that the parties were the absolute owners of their respective shares in the Trade Mark and even on termination of the joint venture, as has been done in the instant case, neither of the parties would be entitled to use or register the Mark in their own names or jointly with some other party. 36. Accordingly, having regard to the arbitration clause, which is Condition No.10 of the terms and conditions of the Deed of Assignment, the interim order passed on the application under Section 9 of the Arbitration and Conciliation Act, 1996, filed by the Appellant in keeping with the terms and conditions agreed upon between the parties, was justified and within the jurisdiction of the District Judge, Khurda. As we have mentioned hereinbefore, the interim order passed by the learned District Judge, Khurda, restraining the Respondent from selling her products by herself or by any other person, save and except through the Appellant, was apposite to the circumstances. The said order took into consideration the interests of both the parties flowing from the Agreement and the Deed of Assignment, pending decision by an Arbitral Tribunal. The cause of action for the suit filed by the Respondent before the District Judge, Khurda was the incorporation of a Company by the Appellant with his son under the name and style of Naturoma Herbals (P) Ltd. and the subsequent application made before the Registrar of Trade Marks to register Naturoma Herbal in the name of the said Company. It is in that context that the interim order was passed restraining the Appellant from distributing, manufacturing or marketing any of the products in the name of Naturoma or Trade Mark Naturoma Herbal. The said order of injunction did not permit the Respondent to manufacture and market the goods under the said Trade Mark in violation of the provisions of the Deed of Assignment referred to hereinabove. 37. The learned Single Judge of the High Court, while referring to some of the provisions of the Agreement between the parties, apparently overlooked the provisions relating to the use of the Trade Mark contained in the Deed of Assignment. Although, reference was made to Clause 19 of the Agreement, the High Court failed to notice that the same was not contained in the Deed of Assignment, whereby 50% of the right, title and interest of the Respondent in the Trade Mark Naturoma Herbal was assigned in favour of the Appellant absolutely and forever. As has been emphasized hereinbefore, even upon termination of the joint venture under the Agreement between the parties, neither the Appellant nor the Respondent would be entitled to use or register the Mark in their own names or jointly with some other party. In fact, the relevant terms and conditions of the Deed of Assignment had been extracted by the learned Single Judge in the impugned judgment, but the same appear to have been lost sight of while considering the terms and conditions of the Agreement executed between the parties. 38. In our view, this is not a case where money can be an adequate compensation, since the Appellant has apparently acquired a 50% interest in the Trade Mark in question, together with the goodwill of the business in relation to the products in which the Trade Mark is used. 39. We are, therefore, of the view that the High Court erred in reversing the order passed by the District Judge in ARBP No.576 of 2007 filed by the Appellant, under which the status-quo would have been maintained till the dispute was settled in arbitration. 40.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]31. As far as the first two questions are concerned, the terms of the Deed of Assignment clearly indicate that the Respondent had of her own volition parted with 50% of her right, title and interest in the Trade Mark Naturoma Herbal with proportional goodwill of the business concerning the goods in respect of which the Mark was used, absolutely and forever, from the date of the Deed, namely, 1st October, 2000. It is no doubt true that on behalf of the Respondent it has been claimed that the Deed of Assignment had never been acted upon and that, in any event, the same had been revoked on 25th September, 2007, when the Agreement dated 1st April, 1999, was cancelled. However, in view of the provisions of the Deed of Assignment, it is yet to be adjudicated upon and decided as to whether by virtue of the revocation of the Deed of Assignment by the Respondent, the Appellant was no longer entitled to the benefits of the Trade Mark which had been transferred to him to the extent of 50% absolutely and forever. In such circumstances, the order passed by the District Judge, Khurda, in ARBP No.576 of 2007, restraining the Respondent from marketing her products through any person, other than the Appellant, was more apposite in the facts of the case, as the rights of both the parties stood protected till such time as a final decision could be taken in arbitral proceedings, which, in effect, is the object and intention of Section 9 of the Arbitration and Conciliation Act, 199632. As far as the third question is concerned, it was inappropriate on the part of the High Court to allow the Respondent to file an affidavit, on which reliance was placed, after the hearing had been concluded and judgment had been reserved, without giving the Appellant an opportunity of dealing with the same. However innocuous the additional affidavit may have been, once the hearing was concluded and judgment was reserved, it would have been prudent on the part of the High Court to have given an opportunity to the Appellant to deal with the same before allowing it to be taken on record. It has been submitted that the additional affidavit which was filed on behalf of the Respondent after the judgment had been reserved by the Appeal Court, only sought to bring on record the proceedings whereby the corrigendum which had been issued by the Trade Mark Registrar on 1st July, 2008, showing the Appellant as the Joint Proprietor of the Trade Mark Naturoma Herbal, had been subsequently cancelled on 26th September, 2008. Since what was produced was a record of the official proceedings, the Appellant could not have been prejudiced since he himself had knowledge of the same33. Coming to the last question, as to whether the invocation of Section 42 of the Specific Relief Act, 1963, to enforce the negative covenant contained in the Deed of Assignment, was contrary to the provisions of Section 27 of the Indian Contract Act, 1872, or not, we are inclined to accept Mr. Ghoshs submissions that the injunction sought for by the Appellant was not to restrain the Respondent from carrying on trade or business, but from using the Trade Mark which was the subject matter of dispute. Accordingly, the provisions of Section 27 of the Indian Contract Act, 1872, would not be attracted to the facts in this case. For the sake of reference, Section 27 of the above Act is reproduced hereinbelow :27. Agreement in restraint of trade, void.Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. Exception 1.Saving of agreement not to carry on business of which goodwill is sold.One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the businessIt is obvious that what is declared to be void by virtue of Section 27 is any Agreement to restrain any person from exercising his right to carry on a profession or trade or business and any restraint thereupon by an Agreement would be void34. As will be seen from the materials on record, the Appellant did not ask for any injunction against the Respondent from carrying on any trade or business, but he objected to the use by the Respondent of the Trade Mark, in which he had acquired a 50% interest, while selling her products35. The conditions in the Deed of Assignment clearly stipulate that all the goods manufactured by the Respondent under the Trade Mark Naturoma would be marketed solely by the Appellant. It was also submitted that the said Trade Mark would be used only in relation to goods connected in the course of trade with both the parties. One of the other conditions of the Deed of Assignment was that both the parties would be entitled to assign their respective shares in the Trade Mark subject to prior written consent of the other party, which presupposes that the parties were the absolute owners of their respective shares in the Trade Mark and even on termination of the joint venture, as has been done in the instant case, neither of the parties would be entitled to use or register the Mark in their own names or jointly with some other party36. Accordingly, having regard to the arbitration clause, which is Condition No.10 of the terms and conditions of the Deed of Assignment, the interim order passed on the application under Section 9 of the Arbitration and Conciliation Act, 1996, filed by the Appellant in keeping with the terms and conditions agreed upon between the parties, was justified and within the jurisdiction of the District Judge, Khurda. As we have mentioned hereinbefore, the interim order passed by the learned District Judge, Khurda, restraining the Respondent from selling her products by herself or by any other person, save and except through the Appellant, was apposite to the circumstances. The said order took into consideration the interests of both the parties flowing from the Agreement and the Deed of Assignment, pending decision by an Arbitral Tribunal. The cause of action for the suit filed by the Respondent before the District Judge, Khurda was the incorporation of a Company by the Appellant with his son under the name and style of Naturoma Herbals (P) Ltd. and the subsequent application made before the Registrar of Trade Marks to register Naturoma Herbal in the name of the said Company. It is in that context that the interim order was passed restraining the Appellant from distributing, manufacturing or marketing any of the products in the name of Naturoma or Trade Mark Naturoma Herbal. The said order of injunction did not permit the Respondent to manufacture and market the goods under the said Trade Mark in violation of the provisions of the Deed of Assignment referred to hereinabove37. The learned Single Judge of the High Court, while referring to some of the provisions of the Agreement between the parties, apparently overlooked the provisions relating to the use of the Trade Mark contained in the Deed of Assignment. Although, reference was made to Clause 19 of the Agreement, the High Court failed to notice that the same was not contained in the Deed of Assignment, whereby 50% of the right, title and interest of the Respondent in the Trade Mark Naturoma Herbal was assigned in favour of the Appellant absolutely and forever. As has been emphasized hereinbefore, even upon termination of the joint venture under the Agreement between the parties, neither the Appellant nor the Respondent would be entitled to use or register the Mark in their own names or jointly with some other party. In fact, the relevant terms and conditions of the Deed of Assignment had been extracted by the learned Single Judge in the impugned judgment, but the same appear to have been lost sight of while considering the terms and conditions of the Agreement executed between the parties38. In our view, this is not a case where money can be an adequate compensation, since the Appellant has apparently acquired a 50% interest in the Trade Mark in question, together with the goodwill of the business in relation to the products in which the Trade Mark is used39. We are, therefore, of the view that the High Court erred in reversing the order passed by the District Judge in ARBP No.576 of 2007 filed by the Appellant, under which theo would have been maintained till the dispute was settled in arbitration.