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2016 Supreme(Del) 1133
IN THE HIGH COURT OF DELHI AT NEW DELHI
MANMOHAN SINGH, J.
KOHINOOR SPECIALITY FOODS INDIA PRIVATE LIMITED – Petitioner
Versus
KOHINOOR FOODS LIMITED & OTHERS – Respondents
O.M.P. (I) No. 575 of 2015
Decided On : 01-03-2016
For the Petitioner:Dr. Abhishek Manu Singhvi with Mr. Rajiv Nayar, Senior Advocates, Mr. Anuj Berry, Mr. Mithun V. Thanks, Mr. Sourabh Rath and Mr. Nikhil Varshney, Advocates.
For the Respondent:Mr. Sandeep Sethi with Mr. Ramji Srinivasan, Senior Advocates, Mr. Kamal Nijhawan, Mr. Shailesh Kapoor, Mr. Gurmehar S. Sistani and Mr. Sumit Gaur, Advocates.
Headnote:
Arbitration and Conciliation Act, 1996 - Section 9 - Non-compete obligations - Competing Products - Agreement - Termination of contract - Scope of - Non-competing in the business - Respondents have admitted that after termination, the respondents have sold the rice in the commercial market under the corporate name KOHINOOR which forms part of the mark Kohinoor for which separate agreement of assignment of trademark has been executed - Huge amount of consideration has been received by the respondents - Even after termination of Rice Agreement respondents were not entitled to use the mark Kohinoor in any manner by selling the Rice - Petitioner has refused to purchase the rice from the respondents and he is also insisting that the respondents as per the Rice Agreements are not entitled to sell rice - Petitioner is entitled for an injunction to restrain the respondents from breaching the term of clause 5.2 of the Rice Agreement as well as from breaching the non-compete obligations contained in the BTA dated 1st June, 2011 - Petition is disposed of - Respondents are granted two weeks time to dispose of the existing stock of Rice, which are already in the market under brand name other than Kohinoor but under the corporate name Kohinoor Food.
Specific Relief Act, 1963 - Section 14(1)(a), 16(c), 41(e) - Termination of agreement - Stay not allowed - Damages permissible - Operation after termination of agreement cannot be stayed which would be wholly contrary to the provisions of the Specific Relief Act, 1963 - Even if the termination of the agreement was found to be illegal and unlawful, in case of terminable contract, the only relief which could have been granted is damages/compensation for the period of notice as provided in the contract.
MANMOHAN SINGH, J.
1. The petitioner has filed the present petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act") seeking interim measures of protection to restrain the respondents from breaching the non-compete obligations contained in the Business Transfer Agreement dated 1st June, 2011 (hereinafter referred to as "Business Transfer Agreement") between the petitioner, respondent No. 1, Mr. Jugal Kishore Arora, Mr. Satnam Arora and Mr. Gurnam Arora (hereinafter collectively referred to as "Promoters") who are respondents No. 2, 3 and 4 and Non-Compete and Non-Solicitation Agreement dated 1st June, 2011 between the petitioner and the Promoters (hereinafter referred to as "Non-Compete Agreement").
FACTS AS PER PETITION
2. Kohinoor Speciality Foods India Private Limited, the petitioner is a company incorporated under the Indian Companies Act, 1956, by the respondent No. 1 on 25th May, 2011 to carry on the business of inter alia the marketing, trading, selling and distributing of rice products including broken rice in India. By virtue of a Shareholders and Investment Agreement dated 1st June, 2011 (hereinafter referred to as "Shareholders Agreement") between respondent No. 1, petitioner and McCormick Ingredients Southeast Asia Private Limited (hereinafter referred to as "McCormick") McCormick subscribed to 85% of total issued and paid up capital of the petitioner.
The respondent No. 1 is a public listed company. The Promoters have incorporated the respondent No. 1 on 26th July 1989, in the name of Satnam Overseas Private Limited as a private company to carry on the business of inter alia manufacturing, sale, distribution and trade of basmati rice, ready to eat products, cook-in sauces and cooking pastes, spices, seasonings and frozen food. Respondent No. 1 holds 15% of total issued and paid up capital of the petitioner.
In para 13 of the Business Transfer Agreement and the Non-Compete Agreement, Clause 13 also contained the mode of dispute resolution by way of Arbitration proceedings.
2.1 Brief facts of the case as per the petition are that by virtue of the Shareholders Agreement between respondent No. 1, the petitioner and McCormick, McCormick subscribed to 85% of total issued and paid up capital of the petitioner-Company and became its majority shareholder.
2.2 On the same day, the Business Transfer Agreement was executed between the petitioner-Company, respondent No. 1 and the Promoters. In terms of the Business Transfer Agreement, respondent No. 1 sold its entire Undertaking comprising of assets, employees, employees benefit plans, current liabilities and licenses (hereinafter referred to as "Undertaking") belonging exclusively to the business of manufacturing, processing, finishing, marketing, trading, distributing, importing, exporting and/or supply of food products, including ready to eat products cook-in sauces, cooking pastes, spices, seasonings, frozen food, and the marketing trading, selling and distributing of rice products (including "broken rice") in the territory of India to the petitioner-Company (hereinafter referred to as the "Transferred Business") for a consideration of Rs. 315,00,00,000/- (hereinafter referred to as the "Purchase Price"). Clause 2.1.1 of the Business Transfer Agreement records that the Purchase Price includes value being paid to respondent No. 1 to undertake the non-compete obligations as set out under the Agreement, and that respondent No. 1 acknowledges the adequacy and sufficiency of such consideration.
2.3 In terms of Clause 8 of the Business Transfer Agreement, respondent No. 1 agreed that it would inter alia not commence, establish, engage in, or carry on, whether directly or indirectly, any business in India, which is in competition with the business of the petitioner, for a period of 7 years from 9th September, 2011.
2.4 The res
