Delhi High Court
Crompton Greaves Limited vs Hyundai Electronics Industries Co. ... on 29 October, 1998
Equivalent citations: 1(1999)CLT25, 76(1998)DLT733, 1999(48)DRJ754
JUDGMENT M.K. Sharma, J.
1. In this suit instituted by the plaintiffs against the defendants seeking for a decree for specific performance of the Joint Venture Agreement dated 23.8.1996 and also for a declaration that the letters dated 16.7.1998 and 17.7.1998 written by defendant No. 1 are illegal, invalid, null and void, the plaintiffs have also filed an application under Order 39 Rules 1 & 2 read with Section 151. CPC praying for an interim temporary injunction. In the aforesaid suit as also on the application summons and notices were issued and the defendant No. 2 has entered appearance and filed its reply to the injunction application. By this order I propose to dispose of the aforesaid application filed by the plaintiff against the defendants under Order 39 Rules 1 & 2 CPC.
2. The plaintiffs entered into an agreement with defendants No. 1 & 3 for establishing a joint, venture for providing Globalstar Satellite Link Services in India. A copy of the said joint venture agreement has been placed on record. It is stated in the paint that the plaintiffs entered into the aforesaid joint venture agreement with the defendants No. 1 & 3 on the representations made by defendant No. 1 that the defendant No. 1. had entered into a Founder Service Provider Agreement with the second defendant as the Service Provider and that in pursuance to the aforesaid agreement the defendant No. 1 had the necessary right to enter into an agreement with Indian parties for providing Satellite Link Telecommunication Services. The plaintiffs have stated that in fact defendant No. 2 is acting through defendants No. 1 & 3 and that the said defendant No. 2 was in fact de facto entering into an agreement and was render-
ing services unto it. Some of the relevant clauses of the said agreement which may have a bearing in the present context are quoted herein below:-
2.2 Unavailability of Approvals. Each Party, in its sole discretion, shall have the right to terminate this Agreement in the event that the Governmental Approvals have not been obtained in a form satisfactory in the parties on or before March 31, 1997 or such other date as may be agreed upon among the Parties. Termination pursuant to this Section 2.2 shall be effective with seven days prior written notice setting forth the reason for the termination and the parties shall cause the dissolution of the company (or GISS as the case may be) and shall have no further liability whatsoever to each other under this Agreement.
3.2.3 In the event that the approval is given by RBI but neither the Government Approvals nor the In-Principle Approval is given by December 31, 1996, the parties shall make a decision as to whether this Agreement is to be terminated pursuant to Section 2.2/2.3 and in the event of such termination, HYUNDAI/DACOM shall reserve the right to repatriate the money remitted or any portion thereof to Korea subject to the approval of RBI calculated in accordance with Section 2.3. 3.6 Additional Agreements HYUNDAI/DACOM and Local Partners shall cause their representatives on the Company's Board of Directors to review at their initial meeting and cause the Company to enter into the LSPA with Hyundai/DACOM, substantially in the form attached hereto as Exhibit A, nor a part of this Agreement but as a reference only. If Hyundai Electronics Industries Co. Ltd. ("HEI"), requests and the Company deems it necessary, the Company shall enter into the Equipment Purchase Agreement with HEI ("EPA"),, whereby the Company will purchase certain Globalstar Service-related products from HEI provided the prices and terms are competitive with those of other similar suppliers. 18.2 Survival of Obligations: Notwithstanding any termination of this Agreement for any cause the parties hereto shall not be released from any liability which at the time of such termination has already accrued to such Party or which thereafter may accrue to such party in respect of any act or omission prior to such termination, unless such liability shall have been specifically released.
18.11 Force majeure: Any failure of any Party to perform any of the obligations under this Agreement due to causes including, but not limited to, strikes, acts of God or of the public enemy various incendiaries, interference by civil or military authorities, compliance with governmental laws, rules and regulations and inability to secure necessary government approval which are beyond the reasonable control of such Party shall be deemed not to be a default and the performance of such affected obligations and any obligations consequential thereto shall be suspended until the force majeure circumstances have ended.
3. Pursuant to the aforesaid Joint Venture Agreement defendant No. 4 was incorporated in India on 15.7.1996 and the parties to the Joint Venture Agreement namely the plaintiffs and the defendants No. 1 and 3 deputed their representatives on the Board of Directors of defendant No. 4. Pursuant to the aforesaid Joint Venture Agreement the defendant No. 4 also applied for and received the approvals from Secretariat for Industrial Approvals for Foreign Investments and the approval of Reserve Bank of India for foreign investment by defendant No. 1. The defendant No. 4 also made an application to the Director General of Telecommunication for license to provide Mobile Satellite Services in India, which is however, awaited as the Government of India is yet to formulate a policy in that respect. However, all of a sudden the plaintiffs came to learn about the intimation sent by defendant No. 2 to defendant" No. 4 under the letter dated 2.7.1998 about the withdrawal by defendant No. 1 and 3 from the Globalstar Joint Venture Agreement. The aforesaid communication was placed in a meeting of defendant No. 4 held on 3.7.1998 wherein the parties reviewed the affairs of defendant No. 4. In the said meeting the progress on license and application under Section 372 as also the reasons for delay in obtaining approval was discussed. The plaintiffs made a request to defendant No. 1 not to terminate the agreement until the matters are sorted out with defendant No. 2. In spite of the aforesaid request of the plaintiffs not to terminate the Joint Venture Agreement the defendant No. 1 chose to terminate the agreement and accordingly the present suit was instituted by the plaintiffs.
4. Alongwith the said suit as stated hereinabove an application under Order 39 Rules 1 & 2 CPC was also filed praying for the following reliefs:-
a) That pending the hearing and final disposal of the suit this Hon'ble Court be pleased to restrain defendant No. 2 by an order and injunction of this Hon'ble Court from using and/or utilising and/or passing on, directly or indirectly, the infrastructure, benefits, knowledge, resources, data and/or result of market surveys and/or intelligence and/or defendant No. 2 Be restrained by an Order and Injunction of this Hon'ble Court from parting with or delivering to and/or transferring, directly or indirectly, infrastructure benefits, knowledge, resources, data and/or result of market surveys and/or intelligency, directly or indirectly to any person and/or any equity;
b) that pending the hearing and final disposal of the suit, this Hon'ble Court be pleased to pass an order or injunction restraining the defendants, their servants, agents affiliates, sister concerns and associate concerns from in any manner whether directly or indirectly entering into any agreement or understanding for providing Globalstar Services or Data Transmission Services and/or Satellite Transmission Services and/or any other similar services by whichever name either by themselves or by any association or joint venture agreement or from transferring or parting with or delivering any infrastructure, benefits, knowledge resources, data and/or result of market surveys and/or intelligence to any person or entity unless done in pursuance of the Joint Venture Agreement dated 23rd August, 1996;
c) for ad interim reliefs in terms of prayers (a) and (b) above.
5. The defendants No.1 & 3 inspite of service of summons and notices did not appear to contest the suit as also the injunction application till hearing of this application, whereas the defendant No. 2 has entered appearance and has filed a reply to the aforesaid application. The defendant No. 2 has stated in the reply that the Joint Venture Agreement entered into between the plaintiffs and defendants No.1 & 3 was by its nature and as per its provisions terminable and determinable. It was also stated that the Joint Venture Agreement contained provision for dispute resolution by reference to arbitration. It also stated that the minutes of the meeting of the Board of defendant No. 4 clearly disclosed that plaintiffs are yet to obtain approval from the Central Government in respect of its equity participation and no share allotment had taken place. The defendant No. 2 further stated that the defendant No. 2 has been imp leaded as a party to the suit on the allegation that the technology belongs to defendant No. 2 and that the defendant No. 2 was acting through defendants 1 & 3 and was a de facto party to the Joint Venture Agreement but as a matter of fact the defendant No. 2 is not a party to the JVA although it agreed to provide to defendant No. 1 and 3 and DACOM Corporation Globalstar System capacity on an exclusive basis for the purpose of engaging in the business of providing Globalstar Service. It was categorically asserted that the defendant No. 2 was not a party to any negotiation or discussions concerning the Joint Venture between the plaintiffs and defendants No.1 & 3. It is also stated that defendant No. 2 made no representation to the plaintiff or to defendants No.4 or 5 concerning the Joint Venture, although it is stated that defendants No.1 & 3 and DACOM Corporation who had entered into an agreement with defendant No. 2 had informed the defendant No. 2 about the Joint Venture with plaintiffs and defendants No.1 & 3. The defendant No. 2 was informed by the defendants No.1 & 3 somewhere in the middle of March, 1998 that as a result of the economic situation in Korea it intended to withdraw as a Globalstar Services Provider and pursuant to the aforesaid notification, the defendant No. 1 and the defendant No. 3 under a separate agreement dated May 20,1998 withdrew as Globalstar Service Provider in various countries of which India was one and to relinquish all of its rights and claims with respect thereto. Thus the defendant No. 2 by its letter dated 2.7.1998 informed the plaintiff, defendant No. 4 & defendant No. 5 about the decision of defendants No.1 & 3 about withdrawal as Globalstar Service provider in India and relinquishment of all their rights and claims with respect FSPA (Foreign Service Provider Agreement).
6. In the context of the aforesaid pleadings of the parties I am required to examine as to whether a temporary injunction in the nature as sought for could be granted in favour of the plaintiffs and against the defendant No. 2. The temporary injunction has been sought for by the plaintiffs against the defendant No. 2 particularly as pleaded in the application. Dr. Singhvi, during his submissions categorically stated that the application in hand is directed against the defendant No. 2 restraining it from entering into any understanding with any Indian Party in future in relation to similar business.
7. Admittedly the defendant No. 2 is not a party and signatory to the Joint Venture Agreement. The plaintiffs in paragraph 36 of the plaint have categorically asserted that if the parties to the JVA cannot come to a mutual decision the same would be required to refer to the arbitration under clause 17.2. It was also stated therein that the plaintiffs are unable to refer the dispute to the arbitrator in view of the fact that the defendant No. 2, who is the prime done and the moving force and spirit and de facto party to the Joint Venture Agreement, through the medium, mode and channel of defendants No. 1 & 4, is not a party to the said arbitration agreement. The arbitration agreement namely Clause 17.2 is admittedly a part of the Joint Venture Agreement. Thus it is admitted by the plaintiffs that defendant No. 2 is not a party to the Joint Venture Agreement. Dr. A.M.Singhvi appearing for the plaintiffs submitted that the court should lift the Corporate veil and find out as to who is the prime done and the moving force and de fad o party behind the defendants 1 & 3, and on such consideration if it is found that the defendant No. 2 is the moving force and in fact the principal of which use defendants No.1 & 3 are he agents then the court can and has the power to grant an injunction as sought for. He further submitted that according to the terms of the agreement, the agreement was not otherwise determinable but for and on happening of particular event as envisaged in the said agreement namely - failing to receive the approval from the competent authority. He submitted that most of such approvals have already been received and in fact the plaintiffs and defendant No. 4 are awaiting the formulation of the policy by the Government of India in the matter on announcement of which the license would also be received by defendant No. 4 and thus in the light of the aforesaid facts the present JVA was not determinable and therefore, an injunction could be granted by this court even as against the defendant No. 2. He further submitted that there is a negative covenant in the JVA and the plaintiffs seek to enforce the same.
8. Mr. Oberoi, appearing for defendant No. 2 submitted that admittedly the defendant No. 2 is not a party to the Joint Venture Agreement and that the defendant No. 2 has neither any place of business in India nor carrying out any business in India and therefore, this court has no jurisdiction to grant any injunction as against defendant No. 2. It was also submitted that the plaintiff has no right to claim any permanent or temporary injunction against defendant No. 2 as the plaintiff could not have sought for any declaration or specific performance or injunction against defendant No. 2 as it is neither a party to the JVA nor does there exist any contractual or legal obligation on defendant No. 2 qua the plaintiffs. He submitted that in entering into the Joint Venture Agreement all the parties contracted as principals in their own rights and none of the parties entered into the agreement as an agent or a representative of any other person or entity and that there can be no de facto party to such an agreement nor can JVA be treated as de facto agreement between the plaintiff and defendant No. 2. He further submitted that a suit for declaration and specific performance and for the reliefs as claimed is not maintainable even between the parties to the JVA in view of the provisions of Section 14 of the Specific Relief Act, and no injunction could be claimed or ought to be granted in respect of the alleged cause of action in view of the provisions of Section 38 and the rules and provisions contained in Chapter II and Section 41 of the Specific Relief Act, 1963. Mr. Oberoi also submitted that since the plaintiff is not entitled to the main reliefs by way of specific performance, declaration or injunction claimed in the suit no interim relief can be claimed or ought to be granted. He also refuted the submission of the counsel for the plaintiffs that the plaintiffs are entitled to invoke the provisions of Section 42 of the Specific Relief Act in the present ease.
9. The defendant No. 2 is neither a signatory nor a party to the JVA therefore, ex facie there is no privity of contract between the plaintiffs and defendant No. 2. The Joint Venture Agreement specifically disclosed as to who are the parties to the Joint Venture Agreement. Of course it is true that defendants No.1 & 3 had the exclusive right to offer Globalstar System for providing Globalstar service to and from subscribers within India. But a separate agreement was entered into between the plaintiffs and the defendants No. 1 & 3 in the nature of the Joint Venture Agreement under which the defendant No. 1 was willing to grant to the defendant No. 4 the right to provide Globalstar Service to and/or from subscribers within India upon terms and conditions of a separate Local Service Provider Agreement. The said separate local service provider agreement admittedly has also not been entered into till date. The defendant No. 2 being neither a signatory nor a party to the aforesaid Joint Venture Agreement it cannot be said that merely because it agreed to provide an exclusive right to defendants No.1 & 3 to offer its Globalstar System capacity of providing Globalstar Service a valid and subsisting contract also existed between the plaintiffs and defendant No. 2. The defendant No. 2 is a separate legal entity altogether and except for having an understanding with the defendant No. 1 and 3 to provide exclusive right to offer Globalstar System Capacity for providing Globalstar service to and from subscribers within India there was no other connection between the defendants No.2 and defendants No.1 & 3. The contract and/or agreement between the plaintiffs and the defendants No.1 & 3 was executed in between the said parties as a result of which the defendant No. 4 was constituted and on none of the aforesaid occasions the defendant No. 1 participated. In order to invoke the provisions of Specific Relief Act for specific performance of the contract and to obtain an injunction in respect of the same the plaintiffs are required to prove that there is a valid and subsisting contract between the plaintiffs and the defendant No. 2. The plaintiff can seek for an injunction only in respect of a contract and when a contract subsists between the seeker of the injunction and the party against which such injunction is sought for. A bare glance at the provisions of Section 10,14, 38, 41 & 42 would indicate that a contract could be enforced only under certain specific circumstances and when certain pre-conditions are fulfillled. However, when there is no contract at all between a party the question of enforcement of such a contract does not arise. As stated by the counsel for the plaintiffs it is permissible under the law laid down by the Supreme Court for the court to lift the veil under certain circumstances. But still the court has to look into the document itself to find out as to who are the signatories and parties to an agreement. From the documents placed on record including the Joint Venture Agreement it cannot be deduced that the defendant No. 2 is the Principal and defendants No.1 & 3 are its agents. It is true that there was a contract between the defendants No.1 and 3 and defendant No. 2 to provide Globalstar services to and from subscribers within India. But such arrangement, in my prima facie view, cannot create any privity of contract of binding nature between the plaintiffs on the one hand, with whom the defendants No.1 & 3 entered into the Joint Venture Agreement and the defendant No. 2, on the other. Section 19 of the Specific Relief Act has specified the parties and persons as against whom specific performance of contract may be enforced. The defendant No. 2, prima facie, does not come within any of the categories provided therein and thus, there could be no such injunction to enforce specific performance of a contract against defendant No. 2.
10. I have also carefully analysed the conditions of the Joint Venture Agreement and on careful perusal of the same I am prima facie satisfied that the said agreement is determinable in nature. When clauses 2.2 and 3.2.3 are read together the intention of the parties is clear and apparent that the contract could be determined at the option of the parties. The defendants No.1 to 3 have taken a stand in their letter dated 31.1.1998 that they are terminating the agreement for not obtaining the approval within the time frame as stipulated in the agreement. The agreement provided for a time limit to obtain the approval and it is admitted that within the aforesaid time frame the approval could not be obtained as the Government is yet to formulate and announce the policy in respect of the project. If a contract is determinable no suit for specific performance of the said contract would lie which is settled law by now. It is provided by Section 38 of the Specific Relief Act that in granting an injunction to prevent the breach of a contract the Court is to be guided by the rules contained in Chapter II relating to specific performance. Section 41(e) states that an injunction cannot be granted to prevent the breach of a contract, the performance of which could not be specifically enforced. There is however, an exception provided under Section 42 that if a particular contract contains both positive and negative covenants then in such a case the court can grant an injunction to perform the negative covenant. It is also settled law that even in such a case a party has to satisfy the three primary factors for grant of injunction. Counsel for the plaintiffs initially did not submit that the plaintiffs are seeking to enforce any negative covenant in the present case. However, at the time of his rejoinder submissions, he referred to Clause 14 which is non-competing clause and submitted that this being in the nature of negative covenant injunction could be sought for performance of the same. The plaintiffs however, have not pleaded in the plaint that there is a negative covenant in the contract. It is nowhere pleaded that the suit has been instituted to give effect to the said negative covenant and that injunction is sought for to perform the negative covenant. The plaint also does not contain any prayer for a relief of enforcement of a negative covenant. Even assuming that there is a negative covenant in the agreement and the plaintiffs could enforce the same as provided for under Section 42 of the Specific Relief Act, the same could be enforced and injunction could be obtained only in respect of a contract which is valid and subsisting. Since the defendant No. 2 and the plaintiffs had no privity of contract, the defendant No. 2 had no obligation qua the plaintiffs under the Joint Venture Agreement or otherwise and thus no injunction could be granted against the defendant No. 2 compelling performance of any negative covenant in the contract. The said negative covenant, if any, at best binds the plaintiffs and the defendants No.1 & 3 and not the defendant No. 2.
11. Thus taking all the aforesaid factors into consideration I am of the considered opinion that no injunction could be granted in favour of the plaintiffs and against the defendant No. 2 restraining the said defendant No. 2 as sought for by the plaintiffs in the injunction application. The application, therefore, has no merit and is dismissed.
It is however, made clear that whatever expressions and opinions have been expressed by me herein are all my prima facie views for the purpose of deciding the present injunction application and shall have no bearing and shall not be treated as my final opinion for the purpose of deciding the suit.