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2001 Supreme(Del) 1672
High Court Of Delhi
ROHIT DHAWAN - Appellant
Versus
G.K.MALHOTRA - Respondent
Interim Application 4308 of 2001
Decided On : 11/29/2001
D.Hasija, N.K.KAUL, Rajesh Rai, TRIDIP PAIS
A party seeking discretionary relief must approach the court with clean hands and disclose all material facts. The doctrine of perpetuity should not be applied to agreements involving mutual trust and confidence, especially in commercial contracts.
Headnote:
SUPPRESSION OF MATERIAL FACTS - BREACH OF AGREEMENT - EXCLUSIVE MARKETING RIGHTS - [FACT OF THE CASE] The plaintiff and defendant entered into an agreement for manufacturing and marketing two herbal medicines for diabetes management. The plaintiff alleged consistent defaults by the defendant in adhering to the terms and conditions of the agreement, including non-delivery of consignments, billing at a price of their own choice, and failure to supply sales promotion material. The defendant contended that the plaintiff failed to fulfill their financial obligations and marketing commitments, leading to the termination of the agreements. [FINDING OF THE COURT] The court found that the plaintiff was guilty of suppressing material facts, disentitling them from discretionary relief of injunction. The court also held that the plaintiff's claim for exclusive marketing rights was not upheld due to their failure to create a significant market for the products. [ISSUES] The issues revolved around the breach of agreement, suppression of material facts, and the balance of convenience in granting the injunction. [RATIO DECIDENDI] The court emphasized that a party seeking discretionary relief must approach the court with clean hands and disclose all material facts. The court also highlighted that the doctrine of perpetuity should not be applied to agreements involving mutual trust and confidence, especially in commercial contracts. [FINAL DECISION] The court vacated the ex parte injunction and rejected the plaintiff's application, ordering the plaintiff to pay the defendant's costs.
Based on the provided legal document, the key points are as follows:
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The case involves a dispute over agreements related to the manufacturing and marketing of herbal medicines, specifically "glunorm" and "dbnorm" capsules, between the plaintiff and the defendant. The plaintiff claims exclusive marketing rights, while the defendant denies breach and alleges non-performance by the plaintiff (!) (!) .
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The plaintiff alleges that the defendant failed to adhere to contractual obligations, including delayed delivery, inconsistent billing, and failure to supply promotional materials, which hampered the plaintiff's marketing efforts and international trade prospects (!) .
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The defendant contends that the plaintiff did not fulfill financial commitments, delayed payments, and did not lift the agreed stock quantities, leading to the termination of the marketing agreements. The defendant also claims that the plaintiff suppressed material facts regarding the termination notices and communications (!) (!) .
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The court found that the plaintiff had suppressed material facts, including notices of termination of the marketing rights, which were received but not disclosed to the court. This suppression was deemed to disqualify the plaintiff from obtaining discretionary relief such as an injunction (!) (!) .
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The court emphasized that a party seeking discretionary relief must approach with clean hands and full disclosure of all material facts. Concealment or suppression of relevant information can lead to denial of such relief (!) (!) .
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The court observed that the agreements for exclusive marketing rights were already terminated prior to the filing of the suit, and the plaintiff's claim that the agreements were still in force was incorrect. The misrepresentation influenced the initial grant of ex parte injunction (!) .
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The court noted that the doctrine of perpetuity should not be applied to commercial agreements involving mutual trust, especially in business relationships where one party's inaction could severely damage the other’s business (!) .
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Considering the balance of convenience, the court held that the defendant would suffer irreparable loss if restrained from selling their products, while the plaintiff could be adequately compensated if their claim for exclusive rights was upheld. The stocks of the products remaining unsold further supported vacating the injunction (!) .
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Ultimately, the court vacated the ex parte injunction, ruling that the plaintiff was not entitled to discretionary relief due to suppression of material facts and misrepresentation. The defendant's application to vacate the injunction was allowed, and the plaintiff was ordered to pay costs (!) .
In summary, the court dismissed the plaintiff's application for an injunction, primarily because of non-disclosure of material facts regarding the termination of the agreements and the potential harm to the defendant's business interests.
( 1 ) ON 2/10/1999 parties entered into an agreement under which the defendant company was to manufacture two herbal medicines for diabetes management under two brands namely "glunorm" and "dbnorm" which work as co-adjutants for diabetic therapy and the plaintiff was to have the exclusive selling and marketing rights in respect of two brands all over the world. Relevant portion of terms and conditions contained in agreement II dated 2/10/1999 are as under :-
THIS agreement is in addition to Agreement -I. This agreement is being signed between Platinum remedies Pvt. Ltd. (PRPL involved in the manufacturing of herbal medicines/products) represented by Mr. G. K. Malhotra s/o Mr. K. L. Malhotra r/o A-5b, 365, SFS Shanti Kunj, Paschim vihar, New Delhi -110 061. AND sree Bankey Bihari Impex P. Ltd. (SBBI involved in the trading and distributors of various products) represented by Mrs. Veena Dhawan r/o 169, Sainik Farms, New Delhi -100062, with the following terms and conditions:- 1. To create infrastructure for the manufacturing of GLUNORM and Dbnorm, SBBI will be contributing maximum 50% of the project cost that comes to approx. 6,00,000. 00 lacs (As total project cost is Rs. 12,00,000. 00 lacs with the capacity of 1. 5 to 2 lac capsules per month as mentioned by PRPL ). In case the project cost comes down, the investment by SBBI will be proportionately as above. The amount to rs. 1,51,000. 00 already deposited in PRPL, by Smt. Veena Dhawan, one of the Directors in SBBI, will be adjusted by SBBI against the payment of first supply from PRPL. 2. PRPL will be delivering the first consignment of 1 lac capsules plus free sampling, within a span of two months after receiving the infrastructure investment from SBBI. In case PRPL fails to deliver the required first consignment of 1 lac capsules within the stipulated time frame i. e. 2 months, a penal interest at the rate of 5% per month will be paid to SBBI by PRPL, on SBBI investment, upto date of delivery of first consignment along with the samples. This is subject to maximum 3 months and thereafter there will be definite supply of capsules. 3. Once SBBJ achieves the target of about 2 lac capsules per month, PRPL will increase the production capacity with its (PRPL) own investment within three months (as agreed by Shri G. K. Malhotra) according to the demand placed by SBBI.
IN any case PRPL is bound to part with SBBI, 25% of its increased capacity of total GLUNORM and dbnorm capsules, in addition to 2 lac capsules. In case prpl is having a capacity of say, 5 million capsules per moth, 1. 25 million capsules per month will be for SBBI in addition to already committed 2 lac capsules per month. The same pattern will be followed in case the production capacity is increased in future. To be more precise, PRPL will not let down SBBI in national and international market so for the supply of order for capsules from SBBI is concerned except constraints or factors not in absolute control of prpl.
4. Infrastructure investment by SBBI will remain in PRPL forever. 5. PRPL will invoice @ inclusive of Sales tax and packaging, 51% less of the MRP rate. Being MRP rs. 12. 00 per capsules, PRPL will invoice at Rs. 5. 60 plus sales tax (5%) -/28 paisa, totalling Rs. 5. 88. This standard of 51% less of the MRP rate will remain forever inspite of increase/decrease in the mrp rate in future. 6. Even in case of export outside India, PRPL will invoice at Rs. 5/88 per capsule against form h . 7. The payment terms will be 60 days credit basis initially for 3/4 months and then it will be on 45 days upto supply of 2 lac capsules. The credit period will not go beyond 60 days and will be maximum for 2 lac capsules. 8. There would be 10% sampling by PRPL, of the supply to SBBI. This sampling shall be increased if PRPL deems it fit. 9. These two brands i. e. GLUNORM and dbnorm will be treated as co-sharer brands between SBBI and prpl since efforts will be made to make it world renowned by both SBBI and PRP
