Usha Drager P. Ltd. v. Draegerwerk Aktiengesellschaft

Mukul Mudgal, J.:— The application (I.A No. 3171 of 2004) for interim relief arises from a suit for permanent injunction and rendition of accounts and is based upon clause 6 of the joint venture agreement (hereinafter referred to as the JVA or agreement) dated May 9, 1987, said to be in the nature of a non-compete clause between the parties.

2. The case of the plaintiff is as under:

(a) One Usha Services and Consultants Ltd. (hereinafter referred to as “Usha”) and RKKR Infotech (P.) Ltd., plaintiff No. 2 entered into a 50:50 joint venture with Draegerwerk Aktiengesellschaft (hereinafter referred to as “Draeger”), defendant No. 1 to form a joint venture company by the name of Usha Drager Pvt. Ltd., plaintiff No. 1, as per clause 4 of the agreement.

3. Article 2 of the articles of association of plaintiff No. 1 defines Drager and Usha as under:

“Article 2 of the articles of association of plaintiff No. 1 company defines Drager and reads as under:

Drager means, Dragerwark Aktiengesellschaft, a Corporation having an office at Moislinger Allee, 53-55, D 24 OO Lubeck, Federal Republic of Germany, its successors, assigns and nominees and their respective parent, subsidiary or associate companies, corporations or bodies corporate and any company, corporation or body corporate in which Drager is amalgamated or merged and their respective parent subsidiary or associate companies and bodies corporate including any company or corporation or body corporate into which any such parent, subsidiary or associate companies, corporations or bodies corporate have merged. (Therefore defendant No. 1 included all Drager group companies and their respective parent, subsidiary or associate companies)”

4. Article 2 also defines “Usha” as under:

“‘Usha’ means Usha Services and Consultants Private Limited a company incorporated under the Indian Companies Act and having its registered office at Jeevan Tara, 5, Parliament Street, New Delhi-110001, India and its successors, assigns and nominees and their respective parent subsidiary or associate companies, corporations or bodies corporate and any company, corporation or body corporate in which Usha Services and Consultants Private Limited is amalgamated or merged and their respective parent, subsidiary or associate companies and bodies corporate including any company or corporation or body corporate into which any such parent subsidiary or associate companies, corporations or bodies corporate having merged.”

5. The agreement was in respect of development, manufacture and sale of medical products of Drager and the companies directly or indirectly controlled by the Drager group. The relevant clause 6 which leads to the filing of the present suit reads as follows:

“Clause 6: The shareholders of the joint venture and their directors including their husbands/wives shall not compete in any respect directly or indirectly, neither as shareholders nor as board members, employees or consultants with the activities of the joint venture or of Drager or of any company of the Drager group in the field of the products as specified in Appendix 2.”

(b) Pursuant to the agreement dated May 9, 1987, plaintiff No. 1 was incorporated under the Companies Act. Accordingly on February 22, 1999, a distribution agreement was entered between plaintiff No. 1, Usha Drager and Draegerwerk's AG, defendant No. 1, group company for the exclusive sale of the products of M/s. Drager Medizintechnil GmbH presently known as Draeger Medical AG and companies, KGaA proposed defendant No. 2. On February 15, 2002, the name of M/s. Draeger Medical Pvt. Ltd. was changed to M/s. Draeger Medical (I) Pvt. Ltd. Thereafter certain disputes arose between Usha and Draeger groups leading to the termination of the distribution agreement on June 18, 2003.

(c) In spite of objection to the termination of distributorship agreement dated February 22, 1999, another company was set up by the Draegerwerk's AG, i.e, defendant No. 1, by the name of Draeger Medical (I) Pvt. Ltd. proposed defendant No. 2. The shareholders in this company comprise only of the power of attorneys and the lawyers of the defendant. Since the defendant was effecting sales in India directly to itself or through its group of companies and further there had been instances of competing with the customers of plaintiff No. 1. Clause 6 was thus violated, leading to the filing of the present suit with the following prayer:

“(i) Pass a decree of a permanent injunction in favour of the plaintiffs and against the defendant restraining the defendant and its group companies or subsidiary companies or any company in which the defendant or its shareholders hold any shares from carrying out any business in India in competition with plaintiff No. 1, including selling their medical appliances/equipment/apparatus in India except to or through plaintiff No. 1;

(ii) Pass a decree of rendition of accounts, directing the defendant to render accounts of all sales made by it or by its group/subsidiary companies directly or indirectly in lndia and a decree for payment of 20 per cent commission on all such sales along with interest at 13 per cent per annum”

6. The prayer in the application for injunction reads as follows:

“A. Pass an order of temporary injunction in favour of the plaintiffs and against the defendant restraining the defendant and its group companies or subsidiary companies or any company in which the defendant or its shareholders hold any shares from carrying out any business in India in competition with plaintiff No. 1, including selling their medical appliances/equipment/apparatus in India except to or through plaintiff No. 1.

B. ex parte orders in terms of prayer A above.”

7. The sum and substance of the defendant's case is:

(a) no contract whatsoever, exists between the joint venture and Draeger. Therefore, the plaintiff could not be permitted to seek an injunction in respect of a contract to which the plaintiff is not a party;

(b) without impleading Draeger Medical as a party in the present suit, the plaintiff cannot seek to lift the corporate veil of the said company;

(c) Usha and not UDPL is entitled to enforce the non-compete clause in the joint venture agreement;

(d) since Usha Services does not hold any shares in UDPL, the joint venture has ceased to exist;

(e) the plaintiff, in the guise of seeking an injunction and claiming damages for breach of contract cannot be permitted to claim specific performance of the said contract. Thus, even if it is assumed that the plaintiff has the locus standi, specific performance should not be granted since compensation in money for non-performance would afford adequate relief in the present case.

8. An application I.A No. 4241 of 2004 was filed by the plaintiff seeking the impleadment of M/s. Draeger Medical AG and Co. KGaA, M/s. Draeger Medical India Pvt. Ltd. and M/s. H.L Medical Systems Pvt. Ltd. as defendants Nos. 2, 3 and 4 respectively. An application, I.A No. 4906 of 2004, had also been filed by defendant No. 2 seeking its deletion from the array of parties on the plea that the defendant is not carrying on its business activities in India directly or indirectly through plaintiff No. 1.

9. Thus in sum and substance what is to be determined is the scope and effect of clause 6 of the agreement and whether this covenant was applicable and enforceable in the facts and circumstances of the present case.

10. The plaintiff's case is thus—

(a) Primarily founded on the plea that the phrase “another company of the Draeger group” contained in clause 6 of the agreement covers the three proposed defendants mentioned in I.A No. 4241 of 2004. Since the said proposed defendants derived their existence through the Draeger group and clause 6 covers such entities they are not only required to be joined as parties but are required to be injuncted from violating clause 6.

(b) That the joint venture is the ultimate victim of the acts of the defendants and the proposed defendants.

(c) That it is the defendant who is blackmailing the plaintiff as is evident from the e-mail of Mr. Alain Rastouil dated June 14, 2002, wherein it was stated that unless plaintiff No. 1 is converted into a subsidiary of the Draeger group with 51 per cent of its shares to be with defendant No. 1, no new business plans would be presented or considered by defendant No. 1.

(d) That the original shareholders are M/s. Usha Services - 20 shares, RKKR - 20 shares, Anil Rai and Co. - 20 shares and Mr. Anil Rai - 40 shares. M/s. Usha Services ceased to be a shareholder on October 23, 1992, and the present shareholders are RKKR, Mr. Anil Rai, Mrs. Malvika Rai and Mr. Anand Rai and since shares were transferred in duly convened board meeting attended by Draeger nominees who had consented thereto, the joint venture does not cease and the assignment of the shares objected to by the defendants thus has been approved by virtue of the board meeting attended to by the Draeger nominees.

(e) That the present suit has not been filed for the termination of the distributorship agreement or the damages arising out of such cancellation. The suit has been filed for enforcement of the non-compete clause in the joint venture agreement and sections 14 and 42 of the Specific Relief Act cannot come to the aid of the defendants. If the joint venture ceased to exist no one will be there to claim damages and the basic purpose of the application for injunction is to ensure the survival of the joint venture.

11. Dr. Singhvi, learned senior counsel for the plaintiff relied upon several judgments to seek the enforcement of clause 6, a negative covenant, but since the latest judgment on this issue of this hon'ble Supreme Court in Gujarat Bottling Co. Ltd. v. Coca Cola Co., [1995] 84 Comp Cas 618 : (1995) 5 SCC 545 : AIR 1995 SC 2372, holds the field, for the purpose of disposal of this certain application it is not necessary to consider the above judgments. Learned counsel for the petitioner relied upon para. 34 of the judgment in Gujarat Bottling Co. Ltd., [1995] 84 Comp Cas 618 : (1995) 5 SCC 545 : AIR 1995 SC 2372 which reads as follows (page 646):

“34. If the negative stipulation contained in paragraph 14 of the 1993 agreement is considered in the light of the observations in Esso Petroleum Co. Ltd., [1968] AC 269 (HL), it will be found that the 1993 agreement is an agreement for grant of franchise by Coca Cola to GBC to manufacture, bottle, sell and distribute the various beverages for which the trade marks were acquired by Coca Cola. The 1993 agreement is thus a commercial agreement whereunder both the parties have undertaken obligations for promoting the trade in beverages for their mutual benefit. The purpose underlying paragraph 14 of the said agreement is to promote the trade and the negative stipulation under challenge seeks to achieve the said purpose by requiring GBC to wholeheartedly apply to promoting the sale of the products of Coca Cola. In that context, it is also relevant to mention that the said negative stipulation operates only during the period the agreement is in operation because of the express use of the words ‘during the subsistence of this agreement including the period of one year as contemplated in paragraph 21,’ in paragraph 14. Except in cases where the contract is wholly one sided, normally the doctrine of restraint of trade is not attracted in cases where the restriction is to operate during the period the contract is subsisting and it applies in respect of a restriction which operates after the termination of the contract. It has been so held by this court in N.S Golikari, [1967] 2 SCR 378 : AIR 1967 SC 1098 wherein it has been said:

‘The result of the above discussion is that considerations against restrictive covenants are different in cases where the restriction is to apply during the period after the termination of the contract than those in cases where it is to operate during the period of the contract. Negative covenants operative during the period of the contract of employment when the employee is bound to serve his employer exclusively are generally not regarded as restraint of trade, and therefore, do not fall under section 27 of the Contract Act. A negative covenant that the employee would not engage himself in a trade or business or would not get himself employed by any other master for whom he would perform similar or substantially similar duties is not, therefore, a restraint of trade unless the contract as aforesaid is unconscionable or expressly harsh or unreasonable or one sided as in the case of W.H Milsted and Son Ltd., [1927] WN 233 (P. 389) (of SCR): (at pp. 1104-05 of AIR)’.”

12. The plea of learned counsel for the plaintiff thus is the non-compete clause 6 was very widely worded and even included the husbands and wives and thus clearly brought within its purview not only defendant No. 1 but the proposed defendants Nos. 2 to 4. Thus the question which the court is required to resolve is whether the interim injunction enforcing the negative covenant is required to be granted on the facts of the present case.

13. At this stage before the main application for interim injunction is taken up it would be appropriate to dispose of the plaintiff's application for impleadment of M/s. Draeger Medical AG and Co. KGaA, M/s. Draeger Medical India Pvt. Ltd., and M/s. H.L Medical Systems Pvt. Ltd. as defendants Nos. 2 to 4, i.e, I.A No. 4241 of 2004. Originally the averment of the applicant is that the proposed defendant No. 2 is a subsidiary group company of defendant No. 1 and the proposed defendant No. 2 was formed by defendant No. 1 for its sales in India taking the impact of negative covenant clause 6 of the agreement. It is not in dispute that the companies, defendants Nos. 2 and 3 are part of the Draeger group.

14. On the other hand the case set up by learned senior counsel for defendant No. 1, Shri Rajiv Nayyar, is that the proposed defendant No. 2 is not a party to clause 6 of the agreement and consequently no privity of contract exists in favour of proposed defendant No. 2. It has also been submitted that defendant No. 2 is a separate and distinct entity and no cause for lifting the corporate veil has been made out. Similar pleas have also been taken in regard to proposed defendant No. 3.

15. In my view clause 6 of the agreement contemplates “any company of the Draeger group” in the competing field of the products and it is not in dispute that the proposed defendants Nos. 2 and 3 are group companies of defendant No. 1. It is also evident that—

(i) The proposed defendants Nos. 2 and 3 are part of the very same Draeger group. The website of the Draeger group duly depicts that both defendant No. 1 and proposed defendant No. 2, who is directly competing with the business of plaintiff No. 1 are an integral and fundamental part of the Draeger group. The relevant extracts from copy of the website download of Draeger group are as follows:

“For customers, frequently asked questions concerning the joint venture (between Draeger AG and Siemens AG), dated April 30, 2003,

Draegerwerk AG integrates its division Draeger Medical AG and Co. KGaA with all its world wide business activities….”

Company Overview, Dated September 4, 2004

“Effective July 1, 2003, Draeger Medical AG and Co. KGaA is a 65:35 joint venture Co. between Draegerwerk AG and Siemens AG.” (para. 3)

“Draeger Medical is the largest division of Draegerwerk AG” (para. 5)

Structure of the Draeger Group, dated September 4, 2004, page 19: Draeger WERK AG

Draeger Work AG Subgroups Draeger Medical AG and Co KGaA 65% Draeger Safety AG and Co GmbH 100% Subsidiaries in Germany and Abroad Subsidiaries in Germany and Abroad Other Interservices companies

(i) Therefore, it is evident from the website of the defendant that the defendant and proposed defendant No. 2 are interconnected and linked together and are a part of the Draeger group.

(ii) Clause 6 of the joint venture agreement clearly states and uses the phrase “any co. of The Draeger Group”. Therefore, it is immaterial that the proposed defendants are not parties to the joint venture agreement. As rightly contended by the plaintiff, in a broader sense, there is a privity of contract between the constituents Draeger group and Usha group. If clause 6 is construed in the manner pleaded by the defendants, then it would be meaningless and all that a defaulting party has to do to get over a negative covenant such as clause 6 is to plead that the entity said to be violating the covenant, though a group company is not a signatory to the agreement and not bound by such a covenant. Such a construction would render the negative covenant totally nugatory and cannot be countenanced.

16. Hence, the proposed defendant No. 2 is a proper party in the present suit and is allowed to be impleaded as such. The defendant has already set up a company by the name of Draeger Medical India Pvt. Ltd., proposed defendant No. 3, which was actually to be the changed name of plaintiff No. 1 company as per the board meeting dated February 15, 2002. Hence the proposed defendant No. 3 is also required to be joined as a party. Furthermore, it is also a Draeger group company covered under clause 6 of the agreement. Accordingly, it would be appropriate and indeed in the interest of justice that since both the proposed defendants Nos. 2 and 3 are group companies of the Draeger group and would thus fall within the scope and ambit of clause 6 of the agreement, they are required to be impleaded as defendants Nos. 2 and 3. Whether or not the proposed defendants Nos. 2 and 3 are necessary parties, they certainly are proper parties.

17. In so far as the proposed defendant No. 4 is concerned, after the hearing on May 17, 2004, in the present suit, when the defendant appeared through its counsel, the said Draeger Medical AG and Co. KGaA caused a public notice to be published in the Economic Timesannouncing that M/s. H.L Medical Systems Pvt. Ltd. would be their exclusive distributor for their products for the territory of India. This act of the defendants, shows beyond doubt that the defendants are distributing through its exclusive distributor H.L Medical Systems Pvt. Ltd. (proposed defendant No. 4) the products of the defendant as is evident from the public notice published in the Economic Times and the violation of clause 6 has been averred to be achieved through the distribution of the products through defendant No. 4. This defendant is also thus required to be impleaded as defendant No. 4 as the violation of clause 6 is being sought to be achieved through the medium of defendant No. 4.

18. Accordingly, the proposed defendants Nos. 2 to 4 mentioned in this application are impleaded as defendants Nos. 2 to 4 and the application stands allowed and disposed of. Amended memo of parties be filed by the plaintiff within 2 weeks.

19. In view of the foregoing reasons given in I.A No. 4241 of 2004 I am not inclined to grant the prayer made in the application, I.A No. 4906 of 2004, filed by the defendant for deletion of its name from the array of parties. Furthermore, it has been averred in the application that the defendant is not carrying on any business of distribution of medical equipment in India directly or indirectly in India, other than through plaintiff No. 1 company. In my view this is a matter which is to be determined at the time of hearing of the suit. Accordingly on this ground alone the application cannot be allowed at this stage and the same is rejected.

20. In reply to the reliance by learned counsel for the plaintiff on paragraph 34 of the judgment of the Gujarat Bottling Co. Ltd., [1995] 84 Comp Cas 618 : (1995) 5 SCC 545 : AIR 1995 SC 2372, learned senior counsel for the defendant, Mr. Arun Jaitley, has relied on paragraphs 45 and 46 of the said judgment, the relevant portion of which judgment are as under:

“45. In the matter of grant of injunction, the practice in England is that where a contract is negative in nature, or contains an express negative stipulation, breach of it may be restrained by injunction and injunction is normally granted as a matter of course, even though the remedy is equitable and thus in principle a discretionary one and a defendant cannot resist an injunction simply on the ground that observance of the contract is burdensome to him and its breach would cause little or no prejudice to the plaintiff and that breach of an express negative stipulation can be restrained even though the plaintiff cannot show that the breach will cause him any loss (see: Chitty on Contracts, 27th Edn., Vol. I, General Principles, para. 27-040 at p. 1310; Halsbury's laws of England, 4th Edn. Vol. 24, para. 992). In India section 42 of the Specific Relief Act, 1963 prescribes that notwithstanding anything contained in clause (e) of section 41, where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the circumstance 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. This is subject to the proviso that the plaintiff has not failed to perform the contract so far as it is binding on him. The court is, however, not bound to grant an injunction in every case and an injunction to enforce a negative covenant would be refused if it would indirectly compel the employee either to idleness or to serve the employer. (See: Ehrman v. Bartholomew, [1898] 1 Ch 671; N.S Golikari, [1967] 2 SCR 378 at p. 389) : (AIR 1967 SC 1098 at p. 1104).

46. The grant of an interlocutory injunction during the pendency of legal proceedings is a matter requiring the exercise of discretion of the court. While exercising the discretion the court applies the following tests—(i) whether the plaintiff has a prima fade case; (ii) whether the balance of convenience is in favour of the plaintiff; and (iii) whether the plaintiff would suffer an irreparable injury if his prayer for interlocutory injunction is disallowed. The decision whether or not to grant an interlocutory injunction has to be taken at a time when the existence of the legal right assailed by the plaintiff and its alleged violation are both contested and uncertain and remain uncertain till they are established at the trial on evidence. Relief by way of interlocutory injunction is granted to mitigate the risk of injustice to the plaintiff during the period before that uncertainty could be resolved. The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial. The need for such protection has, however, to be weighed against the corresponding need to the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated. The court must weigh one need against another and determine where the balance of convenience lies, (see: Wander Ltd. v. Antox India P. Ltd., [1990] (Suppl.) SCC 727 at pp. 731-32). In order to protect the defendant while granting an interlocutory injunction in his favour the court can require the plaintiff to furnish an undertaking so that the defendant can be adequately compensated if the uncertainty were resolved in his favour at the trial.”

21. While it is not in doubt that negative covenant could be enforced by an injunction, nevertheless the principles informing and guiding the grant of interlocutory injunctions as set out in paragraph 46 of the Gujarat Bottling Co. Ltd., [1995] 84 Comp Cas 618 : (1995) 5 SCC 545 : AIR 1995 SC 2372, judgment, and extracted above, would nevertheless continue to govern these proceedings.

22. Applying the aforesaid position, the following factual situation emerges:

(a) The plaintiffs have a prima fade case as it has been demonstrated that clause 6 of the JVA operates between plaintiff No. 1 and defendant No. 1 and the newly joined defendants Nos. 2 to 4 may be injuncted to enforce clause 6 even though they are not signatories but are nevertheless group companies and associates of defendant No. 1 contemplated by clause 6 of the JVA

(b) The balance of convenience between the Usha and Draeger group appears to be even. A dispute about the control of plaintiff No. 1 company between the Usha group and the Draeger group is pending in this court for determination and to avoid a deadlock in the governance of the company in addition to the directors of each group, an independent chairman. Mr. Justice A.B Saharia, a former Chief Justice of the Punjab and Haryana High Court has been appointed to preside over the meetings of the board of directors and has been functioning. Both the Draeger and the Usha group hold equal number of shares in plaintiff No. 1 company and thus are equal owners of the plaintiff company. In view of the protracted litigation about the control of plaintiff No. 1 company, the balance of convenience cannot be said to exist either in favour of the Usha or Draeger group. However, since clause 6 operated to safeguard the position of plaintiff No. 1, irrespective of the fact whether the Usha or Draeger group control it, the balance of convenience exists in favour of plaintiff No. 1;

(c) The plaintiff in its prayer for interim relief had sought that the defendant and its group or subsidiary companies be restrained from carrying out any business in India in competition with plaintiff No. 1. Apart from the fact that the reliefs in the suit sought by the plaintiff's can be compensated in money terms, even in paragraph 34 of the plaint, the cause of action is said to arise on:

(i) May 9, 1987, when the JVA was entered into between the two groups;

(ii) February 22, 1999, when the defendant caused the distributorship agreement to be executed between its subsidiary and plaintiff No. 1;

(iii) February 15, 2002, and June 14, 2002, when the defendant insisted upon 51 per cent shares as a precondition for presenting the business plans;

(iv) June 2003 when the defendant caused the termination through its subsidiaries, of the distributorship agreement dated February 15, 2002, to set up defendant No. 3.

23. While other causes of action such as luring the employees and purloining the intellectual property and trade secrets have also been pleaded, no specific date has been mentioned in respect of the said pleas.

24. Thus, the last specified date relating to the cause of action is June 2003. The suit was filed on May 12, 2004. Hence, the balance of convenience would not lie in favour of a state of affairs existing for about 1 year prior to the filing of the suit being altered materially at this stage. The interests of justice after taking into account the above factor would be protected by partly granting the alternate relief for commission prayed for in the suit.

(d) That brings me to the cardinal issue of the irreparable injury to plaintiff No. 1 if the interlocutory injunction is disallowed. Gujarat Bottling Co. Ltd., [1995] 84 Comp Cas 618 : (1995) 5 SCC 545 : AIR 1995 SC 2372 clearly lays down that (page 652)—

“… The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial of the case…”

(e) The plaintiff itself had quantified its damages at 20 per cent commission on sales made by the defendants or by its group/sub-sidiary companies directly or indirectly in India contrary to the mandate of clause 6 of the JVA.

(f) Furthermore, even if the companies of the Draeger group such as defendants Nos. 2 and 3 have an independent legal existence, nevertheless these companies cannot be adopted as a medium for violating clause 6 of the JVA particularly when prima facie the sale of such products through the group companies is being effected by defendant No. 1.

25. The plaintiff has also sought to raise other pleas which essentially relate to the protracted dispute between the Usha and Draeger group. In my view, for determining the plea relating to the enforcement of clause 6 of JVA, it is not necessary at this stage to consider the other pleas raised by the plaintiff. Similarly, the plea raised by the defendant that there is no appendix 2 is too technical a plea so as to affect the plaintiff's entitlement to invoke clause 6. It is apparent from the perusal of the entire agreement and the subsequent conduct of the parties that the reference to appendix 2 is an obvious typographical error and both the parties understood the appendix 1 to be the relevant appendix which delineated the products covered by the JVA. Consequently, this plea of the defendant relating to appendix 2 has no merit and deserves to be rejected

26. In so far as the plea of the defendant that plaintiff No. 2 only being a shareholder and a non signatory to the JVA being disentitled to enforce the terms and conditions of the JVA is concerned, it has no merit. Since plaintiff No. 1 has locus to enforce clause 6 of the JVA which is in favour of and for the benefit of plaintiff No. 1, notwithstanding the dispute between the Usha and the Draeger group for control of plaintiff No. 1, whether or not plaintiff No. 2 has such locus does not materially affect the rights enforceable by plaintiff No. 1. In any event the entitlement of plaintiff No. 2, at this stage, to maintain the suit cannot preclude any order which plaintiff No. 1 may be entitled to.

27. Similarly the plea of the defendant that the articles of association of plaintiff No. 1 do not incorporate the non-compete clause and it cannot, therefore, be enforced has no merit as the plaintiffs are not seeking to enforce the articles of association but the JVA which is the precursor of the formation of plaintiff No. 1 and the formulation of the articles of association.

28. Defendant No. 1 in its reply has submitted that even assuming, without admitting that the plaintiffs have a locus to file the present suit still, the plaintiffs are not entitled to injunction or specific performance since specific performance will not lie where compensation in money for non-performance would be an adequate relief. It is also submitted that on the one hand the plaintiff prays before the hon'ble court for specific performance of the contract and on the other hand the plaintiffs are seeking compensation in money for the alleged breach by defendant No. 1 and that too as not the alternate but simultaneously, which cannot be permitted.

29. In my view since damages claimed by the plaintiffs can be compensated in terms of money in view of the position of law summarized in paras. 45 and 46 of the Gujarat Bottling Co. Ltd., [1995] 84 Comp Cas 618 : (1995) 5 SCC 545 : AIR 1995 SC 2372, plaintiff No. 1 at best will be entitled to commission on the sales affected and indeed quantified by the plaintiff itself.

30. Consequently, in my view the following safeguards would adequately meet the ends of justice (a) that the defendants shall file quarterly accounts of all sales of the products covered by the agreement dated May 9, 1987, from the date of the suit up-to-date and those sales which take place during the pendency of this suit, in this court with advance copy to learned counsel for the plaintiff. The plaintiff had also claimed 20 per cent commission on sales made by the defendants or by its group/subsidiaries directly or indirectly in India.

31. However, no agreement or document had been shown or furnished or even averred to demonstrate how the figure of 20 per cent was arrived at. While no agreement/document was placed on record for justifying 20 per cent commission on sales either in the plaint or otherwise, taking into account the overall circumstances of the present case and the commercial nature of the agreement I am of the view that an interim direction in respect of securing of 10 per cent of the commission on the sales of the products covered by the agreement dated May 9, 1987, should be passed. Accordingly, it would be appropriate to direct defendant No. 1 to secure 10 per cent of the commission on the sales already effected since the date of the suit up to date in this court in respect of the products mentioned in appendix 1 of the JVA and on any other and future sales covered by clause 6 of the agreement dated May 9, 1987, as per the quarterly statement of accounts. Such amount is directed to be secured to the satisfaction of the Registrar of this court within four weeks from the filing of first quarterly statement which shall be filed on or before March 1, 2005, incorporating the sales from the date of the suit up-to-date.

32. In view of the foregoing discussion and reasons, the applications (I.A Nos. 3171, 4241 and 4906 of 2004) stand disposed of.

CS(OS) No. 519 of 2004 and LA No. 8080 of 2004.

33. List the suit before the appropriate court as per the roster for directions on February 8, 2005.