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High Court Of Delhi
MODERN FOOD INDUSTRIES INDIA LIMITED - Appellant
Versus
KRISHNA BOTTLERS PRIVATE LIMITED - Respondent
Decided On : 03/30/1983
MODEN FOOD INDUSTRIES LTD. V. SHRI KRISHNA BOTTLERS PVT. LTD. - SPECIFIC RELIEF ACT, 1963 - SECTION 41(E), 42 - ARBITRATION ACT, 1940 - SECTION 20 - INJUNCTION AGAINST BREACH OF NEGATIVE COVENANT - PRINCIPLES GOVERNING GRANT OF INJUNCTION - BALANCE OF CONVENIENCE.
Fact of the Case:
Moden Food Industries Ltd. (petitioner) entered into a franchise agreement with Shri Krishna Bottlers Pvt. Ltd. (respondent) for the manufacture, bottling, and distribution of the petitioner's aerated water soft drinks, including "77" and "tingler." The agreement contained an affirmative agreement to manufacture and bottle the petitioner's products and a negative agreement not to manufacture or bottle any other soft drink, except for "nova Cola" for a period of one year. The respondent subsequently entered into an agreement with M/s. Mcdowell Company to manufacture and market their soft drink "thril" during the currency of the agreement with the petitioner.
Finding of the Court:
The court held that the negative agreement in the contract could be enforced by injunction, as it was reasonable in reference to the interests of the contracting parties and the public. However, the court found that it was not a fit case to grant an injunction as the petitioner had alternative arrangements for marketing and selling its products in the disputed territory, while the respondent would suffer irreparable loss if injuncted from selling "thril." The court also noted that the petitioner had not yet performed its part of the contract by advancing a soft loan to the respondent.
Issues: 1. Whether an injunction can be granted to enforce a negative covenant in a contract. 2. Whether the principles governing the grant of temporary injunctions under Order 39, Rules 1 and 2 of the Code of Civil Procedure apply to injunctions sought under Section 42 of the Specific Relief Act. 3. Whether the balance of convenience favors the grant of an injunction.
Ratio Decidendi: 1. An injunction can be granted to enforce a negative covenant in a contract if it is reasonable in reference to the interests of the contracting parties and the public. 2. The principles governing the grant of temporary injunctions under Order 39, Rules 1 and 2 of the Code of Civil Procedure do not apply to injunctions sought under Section 42 of the Specific Relief Act. 3. In deciding whether to grant an injunction under Section 42 of the Specific Relief Act, the court must consider the balance of convenience between the parties.
Final Decision: The court dismissed the petitioner's application for an injunction and allowed the respondent's application to vacate the ex parte ad interim injunction.
( 1 ) ON 8th March, 1983, for reasons to be recorded later on,. I allowed I. A. No. 793 of 1983 filed by the defendant herein under Order 39, Rule 4 of the Code of Civil Procedure seeking vacation of the ex parte ad interim injunction passed on 16th February, 1983, and thus dismissed the plaintiff s applition, I. A. No. 719 of 1983.
( 2 ) THE plaintiff therein called the petitioner ) Moden Food Industries Ltd. , is the owner of trade mark 77 an aerated water soft drink. It has filed a petition under Section 20 of the Indian Arbrtration Act seeking that the original arbitration agreement contained in the contract between it and M/s. Shri Krishna Bottlers Pvt. Ltd. be filed in Court and the disputes raised by it in para 16 of the petition be referred to arbitration in accordance with, arbitration clause of the contract.
( 3 ) IT is the ease of the petitioner that it has entered, into a franchise agreements with different bottlers in various parts of the country. Under those agreements it sells concentrate for manufacturing "tt" to the bottlers who actually manufacture and bottle the said aerated water drink and distribute it in their respective terrilories. According to it, it had entered into such a franchise agreement with the respondent, a private limited company, carrying on the business of manufacturing, bottling and distributing soft drinks at Hyderabad. The agreement executed between them on 17th March, 1982, was valid for a period of five years in the first instance. By another agreement of the same date between them the petitioner in addition was to supply the concentrate of another aerated water soft drink known as "tingler". The allegations are that the respondent on one pretext or the other not only failed to bottle and market the soft drink 77 ,. but has now entered into an agreement with another company M/s. Mcdowell Company to bottle and market their aerated water soft drink known as thril in contravention of the said agreement of 17th March, 1982. Further, the case is that that soft drink is absolutely akin, similar in flavour, taste etc. to 77 . The grievance of the petitioner is that the defendant (herein called the respondent ) by virtue of the existing agreement between them,. is prohibited from manufacturing or selling or in any manner dealing with any other product which is akin in taste, colour and flavour or design to the beverage of the petitioner-company without its written permission, and that because of that agreement between the parties the petitioner could not enter into a franchise agreement for the territory of Hyderabad with other bottlers. It is further pleaded that "in case the respondent does not manufacture and market the products of the petitioner in its territory during the current year, the petitioner s products would not become known in that territory and it would suffer huge and irreparable losses". The toss has been quantified at Rs. 60 lacs for the current season.
( 4 ) ALONG with the suit the petitioner filed application, I. A. No. 719 of 1983, whereby the respondent-company was sought to be restrained from manufacturing, marketing or in any other manner dealing with or promoting the interests of aerated water thril . While issuing notice of the application for 25th March, 1983, interim order in these terms was issued. The respondent moved application (I. A. No. 793 of 1983) under Order 39 Rule 4 on 22nd February, 1983. The submission made was that the ex parte ad interim order was obtained by the petitioner by suppressing the facts. Notice of that application was issued for 24th February. 1983. Because of the urgency involved in the matter at joint request of the counsel for the parties I advanced the hearing of the petitioner s application and heard counsel for the parties on both the applications.
( 5 ) AFTER hearing them at length I passed the short order, as noticed above.
( 6 ) THE dispute sought to be referred is contained in para 16 of the petition and
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