Gujarat High Court
Intercontinental Hotels vs Shiva Satya Hotels Private on 22 November, 2013
Author: R.D.Kothari
Bench: R.D.Kothari
INTERCONTINENTAL HOTELS GROUP-INDIA PRIVATE LIMITEDV/SSHIVA SATYA HOTELS PRIVATE LIMITED....Defendant(s) C/FA/2155/2013 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD FIRST APPEAL NO. 2155 of 2013 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE R.D.KOTHARI ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ INTERCONTINENTAL HOTELS GROUP-INDIA PRIVATE LIMITED & 1....Appellant(s) Versus SHIVA SATYA HOTELS PRIVATE LIMITED....Defendant(s) ================================================================ Appearance: MR MIHIR JOSHI, Sr. Advocate with MR SANDEEP SINGHI for SINGHI & CO, ADVOCATE for the Appellants MR KAMAL TRIVEDI, Sr. Advocate with MS SANGEETA VISHEN, with MR ABHISHEK M MEHTA with MR HURSH JANI, WITH MR VINAY VISHEN, ADVOCATES for the Respondent ================================================================ CORAM: HONOURABLE MR.JUSTICE R.D.KOTHARI Date : 22/11/2013 ORAL JUDGMENT
1. Intercontinental Hotel Group (India) Private Limited ( IHG ) appellant herein, being aggrieved by the order passed by the City Civil Court (Court No.16), Ahmedabad, in an application under Section 9 of the Arbitration Act, has filed the present appeal.
2. The appellants and the respondent entered into an agreement for running a hotel of international standard at Sapath-V, S.G.Road, Ahmedabad. The parties had entered into a management agreement. It is dated 19.8.2008. It was agreed upon that respondent would construct / build hotel as per the terms and conditions set out in the agreement. The said hotel was to run in the name of Hotel Crown Plaza said to be brand standard of the appellants. Under the agreement, appellants were to run and manage the hotel for 20 years. Agreement had also clause for renewal and extension of period. Mode of sharing the profit / income was also agreed upon between the parties. It was agreed that all the disputes arising out of the agreement shall be referred to Singapore International Arbitration Centre. On 8.4.2013, the respondent had terminated the agreement entered into with the appellants. The appellants had moved City Civil Court, Ahmedabad, as stated above, by filing CMA No.430 of 2013. The said Court had passed order dated 8.8.2013 had rejected the appellants application. Hence, the present appeal.
3. In CMA No.430 of 2013, from which present appeal arises, the appellants have prayed as under :
(a) Injunction restraining the opponent from operating and managing the hotel either on its own or by transferring operational management rights to any other third party until such time disputes arising out of the agreement dated August 19, 2008 are finally adjudicated by the Arbitral Tribunal under terms of the agreement;
(b) Injunction restraining the opponent from interfering with the operation and management of the hotel by the applicant as provided under the agreement until such time disputes arising out of the agreement dated August 19, 2008 are finally adjudicated by the Arbitral Tribunal under terms of the agreement.
Alternatively, Injunction restraining the opponent from directly or directly using or permitting any third party from using applicant s marks, system, brand standards and intellectual property or like interest until such time disputes arising out of the agreement dated August 19, 2008 are finally adjudicated by the Arbitral Tribunal under terms of the agreement.
Directing the opponent to pay cost of the present proceedings to the applicants;
(e) Pass such further or other orders and/or directions as this Hon ble Court may deem fit and proper, in the facts and circumstances of the case.
4. The findings of the learned trial court may be summarized as under :
(a) The say of the applicants/appellants, ...IHG s role to construct and design was restricted to providing recommendation and feedback in accordance with its brand standard which were not implemented by the consultant.... gives impression that suggestions, recommendations and brand standard of the applicants were ignored and not implemented on number of occasions by the opponent.
(b) On visual comparison of the photographs, it appears that it is not comparable in any manner with any of the similar aspects of the other Crown Plaza Hotel. The Court refers the comparison of interior upholstery, design of lobby, rooms, bathrooms, fittings, cutlery and outer facade.
(c) The Court found that the present hotel is not a replica or is not a similar in any manner compare to any hotel of the Crown Plaza - as alleged by the appellants.
(d) Prima facie statement of the opponent that opponent is not utilizing any system of the applicants or any intellectual property rights belonging to the applicants is believable and trustworthy.
(e) Say of the opponent that applicants, though required, did not make any value addition in terms of conceptualization, design and any other respect which go into the setting up of the hotel and the appellants only provided flawed design which required re-design and resulting in considerable loss of time, is possible to believe at this stage.
(f) Irremediable outcomes of the flawed design provided by the applicants is over cost in completion of hotel and delay in its completion.
(g) That the Court is not dealing with any passing off action and/or with the infringement of the trademark and/or with the complaint of infringement of trademark. If the applicants believe that opponent is utilizing trademark, intellectual property of the applicants in violation of the terms and conditions of the agreement in dispute, then also applicants are at liberty to initiate legal proceeding as per the provisions of law against the opponent.
(h) Relying upon Mariott International Hotel s case 82 (1999) DLT 137, the court negatived the say of the applicants that agreement in question is not determinable in nature.
(i) Looking to the terms and conditions of the agreement entered into between the parties, it is not possible to accept that agreement in question is unique in its nature.
(j) The agreement in dispute in its very nature involves personal services.
The court also found that it is in nature of private commercial transaction. In either case, it is determinable in nature without assigning any reasons. That Section 10 of the Specific Relief Act do not apply nor the case law relied on by the applicant supports the say of the applicants in the facts of the present case.
(k) That reply given by the applicants to the notice given to the opponent supports the say of the opponent plus the grounds stated by Mr.Gupta for resigning as a Manager of the applicants support this assertion of the opponent.
(l) Signage, marks etc. have been removed. There is no distinctive quality that can be pointed out as capable to mislead the public at large or to the customer to infer that the opponent is running Crown Plaza Hotel.
(m) That irreparable loss would be to the opponent and if the applicants succeed, then applicants can be compensated by awarding suitable compensation.
(n) Considering the facts and circumstances of the present case and considering the nature of agreement entered into between the parties, case law relied on by the applicants do not help the applicants.
(o) It is for the Arbitrator to decide the questions, viz., termination of agreement is wrongful or not, whether the opponent was justified in terminating the agreement or not and whether there is material breach committed by the party or not.
(p) Looking to the facts of the case and looking to the agreement in nature, the agreement is not in nature of joint ventured agreement.
The submission of learned advocates for parties mainly revolves around the following points; whether the existence of essential ingredients of granting interim relief is made out by the party or not, whether Section 14 of the Specific Relief Act is attracted or not, and how far Section 10 of the Specific Relief Act would be attracted and other subsidiary points. The principal submissions of learned advocates for the parties were submission on points of law. These legal submissions were sought to be supported by relying on case laws. I may first refer the relevant case laws relied on by the learned advocate for the parties and thereafter, examine the merits of the case.
6. Learned Senior Advocate Shri Mihir Joshi with learned advocate Mr.Sandeep Singhi for Singhi & Co. on behalf of the appellants has drawn attention to relevant case law. The principal reliance was placed on Adhunik Steel Ltd. s case [2007 (7) SCC 125, Page Guide s case (1985 WL 310887), Indian Oil Corporation v. Amritsar Gas Company s case [(1991) 1 SCC 533], KSL & Industries v. National Textile Corporation Ltd. s case, [2012 (3) Arb.LR 470 (Delhi) and N. Srinivasa v. Kuttukaran Machine Tools case [(2009) 5 SCC 182 and other case laws.
7. Much reliance was placed on Page Guide s case (1985 WL 310887). In that case, the Court of appeal had upheld the granting of interim injunction by the lower court. The case arose, thus; Regent International Hotel Ltd., which has over dozen luxury hotels world over, had entered into two agreements i.e. management agreement and marketing agreement in July,1984 with Dorchester Hotel Ltd. of London. There are two Regents i.e. Regent International Hotel and Regent (UK), the latter company wholly owned and subsidiary of the former, had entered into agreement whereby Regent Hotel was provided right to operate the hotel for 25 years. During July,1984 to January,1985, Regents had embarked upon planned expenditure of Rs.1.5 million pound for upgrading the hotel. At the end of 1984, the owner of Ritz Hotel, Paris had shown interest in purchasing the Dorchester Hotel. Showing of interest by Ritz Hotel led to negotiation between the parties. Essential condition of negotiation was Regent made it clear management and marketing rights would continue with it. In January,1985, Page Guide acquired the hotel. Under the novation agreement, the period of management and marketing was reduced to 15 years from 25 years and variation in other conditions. Then, without any prior warning on 21.2.1985, Regent (UK) and its solicitor received a letter alleging, serious and fundamental breach of management agreement. It was contended in the letter that Page Guide was no longer bound by the management agreement. Regent Company initiated legal action wherein the trial court was pleased to grant injunction and being aggrieved by that, Page Guide filed an appeal. The Court of appeal was pleased to dismiss the appeal. Much reliance was placed on following holding :
The effect of the injunction granted by Mr.Justice Brown does not of course provide the defendants with no alternative but to comply with the Management and Marketing Agreements. Page guide are entitled, pursuant to clause-35, to sell the hotel again. If they are not entitled to determine these agreements, subject to which they purchased the hotel, and if in reality their only complaint is that they are dissatisfied with the bargain which they made, such a course is one which in justice they should take. Thus, if the effect of this injunction is to put pressure on Pageguide to honour its bargain, this would seem to me to be wholly unobjectionable.
As already stated, we are not concerned with a contract of personal service, but with a commercial arrangement made between two independent companies involving the employment of no named individuals. In such a situation, Mr.Rix submits, there is no bar to the enforcement of obligations by means of injunction, even where the commercial relationship is a long -term one and does involve a substantial degree of mutual co-operation. He relies upon the case of Evans, Marshall v. Bertola to which I have already referred, where Lord Justice Sachs at page 379 stated:
This is a commercial agreement between trading companies that can be implemented to the profit of both parties, if each conforms with its expressed and implied terms. As in a great many commercial contracts consultation between the parties as to implementation is desirable; but that does not necessarily turn them into joint venture.
But in any event that fact that some degree of mutual co-operation or confidence, is needed does not preclude the Court from granting negative injunction designed to encourage : the party in breach to perform its part.
8. Reliance was also placed on Amritsar Gas Service Company s case
- [(1991) 1 SCC 533]. In that case, the respondent was granted distributorship under the agreement entered into with the appellant. The agreement was for sale of LPG gas i.e. Indane cylinder for household and commercial consumer use for Amritsar area. Clause-27 of the agreement provides for termination of agreement forthwith by the Corporation on happening of events specified therein. Clause-28 permits either party to terminate the agreement by 30 days notice to the other party without assigning any reason for such termination. In pursuance to the complaint received about the working of the respondent, the appellant had terminated the agreement forthwith by invoking Clause-27. The respondent had filed suit before Amritsar court. The relief prayed for was for declaration that termination is illegal and for other consequential reliefs. The appellant had filed an application under Section 34 of the Arbitration Act (old) praying to stay the suit. The trial court and High Court had dismissed the application. In further appeal before the Hon ble Supreme Court, retired Judge of Punjab & Haryana High Court was appointed as an arbitrator, with the consent of the parties. The arbitrator was pleased to allow the respondent s claim and he had, inter-alia, ordered to restore the grant of distributorship to the respondent. An application to make award Rule of Court came up for consideration before the Hon ble Supreme Court and it was contested by the parties. The Hon ble Supreme Court had set aside the direction of restoration of distributorship to the respondent and had also modified the other reliefs. In Para.12, it has held, thus :
12. The arbitrator recorded finding on Issue No. 1 that termination of distributorship by the appellant-corporation was not validly made under clause 27. Thereafter, he proceeded to record the finding on Issue No. 2 relating to grant of relief and held that the plaintiff-respondent 1 was entitled to compensation flowing from the breach of contract till the breach was remedied by restoration of distributorship. Restoration of distributorship was granted in view of the peculiar facts of the case on the basis of which it was treated to be an exceptional case for the reasons given. The reasons given state that the Distributorship Agreement was for an indefinite period till terminated in accordance with the terms of the agreement and, therefore, the plaintiff-respondent 1 was entitled to continuance of the distributorship till it was terminated in accordance with the agreed terms. The award further says as under:
"This award will, however, not fetter the right of the defendant Corporation to terminate the distributorship of the plaintiff in accordance with the terms of the agreement dated 1/04/1976, if, and when an occasion arises. "this finding read along with the reasons given in the award clearly accepts that the distributorship could be terminated in accordance with the terms of the agreement dated 1/04/1976, which contains the aforesaid clauses 27 and 28. Having said so in the award itself, it is obvious that the arbitrator held the distributorship to be revocable in accordance with clauses 27 and 28 of the agreement. It is in this sense that the award describes the Distributorship Agreement as one for an indefinite period, that is, till terminated in accordance with clauses 27 and
28. The finding in the award being that the Distributorship Agreement was revocable and the same being admittedly for rendering personal service, the relevant provisions of the Specific Relief Act were automatically attracted. Ss. (1 of S. 14 of the Specific Relief Act specifies the contracts which cannot be specifically enforced, one of which is 'a contract which is in its nature determinable'. In the present case, it is not necessary to refer to the other clauses of Ss. (1 of S. 14, which also may be attracted in the present case since clause (c) clearly applies on the finding read with reasons given in the award itself that the contract by its nature is determinable. This being so granting the relief of restoration of the distributorship even on the finding that the breach was committed by the appellant-corporation is contrary to the mandate in S. 14 (1 of the Specific Relief Act and there is an error of law apparent on the face of the award which is stated to be made according to 'the law governing such cases'. The grant of this relief in the award cannot, therefore, be sustained.
9. In Adhunik Steel Ltd. s case [2007 (7) SCC 125], the OMM Pvt. Ltd. was granted lease for mining from certain areas of Sundernagdh District, Orissa. By entering into an agreement with Adhunik, OMM had given their right of mining to Adhunik. This agreement was for the period of 10 years with option to renew the agreement for further period. Pursuant to the agreement, Adhunik had, mobilized huge resources and had incurred expenses. OMM had given notice and had terminated the agreement. Adhunik filed an application under Section 9 of the Act before the District Court, Sundernagdh. Adhunik had alleged that it had incurred considerable expenses pursuant to the agreement. The District Court had granted the interim relief to the appellant. OMM filed an Appeal. The High Court took the view that in view of Clause-8.2 of the agreement, contract was not determinable in nature. It is this finding and conclusion of the High Court that was strongly relied on by Shri Joshi. It was submitted that there is same clause in the agreement in the present case. The High Court in that case was pleased to refuse the injunction holding that loss to the Adhunik that may be sustained is possible to calculate. Hence, the appeal was allowed. In appeal filed by Adhunik before the Hon ble Supreme Court, the Hon ble Supreme Court substantially dismissed the appeal. However, it restrained the OMM from entering into any contract with third party. Shri Joshi has drawn attention to holding of the Hon ble Supreme Court by referring to Para.21. Emphasis was placed on this holding of this paragraph; So viewed, it was open to the Court to pass an order by way of interim measure of protection that the existing arrangement under the contract should be continued pending the resolution of the dispute by the arbitrator. &
10. Reference and reliance was placed on KSL & Industries case [2012) Arb.LR 470 (Delhi)]. In that case, the petitioner along with two others had filed an application under Section 9 of the Act, seeking stay of letter of termination of MoU. The petitioners had also prayed for other consequential reliefs. The petitioners were engaged in textile and real estate business. The respondent - National Textile Corporation Ltd. (NTCL) a public sector enterprise, engaged in affairs of sick textile units in the private sector. The business of respondent is to take over sick units. The respondent owned several textile mills. Upon receiving report / opinion from BIFR, the respondent has decided to revive the sick textile units owned by it by joint venture. For the said purpose, bids were invited. The petitioners applied for the same. As per the condition in the bid, 51% of the total capital would be held by the respondent. The petitioners bid was accepted. In pursuance to that, MoU was signed by the parties. Later on, the respondent had issued letter of termination, alleging that petitioners have not entered into definitive agreement as agreed between the parties under the MoU. In an application under Section 9 of the Act by the petitioners, the learned Single Judge was pleased to issue injunction, as prayed for, by the petitioners. The Court therein concluded, thus;
From the facts narrated above, it prima facie appears that there is no justification offered by the respondent for the sudden termination of MoU without furnishing any reasons thereof, when both the parties and, in particular the petitioner had taken all the steps that were expected of it in furtherance of MoU. I may note that the respondent has not even offered to explain or to justify its conduct in terminating the MoU and its defence is only that termination is in terms of the MoU. Prima facie, I am, therefore, of the view that the termination of the MoU vide letter dated 14.9.2010 is arbitrary, irrational and illegal& (Para.100)
11. In Gujarat Bottling Co. s case (GBC Case) 1995 (5) SCC 545, the appellant company had bottling plant at Ahmedabad and Rajkot. Earlier with the arrangement and agreement entered into between the parties i.e. Parle Products, GBC was bottling the different products of Parle i.e. Gold Spot, Thums Up, Rim Zim etc. On 12.11.1993, Coca Cola acquired the Parle Company. During the course of negotiation with Parle, Coca Cola had also entered into an agreement with GBC. Two agreements were entered into with GBC. After 12.11.1993, another two agreements were entered into with Coca Cola. After entering into these four agreements, GBC has taken steps to upgrade its plant at Ahmedabad and Rajkot. Coca Cola had also advised GBC to make additional investment in marketing arrangement, purchasing of crates, trucks and other equipments etc. GBC was reluctant to make further investment. While so, some of the respondents asked permission from Coca Cola to grant them permission in advance for transfer of their interest in GBC. Coca Cola declined to give permission in advance, without being aware as to who is prospective purchaser and further it made it clear that GBC may not in that event loose the controlling power. Thereafter, some of the respondents, who had a share and interest in GBC, had transferred their rights and interest into one company which happens to be subsidiary of Pepsi. As a result of which Pepsi acquired control over GBC. GBC gave notice to Coca Cola terminating the agreement with it. Coca Cola filed a suit before the Bombay High Court. Against the interim order passed by the learned Single Judge, parties had carried the matter before the Division Bench. In the said appeal preferred by both the side, the Court passed interim order. The nature of the order passed by the Court was strictly in the facts and circumstances of the case. Same is not material for the present purpose 11.1 Against the order passed by the Division Bench, GBC filed an appeal before the Hon ble Supreme Court. The Hon ble Supreme Court considered essential ingredients for granting interim relief. The Hon ble Supreme Court placed emphasis on balance of convenience and on fairness. It held that party seeking interim relief should be fair and honest. It also held that if the Court does not intervene then Pepsi would be free to use the plant of GBC for manufacturing its products. It would also cover the area that is covered in the agreement with Coca Cola. The Hon ble Supreme Court held that loss of goodwill and profit to Coca Cola cannot be compensated in terms of money and on the other hand, possible loss that GBC may suffer can be assessed and GBC can be compensated by awarding damages.
12. Reference to principle of the essential ingredients for interim injunction in that case ought to be considered in the background of the above facts and circumstances. It had held in Para.43 as under :
...
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 that uncertainty could be resolved. The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which eh 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.
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 trial. (Para.43) (emphasis supplied) 12.1 In short, it lay emphasis on balance of convenience. It also held that conduct of party, who seeks interim relief, should be free from blame. That GBC has committed breach of agreement entered into with Coca Cola.
13. In Modi Rubber s case 2007 (2) Arb.L.R. 133 (Delhi), two leading companies i.e. Modi Rubber Company and Guardian International Corporation, which were financially strong and stable , had executed MoU. Pursuant to the said MoU, it had entered into another agreement i.e. shareholder s agreement whereby they have agreed to promote one company, viz., Gujarat Guardian Ltd. - as a joint venture company for production of float glass. The dispute arose between them and question arose for consideration before the Court, as stated by the Court, were :
1) This petition raises two very interesting questions which are required to be answered. The first question raised is whether a party can seek interim relief on the ground that the other side has raised a dispute before the arbitral tribunal.
2) The second question which has been raised by the respondent is to the effect that on account of sickness of its partner in a joint venture under the Sick Industrial Companies (Special Provisions) Act,1985, the underlying shareholders agreement between the parties is rendered frustrated and incapable of implementation. Consequently, the petitioner cannot base a petition for prohibitory relief based on a clause in this agreement which prohibited the parties thereto from undertaking any business similar to that of the joint venture during its currency.
It held as under :
In a private contract, a party is free to choose the person as also the subject matter of the transaction according to its own free will. No restriction or fetter could be imposed on either of the parties as to the manner, mode and the nature of the agreement that they choose to enter into. Such freedom is available in the realm of private law Section 9 of the Arbitration and Conciliation Act, 1996 enables a court to exercise jurisdiction and pass such orders as are required to maintain the substratum of the subject matter of the arbitration.
14. In Frankfinn Aviation Services Pvt. Ltd. v. B.C.Gupta, MANU/DE/8609/07, it would appear from the Head Note itself that it was a typical case as the airbus facility was available only with the defendant in India. It Head-Note reads;
Case Note : Civil Interim Injunction Section 10(ii)(a) of Specific Relief Act, 1963 and Order 39 Rules 1, 2 and 4 of Code of Civil Procedure, 1908 (CPC) Present application filed by plaintiff under Order 39 Rules 1 and 2 of CPC for interim prohibitory injunction and objection filed by defendant against grant of injunction under Order 39 Rule 4 of CPC Held, copy of brochures printed by plaintiff contains its course content which includes training inside a leased real airbus A-300 plaintiff has stated in its brochures that it is only institute in world to have such a facility It appears that course and training imparted by plaintiff contains training inside airbus A-300 as its integral part which has to be essentially undergone by each student in order to obtain qualification of BTEC Therefore refusal to renew contract would jeopardise career of thousand of students as well as their future prospects Airbus fuselage is only fuselage available anywhere in India and no other fuselage would be available and this position is not disputed by defendants This facility would certainly fall within definition of not being ordinary article of commerce and being of special value and interest to plaintiff falling within expression of such unique item in explanation to Section 10(ii)(a) of Act Therefore plaintiff has made out a prima facie case for grant of ad interim protection and that award of damages would not be a complete or adequate remedy or relief plaintiff acted in good faith and would certainly suffer irreparable loss and damage in case interim protection is not granted Conduct of defendant in not making available log books and not even disclosing same on record of case and its belated response to letter and reminder of defendant shows that defendant has not acted bonafide Balance of convenience is clearly in favor of plaintiff who has exercised option to renew agreement between parties in manner envisaged in agreement Hence, application of plaintiff allowed subject to payment of enhanced amount by plaintiff to defendant in terms of agreement and application of defendant dismissed.
15. Laurizencool A.B. s case (2005) EWCAV 579 is a foreign decision wherein two ships were chartered for services in pool. Owner of the ship intends to withdraw the ship early from the date mentioned in the agreement. The Court of appeal upheld the granting of injunction, preventing the owner from employing the vessel outside the pool pending the arbitration.
16. In Holiday Inn s case (1976) 1 MLJ 213, on 1.9.1971 parties had entered into agreement whereby plaintiff was to manage the hotel. At the time of this agreement between the parties, hotel at Scott Road, Singapore was under construction. The hotel opened on 1.4.1974. In May,1974, plaintiff approached the defendant for reduction in management fees. Discussion took place between the representatives of parties, however, it did not bear any result. On 30.11.1974, the defendant gave telex notice terminating the agreement. Say of the defendant was fraudulent management and breach of management agreement by the plaintiff. The Court considered the case law cited before it and quoting the terms of agreement liberally held that the agreement is not a contract of service and that it is an agreement which the Court will specifically enforce. Considering the nature and scope of the agreement and also affidavit evidence placed before it, it held that damages would inadequate remedy, no injustice would be suffered by the defendant if the injunction is granted. It found that balance of convenience lies in favour of the plaintiff.
17. The other two cases i.e. Taco Cabana International, Inc. s case 932 F.2d 1113 and Fuddruckers, Inc. s case 826 F.2d 837 are the cases wherein complaint was made about infringement of trade dress / trademark by the defendant. Both these cases are from USA. In latter case, the Court has observed, trade dress infringement ..... is a complicated area of law made more difficult by a heavy overlay of case law that seems at least facially inconsistent .... The said latter case was remanded by the Court. The order passed by the Court in case of complaint in violation of trade dress and trademark may not help much to the appellant.
18. Similarly, in Colgate Palmolive s case MANU/DE/1000/03 and United Distillery Company s case 2000 PTC 502, the complaints were made about use of trademark, its breach and passing off. In former case, dispute arose between Colgate and Anchor Company and the in latter case, dispute arose between Johnnie Walker name of Scotch Whiskey and the defendant who started production of Guthka and like product in the said name. The order passed in circumstances of that case of complaint about breach of trademark may not be of much help in the present case. Admittedly, no case of breach of trademark in the present case.
19. Reliance was also placed on N. Srinivasa s case [2009 (5) SCC 182. It mainly deals with plea whether time is essence of contract or not. In that case, parties had entered into agreement to sell of immovable property. Said agreement contains the condition of registration of the deed within 60 days. On bare reading of even Head-Note, it would appear that it does not help much to the appellant.
20. Reliance was also placed on Base International Holding s case [1999 (2) Arb.LR 433 (Madras)]. Learned Senior Advocate Shri Joshi had drawn attention to Para.12, 14 and 50, which read as under :
12. All along defendants 1 and 2 had been negotiating and finalizing a consultancy and operating agreement with the plaintiff s competitor, at the same time availing the various confidential and proprietary inputs from the plaintiff under the agreement.
Only from the counter affidavit dated 25.2.1997 the plaintiff discovered that on the one hand, the second defendant had issued the termination notice and on the other, he had been negotiating to his company, the third defendant, entered into a agreement with Hilton International, a competitor of the plaintiff. The defendants are guilty of not honouring their contractual obligation under the agreement including the negative covenants. The defendants had acted in carefully planned design to subvert and to defeat the legal and contractual rights of the plaintiff.
50. Right from the beginning of the hearing of the case what had been agitating my mind was the conduct of the defendants, the second defendant in particular, in unilaterally calling off the deal one fine morning, i.e. on 10.2.1996. If it had alone been done, perhaps it would have passed muster for not granting injunction in respect of negative covenants, but then what was most disturbing was striking a deal with Hilton International on the some day that in my view is the height of dishonesty I do not subscribe to the line of thinking that in business transactions straight-for-wardness is the first casualty. While confabulating with the plaintiff, the second defendant had been surreptitiously dealing behind the scene with Hilton International all people and then he chose of call it off with the plaintiff. The second defendant cannot make a virtue of the fact that the defendants had already gone on record that prior to the institution of the suit by the plaintiff, they had entered into an agreement with Hilton International on 10.2.1996. What is the consequence of this? Will it be enough if ultimately the plaintiff succeeds, it could be satisfied with a decree for money. It should be, is the contention of the defendants.
21. Attention was also drawn to Para.61 wherein the Court had observed that the appellants, in case on hand, have a better case on facts than the case before the Hon ble Supreme Court in Gujarat Bottling Company and others case (1996 PTC 89).
22. Now, reference may be made to case law relied on by learned Senior Advocate Shri Kamal Trivedi with Mr.Abhishek M. Mehta and Ms.Sangeeta Vishen on behalf of the respondent; Rajasthan Breweries Ltd. v. Strowh Brewery Company, 2000 (3) Arb.LR 509 (Delhi), Inhouse Production Pvt. Ltd. s case, Manu/TN/0169/05 (Madras), Mariott International Inc. s case (Supra), Country Development & Management Services Pvt. Ltd. s case (2006 (Suppl.) Arb.LR 248 (Delhi), IRCTC v. Cox & Kings India Ltd. s case [2012 (1) Arb.LR 184 (Delhi) and IRCTC v. Cox & Kings India Ltd. s case [2012 (3) Arb.LR 212 (SC), Dalpat Kumar s case [1992 (1) SCC 719 and Bast Sellers Retail India Pvt. Ltd. s case [(2012) 6 SCC 792 and other case laws.
22.1 Reliance was placed on Rajasthan Breweries Ltd. s case [2000 (3) Arb.L.R. 509 (Delhi)]. Shri Trivedi has drawn attention to Para.1 to 7, 18 and 19. Therein the respondent had granted to the appellant an exclusive licence to produce stroh beer for 7 years which period was renewable further for 3 years. The respondent had terminated the agreement alleging that appellant had not only failed to meet the required quality and standard but, the appellant s inconsistency in production had led to frequent shortage in the market. The appellant had filed a petition under Section 8 of the Act seeking reference of dispute through arbitration. Simultaneously, it had also filed an application under Section 9 of the Act. The learned Single Judge had rejected the prayer, holding that agreement is determinable in nature. In appeal, the Division Bench agreed with the learned Single Judge and it had held that all revocable and voidable contracts may fall within the determinable contracts. The principle on which specific performance is not granted is that, ... the Court will not go through the idle ceremony of ordering execution of the deed which is revocable at the will of the executant. ...
22.2 Reliance was also placed on Inhouse Production Pvt. Ltd. s case [2005 (3) Arb.L.R. 52 (Madras). The dispute in that case relates to telecasting a serial, Vikramaditya . The appellant was seeking injunction in an application under Section 9 of the Act, praying that respondent be restrained from entering into any agreement with any third party pending the arbitration proceeding. There was agreement between appellant and respondent. The respondent had terminated the agreement, alleging that appellant has defaulted in making payments. In an application under Section 9, the learned Single Judge had rejected the application holding that essential ingredients for granting interim injunction are not satisfied in the case on hand. It also held that granting interim relief amounts to granting specific performance of the contract of a personal service. The Division Bench agreed with the finding of the learned Single Judge.
22.3 Much reliance was placed on Mariott International Inc. s case [1982 (99) DLT 137]. In that case, the petitioner had entered into various agreements for construction of five star hotel at Saket, New Delhi. Pending these agreements, respondent had entered into an agreement with ITC. It was in total contravention of the agreement with the petitioner. In an application under Section 9, the petitioner s main contention was that there was no valid termination of petitioner s agreement. The respondent had terminated the agreement with petitioner, alleging that petitioner has failed to perform its obligation under the agreement. It was the case of respondent that petitioner has failed to perform technical service agreement. In respect of other agreements, it was the say of the respondent that other agreement has yet not come into operation. The Court had quite elaborately considered the submissions made by learned advocate for the parties and at the end, the Court was pleased to refuse the interim relief. It may be stated that facts were very peculiar in that case compared to the facts of the present case in the sense that petitioner in that case was far better placed compared to the appellant herein, yet the interim relief in that case was refused. There was quite some debate about precedential value of this case. It was pointed out by learned advocate for the appellant that this matter was carried in appeal before the Division Bench and the Division Bench had taken the view that application under Section 9 is not maintainable as the seat of Arbitral Tribunal in that case was outside the India. That being so, Part-I in which Section 9 is placed, do not apply to cases wherein seat of Arbitration is outside India. Other side has vehemently urged that law laid down in Mariott s case (Supra), holds good. Further, on this, I may say little later.
22.4 Reliance was also placed on Royal Orchid s case [Manu TN/0451/2013 (Madras)]. The appellant in that case claims to run hotel on its own as well as claims to provide operational service whereby hotel will be managed by the appellant with established standard of quality and hospitality service. The parties had entered into an agreement on 3.7.2011, wherein the appellant undertook to operate and manage the hotel on its completion. Consultancy agreement for technical service was entered into on 30.6.2011. The agreement was entered into for a hotel to be established at Chennai. Hotel building owned by the respondent. Fees agreed between the parties was Rs.10 lacs. 50% advance was paid to the appellant. It appears that on apprehension of termination of agreement, the appellant had rushed to the Court. In an application under Section 9, interim relief was prayed that respondent be restrained from entering into agreement for management of hotel with any third party. It was the say of the appellant that respondent is negotiating with the third party. The other main grievance of the appellant was pace of work of respondent was such that operation schedule etc. cannot be maintained. On the other hand, it is the case of the respondent that one Bangalore based hotel group Kamat Hotel had filed a trademark infringement suit against the appellant and in that suit, injunction is granted against the appellant for using the name Orchid. It was also the case of the respondent that technical service agreement has come to an end in June 2012 and operation agreement has yet not come into force. Further, it was the say of the respondent that parties had mutually agreed and had separated. The Court in that case had refused the interim relief by relying on the case laws cited before it, holding that contract was determinable in nature. It may be noted that in that case provision of notice to close the default within 30 days is broadly same and identical as in the present case.
22.5 Reliance was also placed on Country Development and Management s case [2006 (Supp.) Arb.L.R. 248 (Delhi)]. Carlson Company is registered company at USA. Its subsidiary known as CIS is engaged in hotel business. CIS owns and runs hotel on its own as well as it manages and gives franchise for running the hotel. CIS had entered into MoU in 1998 with the respondent. The parties had agreed to develop a hotel at Pune on the land owned by the respondent. By letter dated 8.4.2005, respondent had sought permission from petitioner to run the hotel and it also threatened that on failure to grant such permission, respondent would start operation of hotel to the exclusion of the petitioner. In an application filed under Section 9 of the Act, the petitioner had prayed for interim relief. It was the say of the respondent that as per the term of agreement, if the hotel does not start by the given date and if the compliance to start a hotel on that day, is not waived then respondent is not obliged to be bound by the agreement. It was also contended that total expenses for the construction of hotel etc. was born by the respondent only. The learned Single Judge has refused the injunction, holding that object of interim relief is to protect the appellant against violation of his right for which he could not be adequately compensated in damages recovered in an action, if the dispute is finally dissolved in favour of the appellant. It may be noted that in that case it was contended by the appellant that the appellant has invested six valuable years in the project. The appellant has also tried to point out that how it had taken interest during the construction of hotel. Further, the appellant has also contended that it has disclosed to the respondent confidential information in respect of marks, business system, specifications, operating manuals, policies etc. That the training manual of staff and employee is also disclosed to the respondent. Referring to the case cited above before it, the Court was pleased to reject the interim injunction, holding that essential ingredients for granting the interim relief are not satisfied.
22.6 Attention was also drawn to IRCTC s case [2012 (1) Arb.L.R. 184 (Delhi)]. The Indian Railway Catering Tourism Corporation (IRCTC) runs train famously known as Maharaja Express. IRCTC entered into joint venture agreement with the respondent. The agreement was to run super luxury Majaraja Express train on certain route. The agreement was for 15 years with renewal clause. The joint venture agreement was entered into in December,2008. The respondent had terminated the agreement by letter dated 128.2011. It was the say of the respondent, inter-alia, that some misrepresentation was made by the appellant at the time of entering into agreement. In an application under Section 9, the learned Single Judge had ordered status-quo till the decision by the Arbitral Tribunal and the learned Single Judge had also given some other directions. In an appeal before the Division Bench, various issues including the question whether relief of specific performance can be granted in an application under Section 9 of the Act on the basis of finding recorded by the learned Single Judge and it also considered that when Court records the finding that it cannot restore the agreement which is terminated, could it still pass an order that has an effect of continuing the agreement? In the end, the Division Bench was pleased to set aside the order of status-quo granted by the learned Single Judge. In that case, it was the say of the respondent that it had invested over Rs.45 crores to run this train for the period of 15 years. It was also contended that termination would not only cause monetary loss to the respondent but, it would affect its reputation and goodwill also. It may be noted that in that case, under joint venture agreement, train had run during one season i.e. September,2010 to April,2011. The Division Bench was pleased to hold that whether termination is bad in law or not and whether termination was justified or not, are the issues to be considered by the Arbitral Tribunal. It took the view that the appellant can be compensated by passing the money decree, if ultimately finding of the Arbitral Tribunal is in favour of the appellant. Disbelieving the submission of appellant for termination was, Bolt out of blue. It was held that differences were growing for quite some time as the correspondence on record shows. It held that, it is not a case of sudden stoppage, ... though the respondent may have entertained impression that differences would be sorted out. Referring the case laws cited before it, the Division Bench had concluded, as observed above, that appellant can be compensated by awarding damages and consequently, it held that issues and merits are to be considered by the Arbitrator.
22.7 IRCTC s case (Supra) was carried in appeal before the Supreme Court [2012 (3) Arb.L.R. 212]. The Supreme Court was pleased to dismiss the appeal holding that joint venture agreement is not an agreement in nature of partnership. In response to the submission that appellant has incurred huge expenses, agreeing with the view taken by the Division Bench, it was pointed out that petitioner s remedy, if any, would lay in action for damages.
22.8 Reliance was also placed on Percept D. Mark s case [2006 (4) SCC
227. In that case, it was held that, assuming that submission about the effect of term of agreement is true, and the agreement in question is enforceable agreement, even then no interim relief would be granted for the reason amongst the other that appellant could be fully compensated by awarding suitable compensation, if the appellant finally succeeds in its case. It also held that no case is made out by the appellant for compelling the respondent No.1 to appoint appellant as its agent when the first respondent has no faith or trust in the appellant.
23. At this stage, a reference may be made to termination letter and reply to it by the appellants, so that we may have idea about nature of grievance.
24. Letter of termination is dated 8.4.2013. In the said letter, the respondent has made following assertions :
(a) The appellants have not made any value addition to the concept, design and other aspects of the hotel.
(b) Instead of above, the appellants have provided flawed design and concept that required repeated re-designing.
(c) That due to the inefficiency and incompetency of the appellants, the respondent has to suffer irreparable loss and damage.
(d) That the appellants did not have any team of dedicated individual comprising expertise so as to guide the respondent in construction, design and layout of the hotel.
(e) That the team composition changed several times. Such frequent changes in the team has also affected the work. That the entire service was provided in ad-hoc manner.
(f) That the budget estimate is exceeded so exorbitantly that the attitude demonstrated the appellants lack of expertise.
(g) That in view of above deficiencies and unsatisfactory nature of providing technical service, the respondent has lost faith and confidence in the appellants with respect to the appellants competency qua operation and management of the hotel.
(h) That the respondent terminates the agreement in view of loss of confidence in the appellants ability to manage and operate the hotel.
25. The appellants had replied this notice by letter dated 17.5.2013. Say of the appellants in its reply is, thus;
That the allegations are factually incorrect and the same are made with malafide intention.
On number of occasions, suggestions and recommendations of IHG for hotel were disregarded or ignored by the respondent or by the developer.
These suggestions are well documented. That the alleged problem surfacing is attributable to the developer and to the respondent.
That the IHG had not been privy to the contract between the developer and the owner.
That the interior designer was not appointed for long time, as a result of that the developer was designing the hotel. IHG has pointed out that the interior designer is to be appointed. However, the advice of IHG was ignored.
So far as the delay is concerned, it is primarily caused due to inadequate cash flow on the part of the respondent and also due to the structure of agreement between the respondent and the developer. Thus, the reasons for over cost are attributable to the respondent and developer. That the IHG has not provided any budget estimate.
That the IHG has abide by the agreement and it is ready and willing to work as per the terms of the agreement.
25.1 In the said reply to termination letter, the appellants also point out that service fees that were required to be paid by the respondent to the appellants in May,2010, was paid only in June,2012 when notice in this regard was issued by the appellants. This instance is referred in support of its say that, IHG has at each stage stood committed to the project... The appellants in the end call upon the respondent to pay outstanding service fees forthwith along with the interest.
26. The learned Senior Advocates for the parties have drawn attention to following material correspondence.
27. Referring the facts of the case, Shri Joshi has drawn attention to letters dated 3.2.2011 (Page-1057), 31.12.2011 (Page-1061), 1.3.2012 (Page-1085), 26.3.2012 (Page-1087), 9.4.2012 (Page-1103), 30.8.2012 (Page-1110), 10.9.2012 (Page-1115), 10.9.2012 (Page-1118), 16.1.2013 (Page-1116) and 16.1.2013 (Page-1129).
28. Shri Trivedi has also referred to relevant correspondence between the parties i.e. exchange of e-mail letters between the parties. They are dated 14.4.2012 (Page-1034 to 1037), 9.9.2013 (Page-1115 to 1117), 11.12.2012 (Page-1200 to 1201), 21.1.2013 (Page-1202 to 1203), again 21.1.2013 (Page-1202), 25.1.2013 (Page-1131), 15.2.2013 (Page-1132 to 1133), 11.3.2013 (Page-1204 to 1205), 19.3.2103 (Page-1206 to 1207), 1.4.2013 (Page-1139 Top), 2.4.2013 (Page-1141 Top) and 15.4.2013 (Page-1208). Relying on these e-mail letters, it was submitted that it was not that respondent had terminated the agreement with the appellants all of a sudden. It was submitted that roots of the termination notice can be traced from these e-mail letters and correspondence.
28.1 At the time of hearing, attention was also drawn to following relevant clauses; (i) Clause-1.4 Owner to construct the hotel (ii) Clause-1.7 Brand standard (iii) Clause-2.1 Initial term (iv) Clause-2.2 Right of extension (v) Clause-8 Personnel (vi) Clause-8.1 Engagement of General Manager and other employees by the Manager (vii) Clause-8.2 Employment of Personnel (viii) Clause-11 Brand and trade-mark (ix) Clause-11.1 Installation of signs (x) Clause-11.2 Ownership and usage of marks, customer data and systems, (xi) Clause-11.3 Owner not to refer to the marks in certain circumstances (xii) Clause-11.5 Right to termination (xiii) Clause-11.6 Manager s right to removal.
(xiv) Clause-15 Termination (xv) Clause-15.2 Material breach (xvi) Clause-18 Applicable law and dispute resolution, (xvii) Clause-18.1 Governing law and (xviii) Clause-18.2-Dispute resolution.
29. I may consider the case of the parties on merits.
30. At the time of hearing, it was vehemently urged by learned Senior Advocate Shri Kamal Trivedi that opening of the hotel was unreasonably delayed. It was submitted that hotel was scheduled to open in December,2010. It could not open in 2011 and also not in 2012. In one of the letters, the appellants suggested to open the hotel in October,2013. On this, the appellants in its reply to the letter of termination as referred above - points out that opening of hotel has delayed because of the inadequate cash flow by the respondent and secondly, because of the nature of agreement between the respondent and the developer. That the delay is caused on account of owner and developer. It would appear from this say of the appellants that whatever may be the reason for delay there is some substance in grievance of the respondent that opening of hotel was delayed. As to the reason for delay, viz., inadequate cash flow from the respondent, it may be stated that not a single letter / correspondence or the circumstances shown by the appellants in support of this assertion. Further, though the delayed opening of hotel was argued with vehemence by the respondent at the time of hearing, no serious attempt was made by the appellants to refute this assertion by pointing out that in reality, it was on account of failure on the part of respondent to make the timely arrangement for the suitable funds. Therefore, this ground of delay advanced by the appellants cannot be accepted.
31. As to the second reason for delayed opening, it can be said that nature of agreement between owner/respondent and the developer is not in issue. Perhaps, the say of the appellants that opening delayed on account of developer may not be incorrect but, in a sense it is more or less argument of convenience. That apart, there is also material on record to disbelieve this ground advanced by the appellants. In one of the e-mail letter written by the manager who is appellants appointee writes to the President of his company / appellants and to the others wherein the manager makes complaint about delaying of the project on account of Design and Engineering (D&E) Department of the appellants. He says that the said Department has delayed the project by making suggestions by sitting in Ivory Towers i.e. in the office of the appellants. In another letter, said manager also points out that respondent has incurred additional expenses of Rs.20 crores + he is incurring Rs.50 lacs as a pre-opening expenses every month. In view of this material on record, it cannot be said that delay in opening of the hotel is not at all attributable to the appellants.
It may also be noted that Mr.Sanjay Majmudar, Chartered Accountant of the respondent in fairly detailed letter to the appellants has inter-alia pointed out, .... even on the ground floor, they have provided for special open type of kitchen, bakery etc. which, according to Savvy, is unheard of in any Crown Plaza worldwide.... and also, .... Savvy has blamed IHG for this kind of lavish planning without serious consultation (sic - consideration) on the cost implications.... . Savvy is developer / builder.
32.1 It is interesting to note that though delayed opening of hotel was vehemently urged at the time of hearing, the respondent does not complaint specifically about causing delay in opening of hotel in termination letter, yet appellants defend the same in its reply to termination letter.
33. Prima facie grievance that opening of the hotel was delayed is possible to believe. Say of the appellants in this regard is referred hereinabove. Let the Arbitrator decide the reason for occurring delay and who is responsible for the same.
34. Learned Senior Advocate Shri Mihir Joshi for the appellants, opening the submission on behalf of the appellants has pointed out that agreement in the present case is not determinable in nature. Much emphasis was placed on this. The question that whether such agreement can be considered to be determinable in nature or not, is considered earlier in many cases by different High Courts. As referred above, in Rajasthan Beverages (Supra) (Delhi High Court) and in Royal Orchid s case (Supra) (Madras High Court) has held that agreement is determinable in nature. On the other hand, in Adhunik Steel s case (Supra), the Orissa High Court has taken the view that agreement is not determinable in nature. I am inclined to agree with the view taken by the Orissa High Court (AIR 2005 Orissa
113) . It may be stated that Adunik Steel s case (Supra) was carried in appeal before the Hon ble Supreme Court. On this point, the Hon ble Supreme Court had upheld the view taken by the Orissa High Court. In the present case, in Para.15.2 it is specifically provided to call upon the other side i.e. non-defaulting party to close the breach within 30 days. It takes care of both types of breach i.e. breach which is capable of being remedied and breach which is not capable of being remedied. Thus, the agreement clearly provides mode of determination. Relevant Clause 15 in the agreement between the parties reads thus;
15. TERMINATION :
15.1 xxx xxx xxx 15.2 Material breach If either party commits a material breach of this Agreement, the other party may terminate the Agreement at the expiration of thirty (30) days after giving written notice to the party which committed the breach PROVED the breach has not been remedied or the defaulting party has not demonstrated to the satisfaction of the non-defaulting party within such thirty (30) day period that it has taken appropriate steps to cure the default and is working diligently to complete such cure within a period satisfactory to the non-defaulting party, acting reasonably.
However, if the default is not capable of being cured, the non-defaulting party may serve a notice on the defaulting party providing details of the alleged default and specifying an amount of compensation, to be paid to the non-defaulting party within sixty (60) days after the non-defaulting party s serving the notice on the defaulting party, for which the non-defaulting party is willing to settle the default. If such sixty (60) day period expires without the non-defaulting party receiving the compensation required in its notice or adequate compensation to the reasonable satisfaction of the non-defaulting party, then at any time within six (6) months of the date of expiration of such sixty (60) day period, (or within one (1) month if such sixty (60) day period expires at a time less than six (6) months prior to the Expected Completion Date as provided in Item 6 of the Details), the non-defaulting party has the right to terminate this Contract by notice to the defaulting party.
xxx xxx xxx xxx xxx xxx
35. What is meant by determinable? Its dictionary meaning as per Oxford English Dictionary is, (I) Fixed definable (ii) Able to be authoritatively decided, definitely fixed or definitely ascertained and (iii) Liable to come to an end, terminable. In the earlier Act i.e. Specific Relief Act,1877 Clause (d) of Section 21 had used the word revocable . The Law Commission had suggested that revocable is not the proper expression. Following the recommendation of Law Commission, the word determinable is introduced. So, word determinable can be considered as a synonyms of word revocable . Further, when term in question in the agreement is not incomplete, or not lacking in clarity or it is not uncertain and such term or terms of the agreement is breached and question arose for determination whether the agreement is determinable or not, then answer most likely than not , in all cases would be in negative i.e. not determinable. How to consider that agreement is determinable in nature or not? In Rajasthan Breweries Ltd. s case (supra) gives one test, viz., all voidable agreements are revocable and such agreements are determinable. In Adhunik Steel s case (supra), the Orissa High Court took the view that provision of closing the breach i.e. calling upon the other side to remedy the breach within 90 days makes the agreement not determinable at the instance of either party. In Mariott International Inc. s case the Court found that agreement is not specifically enforceable on account of Section 14(1)(a) and 14(1)(b). Clause- (c) does not appear to have been specifically considered by the Court. One way of looking at it, is to ask the question whether it is possible to issue order of specific performance and possible to enforce that order? In other words, the Court would not issue idle or formal order or the direction. The Court would not issue futile direction. Obviously, the facts and circumstances of the case mainly the terms of the agreement would decide whether it is just, proper and legal to enforce the agreement or not. Determinability of the agreement may be determined by applying the test of propriety.
35.1 In the present case, it is not in dispute that initial term of contract was for 20 years. This term is clear. It is also provided in the agreement that after expiry of initial term of 20 years, further extension of five years would be automatic. The parties had entered into agreement in 2008. The respondent issued termination letter in 2013. There is a breach in respect of period for which the parties had agreed to work jointly and further providing of mode of determination even in the case where breach is not possible to remedied makes the agreement not determinable in nature.
36. The effect of holding that agreement is not determinable is, the appellants will be entitled to specific performance or to be precise, one of the impediments in the way of the appellants in the form of refusal of specific performance in cases of contract stands removed. But that does not mean that Court will not take into consideration the facts and circumstances of the given case or that the other considerations for granting interim relief in the form of injunction or specific performance will not come into play. For instance, monetary compensation, may be adequate remedy [Section 14(1)(a)]. Further, while the relief of specific performance is discretionary relief means facts and circumstances of the case would prevail, in case of relief of injunction essential ingredients i.e. prima facie case, balance of convenience and irreparable loss or not, are to be considered by the Court.
37. This led me to consider the essential ingredients of granting injunction. Learned Senior Advocate Shri Mihir Joshi is right in his submission that it is possible to draw conclusion from the submission of the respondent that triable issue arises for consideration in the present case. It may be recalled that in the present case, agreement between the parties was for 20 years + clause for renewal of the period and against this, it is the say of the appellants that the respondent has terminated the agreement, when the hotel was on the verge of opening, out of blue. It was also submitted that no previous complaint or grievance at any time voiced by the respondent. The respondent disputed this submission, viz., no complaint at earlier point of time made by the respondent. The respondent also disputed that termination is all of sudden. The case does give rise to triable issue. Therefore, the appellants have a prima facie case.
As to the other ingredients for granting injunction, it was submitted by learned advocate for the appellants that it is impossible to calculate the damage. It was contended that there is no formula to calculate how well the hotel will have run if it would have operated and managed by the appellants. Then, it was also submitted by the learned advocate for the appellants that in the process of commencing the work of setting up of a hotel of a high standard, the appellants being well experienced in the field have shared confidential information with the respondent. How would you assess or evaluate the use of confidential information in the project.
As to the former submission, it was pointed out by learned advocate for the respondent that appellants have provided projections wherein income and profit that may be derived from the project in the first three years period is calculated by the appellants and specific figure of profit that this project would earn is provided and pointed out in the projections. In this regard, attention was drawn to Page-168 (Vol.-I). In view of this material on record, the submission that what hotel will earn in future is not possible to calculate, cannot be accepted. It may also be stated that otherwise also this submission is also not possible to accept. In theory, Yes future income or profit may not be possible to calculate. But mere submission that what in future, hotel may earn is not possible to measure by itself may not be sufficient. Uncertainty of future will present in all the cases. The appellants cannot succeed merely on this submission. It is too general and too broad proposition to uphold. Further, this may not be mixed up or compared with the irreparable injury. Both are distinct and different. To say that interim relief be granted to the appellants as how well the hotel may have run jointly is not possible to measure, is a one thing and to say that not granting of interim relief, as prayed, would result in irreparable loss, is a different thing. In this context, it may also be noted that the grievance of the appellants in its reply to termination notice is only for payment of remaining unpaid amount of service fee which the appellants claim with interest.
As to the grievance that appellants have shared confidential information with the respondent, it may be stated that this aspect was urged also in Mariott s case (Supra) and also in Country Development s case (Supra). In Mariott s case (Supra), interim relief was specifically urged by advancing plea of disclosure of confidential information to the other side. This plea did not weigh with the Court in that case and as referred above, in Country Development s case (Supra), the appellant had urged that it has made disclosure of confidential information in the form of marks, business system, specifications, operating manual and policies etc. It was also contended that the appellant has disclosed training manual of staff and employee. However, in both these cases, as referred above, the Court was pleased to refuse the interim relief. It may also be noted that the appellants herein have charged the service fee. The appellants are already paid over Rs.47,29,000/-. Further, the appellants claim to be an expert in the hotel business and they have hotel at USA, China and in other countries, if it is so it is less likely that the appellants may have shared some more crucial confidential information particularly when the hotel was yet not opened. The attractive submission of sharing of confidential information is not possible to accept.
Now, reference may be made to the submission of learned Senior Advocate Shri Kamal Trivedi that respondent has lost faith and confidence in the appellants. It was submitted by the learned advocate for the appellants that termination letter was out of blue. It is not that the respondent was making complaint / grievance about working of the appellants prior to termination also and that termination is just end result of those complaints. It was also submitted by the appellants that just less than one month before they have jointly performed the Pooja at hotel. Against this, it is the say of the respondent that reference to the correspondence e-mail letters would support the say of the respondent about loosing the faith and confidence in the appellants. Reading of these, it was submitted, would show that discontentment was brewing. I may refer just one instance of fire and safety audit. This instance had added fuel to their problem of opening the hotel at an early date. In February,2013, the appellants informed the respondent that the person, who was assigned fire and safety audit, had proceeded to Canada and he would not be available till April. The appellants, therefore, advised to the respondent to appoint another person as a fire auditor. Accordingly, opinion of another person / auditor was solicited. Said another auditor has suggested change in 85 items, of which 60 to 70 items were approved by the previous auditor. Even the manager of the hotel also disapproved the approach of later auditor. Oddly, in contrast to this happening, the respondent had moved the Fire Safety Division of Municipal Corporation and it obtained certificate from the said Department in January,2013.
41.1 On one hand, it is the say of the respondent that they have lost faith and confidence in the appellants and on the other hand, it is the say of the appellants that termination letter came out of blue. The say of the appellants, - if one try to gather from the reply to the termination letter it would appear that in fairly detailed reply given by the appellants, the tone of the appellants is defensive one and claim of the appellants is for outstanding service fees. The defensive tone that can be discerned from the reply to the termination letter is not consistent with assertive tone of learned Senior Advocate for the appellants urging that the appellants are the victim of the wrongful action of termination of agreement by the respondent.
Lastly, I may refer to the submission of learned Senior Advocate Shri Kamal Trivedi that act of respondent of terminating the agreement may not be wise or it may even bad and illegal, but it is a matter of perception. The submission is, the respondent may be asked to pay the damages. The submission is attractive, however, as a general proposition, it may turn out to be too broad. That how far this submission is acceptable, may be considered in appropriate case. It is enough to say that demarcating line has to be drawn. Perception goes wrong may be tolerated but if it goes wild, the Court would intervene by granting appropriate injunctive relief. The party cannot disregard the agreement and flout its terms at sweet choice and whims and urge that his/its action not found to be legal, damages be awarded to the other side. In substance, one s perception ought to be reasonable. It may also be stated that party cannot sail successfully in all situations under every circumstances on the plea of perception. It has to be conceded that to considerable extent, the facts and circumstances of the case would decide that such a plea should be accepted or not. It is true that there should be proper appreciation of facts and circumstances of the case. Beside that, the Court may weigh the action of termination of agreement on the touchstone of reasonableness. One s perceptions ought to be within circle of reasonableness. It is also true that principles that hold good for administrative law could not, strictly speaking, attracted in the realm of contractual relationship, more so when the parties are private parties. But the fact that agreement and action has to pass through the test of public policy reduced this distinction between question arising under administrative law and it arising from contractual obligation between the private parties as an academic one. For appreciating reasonableness, one may profitably refer to the test of reasonableness as laid down in Om Praskash s case (AIR 2004 SC 1896, at P.1930). Further, the plea that proprietary of termination of agreement is a matter of one s perception, also attracts the principle of proportionality. This principle is developed by laying down the balancing test and test of necessity test in Coimbatore District Central Cooperative Bank s case [2007 (4) SCC 669. In appropriate case, limits of theory of perception may be considered. In the present case, case of appellants otherwise also fails.
43. Among the cases cited by learned advocates for the parties, six cases are such wherein parties were engaged in hotel business as in the instant case. Generally speaking, the relief claimed in all those cases is almost same / identical to the relief claimed in the present case. It is somewhat dramatic that if conclusion of all those cases, considered together, it would appear that its result hang in balance in the sense that in three hotel cases, the Court had refused the relief and in three hotel cases, the Court had granted the relief. But if we weigh the cases wherein relief was refused versus cases wherein relief was granted by the Court, it would appear that scale of former far outweigh the later. The reasons are; beside the fact that of three cases wherein Court had granted injunction, In two cases, judgments were by the foreign Court, there are also other distinguishing feature of those cases. First I may refer the objection raised by respondent in placing reliance on foreign cases. It was submitted by the respondent that foreign case has no precedential value. In this regard, reliance was placed on Burn and Co. v. McDonald, (1909) ILR 36 Cal 354 and in Ganpatlal v. Nandlal Haswani & Ors., AIR 1989 MP 209. It is not necessary to deal with this contention of respondent in detail. It is enough to say that mode of dealing with the issue and consideration that weighed with the Court in resolving the controversy, line of reasoning adopted by the Court etc., if throws light on the issue that arise for consideration in the case on hand, then Court would not be committing any error in referring and even on relying on the foreign case law. It would be too technical to discard such decision by labeling it as a foreign case law. Bearing this test in mind i.e. permissible to look at it profitably - if we refer Holiday Inn case (supra), it would appear that in that case, Court had granted interim relief bearing in mind the facts and circumstances of that case only and without laying down any principle for general application. The Court therein quotes quite liberally the terms of the agreement between the parties. As to the Page Guide s case (Supra), it may be bear in mind that facts of that case was typical and further, the appellants have undertaken to re-furnish the hotel by spending over 1.5 Million Pounds. Further, Regent in that case had purchased Dorchester hotel. Then, when it was re-purchased on behalf of Ritz hotel, the Regent had expressly reserved rights about its management in agreement entered into between the parties. In contrast to that case, the claim of the appellants is just unpaid service fee. The third hotel case wherein injunction was granted by the Court i.e. Base International Holding s case (supra), dishonesty appeared and believed even prima facie and it is in that circumstance, as referred above, injunction came to be granted in that case. Together with this distinguishing feature, if we bear in mind those three cases wherein material facts and circumstances of the case has given way to refusal of interim relief and if we read all these, hotel cases where granting of interim relief was considered and apply the same to the facts and circumstances of the case on hand, it would appear that as observed above scale lean in favour of refusing the interim relief. In Royal Orchid s case (Supra), the technical service agreement had come to an end at the time of termination. The provision of notice to close the default was identical to the present case. One may also bear in mind that service fee was also agreed in that case and partly it was paid. But more than Royal Orchid s case, it is Mariott International Inc. s case (Supra) and Country Development s case (Supra) which are the real villain for the appellants. In later case, grievances of the appellant were, that it has invested six valuable years for the project (more than the present appellants), that it has taken interest in the project during the construction (in the present case, respondent has grievance against the appellants about this validity of the say of the respondent may be decided by the Arbitrator), then as in the present case, in that case also it was pointed out by the appellant that it has made disclosure of confidential information to the respondent reference to it made hereinabove all these plea did not find favour with the Court in Country Development s case (Supra). As to the Mariott International Inc. s case (Supra), as observed above, there was quite some debate about the precedential value of it. Attempt was not made by referring one or other typical aspect of that case or by emphasizing the distinguishing facts of that case. In Mariott International Inc. s case (supra), on which reliance was placed by the respondent, the Court proceeded to examine the merits of the case without considering the maintainability of the petition. The Court considered the case on merits at quite some length. Then, before the Division Bench, plea of maintainability was raised and it weighed with the Court. It was pointed out at the time of hearing in the present appeal that the Supreme Court, in Bhattia International s case 2002 (4) SCC 105, took the view that such applications are maintainable, as Part-I (Section 9) is equally applicable to international commercial arbitration whose seat is outside India, unless..... This point was again examined by the Constitution Bench in Bharat Aluminum s case (2012 (9) SCC 592 (decided on 6.9.2012) wherein it held that Part-I (Section 9) is not applicable in such cases. Thus, the view taken in Bhattia International s case (Supra) came to be set aside in this later case. However, in view of the fact that uncertainty over the question was prevailing and particularly Bhatiya International s case was holding the field till this decision by Constitution Bench came, it was held that this later decision would have prospective effect and operation. That all the arbitration agreements executed earlier to the date of decision of Bharat Aluminum s case would not have applicability of view taken by the Constitution Bench. So, operation of opinion of learned Single Judge in Mariott International Inc. s case (Supra) was saved by the Constitution bench.
43.1 The appellants who are seasoned operator in the field of hotel business, are less likely to be unaware of the law prevailing in this field. That apart, if in Mariott International Inc. s case (Supra), appellants even with comparatively better case on facts, fails the case of the present appellant shall also fail.
44. It was also submitted by learned Senior Advocate Shri Joshi that agreement between the parties was unique in nature and because of its such special venture, in case wherein question is propriety of termination of agreement, damages would not be adequate remedy. It was also submitted that proper remedy in such case is to grant specific performance. In this regard, reference was made and reliance was placed on Section 10 of the Specific Relief Act. It was also submitted, in the alternate that it is a typical kind of joint venture agreement which attracts Section 10 of the Act.
45. As to the submission that it is a special kind of joint venture agreement, it is enough to say that clause 17.1 of the agreement is contrary to this submission. It specifically says that present agreement between the parties is not a joint venture agreement. As to the submission that agreement is unique in nature, it was not pointed out at the time of hearing that what makes the present agreement unique one. Is it possible to say that it is not an usual business / commercial agreement? In case laws referred to and relied on by the learned advocates for the parties in so many cases parties did enter into management agreement. In none of the cases, Court had elevated such agreement to the status of unique agreement. It is not the say of the appellants that management agreement in the present case is distinct and different and peculiar compare to the management agreement in cases referred to and relied on by the parties. But then the agreement would loose its flavour of uniqueness if it is possible to compare it with other cases. So, apart from the fact that, in none of the cases management agreement is considered unique agreement in the present case, as observed above, uniqueness is not clearly pointed out. It is not possible to agree with the submission that agreement in the present is unique in nature.
The conclusion of the trial court does not call for any interference. In the present case, the other two essential ingredients balance of convenience and irreparable loss are not in favour of the appellants. It is also important to note that till the hearing of appeal concluded, no petition is filed before the Arbitrator. That the appellants have yet to move the Arbitrator. This circumstance also goes against the appellants.
There is no case made out for granting of interim relief or interim direction. Therefore, the appeal fails and same is dismissed.
(R.D.KOTHARI, J.) FURTHER ORDER At this stage, learned advocate Shri Sandeep Singhi for the appellants prays that statement of learned Senior Advocate Shri Kamal Trivedi operating till today, be continued at least for a period of 3 weeks to enable the appellants to approach the higher forum.
Opposing the aforesaid request, learned Senior Advocate Shri Kamal Trivedi submitted that in pursuance to the statement made on behalf of the respondent, the respondent has entered into negotiation with the third party, and the matter has been prolonged for quite some time at the interim stage. It is also submitted that the respondent is incurring expenditure to the tune of Rs.4 crores every month which causes great hardship and injustice to the respondent.
Considering the submissions made by learned advocates for the parties, the statement of learned Senior Advocate Shri Kamal Trivedi for the respondent recorded in order dated 10.7.2013 passed in First Appeal No.1757 of 2013, which was extended from time to time and which is operating till today, let it be continued till 5.12.2013.
The Office shall deliver the copy of the order before 26.11.2013.
(R.D.KOTHARI, J.) (vipul) Page 46 of 46