Indian Kanoon - Search engine for Indian Law

(c) Without making any final order on the Appellant‟s application seeking a direction to the Respondent to produce the agreement dated 19th April 2011, it would not be possible to restrain the Respondent from entering into any business relationship with other parties and just to keep its business activity idle;

(d) The negative covenant could be enforced only if the positive covenant was found to be enforceable and where the positive and negative covenants were inter related. If such circumstances existed in which the performance of positive covenant in favour of the Appellant would not be enforced by injunction, then the negative covenant would also not be enforced by grant of injunction;

20. On behalf of the Appellant it was submitted by Mr. Ramji Srinivasan, learned Senior counsel and Ms. Shally Bhasin, learned counsel as under:

(i) Till date there was no formal termination of the MOA dated 9th August 2001. The consent terms and two Addendums did not alter the essential features of the MOA, particularly the renewal of the MOA for a further period of seven years after 31st March 2006.

(ii) Under Section 42 SRA, notwithstanding anything contained in Section 41 (e), where a contract contained an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the mere fact that that the court was unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement. Consequently, in the present case the Arbitral Tribunal erred in not granting ad interim injunction requiring the Respondent to perform the negative covenant and restrain it from entering into any fresh agreement with third parties. Reliance is placed on the judgments in Gujarat Bottling Co. Limited v. Coca Cola Co. (1995) 5 SCC 545, Dirk India Private Limited v. Mahagenco 2007 (5) BomCR 207, Old World Hospitality Private Limited v. India Habitat Centre 73 (1997) DLT 374, Goyal MG Gases Limited v. M/s. Griesheim Gmbh [decision dated 23rd October 1998 in FAO (OS) No. 251 of 1998], Modi Rubber Limited v. Guardian International Corporation 141 (2007) DLT 822 and Lady Navigation Inc. v.

26. The relief of an injunction to enforce a negative covenant under Section 42 SRA is a discretionary one. It is contingent upon the injunction seeker performing its obligations. Section 42 SRA reads as under:

"42. Injunction to perform negative agreement: -

Notwithstanding anything contained in clause (e) of Section 41, where a contract comprises an affirmative agreement to do a certain act, coupled with a negative, express or implied, not to do a certain act, the circumstances that the Court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement:

Provided that the plaintiff has not failed to perform the contract so far as it is binding on him."

27. It is therefore not as if the mere existence of a negative covenant is enough to persuade a court to grant an interim injunction to enforce it. Under Section 14 (1) (c) SRA a contract which is in its nature determinable cannot be specifically enforced. Further under Section 41 (e) SRA an injunction cannot be granted to prevent the breach of a contract the performance of which would not be specifically enforced. Although Section 42 is an exception to this rule, and a court can grant an injunction to perform the negative agreement in a contract which is coupled with an affirmative agreement, it is conditional upon the contract subsisting at the time such injunction is sought and further the injunction seeker complying with the contractual obligations placed on him in terms of the proviso to Section 42 SRA. As discussed hereinbefore, the Court is prima facie of the view that the contract came to an end by efflux of time on 31st March 2011. Further, on its own admission the Appellant did not pay the Respondent any amount from October 2010 onwards. The deposit of 50% of the minimum guaranteed amount in this Court was only to meet the condition imposed by this Court while passing the interim order dated 24th May 2011. Consequently the conditions envisaged under Section 42 SRA for enforcement of a negative covenant of the MOA do not appear prima facie to be met.