Delhi High Court
Mittal Services vs Escotel Mobile Communication Ltd. on 8 July, 2003
Equivalent citations: 2003VAD(DELHI)517, AIR2003DELHI410, 2003(69)DRJ677, AIR 2003 (NOC) 410 (DEL), 2003 CLC 1083 (DEL), (2003) 68 DRJ 616, (2003) 104 DLT 643, (2003) 69 DRJ 677, (2004) 1 RECCIVR 102
Author: B.N. Chaturvedi
Bench: B.N. Chaturvedi
JUDGMENT B.N. Chaturvedi, J.
1. By instant application, plaintiff seeks issue of a restraint order against the defendant injuncting it from appointing another franchisee for the territory of District Kaithal in its place.
2. The plaintiff is a registered partnership firm. It runs its business at District Kaithal, Haryana. The defendant is an incorporated Company with its registered office at A-36, Mohan Cooperative Industrial Estate, New Delhi. It is engaged in the business of providing/operating mobile cellure telephone services in the telecom circles of Haryana, West Uttar Pradesh and Kerala.
3. Plaint version unfolds that the defendant in order to reach out to a wider segment of public in the State of Haryana entered into a Franchisee Agreement dated 25.06.1999 with the plaintiff and appointed it as its sole franchisee for the District of Kaithal with effect from 25th of June, 1999. The agreement was intended to be for a period of five years. However, in case of either party intending to terminate the same, 90 days' notice, in writing, was required to be served on the other party. On being appointed as franchisee under the said agreement, the plaintiff endeavored its utmost to capture the market of District Kaithal. However, for reasons not known to it, the defendant, helped by its marketing associates, allegedly started indulging in obnoxious and anti business activities. The plaintiff learnt about the same on receiving complaints from various customers to the effect that certain employees or representatives of the defendant were approaching them directly and demanding money on the pretext of providing Discount Cards. The plaintiff by its letter dated 3.1.2001 informed the defendant Company of the aforesaid practices and requested them to take corrective measures. This apart, the defendant Company was also informed of the same in the course of personal meetings with the defendant Company and the defendant Company had all through been assuring it to take corrective steps and even returned money to some of the customers-complainants.
4. Contrary to the assurance for taking corrective measures, the defendant Company, however, started creating problems for the plaintiff by arbitrarily amending the Franchisee Agreement unilaterally to the detriment of the plaintiff by reducing the rate of interest. Further, the defendant in violation of the terms of the agreement appointed marketing associates, namely, Hind Telecom and Samir Telecommunication without any intimation or prior notice to the plaintiff. The defendant by its letter dated 6.6.2001 illegally terminated the agreement in violation of clause 14 thereof. The defendant, it is pleaded, is seeking to take advantage of the efforts and hard work put in by the plaintiff for a period of two years in developing a non-potential market by appointing another franchisee in its place.
5. Not disputing the execution of agreement dated 25.6.1999 and appointment of the plaintiff as its franchisee, the defendant, however, pleads that the appointment was on `non-exclusive basis'. It is asserted that even during the currency of the agreement, the defendant was entitled to appoint any number of franchisees in the same territory as of the plaintiff. It is pointed out that Clause 14 stipulates that the defendant could terminate the agreement any time by giving 90 days' advance notice in writing and without assigning any reason therefore. It is claimed that the defendant having done that by issuing termination letter dated 6.6.2001, there is no scope for seeking a declaration that the termination is bad. It is pleaded that the suit itself is barred by section 14(1) of the Specific Relief Act, 1963 as the contract between the parties is not specifically enforceable. From its very nature, it is added, the contract being determinable, cannot be specifically enforced. It is submitted that the suit is hit by clauses (a) to (d) of sub-section (1) of Section 14 of the Specific Relief Act. Business interest, according to the defendant, prompted termination of the agreement as the business showed a substantial decline after appointment of the plaintiff as its franchisee. The plaintiff was apprised of defendant's concern in these respects, time and again, but in spite of its assurance to improve upon, the plaintiff failed to do so.
6. I have heard arguments on either side.
7. Termination of Franchisee Agreement is questioned by the plaintiff on the ground that a 90 days' advance notice in terms of clause 14.1 of the agreement was not served on it by the defendant. Referring to the termination notice dated 6.6.2001, it was pointed out that the Franchisee Agreement was terminated with immediate effect from 6th of June, 2001 itself and, therefore, termination of the agreement being contrary to clause 14.1 of the agreement, is bad in law. It is contended that since the termination of the agreement was not in accordance with clause 14.1 of the agreement, the terms and conditions of the agreement continue to govern the relationship between the parties thereto and in such a situation it is not open to the defendant to appoint any other franchisee in place of the plaintiff for the area in question.
8. Countering the argument raised on behalf of the plaintiff, as aforesaid, the plea of the defendant is that even if a 90 days' advance notice, in writing, as contemplated under Clause 14.1 of the agreement, has not been given to the plaintiff, that would not render the termination of the agreement bad as the plaintiff cannot seek to injunct the defendant from appointing any other franchisee for the territory of District Kaithal in place of the plaintiff as at best, the plaintiff could seek compensation for the notice period of 90 days. Referring to clause 5.2 of the agreement, it was contended on behalf of the defendant that the rights granted to the plaintiff under the agreement being of non-exclusive nature, the defendant is within its right to appoint any number of franchisees in a given area as it deems fit. It was argued that the relief of temporary injunction, being sought by the plaintiff, cannot be granted in view of statutory bar in that respect under Section 14 of the Specific Relief Act.
9. The relief of temporary injunction, being sought by the plaintiff, is in the nature of injunction restraining the defendant from appointing another franchisee for the territory of District Kaithal in its place. There being an agreement, the rights and obligations of the parties thereto are to be governed by the terms and conditions thereof. The precise question requiring examination in the present context is, if during continuance of the plaintiff as its franchisee for the territory of District Kaithal, the defendant, under the terms and conditions of the agreement, has a right to appoint another franchisee? To answer this question, it is unnecessary to look into the plaintiff's plea regarding validity of termination of the agreement for want of 90 days' advance notice, in writing, as provided under clause 14.1 of the agreement. The assertion of the defendant is that even during the currency of the Franchisee Agreement it had otherwise a right to appoint any number of franchisees for a given area, including the territory of Kaithal, as the appointment of plaintiff as franchisee for the said area was on a `non-exclusive basis'. Clause 5.2 of the agreement deals with this aspect. It runs thus :
" The rights granted to the Franchisee under this Agreement are non-transferable and non-exclusive. Escotel may appoint any number of Franchisees as it deems fit in a given area and Escotel is further entitled, at its discretion, to curtail or in any manner vary the territorial limits within which a Franchisee is operating without assigning any reasons. The Franchisee shall be given a notice of any such variation. Such variation or curtailment shall not give rise to any cause of action in favor of the Franchisee against Escotel."
10. Above extracted part of the terms and conditions of the agreement would appear to show that the appointment of the plaintiff as franchisee for the territory of District Kaithal was on a non-exclusive basis and the defendant reserved its rights to appoint any number of franchisees in that area as it deemed fit at a given point of time.
11. Admittedly, the agreement was for a period of five years determinable at any time by either party by serving a 90 days' advance notice, in writing. Section 41(e) of the Specific Relief Act, 1963 (for short 'the Act') provides that no injunction can be granted to prevent the breach of a contract the performance of which would not be specifically enforceable. There is, of course, an exception to this, contained in Section 42 of the Act, which lays down that where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the circumstances 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. In terms of Section 38, perpetual injunction may be granted to the plaintiff to prevent the breach of an obligation existing in his favor, whether expressly or by implication. Where any such obligation arises from a contract, the Court is to be guided by the provisions contained in Chapter II of the Act. Section 14 under Chapter II of the Act enumerates the cases where the contracts cannot be specifically enforced including one, which in its nature is determinable. Since in the present case the agreement in question was in its nature determinable by giving a 90 days' advance notice, in writing, the agreement in question is obviously one which can be held to be not specifically enforceable in view of Section 14(1)(c) of the Act.
12. A number of decisions of this Court, in " Crompton Greaves Limited Vs. Hyundai Electronics Industries Company" , " Shubhmangal Mercantile (P) Limited Vs. Tricon Restaurants (India) Private Limited" , 1999 (5) DRJ 437; " Airport Authority of India Vs. Kanwar Singh Yadav", " Sumer Arora Vs. Domino's Pizza India Limited", and "Rajasthan Breweries Limited Vs. The Stroh Brewery Company", 2000 VI AD (Delhi) 741 (DB), were referred on behalf of the defendant in support of its plea that the agreement in question being determinable in nature, would not be specifically enforceable and, consequently, no injunction, as prayed for by the plaintiff, could be granted in its favor.
13. It is unnecessary to set out the factual matrix of the above referred cases individually as a mere reference to the facts in Rajasthan Breweries (supra) would suffice to set the controversy at rest. In Rajasthan Breweries, by an application under Section 9 of the Arbitration and Conciliation Act, 1996, an ad interim injunction staying notices of termination issued by the respondent terminating a Technical Knowhow Agreement as well as a Technical Assistance Agreement, executed between the parties, and also an interim order restraining the respondent from executing any fresh contract of similar nature with any third party, were sought. Unlike the present case, there was no clause in the agreements permitting the respondent to terminate the same by giving a notice of termination. The learned Single Judge, however, dismissed the appellant's application on the ground that injunction prayed for was statutorily prohibited on a conjoint reading of Section 41 and Section 14.(1)(c) of the Specific Relief Act since the contracts in question were held determinable in nature. On appeal against the order of the Learned Single Judge dismissing the same, it was held:-
"The effect of breach of a contract by a party seeking to specifically enforce the contract under the Indian law is enshrined in Section 16(c) read with Section 41(e) of the Specific Relief Act, 1963. Clause (e) of Section 41 of the Specific Relief Act provides that injunction cannot be granted to prevent the breach of contract, the performance of which would not be specifically enforced. Clause (c ) of Section 41 enumerates the nature of contracts, which could not be specifically enforced. Clause (c ) to sub-section (1) of Section 14 says that a contract which is in its nature determinable cannot be specifically enforced. Learned Single Judge thus was justified in saying that if it is found that a contract which by its very nature is determinable, the same not only cannot be enforced but in respect of such a contract no injunction could also be granted and this is mandate of law. This, however, is subject to an exception, as provided in Section 42 that where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the circumstances 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."
14. Apart from the fact that the plaintiff was appointed as a franchisee for the territory of District Kaithal only on a `non-exclusive basis', as is evident from clause 5.2 of the agreement, and the defendant had discretion to appoint as many franchisees for that very area as it deemed proper, the agreement being of a determinable nature, is not specifically enforceable in view of Section 14(1)(e) of the Act and by virtue of Section 41(c) of the Act, no injunction of the nature prayed for by the plaintiff can be granted. Thus, finding no prima facie case in favor of the plaintiff, the application is liable to be dismissed.
15. The application is accordingly dismissed and ad interim injunction granted by order dated June 29, 2001 stands vacated.