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S.C.AGRAWAL, S.SAGHIR AHMAD, B.P.JEEVAN REDDY, KULDIP SINGH
Gujarat Bottling Company LTD. – Appellant
Versus
Coca Cola Company – Respondent
What is the validity of the negative covenant in paragraph 14 of the 1993 Agreement under Section 27 of the Indian Contract Act? What is the effect of the 1994 Agreement on the subsistence of the 1993 Agreement and the termination rights under paragraph 21? What are the circumstances under which an interim injunction enforcing the negative covenant can be granted and sustained?
Key Points: - The Court held that the negative stipulation in paragraph 14 of the 1993 Agreement is not void under Section 27 because it operates only during the subsistence of the agreement. (!) (!) - The Court found that the 1994 Agreement cannot be construed as superseding the 1993 Agreement, and the 1993 Agreement subsists; the termination period remains one year under paragraph 21 of the 1993 Agreement. (!) (!) - The 1994 Agreement is to be treated as a registered-user agreement under the Trade Marks Act, while the 1993 Agreement contains broader franchise-like terms not wiped out by the 1994 Agreement. (!) (!) - The interim injunction enforcing the negative covenant was warranted given the parties’ conduct and the resulting risk to Coca Cola’s goodwill and market share after Pepsi's takeover of GBC. (!) (!) - The balance of convenience favored maintaining the injunction to prevent irreparable loss to Coca Cola’s market position and goodwill, with damages as a possible remedy for GBC. (!) (!) - Clause (b) of paragraph 19, regarding transfer of GBC shares and control, was interpreted as binding between Coca Cola and GBC only, not as a restraint on shareholders’ transfer rights. (!) (!)
JUDGMENT
S. C. AGRAWAL. J. :—Special leave granted.
2. In the past nations often went to war for the protection and advancement of their economic interests. Things have changed now. Under the international order envisaged by the Charter of the United Nations war is no longer an instrument of State policy. Now-a-days there are wars between corporations, more particularly corporations having multi-national operations, for the protection and advancement of their economic interests. These wars are fought on the economic plane but some of the battles spill over to Courts of law. The present case is one such legal battle. The combatants are two American multi national corporations dominating the soft drinks market having operations in a number of countries. On the one side is Coca Cola Company (respondent No. 1), hereinafter referred to as "Coca Cola," and on the other side is PEPSICO INC.(for short "Pepsi"), and its subsidiaries and subsidiaries of the subsidiaries which are under, direct or indirect, control of Pepsi. There is a long history of trade rivalry between these two multi-national corporations.
3. Coca Cola had been operating in this country till 1977 when on account of change
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