Delhi High Court
M/S National Auto Impex vs M/S Autocop (India) Pvt. Ltd. & Ors. on 21 May, 2001
Equivalent citations: 93(2001)DLT74
Author: J.D. Kapoor
Bench: J.D. Kapoor
ORDER J.D. Kapoor, J.
1. Through this petition, the petitioner has sought an interim protection by way of restraining the respondent, their servants, agents, representatives, dealers, sub-distributors and all other persons on their behalf from selling or offering for sale Car Security and Remote Control Central Locking System under the trade mark "PIRANHA" and "AUTOCOPXS" and also directing the respondents to supply the aforesaid goods to the petitioner against cash payment or current date cheques and also directing the respondents by way of mandatory injunction to clear the outstanding payment or adjust the outstanding payment.
2. The aforesaid interim measures are being asked for on the basis of the agreement executed between the petitioner and respondents 1 and 2 on 1st of February 1995 whereby the petitioner was appointed as the distributor to sell the product of the respondent company under the trade name "PIRANHA" for whole of India except Greater Bombay. As per clause 6 of the Agreement it was agreed that no agent will be appointed by the respondents 1 and 2 to sell any other product in the distribution territory. Plaintiff was also given the liberty to appoint sub-agent and dealers in the territory for sale promotion of the products.
3. As per clause 15 it was agreed that it will be lawful to the principal to discontinue service of the Distributors by giving 3 months notice in writing and in case the distributors are unable to meet their mutually decided conditions, the principal cannot terminate this agreement up to period of six months from the date of this Agreement, since at least 3 months will be required by Distributors to have a concrete working of the product under this Agreement, after which time a suitable target can be evolved by mutual understanding. In such a case servicing will be totally borne by the principals within warranty period.
4. However, by way of letter dated 20th of December 1996, the respondents informed the petitioner that the latter has not been making payments of bills as agreed between them and in spite of the repeated warning to the petitioner the payments were not made regularly, punctually and within the prescribed period and since the agreement which was entered between them on 1st of February 1995 has become outdated in many respect and since the petitioner has in spite of being requisitioned several times to sign a new agreement has not entered into a new agreement, the agreement dated 1st of February 1995 be treated as null and void. The petitioner was also called upon to clear dues amounting to Rs. 12,01,520/- by 31st of December 1996 along with interest at the rate of 24 per cent per annum and after payment of the same the petitioner may place written purchase orders with the payments towards those orders in advance after which only the further material can be supplied by the petitioner.
5. As against this the petitioner has relied upon a letter dated 2nd of April 2001 to show that the distributorship has not been terminated in terms of clause 15 whereby three months notice was required but the perusal of the said letter shows that the respondents informed the petitioner with great anguish that it has terminated all business relations with the petitioner because of petitioner's unprofessional approach due to which the respondents had suffered time and again both in terms of money and reputation. In this very letter the petitioner was informed that right from the day one of the agreement dated 1st of February 1995 the petitioner has with all impunity flouted each and every commitment made under that agreement with effect from 1st of January 1997. The respondents also wanted the petitioner to rectify the breaches committed by it in the following terms:
"We do not understand as to how we can have any business relations with you when you are not paying out moneys due and payable, instructing the banks not to honour the cheques issued to us, misleading and misrepresenting to the market about us and the products, creating a scarcity in the market by not supplying to the sub-distributors/dealers and not placing any orders on us. In effect you have created a deadlock which requires immediate correction.
Please be advised that if you do not rectify the breaches committed by you at the earliest we shall be constrained to take such action as may be necessary to protect out interests."
6. It is apparent from the aforesaid letter that the agreement dated 1st of February 1995 was terminated with effect from 1st of January 1997. Letter dated 2nd of April 2001 was not a notice for termination of the agreement and as such the contention that the agreement was not terminated in terms of clause 15 whereby three months notice was required is completely devoid of merit and without any substance.
7. Merely because the respondent showed a gesture that it would continue to supply goods but only against payments in advance did not mean that the supply was in terms of the agreement that was originally executed in 1995 and terminated in 1997. The huge outstanding payments that have not been made by the petitioner is also a circumstance that is relevant for justifying the action of the respondent in not supplying the goods to the petitioner and opening up other channels for the sale of their goods.
8. Admittedly the petitioner had defaulted in making the payment of various bills and large number of cheques which were dishonoured for which the petitioner is also facing criminal action under Section 138 of the Negotiable Instruments Act and this demonstrates that the petitioner has not come with clean hands and therefore is not entitled to discretion of interim protection by the Court. As per clause 14 of the Specific Relief Act, 1963 following kinds of contracts are not enforceable:-
(1) The following contracts cannot be specifically enforced, namely:-
(a) a contract for the non-performance of which compensation is an adequate relief;
(b) a contract which runs into such minute or numerous details or which is no dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the court cannot enforce specific performance of its material terms;
(c) a contract which is in its nature determinable;
(d) a contract the performance of which involves the performance of a continuous duty which the court cannot supervise.
(2) Save as provided by the Arbitration Act, 1940, no contract to refer present or future differences to arbitration shall be specifically enforced; but if any person who had made such a contract (other than arbitration agreement to which the provisions of the said Act apply) and has refused to perform it, sues in respect of any subject which he has contracted to refer, the existence of such contract shall bar the suit.
9. Incidently the contract in question was determinable in nature and has since been determined. In support of his contention that the contract of the kind one in question is not enforceable, learned counsel for the respondents has received strength and support from the judgment of the Supreme Court , ( Indian Oil Corporation Ltd. vs. Amritsar Gas Service & Ors.) wherein the distributorship agreement was made between the Indian Oil Corporation Ltd. and the Amritsar Gas Service and clause 27 of the agreement provided for termination of the agreement by the Corporation forthwith. Aggrieved by the termination of distributorship, the respondent filed a suit in the court of Sub-Judge. However, Indian Corporation filed an application under Section 34 of the Arbitration Act for setting aside the suit. It was held that since the contract is revocable at the instance of either party, in accordance with the Clause 28 by giving 30 days' notice, the only relief which could be granted was the award of compensation for the period of notice.
10. In view of this settled position of law, the nature of interim relief sought by the petitioner is prima facie barred firstly by the provisions of Section 14 of the Specific Relief Act as it was an agreement which was revocable and determinable and secondly because the agreement had already been terminated way back in the year 1997 and thereafter, it was just a business gesture shown by the respondent to continue the business relationship because of past relations that further deliveries of the goods by the respondent were made available to the petitioner but only against the payments in advance Along with purchase order.
11. The discretion to be exercised by the court under Section 9 is not a discretion which should be exercised in favor of the person who comes with unclean fingers. Petitioner cannot be allowed to exploit the respondent under the garb of an agreement that was determined long back and the plea that unless it receives payment from its customers, it is not in position to make the payment of outstanding bills of the respondent that run into crores is not the concern of the respondent. Petitioner appears to be taking undue advantage of the business gesture shown by the respondent. I do not perceive any reason whatsoever to accede to the request of the petitioner in granting interim injunction or interim protection as prayed for.
12. Accordingly the petition is dismissed.