Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL Nos. 4313-4314 OF 2012
(Arising out of SLP (C) Nos. 34627-34628 OF 2010)
M/s Best Sellers Retail (India) Pvt. Ltd. … Appellant
Versus
M/s Aditya Birla Nuvo Ltd. & Ors. … Respondents
WITH
CIVIL APPEAL No. 4315 OF 2012
(Arising out of SLP (C) No. 34839 OF 2010)
A.C. Thirumalaraj … Appellant
Versus
M/s Aditya Birla Nuvo Ltd. & Ors. … Respondents
J U D G M E N T
A. K. PATNAIK, J.
Leave granted.
2. These are appeals by way of special leave under Article 136 of the
Constitution of India against the judgment and order dated 25.08.2010 of
the High Court of Karnataka in MFA No.4060 of 2010 and in M.C. No12036 of
2010 and in M.C. No.12036 of 2010.
3. The relevant facts briefly are that Aditya Birla Nuvo Ltd.,
respondent no.1 in both the appeals, filed a suit O.S. No.1533 of 2010
against Liberty Agencies, a partnership firm and its partners, in the Court
of the City Civil Judge at Bangalore. The case of the respondent no.1 in
the plaint was as follows: The respondent no.1 was engaged in the business
of readymade garments and accessories under various reputed brand names and
in the year 1995 had appointed Liberty Agencies as an agent to conduct its
business of readymade garments and accessories with the reputed brand name
‘Louis Philippe’. Thereafter, on 02.03.2005 respondent no.1 entered into a
fresh agreement with Liberty Agencies under which Liberty Agencies agreed
to sell the products of the respondent no.1 in the suit schedule property
and also agreed to retain the possession of the suit schedule property
until the expiry of the term of agreement and Liberty Agencies was not to
sell any other articles or goods other than that supplied by the respondent
no.1. Under the agreement dated 02.03.2005 (for short ‘the agreement’),
Liberty Agencies was entitled to a fixed commission of Rs.7,50,000/- per
month and by an addendum dated 01.07.2008 the fixed commission payable to
Liberty Agencies was increased to Rs.9,62,500/-. Thereafter, the
respondent no.1 notified to Liberty Agencies various breaches of the terms
and conditions of the agreement but Liberty Agencies did not set right the
breaches. As a result, the respondent no.1 suffered huge financial losses.
The respondent no.1 issued a legal notice on 06.02.2010 calling upon
Liberty Agencies to comply with the terms of the agreement. Liberty
Agencies, however, sent a letter dated 26.02.2010 claiming that the
constitution of the partnership firm has changed and that its partner A.C.
Thirumalaraj had retired and that A.C. Thirumalaraj as the owner of the
suit schedule property had terminated the tenancy of the suit schedule
property in favour of Liberty Agencies and initiated a collusive eviction
proceeding with an intention to defeat the claim of the respondent no.1.
The respondent no.1 thus prayed for specific performance of the agreement
and in the alternative for damages for expenses and losses amounting to
Rs.20,12,44,398/- if the specific performance of the agreement was refused
by the Court.
4. Along with the suit, respondent no.1 also filed an application under
Order 39 Rules 1 and 2 read with Section 151 of the Code of Civil Procedure
(for short ‘the CPC’) praying for a temporary injunction restraining the
defendants from leasing, sub-leasing, alienating or encumbering the suit
schedule property in any manner pending disposal of the suit. Liberty
Agencies and A.C. Thirumalaraj filed their objections to the application
for temporary injunction and stated, inter alia in their objections that
the possession of the suit schedule property had been delivered to Best
Sellers Retail (I) Pvt. Ltd. The Additional City Civil Judge heard the
parties and by order dated 24.04.2010 allowed the application for temporary
injunction and restrained Liberty Agencies and its partners including A.C.
Thirumalaraj from leasing, sub-leasing, alienating or encumbering the suit
schedule property in any manner pending disposal of the suit.
5. Aggrieved, A.C. Thirumalaraj filed a Miscellaneous Appeal under Order
43 Rule 1 of the CPC against the order of temporary injunction before the
High Court. While the Miscellaneous Appeal was pending, it was brought to
the notice of the High Court in I.A. No.1 of 2010 that in spite of the
temporary injunction granted in favour of the respondent no.1, A.C.
Thirumalaraj and Best Sellers Retail (I) Pvt. Ltd., were opening a shop in
the suit schedule property in the name of ‘Jack & Jones’ and by an order
dated 16.07.2010 the High Court restrained Best Sellers (I) Pvt. Ltd. from
carrying on business in the suit schedule property until further orders of
the High Court. Best Sellers Retail (I) Pvt. Ltd. then filed an
application M.C. No.12036 of 2010 for vacating the interim order dated
16.07.2010. By the impugned judgment, however, the High Court dismissed
the Miscellaneous Appeal and rejected the appeal for vacating the interim
order but directed the respondent no.1 to give an undertaking to the trial
court that in case respondent no.1 fails in the suit, it will compensate
the loss to A.C. Thirumalaraj and Best Sellers Retail (I) Pvt. Ltd. for not
using the suit schedule property. Aggrieved, A.C. Thirumalaraj and Best
Sellers (I) Pvt. Ltd. have filed these Civil Appeals.
6. Mr. Altaf Ahmed and Mr. A.K. Ganguly, learned senior counsel
appearing for the two appellants, submitted relying on the decision of this
Court in Kishoresinh Ratansinh Jadeja v. Maruti Corporation & Ors. [(2009)
11 SCC 229] that while passing an order of temporary injunction under Order
39 Rules 1 and 2 CPC, the Court is to consider (i) whether the plaintiff
has a prima facie case; (ii) whether balance of convenience is in favour of
the plaintiff; and (iii) whether the plaintiff will suffer irreparable loss
and injury if an order of injunction was not passed. They submitted that
the respondent no.1 itself has claimed damages of Rs.20,12,44,398/- as
alternative relief in the event the suit for specific performance of the
contract is not decreed. They argued that as the plaintiff itself had made
a claim for damages for the alleged breach of the agreement by the
defendants, the Court should not have granted the temporary injunction in
favour of the plaintiff.
7. Learned counsel for the appellants further submitted that Section
14(1) of the Specific Relief Act, 1963 provides in clause (b) that a
contract which runs into such minute or numerous details or which is so
dependent on the personal qualifications or volition of the parties, or
otherwise from its nature is such, that the court cannot enforce specific
performance of its material terms, such a contract cannot be specifically
enforced. They submitted that similarly Section 14(1) in clause (d)
provides that a contract, the performance which involves the performance of
a continuous duty which the court cannot supervise, is a contract which
cannot be specifically enforced. They submitted that the agreement between
Liberty Agencies and respondent no.1 is a contract of agency and is covered
under clauses (b) and (d) of Section 14(1) of the Specific Relief Act, 1963
and is one which cannot be specifically enforced. They submitted that
Section 14(1) of the Specific Relief Act, 1963 in clause (c) further
provides that a contract which is in its nature determinable cannot be
specifically enforced. They argued that on completion of six years from
the date of the agreement, Liberty Agencies could terminate the agreement
and the six years period had expired in the year 2011 and hence the Court
cannot specifically enforce the contract. They submitted that Section 41
(e) of the Specific Relief Act, 1963 clearly provides that an injunction
cannot be granted to prevent breach of a contract, the performance of which
would not be enforced.
8. Learned counsel for the appellants cited the decision in Indian Oil
Corporation Ltd. v. Amritsar Gas Service & Ors. [(1991) 1 SCC 533] in which
this Court has held that a contract which is in its nature determinable
cannot be enforced by the Court. They also cited the decision in Percept
D’Mark (India) (P) Ltd. v. Zaheer Khan & Anr. [(2006) 4 SCC 227] in which
this Court has held relying on the judgment of the Chancery Division in
Page One Records Ltd. v. Britton [(1968) 1 WLR 157: (1967) 3 All ER 822],
that where the totality of the obligations between the parties give rise to
a fiduciary relationship injunction would not be granted because the
performance of the duties imposed on the party in the fiduciary
relationship could not be enforced at the instance of the other party.
9. Learned counsel for the appellants further submitted that the
agreement between Liberty Agencies and the respondent no.1 was an agency
agreement and it did not create any interest whatsoever in the suit
schedule property and, therefore, the respondent no.1 was not entitled to
any injunction restraining the owner of the suit schedule property from
dealing with the property in any manner with a third party. They submitted
that in any case since the defendants had clearly stated in their
objections to the application for temporary injunction that possession of
the suit schedule property had already been delivered to a third party,
Best Sellers Retail (I) Pvt. Ltd., the trial court should not have granted
any injunction without the third party being impleaded as a defendant.
Learned counsel for the appellants submitted that the interest of the third
party has been totally ignored by the trial court and the High Court and
this is a fit case in which the order of temporary injunction should be set
aside.
10. Mr. K. K. Venugopal, learned senior counsel appearing for the
respondent no.1, on other hand, submitted that under clause B-2 of the
agreement, Liberty Agencies had given a warranty that the suit schedule
property is owned by it and that it will retain possession of the suit
schedule property until the expiry of the agreement. He submitted that
under clause D of the agreement the duration of the agreement was for a
period of twelve years from the date of the agreement and this period was
to expire in 2017 and, therefore, it is not correct, as has been contended
by the learned counsel for the appellants, that the period of the agreement
has expired. He argued that under clause E-2 of the agreement only the
respondent no.1 company had the right to terminate the agreement by giving
a written notice of not less than three months after the end of six years
from the date of the agreement and hence Liberty Agencies had no right to
terminate the agreement. He submitted that no contention can, therefore,
be raised on behalf of Liberty Agencies that the contract was determinable
in nature or that the contract had expired.
11. In reply to the contention that under Section 14(1)(b) and (d) of
the Specific Relief Act, 1963 the agreement cannot be specifically
enforced, Mr. Venugopal cited Bowstead and Reynolds on Agency for the
proposition that in exceptional cases specific performance of a contract of
agency can also be decreed by the Court. He argued that Section 42 of the
Specific Relief Act, 1963 makes it abundantly clear that where a contract
comprises an affirmative agreement to do a certain act, coupled with a
negative agreement, express or implead, not to do a certain act, the
circumstances that the court is unable to compel specific performance of
the affirmative agreement shall not preclude it from granting an injunction
to perform the negative agreement. He also cited the decision of the
Chancery Division in Donnell v. Bennett reported in 22 Ch.D. 835 where it
has been held that where there is a negative clause in the agreement, the
Court has to enforce it without regard to the question of whether specific
performance could be granted of the entire contract. He referred to clause
B-5 of the agreement which provides that Liberty Agencies shall only sell
the products supplied by the respondent no.1 company and shall not sell any
other articles/products manufactured by any other person/Company/Firm in
the premises during the period of the agreement unless approved by the
respondent no.1 company. He submitted that this is not a case where the
appellants are entitled to any relief from this Court under Article 136 of
the Constitution of India.
12. It is not necessary for us to deal with the contentions of learned
counsel for the parties based on the provisions of Sections 14, 41 and 42
of the Specific Relief Act, 1963 because Section 37 of the said Act makes
it clear that temporary injunctions are to be regulated by the CPC and not
by the provisions of the Specific Relief Act, 1963. In fact, the
application for temporary injunction of respondent no.1 before the trial
court is under the provisions of Order 39 Rules 1 and 2 read with Section
151 of the CPC. It has been held by this Court in Kishoresinh Ratansinh
Jadeja v. Maruti Corporation & Ors. (supra) that it is well established
that while passing an interim order of injunction under Order 39 Rules 1
and 2 CPC, the Court is required to consider (i) whether there is a prima
facie case in favour of the plaintiff; (ii) whether the balance of
convenience is in favour of passing the order of injunction; and (iii)
whether the plaintiff will suffer irreparable injury if an order of
injunction would not be passed as prayed for. Hence, we only have to
consider whether these well-settled principles relating to grant of
temporary injunction have been kept in mind by the trial court and the High
Court.
13. On a reading of clause B-2 of the agreement, we find that Liberty
Agencies had given a warranty that the suit schedule property was owned by
it and that it will retain the possession of the suit schedule property
until the expiry of the agreement. Clause D of the agreement clearly
stipulated that the duration of the agreement shall be for a period of
twelve years from the date of the agreement unless terminated in accordance
with the provisions of the agreement. Clause E-2 further provides that
respondent no.1 and not Liberty Agencies could terminate the agreement by
giving a notice of not less than three months after the end of six years
from the date of the agreement and respondent no.1 had not terminated the
agreement under this clause. Before the expiry of six years from the date
of the agreement, Liberty Agencies sent the letter dated 26.02.2010 to the
respondent No.1 committing a breach of clause B-2 of the agreement which
provided that Liberty Agencies will retain possession of the suit schedule
property until the expiry of the agreement. This was the breach of the
agreement which was sought to be prevented by the trial court by an order
of temporary injunction. The trial court and the High Court were thus
right in coming to the conclusion that the respondent no.1 had a prima
facie case.
14. Yet, the settled principle of law is that even where prima facie
case is in favour of the plaintiff, the Court will refuse temporary
injunction if the injury suffered by the plaintiff on account of refusal of
temporary injunction was not irreparable. In Dalpat Kumar & Anr. v.
Prahlad Singh & Ors. [(1992) 1 SCC 719] this Court held:
“Satisfaction that there is a prima facie case by itself is not
sufficient to grant injunction. The Court further has to satisfy that
non-interference by the Court would result in “irreparable injury” to
the party seeking relief and that there is no other remedy available
to the party except one to grant injunction and he needs protection
from the consequences of apprehended injury or dispossession.
Irreparable injury, however, does not mean that there must be no
physical possibility of repairing the injury, but means only that the
injury must be a material one, namely, one that cannot be adequately
compensated by way of damages.”
15. In the present case, the respondent no.1 itself had claimed in the
plaint the alternative relief of damages to the tune of Rs.20,12,44,398/-
if the relief for specific performance was to be refused by the Court and
break-up of the damages of Rs.20,12,44,398/- claimed in the plaint was as
follows:
“I. Net Book stock amount on 28.02.2010 is Rs.1,15,97,638/-.
II. Loan amount due as on 27.01.2010 is Rs.44,81,584/-.
III. Amount due as per Statement of Accounts as on 28.02.2010 is
Rs.20,65,176/-.
IV. Projected Loss of profit on sales, for the balance 7 year term
of the Agency Agreement amounts to a sum of Rs.10,31,00,000/-.
V. Loss of Goodwill, Reputation including amount spent on
advertisement Rs.2,00,00,000/-.
VI. Loss of amount which Plaintiff would incur for relocating the
store to other place in the Brigade Road, Bangalore and to
continue its business for rest of the term 7 years would
amount to Rs.6,00,00,000/- along with simple interest at the
rate of 24% p.a. from the date of payment till realization as
the same being a commercial transaction.”
16. Mr. Venugopal, learned counsel appearing for the respondent no.1,
however, submitted that future profits and loss of goodwill of the
respondent no.1 cannot be calculated in terms of the money, but the
aforesaid statement of damages claimed by the respondent no.1 in the
plaint would show that the respondent no.1 has itself calculated a
projected loss of profit for the balance seven year term of the
agreement as Rs.10,31,00,000/- and has also assessed loss of
goodwill at Rs.2,00,00,000/- besides the loss of Rs.6,00,00,000/- in
relocating the store to another place in Brigade Road, Bangalore.
17. Despite this claim towards damages made by the respondent no.1 in
the plaint, the trial court has held that if the temporary
injunction as sought for is not granted, Liberty Agencies may lease
or sub-lease the suit schedule property or create third party
interest over the same and in such an event, there will be
multiplicity of proceedings and thereby the respondent no.1 will be
put to hardship and mental agony, which cannot be compensated in
terms of money. Respondent no.1 is a limited company carrying on
the business of readymade garments and we fail to appreciate what
mental agony and hardship it will suffer except financial losses.
The High Court has similarly held in the impugned judgment that if
the premises is let out, the respondent no.1 will be put to hardship
and the relief claimed would be frustrated and, therefore, it is
proper to grant injunction and the trial court has rightly granted
injunction restraining the partners of Liberty Agencies from
alienating, leasing, sub-leasing or encumbering the property till
the disposal of the suit. The High Court lost sight of the fact
that if the temporary injunction restraining Liberty Agencies and
its partners from allowing, leasing, sub-leasing or encumbering the
suit schedule property was not granted, and the respondent no.1
ultimately succeeded in the suit, it would be entitled to damages
claimed and proved before the court. In other words, the respondent
no.1 will not suffer irreparable injury. To quote the words of
Alderson, B. in The Attorney-General vs. Hallett [153 ER 1316:
(1857) 16 M. & W.569]:
“I take the meaning of irreparable injury to be that which, if not
prevented by injunction, cannot be afterwards compensated by any
decree which the Court can pronounce in the result of the cause.”
18. For the aforesaid reasons, we set aside the order of temporary
injunction passed by the trial court as well as the impugned
judgment and the order dated 16.07.2010 of the High Court. The
appeals are allowed with no order as to costs.
.……………………….J.
(A. K. Patnaik)
………………………..J.
(Swatanter
Kumar)
New Delhi,
May 08, 2012.
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