JUDGMENT
Subhro Kamal Mukherjee, J.
1. Universal Petro-Chemicals Limited (Universal in short) institutes this suit, inter alia, praying for a decree for perpetual injunction restraining the defendant Nos. 1 and 2 from marketing in India any lubricant and in particular finished automotive and industrial lubricant under the brand name Aral or by using the design of Aral; perpetual injunction restraining the defendant No. 3 from allowing or permitting anybody other than the plaintiff to market finished automotive and industrial lubricant in India under the trademark Aral or design of Aral; declaration that collaboration agreement dated November 1, 1994 read with supplementary agreements dated January 3, 1995 and December 27, 2002 and the agreement upon trademark and design are operating, subsisting and binding upon the defendants till December 31, 2009; declaration that the letter of termination dated April 14, 2004 is void and cancelled and for perpetual injunction restraining the defendant No. 3 from taking any step or from giving any effect to the said letter of termination; perpetual injunction restraining the defendant No. 3 from acting contrary to or in breach of the said collaboation agreement and the agreement upon trade mark and design and the defendant Nos. 1 and 2 from procuring breach thereof or acting contrary thereto in any manner whatsoever; decree for specific performance of the said collaboration agreement and the agreement upon trade marks; perpetual injunction restraining the defendant No. 3 from interfering with the right of the plaintiff to market its products of finished automotive and industrial lubricant under the trade mark Aral and by use of Aral design.
2. In the said suit, BP p.l.c. (BP in short), Castrol India Limited (Castrol in short) and Aral Aktiengesellschaft (Aral in short) have been impleaded as defendant Nos. 1, 2 and 3 respectively.
3. In connection with the said suit Universal files an interlocutory application praying for an order of injunction to restrain the defendant Nos. 1 and 2 from marketing in India any lubricant including finished automotive and industrial lubricant under the brand name Aral or using the design of Aral; injunction restraining the defendant No. 3 from allowing marketing of finished automotive and industrial lubricant in India by anybody other than the plaintiff under the trade mark Aral or design of Aral; injunction restraining the defendant No. 3 from taking any step or giving any effect to the said letter of termination dated April 14, 2004 in any manner whatsoever; injunction restraining the defendant No. 3 from acting in any manner contrary to or in breach of the said collaboration agreement and the agreement upon trade mark and design and to restrain the defendant Nos. 1 and 2 from procuring breach thereof or acting contrary thereto in any manner whatsoever; injunction restraining the defendants from interfering with the plaintiff’s right to market its product of finished automotive and industrial lubricant under the trade mark Aral and by using of Aral design.
4. I am considering the said interlocutory application for injunction.
5. The relevant facts, which are material for disposal of the said interlocutory application, are as under:
On November 1, 1994 Universal and Aral entered into a collaboration agreement for distribution of finished Aral lubricants by Universal in India, blending of Aral lubricants by Universal in India, rebranding of Universal lubricants to the Aral brand name by Universal in India, marketing and technical support by Aral to Universal for sale of the above mentioned products.
6. The relevant clauses of the said agreement are Clauses 1, 2, 5, 9 and 11.
7. Under Clause 1 of the agreement it was agreed that Aral would grant Universal an exclusive licence and right to market and distribute Aral product lines of finished automotive and industrial lubricants, including any and all modifications, improvements and additions, in India. Universal would be permitted to market certain commodity of lubricants manufactured in accordance with international specifications under the brand name of Aral in India, provided, however, approval by written notice in each individual case was to be obtained from Aral. After the initial three years terms, the agreement might be terminated by Universal or Aral by registered letter by giving six months notice if the objectives mutually agreed upon were not reached. After the initial term, the agreement should be prolonged for a term of additional five years and should be extended automatically for periods of two years if notice of termination is not given before six months of the date of termination by either party. At any time during the term, either party might terminate the agreement in the event of either party failed to fulfill the agreement, but after giving a written notice and giving an opportunity to cure the failure. During the currency of the agreement, Aral and its subsidiaries would not market and distribute the Aral products in India nor permit or authorise or support any other person to market or distribute products under the Aral brand name within India. It was agreed that the distribution rights should include the right to use all trademarks, trade names, service marks and related copyrights of Aral under the Aral brand name in connection with the marketing and distribution of the products in India.
8. On the said November 1, 1994 an agreement upon trademark and design was executed by and between the said parties and it was agreed that the said agreement should last as long as the collaboration agreement remained valid.
9. Since Universal was entering into a technical collaboration with Aral, a foreign company, approval was necessary from the Reserve Bank of India to enter into such technical collaboration. The Reserve Bank of India on November 25, 1994 granted such approval under the Foreign Exchange Regulation Act, 1973, but on certain conditions. It was indicated in the said letter of approval dated November 25, 1994 that the duration of the agreement would be for ten years from the date of agreement or seven years from the date of commencement of the commercial production and the said letter of approval should from part of the collaboration agreement.
10. The Reserve Bank of India by a letter dated December 21, 1994 asked the plaintiff to execute a supplementary agreement incorporating the said approval letter as part of the collaboration agreement.
11. It was agreed by the parties that the agreement should be subject to Indian Laws.
12. Universal by a letter dated December 28, 1994 informed Aral that the approval of the Reserve Bank of India for foreign collaboration between any Indian company and its foreign collaborator was imperative and that such approval of the Reserve Bank of India should from part of the collaboration agreement. Universal, therefore, requested Aral to execute a supplementary agreement. However, it was made clear that the supplementary agreement would not disturb the original agreement in letter or in spirit.
13. Accordingly, on January 3, 1995 a supplementary agreement was executed between the parties.
14. On August 8, 1995 Universal entered into an agreement with Motor Industries Company Limited (MICO in short) for supply of automotive lubricants bearing trademark Aral manufactured in technical collaboration and under licence from Aral for sale in India in such quantity as ordered by MICO.
15. With effect from January 1, 1996 the plaintiff started actual production of automotive lubricants under the said collaboration agreement.
16. Sometime in July, 2000 BP acquired majority shareholding in Burmah Castrol Holding Limited, UK, the holding Company of Castrol.
17. Universal received a letter dated December 20, 2001 from the Product Manager of MICO alleging that the representatives of the Castrol were spreading rumours in the market that Castrol would, also, be marketing Aral brand of lubricants in India.
18. Universal sought for clarifications from Aral in view of the letter dated December 20, 2001 received from MICO and Aral informed Universal that the argument used by the representatives of Castrol seemed to Aral as wishful thinking.
19. However, sometime in February, 2002 BP acquired majority shares of Veba Oil, the parent company of Aral. By July, 2002 BP acquired the entire share capital of Veba Oil and Veba Oil, parent company of Aral, became wholly owned subsidiary of BP.
20. Before expiry of the period of collaboration agreement negotiations took place between the plaintiff and Aral for extension of the term of the collaboration agreement and on July 3, 2002, as per mutual decision, an application was made to the Government of India for approval for extension of the tenure of the said collaboration agreement. The Government of India, Ministry of Commerce and Industries, by a letter dated November 13, 2002 conveyed the approval for extension of the approval of the Reserve Bank of India dated November 25, 1994 subject to certain terms and conditions. It was suggested that the duration of the agreement should be for seven years from the date of expiry of the earlier agreement, that is, between January 1, 2003 to December 31, 2009 and royalty should be paid for the extended period of collaboration agreement.
21. On December 27, 2002 a supplementary agreement was executed between Universal and Aral declaring that the letter of approval from the Reserve Bank of India and the approval for extension granted by the Government of India by letter dated November 13, 2002 should form part of the collaboration agreement.
22. As MICO expressed its concern over the rumours spread in the market about taking over of Aral brand by Castrol in India, joint meetings were held in Germany sometime in July, 2003 and the meetings were attended by representatives of Aral, Universal and MICO. In the meeting, which was attended by the representatives of Universal, apprehension was allegedly expressed by the representatives of the Aral that it would be difficult to exit the agreements with Universal. However, it is, also, recorded in the minutes of the meeting dated July 3, 2003 that the current contract was to be terminated in October, 2004.
23. On July 10, 2003 the Finance Director of Castrol sent an e-mail message to an executive of Aral, after obtaining legal advice, that the current arrangements between Aral and Universal would expire at the end of October, 2004 and as such notice was to be given to Universal in April, 2004 that the agreement would not be renewed after October, 2004 and that Universal would have no legal right of marketing Aral products after October, 2004.
24. By sending e-mail on August 21, 2003 Hans Hermann Brunhold, an executive of Aral, conveyed no objection if Universal would introduce a low quality of pump oil within the Universal product range. The said executive of the Aral informed Universal that the Finance Director of Castrol has taken legal opinion to terminate the contract of Aral with Universal. Universal was, further, informed that the Vice-President of BP was requesting for issue of termination letter from Aral to Universal informing Universal that Aral was given six months notice of termination.
25. On April 14, 2004 Aral issued a letter giving Universal notice that the aforesaid agreements for collaboration and agreement upon trademark and design would stand terminated on October 31, 2004 and would not stand extended any further after October 31, 2004. It was pointed out that the said collaboration agreement was for initial term of three years and could be prolonged for a term of additional five years and, thereafter, should be extended automatically for period of two years if either party did not issue notice of termination six months before date of termination. The initial term of three years of the agreement expired on October 31, 1997 and the term of additional five years expired on October 31, 2002. Thereafter, the automatic extension of two years would expire on October 31, 2004.
26. Mr. Anindya Kumar Mitra, learned senior advocate, appearing in support of this application for injunction, submits that the collaboration agreement and the agreement upon trade mark, in view of the execution of the supplementary agreements as per the directions of the Reserve Bank of India and the Government of India incorporating the approvals, the agreement for collaboration and the agreement upon trade mark and design are subsisting at least up to 2009. Mr. Mitra, therefore, submits that the letter dated October 14, 2004 proposing to terminate the agreement is totally bad, as it could not be terminated before 2009. The supplementary agreements were not only executed incorporating the approval of the Reserve Bank of India and the Government of India, but they were acted upon inasmuch as Aral accepted royalties from Universal as per the approval granted by the Reserve Bank of India and the Government of India. Mr. Mitra submits that there is a negative covenant in the agreement; it was provided in the agreement that during the currency of the agreement Aral and its subsidiaries or affiliates will not market or distribute the Aral products within India nor permit or authorise or support any other person to market or distribute products under the Aral brand name within India. Therefore, Mr. Mitra submits that the Universal is entitled to an order of injunction, as prayed for in the application. Mr. Mitra draws my attention to the correspondences between BP, Castrol and Aral and submits that BP and Aral are procuring breach of contract by asking Aral to terminate the agreement between Aral and Universal. Mr. Mitra submits that such breach of negative covenant can be restrained by an order of temporary injunction nor the defendants are entitled to procure breach of contract. In support of his contentions Mr. Mitra cites the decisions in the cases of Parma Singh v. Tulsi Charan Goswami reported in 41 CWN 794, Jairam Valjee v. Indian Iron & Steel Co. Ltd. , Vijaya Minerals Pvt. Ltd. v. Bikash Chandra Deb , Frank Simoes Advertising (P) Ltd v. Hada Leasing & Industries Ltd. and Anr., , Gujarat Bottling Co. Ltd. and Ors. v. Coca Cola Co. and Ors. , Crofter Hand Woven Harris Tweed Company Ltd. & Ors. and Veitch & Anr. reported in 1942 AC 435, Torquay Hotel Co. Ltd. v. Cousins and Ors. reported in 1969(2) Ch. 106, Evans Marshall & Co. Ltd. v. Bertola S.A. and Anr. reported in 1973(1) AER 992 & Lonrho PLC & Fayed & Ors., 1992(1) AC 448. Mr. Mitra submits that the fact that damage may afford relief to the plaintiff is not a bar for injuntion being granted to enforce negative covenant and in this connection he cites the decision in the case of Prestige Pictures v. Sree Krishna Cinema (P) Ltd., reported in ILR 1970(2) Cal 109. Mr. Mitra submits that the Court has full power to grant any interlocutory application including one which might mean granting substantially relief claimed in the suit. In this connection, he cites the decisions in the cases of Chanda Jhun Jhunwala and Anr. v. State of West Bengal and Ors. reported in 89 CWN 924 & Central Bank of India v. Usha Aluminium Industries reported in 1995(2) CLJ 405.
27. Mr. Sudipta Sarkar, learned senior advocate, appearing for the defendant No. 3 (Aral), submits that the present application for interim relief is not maintainable. Mr. Sarkar submits that the contract was a terminable contract and Aral is within its right to terminate the contract. Mr. Sarkar submits that the plaintiff can be adequately compensated by monetary compensation in case of success in the suit and as such is not entitled to any order of injunction. Mr. Sarkar submits that the Reserve Bank of India was only concerned with payment of royalties in connection with foreign collaboration agreement and the approvals granted by the Reserve Bank of India and the Government of India are to be read in the aforesaid context. The duration suggested by the Reserve Bank of India and the Government of India was indicative of the maximum period for which royalty could be paid by Universal to Aral. Moreover, it was clear to the parties that the supplementary agreements do not disturb the original agreement in letter of spirit. Mr. Sarkar submits that the current contract was valid only up to October 31, 2004 and, therefore, rightly Aral terminated the contract by giving six months notice before such expiration. Mr. Sarkar submits that in a suit for enforcement of negative covenant the Court is not bound to grant an interim injunction in every case. Mr. Sarkar, further, submits that Universal knew, long prior to filing of the suit, that Aral insisted that the contract was terminable one and could be terminated by giving six months notice. Aral always proceeded on the basis that the duration of the contract was up to October 31, 2004. Universal never asserted that they were enjoying a fixed duration contract up to 2009. At the highest the contract is up to 2009 and Universal could be adequately compensated by pecuniary damages in the event at the trial it is proved that the order of termination is bad in law. Mr. Sarkar submits that Universal is manufacturing engine oil under the brand name “Haritshakti” and as such on account of termination of the agreement, Universal shall not suffer any loss. Mr. Sarkar in this connection cites the decisions in the cases of Republic Stores (Trade) v. Jagajit Industries Ltd. reported in 81 CWN 646, Cotton Corporation of India Limited v. United Industrial Bank Limited and Ors. , Gujarat Bottling Co. Ltd, and Ors. v. Coca Cola Co. and Ors. , Colgate Palmolive (India) Ltd. v. Hindustan Lever Ltd. and Texaco Ltd. v. Mulberry Filling Station Ltd. reported in 1972(1) AER 513.
28. Mr. P.C. Sen, learned senior advocate, appearing for the defendant No. 2 (Castrol), submits that there has been no breach of negative covenant nor the defendant No. 2 is procuring any breach of negative covenant. Mr. Sen submits that the reliance placed by Universal on the approval granted by the Reserve Bank of India is misplaced one inasmuch as the Reserve Bank of India is only concerned with payment of royalty to the foreign collaborator. Mr. Sen cites the decisions in the cases of Dorab Cawasji Warden v. Coomi Sorab Warden and Ors. , Hindustan Petroleum Corporation Limited v. Sriman Narayan and Anr. and BSES Ltd. v. Tata Power Company Limited and Ors. reported in 2001(4) SCC 195.
29. Mr. D. N. Sharma, learned advocate for the defendant No. 1 (BP) and he adopts the argument advanced by Mr. Sen and Mr. Sarkar.
30. In my opinion, it is not necessary to deal with all those authorities in details inasmuch as the principles for grant of temporary injunction are well known.
31. The grant or refusal of a temporary injunction is covered by three well-established principles, that is, (a) whether the petitioner has made out a prima facie case; (b) where the balance of convenience lies; and (3) whether the petitioner would suffer irreparable loss and injury. With the first condition as sine qua non the petitioner is to prove two conditions conjunctively. Mere proof of one of the three conditions does not entitle a petitioner to an order of temporary injunction. An interim arrangement is normally made on a prima facie consideration of the matter and on broad principles without examining the matter in depth.
32. The Supreme Court of India in Gujarat Bottling Co. Ltd. & Ors. (supra), inter alia, observes that the Court is, however, not bound to grant an injunction in every case.
33. In this case, Universal insists that they are enjoying a fixed duration contract, which is valid till 2009. This argument is based primarily on the basis that Universal and Aral executed supplementary agreements as per the direction of the Reserve Bank of India and the Government of India making the conditions as integral part of the collaboration agreement.
34. On the contrary, it is suggested by the defendants that the contract was valid up to October, 2004 and Aral is within its right to terminate the contract by giving six months prior notice. Consequently, in April, 2004 Aral issued a notice terminating the contract.
35. Prima facie, I find substance in the contention of the defendants that the agreement was valid till October 31, 2004 inasmuch as the Government of India and the Reserve Bank of India were concerned only about payment of royalties to the foreign collaborator and the approvals are to be looked into from the angel. The parties knew all through that the original terms and conditions arrived at between the parties were never disturbed in letter or in spirit; it is clear from a letter issued by Universal on December 28, 1994 to Aral. There is no convincible material available on the records that before the termination of the agreement Universal ever asserted that the contract was valid till 2009.
36. Prima facie, I am of the opinion that Aral was within its right to issue the said letter of termination. I do not find that either BP or Castrol procured any breach of covenant. Holding company and subsidiary company are incorporated companies and each is a separate legal entity. Even the petitioner in the plaint, particularly in paragraph 31 thereof, admitted that Aral was continued to be managed by the executives as a separate and independent corporate entity.
37. Assuming, for the sake of argument, that the contract was valid till 2009, still Universal is not entitled to any order of injunction at this stage inasmuch as at the final ‘hearing Universal can be compensated by pecuniary damages.
38. The Supreme Court of India in the case of Hindustan Petroleum Corporation Limited (supra) holds that objects of the interlocutory injunction is to protect the plaintiff against injury by violation of its right for which it could not be adequately compensated in damages recoverable in the action if the uncertainty is resolved in his favour at the trial. The Court must way and determine where the balance of convenience lies.
39. Universal, it is an admitted position, is manufacturing multi-grade engine oils under the brand name “Haritshakti”. If injunction, as prayed for, is granted Aral will not be in a position to market their products in India according to their choice and if ultimately the suit fails, their prejudice shall remain irremediable.
40. Accordingly, I reject this application for injunction. All interim orders are vacated.
41. I make it clear that the findings arrived at in dealing with the present application for injunction cannot take the place of findings in the final decision of the suit.
42. Parties are, however, directed to bear their respective costs in this application.
43. All parties are to act on a xerox signed copy of this judgment on usual undertaking.
Later :
44. After the judgment is pronounced, Mr. Tilak Bose, learned Advocate, appearing on behalf of the petitioner, prays for stay of the operation of this order.
45. Mrs. Mousumi Bhattacharjee, learned Advocate, appearing on behalf of the defendant No. 3 strongly opposes the prayer for stay.
46. Considering the facts and circumstances of this case, I feel that the ends of justice will suffice if a short stay of 10 days is granted, to the petitioner to enable it to take steps before the appropriate forum. Let there be a stay of the operation of the order for a period of 10 days from date.
47. All parties are to act on a xerox signed copy of this judgment on usual undertaking.