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2018 Supreme(Cal) 99
IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
SOUMEN SEN, J.
Lindsay International Pvt. Ltd. & Ors. - Plaintiffs
Versus
Laxmi Niwas Mittal & Ors. - Respondents
G.A.No.117 of 2017, C.S. No.2 of 2017
Decided On : 17-02-2017
For the Plaintiffs : Mr. S.K. Kapoor, Sr. Adv., Mr. S.N. Mookherjee, Sr. Adv., Mr. Joy Saha, Sr. Adv., Mr. Ravi Kapoor, Adv., Mr. Saunak Mitra, Adv., Ms. Priyanka Prasad, Adv., Mr. S.R. Kakrania, Adv., Mr. Sanjeeb Seni, Adv., Mr. Souvik Kundu, Adv.
For the Respondents:Mr. Jayanta Kumar Mitra, Sr. Adv., Mr. Siddhartha Datta, Adv., Mr. Bodhisatta Biswas, Adv., Ms. Suhani Dwivedi, Adv., Mr. Rajiv Lall, Adv. For the Respondent No.41: Mr. Anindya Kumar Mitra, Sr. Adv., Mr. Arunabho Deb, Adv., Mr. Ramji Srinivasan, Sr. Adv., Mr. Gautam Mitra, Adv., Mr. Soumava Mukherjee, Adv., Mr. Arunabho Deb, Adv., Mr. Pratap Chatterjee, Sr. Adv., Mr. Debajyoti Datta, Adv., Ms. Anshumala Bansal, Adv., Mr. Rishad Medora, Adv., Mr. Pratik Ghosh, Adv.
A party claiming specific performance has to show and establish that he had performed the contract and is ready and willing to perform the contract.
Headnote:
The plaintiff, a company formed to cater to the needs of the Mittal Group of Companies, filed a suit seeking specific performance of several agreements between the petitioners and the respondent Nos.1 to 38 and a declaration that the petitioner-Company is exclusively entitled to be the sole purchasing representative in perpetuity of the respondent Nos.2 to 38 for procurement of the goods and services from India. The defendants resisted the claim on the grounds that the agreements were determinable in nature and that the plaintiff had committed a breach of contract by not paying the price of the goods even after having received the full price from ArcelorMittal within 3 days of receipt thereof or at all. The Court, after considering the arguments of both sides, held that the agreements between the parties were determinable in nature and that the plaintiff had committed a breach of contract. The Court further held that the plaintiff was not entitled to an injunction restraining the defendants from acting in breach of the negative covenant as pleaded in Paragraph 42 of the Plaint. However, the Court granted an interim order restraining the defendants from affecting supplies to ArcelorMittal Companies in respect of all the purchase orders and/or invoices disclosed in the petition and directed the ArcelorMittal Companies to release payment directly to such suppliers after deducting the agreed commission.
Fact of the Case:
The plaintiff, a company formed to cater to the needs of the Mittal Group of Companies, filed a suit seeking specific performance of several agreements between the petitioners and the respondent Nos.1 to 38 and a declaration that the petitioner-Company is exclusively entitled to be the sole purchasing representative in perpetuity of the respondent Nos.2 to 38 for procurement of the goods and services from India. The defendants resisted the claim on the grounds that the agreements were determinable in nature and that the plaintiff had committed a breach of contract by not paying the price of the goods even after having received the full price from ArcelorMittal within 3 days of receipt thereof or at all.
Finding of the Court:
The Court, after considering the arguments of both sides, held that the agreements between the parties were determinable in nature and that the plaintiff had committed a breach of contract. The Court further held that the plaintiff was not entitled to an injunction restraining the defendants from acting in breach of the negative covenant as pleaded in Paragraph 42 of the Plaint.
Issues: 1. Whether the agreements between the parties were determinable in nature? 2. Whether the plaintiff had committed a breach of contract? 3. Whether the plaintiff was entitled to an injunction restraining the defendants from acting in breach of the negative covenant as pleaded in Paragraph 42 of the Plaint?
Ratio Decidendi: 1. The Court held that the agreements between the parties were determinable in nature based on the following factors: a. The agreements were not supported by any written purchase orders and no prima facie case of negative agreement was made out. b. The agreements were of a commercial nature and were, therefore, determinable by the action of the parties. c. There was a gross delay of nine months in filing the suit after the alleged exclusive transactions were discontinued. 2. The Court held that the plaintiff had committed a breach of contract based on the following factors: a. The plaintiff had not paid the price of the goods even after having received the full price from ArcelorMittal within 3 days of receipt thereof or at all. b. The plaintiff had suppressed the fact that it had received payments yet had not paid its vendors. c. The plaintiff had failed to make payment to the various suppliers in spite of receipt of payments from the overseas buyer. 3. The Court held that the plaintiff was not entitled to an injunction restraining the defendants from acting in breach of the negative covenant as pleaded in Paragraph 42 of the Plaint based on the following factors: a. There was no express or implied negative covenant in the agreements between the parties. b. The plaintiff had committed a breach of contract and was, therefore, not entitled to specific performance. c. The claim for damages was not an ascertained sum and needed to be adjudicated.
Final Decision: The Court granted an interim order restraining the defendants from affecting supplies to ArcelorMittal Companies in respect of all the purchase orders and/or invoices disclosed in the petition and directed the ArcelorMittal Companies to release payment directly to such suppliers after deducting the agreed commission.
Soumen Sen, J.
1. The apparent conflict between the shareholders of the plaintiff No.1 has resulted in the institution of a suit by the plaintiffs seeking specific performance of several agreements between the petitioners and the respondent Nos.1 to 38 and a declaration that the petitioner-Company is exclusively entitled to be the sole purchasing representative in perpetuity of the respondent Nos.2 to 38 for procurement of the goods and services from India. The petitioners have also claimed perpetual injunction restraining the respondent Nos.39 to 42 from acting in breach of negative covenant as pleaded in Paragraph 42 of the Plaint.
2. The reliefs in the suit as well as in this application are based on a plea of pre-incorporated contracts, oral agreements, collaboration agreement and a shareholder’s agreement followed by conduct of the parties for almost 20 years giving a special right in favour of the plaintiff to exclusively supply materials to ArcelorMittal Companies (hereinafter referred to as “AM Companies”) outside India after procuring the materials, inter alia, from the respondent Nos.39 to 42. The plaintiff claims that apart from the agreements pleaded in the last 20 years, the parties have proceeded on the basis that the plaintiff No.1 shall act exclusively as a sole purchasing representative of the respondent Nos.2 to 38 for procurement of goods and services from India and the petitioner No.1 in performance of the terms of the agreement have identified the respondent Nos.39 to 42 as vendors for export of goods and services to the ArcelorMittal Group of Companies. Commercial relationship with each of the said defendants was established by the plaintiff Company in the first instance and after being assured that the said defendant companies would be qualified to service the things and requirement of the AM Companies. Such relationship between the plaintiff Company and the said defendants has been continuing for decades and the said defendants amongst others are four of the existing suppliers through whom the plaintiffs effect supply of re-factory materials and other allied goods to the ArcelorMittal Companies. The plaintiff No.1 owes its origin to an agreement entered into between the petitioner No.2 and the first respondent whereby the respondent No.2 appears to have agreed that for the purpose of sourcing supply of goods and services from India for various companies belonging to the first respondent, a joint-venture Company would be set up in India. The petitioner Company was, thereafter, incorporated and started carrying on business of supplying goods to the companies controlled worldwide by the first respondent on and from 1996.
3. Under the arrangement, it is alleged that the proposed company would have the exclusive right to purchase for and on behalf of the ArcelorMittal Group of Companies, all their requirements from India, and no other party would be permitted or authorized to perform any such function whatsoever. The proposed company would be permitted to earn and retain a net profit not to be in excess of 5% of the modalities for disbursement of any excess profit over and above 5 % would be decided by the first defendant at his absolute discretion. Following such arrangement, it is alleged that on 12th August, 1996, the plaintiff company was promoted, established and incorporated at Calcutta. Between the years 1996 and 2003, the total sales in terms of the aforesaid arrangement by the plaintiff company were Rs.292 crores approximately. All the said sales were made to the ArcelorMittal Companies only. The process of procurement of the materials under the aforesaid arrangement as pleaded is:-
(a) The Mittal Companies would exclusively forward all their enquiries (RFQs) for supply of goods or services to the plaintiff company at its said office at Kolkata upon receipt of which the plaintiff company would select the local vendor to supply the requirement product;
(b) A quotation from the chosen supplier or
