Vijaya Minerals Pvt. Ltd. v. Bikash Chandra Deb

1. The Plaintiff instituted the suit for specific performance of an Agreement dated 1st Oct. 1994. The Agreement is for sale and delivery ex-pit mouth of the entire Manganese ore and Iron ore from the mine at Ingani Jharan Village in the district of Keonjhar, Orissa.

2. The aforesaid Agreement provides the price at which ores were to be sold by the defendant to the plaintiff and also records in Clause 6(a) that the plaintiff has already paid an advance amount of Rs. 15,00,000-00 to the Defendant, the receipt whereof the Defendant acknowledged in the said Clause, which was to be treated as advance against purchase and to be adjusted from out of the sale price payable by the plaintiff to the Defendant. Clause 12 of the said Agreement provides as follows: “First Party solemnly declares and agrees that he shall not sell or otherwise part with or dispose of any Manganese and Iron ore from the Mine and the Buyer shall be the sole and the only Buyer of all the Manganese and Iron ore from the Mine for and during the continuance of this Agreement.”

3. Mr. Jayanta Mitra, the learned Advocate on behalf of the Plaintiff has submitted that the aforesaid Clause 12 of the Agreement contains a negative covenant whereby the Defendant agreed not to sell or otherwise part with or dispose of any Manganese and iron ore from the mine, and that the Plaintiff shall be the sole and only buyer of all the Manganese and iron ore for and during the continuance of the Agreement. By and under Clause 13 of the Agreement, rights have been given to the parties to specifically enforce the terms and obligations of the said Agreement.

4. It has been submitted on behalf of the Plaintiff that the Defendant after having entered into the said Agreement and after having received the sum of Rs. 15,00,000/- wrongfully refuse to sell and deliver Manganese and iron ore raised from the said mines to the Plaintiff, and hence the suit.

5. It has also been alleged in the petition that over and above the sum of Rs. 15 lakhs paid as and by way of advance under the Agreement, a further sum of Rs. 2,36 lakhs has been paid by the Plaintiff to the Defendant, and that after appropriating a total sum of Rs. 17.36 lakhs, the Defendant was selling the ore, extracted from the said mines to persons other than the Plaintiff.

6. In the premises, the Plaintiff has prayed for interlocutory relief for receiver and injunction. It has also been contended by the learned Advocate on behalf of the petitioner that there being a clause containing negative covenant in the said Agreement (Clause 12) and a provision giving rights to the parties to specifically enforce the same, a suit for specific performance and injunction is maintainable.

7. The learned Advocate for the plaintiff has referred to Section 42 of the Specific Relief Act and in support of his contention he has also relied upon the following decisions:—

(i) Richard Wheeler Doherty v. James Clagston Allman and W.C Dowden, Reported in (1878) 3 AC 709; (ii) Jairam Valjee v. Indian Iron & Steel Co. Ltd. Reported in AIR 1940 Cal 466.

8. It has been contended on behalf of the defendant on the other hand that the Defendant did not receive Rs. 15 lakhs as mentioned in the Agreement and not payment was actually made by the Plaintiff. It has also been contended on behalf of the Defendant that the Defendant has been forced to sign the Agreement under undue influence and pressure without realising the scope and effect of the Agreement.

9. It has also been submitted on behalf of the defendant that he was in urgent need of funds and otherwise in difficult financial circumstances.

10. It has also been contended by Mr. Anindya Mitra, learned Advocate for the Defendant that the suit is for specific performance of the agreement dated 1st Oct. 1994 for sale of Manganese Ore and Iron Ore for, as long as the Defendant runs the mine and, permanent injunction restraining the defendant from selling, raising of the mine to anybody else.

11. It has also been submitted on behalf of the defendant that Manganese Ore and Iron Ore are ordinary articles of commerce and are easily obtainable in the market. The Manganese ore and Iron ore are not of special value with the Plaintiff because the Plaintiff is not the actual user of such ores, but is only a trader, who buys and sells the ores. The Plaintiff has control on raising of 4 other mines. It has been submitted that this agreement for sale cannot specifically be enforced in view of Sections 10 and 14 of Specific Relief Act, 1963. It has also been contended on behalf of the defendant that damages for non-performance would be adequate relief and breach of contract to transfer moveable property can be relieved by awarding of compensation.

12. It has further been argued on behalf of the defendant that the contract also involves performance of continuous duty which the Court cannot supervise and also runs into minute details.

13. Mr. Anindya Mitra, learned Advocate has referred to Clauses 5, 7, 8 and 9 of the Agreement. Clause 5 refers to fortnightly bills and statement of quantity sold. Clause 7 provides for weighment on a mutual agreed weighbridge. Clause 8 provides for analysis by the representative of sampling Company to be suggested by the buyer and right of rejection of the buyer if the Ores fail short of the specification and compositions, Clause 9, provides for arrangement of permits, signing of declaration form return etc. by the seller.

14. It has been submitted on behalf of the defendant that even if the agreement is specifically enforceable the trial Court hearing the suit may in its discretion refuse to enforce the negative covenant provided the plaintiff has performed all its obligations under the agreement. It is not possible at this interlocutory stage to prejudge in what manner and in whose favour the trial Court will exercise its discretion. Therefore no interim order should be passed at this stage which will have the effect of passing a decree at the interlocutory stage, particularly when the plaintiff has failed to make out a strong case.

15. The defendant has not yet been served with the writ of summons.

16. On the question of prima facie case, it has been submitted on behalf of the defendant that plaintiff has failed to make out even a prima facie case that the trial Court may exercise its discretion in favour of enforcement of negative covenants because, the plaintiff has not performed its obligations under the agreement.

17. In support of his contention learned Advocate for the defendant has submitted as following:—

(a) Since after entering into the agreement on Oct. 1, 1994, the plaintiff has not/performed its obligations under the agreement and has not taken any step for obtaining delivery or ores in terms of the agreement, although the plaintiff was all along fully aware that the defendant was selling the Manganese ores to the third parties. The plaintiff for the first time wrote a letter dated 17th Dec. 1994, threatening to take legal action and on 23rd Dec. 1994 filed the suit. Between the period from 1st Oct. 1994 till 23rd Dec. 1994 and even thereafter the plaintiff has not taken any step under the agreement and has not fulfilled any of its obligations under the agreement.

(b) For delivery and sale of ores under the agreement the following pre-requisites were required to be performed by the plaintiff:

(i) Intimate the buyer's option whether delivery should be ex pitmouth or at any other place (Clause 3);

(ii) No delivery is possible without weighment. It is necessary to mutually agree upon the weighbridge as required under Clause 7. There is no averment in the plaint and petition that the plaintiff had even approached the defendant with any suggestion of any particular weigh-bridge or made any attempt for mutual agreement upon by particular weighbridge.

(iii) The plaintiff did not suggest any Sampling Company for the determination of analysis of Ores. (See Clause 8) Appointment of Sampling Company by the plaintiff is very important, because his analysis report shall be acceptable to both parties and on that basis the buyer's right of rejection will arise.

(iv) No averment that any request was made by the plaintiff to defendant for arrangement of delivery of geological permits or any other permits has been made.

(v) No averment has been made in the plaint or petition that the plaintiff had ever made any approach for mutually setting the price of Iron Ore below 65% F.F or Manganese ore of below 30% mn. although from the said mine substantial quantities of Iron ore below 65% F.F and Manganese ores of below 30% mn. are extracted in regular course.

18. It has also been submitted on behalf of the defendant that the plaintiff has not taken any of the abovementioned steps which are pre-requisite for commencement of supply under the agreement for sale. Therefore, the plaintiff has been unable to show even prima facie that he has performed all its obligations under the agreement as required under provision of Section 42 of the Specific Relief Act. Thus the plaintiff is not at this stage entitled to ask for enforcement of negative covenant and has failed to make out prima facie case.

19. It has also been submitted by the learned Advocate for the defendant that the negative covenant cannot be enforced in part and the plaintiff cannot ask for enforcement of the negative covenant in entirety, because the plaintiff has not even asked for fixation of price of Iron ores below 65% F.F and manganese ore below 30% mn. in this suit. Plaintiff's case, is that the other products have no commercial value. Mr. Anindya Mitra, learned Advocate has submitted that the Agreement in question shows unconscionable bargain between the parties.

20. It has also been contended on behalf of the defendant that the trial Court will not enforce negative covenants if the bargain under the agreement is unconscionable. The Agreement for sale dated 1st Oct. 1994 is ex-facie unconscionable for the following reasons:—

(a) Prices are too grossly inadequate and low-about 16% of market selling prices.

(b) The agreement is of perpetual duration, i.e, as long as the defendant runs the mine and until the mine is transferred to the plaintiff-(clause 14). This is really bondage and servitude, according to learned Advocate for the defendant.

(c) No provision for escalation of prices, although the labour charge under the Minimum Wages Act are to be revised twice in a year. It is a matter of common knowledge that the labour wages and the cost of other mining materials have been increasing every year. It is most unusual and unfair not to provide in a long time contract a clause for price variation commensurate with variation of cost of production in future.

(d) The prices as mentioned are even below the costs of extraction.

(e) Analysis Report of the Sampling agent appointed by the plaintiff will be final and binding upon the defendant.

21. It has also been submitted on behalf of the defendant that the balance of convenience dictates that the plaintiff should not be granted any relief in the instant application. It has been submitted by learned Advocate for the defendant that it is a very rare case where the plaintiff has asked for injunction restraining a running mining industry from selling its products to the customers of its choice at prevailing market prices. It is a worse case because the plaintiff has not taken pre-requisite steps for delivery of the products of the defendant's mine as explained above.

22. It is the case of the defendant that the plaintiff's grievances can be adequately remedied by award of damages if the agreement is held to be valid at the time of trial. On the other hand, if injunction is continued, the defendant would be unable to run the mine because of production cost being 1/5th of market price. Further, the defendant would be at the complete mercy of the plaintiff who may reject ores on the ground of not being according to specifications or may demand further price on that ground. Agreement postulates fortnightly delivered, it is not possible to come and apply to the Court every fortnight as and when the disputes regarding the quality and quantity is raised by the plaintiff on the basis of Sampling agency to be appointed by the plaintiff itself. In the meantime, the bills for price will remain unpaid.

23. The learned Advocate for the defendant has contended that it is not the case of the plaintiff that the reserve of ores in these particular mines will be exhausted within a few years. No case of irreperable prejudice is made out as required for obtaining interim injunction, particular when interim injunction will have the effect of decreeing the suit.

24. It has also been contended by Mr. Anindya Mitra, learned Advocate for the defendant that the plaintiff does not require ores for personal use and consumption. The plaintiff as traders sell ores to its customers. The question of losses can be compensated by money. The plaintiff has four other mines under its control.

25. It has also been contended by Mr. Anindya Mitra, learned Advocate for the defendant that the defendant has in his account mentioned the cost of production on the basis of actual. The plaintiff in reply has annexed a certified of Mining Transporter Company, who is not at all qualified, not being owner of mine, to certify cost of mining. Further the cost of production as given in the certificate produced by the plaintiff is ex-facie unrealistic and absurd in view of the selling prices of the Ores. There cannot be such inordinate gap between the cost of production and selling prices of any article. After all, this is a competitive market and there are numerous other Manganese Ore and Iron Ore mines.

26. It has also been submitted on behalf of the defendant that if the defendant is forced to sell to the plaintiff, the defendant will be incurring huge losses every day and gradually the mine will have to be closed down.

27. The further contention of the learned Advocate for the defendant is that it is a contract of indefinite duration running into minute details and that it is not a contract for one time sale of a particular property. Granting of injunction is likely to land to disputes arising in course of sale of and delivery of ores. It will be difficult for any court of law to render such dispute which are likely to arise very frequently.

28. The defendant has strongly denied the receipt of payment of Rs. 15 lakhs under the Agreement. It has been submitted by the learned Advocate for the defendant at the time of trial, it would be decided whether Rs. 15 lakhs was actually paid by the plaintiff.

29. In order to avoid any possibility of interim order of injunction, the defendant has however, offered to furnish security for Rs. 15 lakhs by way of bank guarantee which will be encashable in the event at trial of the suit it is proved that the plaintiff has advanced such amount of money to the defendant and if any money is held to be payable by the defendant to the plaintiff.

30. It has been contended by the learned Advocate for the defendant that the agreement has not at all been acted upon as yet and the argument of the plaintiff that the defendant has not cancelled the agreement is without any substance, because the question of formal cancellation of the agreement by letter, would have arisen if the plaintiff had applied for performance of the agreement and written a letter for delivery. By filing the suit the plaintiff has, for the first time, claimed performance of the agreement and in the reply the defendant has, on affidavit avoided the agreement. In this connection he has referred to the supplementary affidavit affirmed on 13th Feb. 1995. Had the plaintiff written a letter demanding delivery soon after the agreement dated 1st Oct. 1994, the defendant would certainly have stated in reply that the agreement is not valid or binding.

31. The learned Advocate for the defendant has further contended that in this suit itself, the defendant is entitled to file a counter claim praying for cancellation of the agreement. Time for filing of counter claim has not yet arisen because the writ of summons has not yet been served. The defendant has already by affidavit recorded avoidance of the agreement as mentioned hereinbefore.

32. It has further been submitted by learned Advocate for the defendant when the consideration is grossly inadequate and the terms and conditions are unconscionable, although the parties have signed the agreement the Court will still consider whether any reasonable person with full sense of understanding could execute such agreement containing unconscionable terms. If the terms are found to be unconscionable and the consideration is grossly inadequate, the Court will raise a presumption that the party had been prevailed upon and there has been fraud.

33. It has further been submitted by learned Advocate for the defendant that in instant case the plaintiff and the defendant were not on equal footing. The defendant was in financial distress. The plaintiff is a big trader having control over four mines. The defendant was being pressed by Mr. B.K Mohanti for payment of his dues. The plaintiff gave false assurance to the defendant that the plaintiff will get the defendant absolved of his debt to Mr. B.K Mohanti. Under such false pretence signature of the defendant was obtained on the agreement. The defendant has stated in the affidavit that he has signed the agreement without understanding the contents thereof. The defendant states that there is no evidence that the defendant did receive independent legal advice. The defendant submits that the terms and conditions of the agreement are so unconscionable and the considerations are so shockingly low that there Courts should presume that the defendant was unduly prevailed upon by the plaintiff and that the agreement is vitiated by fraud. The defendant further submits that in any event this type of agreement should not be allowed to be specially enforced directly or indirectly by issuing order of interim injunction restraining sale of products of mine in usual cause and the court should not pass an order interfering with the normal running of a business.

34. It has been contended by the learned Advocate for the defendant that the plaintiff has obtained this ad interim order by misleading the Court and suppressing the following:—

(a) That there are other grades of Manganese and Iron ores for which no price has been mentioned in the agreement and those unpriced grades of ores are of no commercial value. Had this fact been disclosed, the Court would not have passed the blanket ad interim order of injunction restraining sale of the entire quantities of raising of this mine.

(b) The letter dated 29th Oct. 1994 written by the plaintiff to B.K Mohanti disclosed in affidavit-in-opposition and dealt with in affidavit-in-reply.

(c) No step preparatory to the commencement of supply had at all been taken by the plaintiff.

(d) The plaintiff has got four other mines under its control and the plaintiff, as a trader, would be in a position to buy ores from other mines and sell it to its customers. In short, the plaintiff would be able to run its business as a trader of ore even if no injunction is granted but the defendant, having only one mine, would be totally unable to carry on its business.

(e) That the price of different grades of ore, as mentioned in the agreement, were upon too below the market price and even much below the prices at which the plaintiff had sold similar Manganese ore in the year 1993.

35. The defendant therefore prays that Ad interim order should be vacated.

36. In support of the contention learned Advocate for the defendant has relied upon the following decisions:—

(1) Modern Food Industries India Ltd. v. Shri Krishna Bottlers (P) Ltd. reported in AIR 1984 Delhi 119; (2) Dalpat Kumar v. Prahlad Singh reported in (1992) 1 SCC 719 : (AIR 1993 SC 276); (3) Pomal Kanji Govindji Vrajlal Karsandas Purohit reported in (1989) 1 SCC 458 : (AIR 1989 SC 436); (4) Nalini Kishore Choudhary v. Atul Chandra Chakraborty Choudhury reported in (1936) 40 Cal WN 561; (5) Mohd. Latif Choudhary v. Smt. Amritkola Baveja reported in AIR 1959 Madh Pra 309; (6) Warren v. Mendy reported in 1989 (3) All ER 103.

37. In have considered the respective submissions of the learned Advocates for the parties and the decisions cited from the Bar. In my view that there being a Clause containing a negative covenant in the Agreement i.e Clause 12 and the provision giving rights to the parties to specifically enfore contract, a suit for specific performance and injunction is maintenable. The main contention of the defendant is that the price fixed under the contract being extremely low, the bargain has become unconscionable and therefore, contract has become onerous in so far as the defendant is concerned.

38. It may be noted that short of undue influence or duress, an agreement between the parties cannot be rendered nugatory on the ground that the consideration is not adequate. The Courts do not entertain the plea of inadequacy of consideration as a ground for refusal to perform the obligations under a contract.

39. In this connection, reference may be made to Treitel on Contract: 6th Edn. page 59 and 317-318. In fact, the Courts do not go into the question of adequacy of consideration when considering whether an agreement is binding or not.

40. Equity may give the relief of setting aside a transaction as it was “improvidently obtained” when unfair advantage is taken of a person who is poor, ignorant or weak-minded, or is for some other reason in need of special protection. Specific performance may be refused on similar ground, but mere inadequacy of consideration is not a ground for relief where the parties have bargained on equal terms.

41. The judgment and decision in the case of White and Carter (Councils) Ltd. v. Mc Gregor reported in 1962 AC 413 relied upon by learned Advocate for the plaintiff may be taken note of.

42. In the aforesaid decision at page 445 of the said report, the House of Lords held as follows:—

“It may be unfortunate that the appellants have saddled themselves with an unwanted contract causing an apparent waste of time and money. No doubt this aspect impressed the Court of Sessions but there is no equity which can assist the respondent. It is trite that equity will not rewrite an improvident contract where there is no disability on either side. There is no duty laid upon a party to a subsisting contract to vary it at the behest of the other party so as to deprive himself of the benefit given to him by the contract. To hold otherwise would be to introduced a novel equitable doctrine that a party would not to be held to his contract unless the court in a given instance thought it reasonable so to do. In this case, it would make an action for debt a claim for a discretionary remedy. This would introduce an uncertainty into the field of contract which appears to be unsupported by authority either in English or Scottish law save for the one case upon which the Court of Sessions founded its opinion and which must, in my judgment, be taken to have been wrongly decided.”

43. Reliance was also placed upon the judgment and decision in the case of Mountford v. Scott reported in 1975 Ch 258.

44. In the aforesaid case, the defendant challenged an option agreement for purchase of a house at a consideration of £ 1 in a suit for specific performance instituted by the plaintiff. The Court of Appeal negatived the contention of the defendant that the transaction was an unconscionable bargain which the Court should not enforce, and decreed the suit directing specific performance of the agreement holding that it would not be right to deny specific performance to the purchaser, when the vendor entered into the contract with eyes open. Cairns, L.J was of the view that there is a mass of English authority to the effect that anything of value, however small the value, is sufficient consideration to support a contract at law. It was held that there was basis for saying that the consideration was inadequate or for any other reasons specific performance should not be ordered.

45. In the aforesaid case, it has been submitted on behalf of the defendant that the defendant was in financial distress, and the plaintiff as a big trader having control over raising of coal mines was in a position to dominate the will of the defendant who was being pressed by one B.K Mohanty for payment of his dues and on a false assurance by the plaintiff that they would get the defendant absolved of his debt to B.K Mohanty the defendant was persuaded to sign the said agreement.

46. The contention of the learned Advocate for the defendant that in the instant case the plaintiff and the defendant were not on equal footing and as such the plaintiff was in a position to bargain.

47. The aforesaid contention, however, cannot be accepted. The Agreement records receipt by the defendant of Rs. 15 lakhs. In the Agreement itself the defendant acknowledged that he has received the amount. In addition, a separate receipt signed by the defendant has been annexed to the Affidavit-in-reply. There can be no doubt that the signatures are those of the defendant. It has been submitted that he was forced to sign the document without receiving the money. The aforesaid plea or contention of the defendant cannot also be accepted because of the following reasons:—

(a) There is no protest after the Sale Agreement dated 1st October, 1994 that the plaintiff did not pay Rs. 15 lakhs as recorded in the Agreement, or that the Agreement records a false acknowledgment: significantly, not one letter has been written by or on behalf of the defendant between the date of the agreement till today.

(b) No police diary or FIR by the defendant that he has been cheated in having to sign the said agreement acknowledging receipt of a substantial amount without receiving the amount.

(c) No letter by or on behalf of the defendant cancelling the agreement, since according to him, the consideration of the agreement did not pass.

(d) No suit or proceedings initiated by the defendant challenging or praying for delivery up and cancellation of the said agreement or for an injunction restraining the plaintiff from giving effect thereto or acting in terms thereof.

(e) No allegation anywhere in the affidavit that he did not receive independent legal advice before he put his signature to the said agreement.

(f) It has not been stated anywhere in the said affidavit that he had no alternative means of obtaining the finance, and that the plaintiff was the only person who came forward at that time in his so-called distress. Non-availability of an alternative course of action is an important factor which is absent in the instant case.

48. It is not in dispute that the defendant is also a businessman.

49. The plaintiff and the defendant negotiated on equal footing having equal bargaining power. The principle of unconscionable bargain will not at all be applicable in the facts of the instant case.

50. The judgment and decision in the case of Pao On v. Lau Yiu reproted in (1979) 3 All ER 65 at page 78-79 (Privy Council), relied upon by Learned Advocate for the plaintiff may also be taken note of. In considering whether economic duress is sufficient to vitiate a contract, the Privy Council observed as follows:

“It is, therefore, unnecessary for the Board to embark on an enquiry into the question whether English law recognises a category of duress known as economic duress. But, since the question has been fully argued in this appeal, their Lordships will indicate very briefly the view which they have formed. At common law money paid under economic compulsion could be recovered in an action for money had and received: see Astley v. Renolds. ((1731) 2 Stra 915). The compulsion had to be such that the party was depirved of his freedom of exercising his will. It is doubtful, however, whether at common law any duress other than duress to the person sufficed to render a contract voidable; see Blackstone's Commentaries and Skeate v. Beasle, ((1840) 11 Ad & E 1983). American law (Williston on Contracts) now recognises that a contract may be avoided on the ground of economic duress. The Commercial pressure alleged to constitute such duress must however be such that the victim must have entered the contract against his will, must had no alternative course open to him, and must have been confronted with coercive acts by the party exerting the pressure; see Williston on Contracts. American judges pay great attention to such evidential matters as the effectiveness of the alternative remedy available, the fact of absence of protest, the availability of independent advice, the benefit received, and the speed with which the victim has sought to avoid the contract. Recently two English judges have recognised that commercial pressure may constitute duress the pressure of which can render a contract voidable; see Kerr, J. in the Siboen and The Sibotre (1976 (1) Lloyd's Rep. 293) and Mocatta Jin North Ocean Shipping Co. Ltd. v. Hyundai Construction Co. Ltd. (1978 (3) All ER 1170). Both stressed that the pressure must be such that the victim's consent to the contract was not a voluntary act on his part. In their Lordship's view there is nothing contrary to principle in recognising economic duress as a factor which may render a contract voidable, provided always that the basis of such recognition is that it must amount to a cercion of will, which vitiates consent. It must be shown that the payment made or the contract entered into was not a voluntary act.”

51. The judgment and decision in the case of Alec Lobb (Garages) Ltd. v. Total Oil GB Ltd. (1985 (1) All ER 303) relied upon by Learned Advocate for the plaintiff may also be taken note of. In the aforesaid decision Lord Justice Dillion at page 313 of the said report observed and held as follows:—

“Inequality of bargaining power must any how be a relative concept. It is seldom in any negotiation that the bargaining powers of the parties are absolutely equal. Any individual wanting to borrow money from a bank, building society, or other financial institution in order to pay his liabilities or buy some property he urgently wants to acquire will have virtually no bargaining power. He will have to take or leave the terms offered to him. So, with house property in a seller's market, the purchaser will not have equal bargaining power with the vendor. But Lord Denning, M.R did not envisage that any contract entered into in such circumstances would, without more, be reviewed by the Courts by the objective criterion of what was reasonable: Lloyds Bank v. Bundy (1974) 3 All ER 757 at 763. The Courts would only interfere in exceptional cases where as a matter of common fairness it was not right that the strong should be allowed to push the weak to the wall. The concepts of unconscionable conduct and of the exercise by the stronger of coercive power are thus brought in…….”

52. Lord Justice Dunn (p. 317) rejected the contention that inequality of bargaining power of which one party has taken advantage in entering into the transaction would be a sufficient ground for assailing a contract. After taking note of judgment of Lord Denning, M.R in Lloyds Bank Ltd. v. Bundy, (supra) the learned Judge held that mere impecuniosity has never been a ground for equitable relief. It was held that the parties went into the transaction with their eyes open, there is no ground for the Court to interfere in equity and to grant equitable relief.

53. The statutory provisions contained in Specific Relief Act 1963 brought about significant change which completely nullifies the argument on behalf of the defendant.

54. In this connection, Explanation 1 to Section 20(2) introduces a provision which was not there in the 1877 Act. Exp. 1 lays down as follows:—

“Mere inadequacy of consideration, or the mere fact that the contract is onerous to the defendant or improvident in its nature, shall not be deemed to constitute unfair advantage within the meaning of Clause (a) or hardship within the meaning of clause (b)”.

55. The contention of learned Advocate for the defendant that the specific performance cannot be granted for enforcement of the contract of Sale of immovable properties cannot be accepted.

56. In this connection Section 58 of the Sale of Goods Act referred to by learned Advocate for the plaintiff may be taken note of.

57. The said section empowers the Court to decree specific performance of a contract for sale of movable goods, provided the suit is for breach of contract to deliver specific or ascertained goods. “Specific goods” has been defined in Section 2(14) of the Act to mean goods identified and agreed upon at the time a contract of sale is made. In the instant case the Manganese and Iron Ores agreed to be sold to the plaintiff are those which are excavated and raised for delivery ex pit mouth. In other words, only such manganese and Iron Ores are to be sold and delivered to the plaintiff as has been excavated and raised and no sooner the same is done, they become both ascertained and specific goods.

58. In any event, there is a specific provision in the contract, viz. Clause 12 containing a negative covenant whereunder the defendant has agreed not to sell or otherwise part with or dispose of any Manganese or Iron Ore from the mines and has further agreed that the plaintiff shall be the sole and only buyer thereof during the continuance of the agreement. The negative covenant is aforesaid is in clear term and is binding on the defendant.

59. It has been argued on behalf of the defendant that Section 42 of the Specific Relief Act is applicable only at the time of final hearing of the suit, and that no interim order can be passed in pursuance thereof at the interlocutory stage.

60. I am however, unable to accept the said contention.

61. In the case of Donnell v. Bennet reported in (1883) 22 Ch. D. 835 the contract was for the sale of chattels to the Plaintiff contained an express negative stipulation not to sell to any other manufacturer.

62. The Court granted an injunction to restrain the breach of the negative stipulation, although the contract was one of which specific performance would not have been granted. The Court also at page 838-839 of the said report held and observed as follows:—

“Wherever this Court has not proper jurisdiction to enforce specific performance, it operates to blind man's conscience, as far as they can be bound, to a true and literal performance of their agreements; and it will not suffer them to depart from their contract at their Pleasure, leaving the party with whom they have contracted to the mere chance of any damages which a jury may give. The exercise of this jurisdiction has, I believe, a wholesome tendency towards the maintenance of that good faith which exists in this country to a much greater degree perhaps than in any other; and although the jurisdiction is not to be extended, yet a Judge would desert his duty who did not act up to what his predecessors have handed down as the rule for his guidance in the administration of such an equity.”

The Court granted injunction till the hearing of the cause.

63. The judgment and decision in the case of James Jones & Sons, Ltd. v. Earl of Tankerville reported in (1909) 2 Ch. 440 relied upon by learned Advocate for the plaintiff may also be taken note of.

64. In the aforesaid case, under a contract the plaintiff agreed to purchase certain timber growing on the defendant's property. Under the contract, the plaintiff had the right to enter into the property to cut the timber, and saw it up there and to remove the timber. The defendant was to allow the plaintiff to enter on his premises, and take away the timber. The defendant ousted the plaintiff forcibly, wereupon the plaintiff instituted an action asking for injunction restraining the defendant from preventing due execution of the contract and for damages.

65. It was contended on behalf of the defendant that though the suit the for injunction, the claim of the plaintiff was in fact for specific performance, and the contract is such that the Court cannot, or at any rate, will not grant specific performance and should leave the plaintiffs to their remedy by way of damages only. The contention of the defendant was negatived by the Court which, relying upon viz. Section 52 of English Sale of Goods Act a provision similar to Section 58 of the Sale of goods Act in India held that the Court has ample jurisdiction to grant injunction. The Court observed:

“Even if I thought that damages would be an adequate remedy for what they had suffered, I should feel it incumbent upon me, if I could, to assert the authority of the land by refusing to allow the defendant to retain the benefits he has attempted to gain by his highhanded and illegal action.”

66. The Learned Advocate for the petitioner has also relied upon the judgment and decision in the case of Jairam Valjee v. Indian Iron & Steel Co. Ltd., reported in AIR (1940) Cal 466. In the aforesaid Case, on an interlocutory application for injunction restraining the defendants, their servants and agents from purchasing dolomite and lime stone from any party or parties other the plaintiff, after holding that the defendants were guilty of breach of contract in taking lime stone and dolomite from other suppliers, the Court held that under Order 39, Rule 2 of the Civil Procedure Code, the plaintiff would be entitled to an interlocutory injunction, if he can make out a good case that he will succeed, having regard to the provisions of the Specific Relief Act, in obtaining perpetual injunction at the trial of the suit (p. 469). The Court held that this was a case where the contract was to deliver specific and ascertained goods as contemplated by Section 58 of the Sale of Goods Act, and therefore the Court would be entitled to grant a decree for specific performance even in case of sale of movable goods. The Court further held that even if the plaintiff in such a case is entitled to a decree for specific performance, being a case covered by Section 58 of the Sale of Goods Act, breach of an implied negative covenant can also be restrained by an order of injunction.

67. The other contention of the defendant is that Mangenese and Iron ore are ordinary articles of commerce and therefore under Section 10 of the Specific Relief Act, the Court ought not to grant decree for specific performance. This contention however cannot be accepted. As it cannot be said that the Manganese and Iron ore are ordinary articles of commerce. In this connection, the judgment and decision in the case of Uttar Pradesh State Electricity Board, Lucknow v. Ram Barai Prasad, reported in AIR 1985 Allahabad 265, relied upon by learned Advocate for the petitioner may be taken note of.

68. In the aforesaid decision, it was held by the Allahabad High Court that coal ash was not ordinary articles of commerce since it was not easily available in the market. The Court directed decree for specific performance on the ground that in the event of a breach of a contract to transfer coal Ash, the Plaintiff cannot be compensated in money in respect thereof.

69. Manganese and Iron ore are only available in certain areas where such mines are located and therefore it cannot be said to be an ordinary article of commerce as contended by learned Advocate for the defendant. The other contention of the learned Advocate for the defendant is that the contract between the parties is such that it runs into minute and numerous details and continuous duty, which the Court cannot supervise, and therefore under Section 14 of the Specific Relief Act no decree for specific performance could be passed in favour of the Plaintiff, and damages would be the remedy available to it.

70. It is however to be noted that under the contract the defendant is obliged to sell ex-pit mouth such manganese and Iron ore which would be raised by the defendant. The contract is one of sale and delivery of the materials, the operation of the mines remaining entirely in the control of the defendant. Therefore no supervision of the Court is necessary in the matter of operation of the mines.

71. Furthermore once the minerals have been raised, the contract contains procedure for taking delivery and payment of price. After the materials are raised, it is the duty of the defendant as the Seller to inform the plaintiff as the Buyer, whereupon the plaintiff is to appoint an Analyst and inform the defendant. The Analyst would draw sample in the presence of the representative of the plaintiff and the defendant. The samples so drawn shall be acceptable to both the parties. Once samples are accepted the analyst's analysis of the sample with regard to the manganese or Iron content would be binding on both parties. The materials would thereafter be weighed in a weigh-bridge mutually acceptable to both, and the price would be determined on the basis of such weighment multiplied by the agreed price.

72. The entire procedure is such that it will not require any supervision of the Court, and has to be worked out on the basis of the contract between the parties. Any commercial contract for sale, including a contract for sale of immoveable properties, will contain detailed terms to be worked out mutually between the parties. It cannot be contended that no such contract could be specifically performed only because it contains detailed terms to be implemented mutually by and between the parties.

73. It has next been contended on behalf of the defendant that the plaintiff has not performed its obligation under the contract, e.g no sampling agent has been appointed, nor any weigh-bridge has been chosen for weighing the materials, nor has any consignee been chosen for delivery of the materials and therefore, the plaintiff has not shown any readiness and willingness on its part to perform its obligations so as to be entitled to specific performance.

74. The contention of the defendant does not appear to be correct. The contract itself indicates the order in which the respective obligations are to be performed by the parties. Thus, only after the materials have been raised by the defendant from the mines and it has informed the plaintiff, then only the obligation of the plaintiff arises for selecting an analyst or choosing a weigh-bridge or finding a consignee for delivery of the materials. The contract stipulates mutual obligations to be performed by the parties, and the defendant is not entitled to complain of non-performance of a later obligation by the plaintiff without performing his earlier obligations under the contract (Sections 52 and 54 of the Indian Contract Act).

75. It has next been contended by the defendant that the balance of convenience is wholly in favour of the defendant and the Court should not pass the interim order as prayed for. According to the defendant passing of an order of injunction will amount to decreeing the suit which is a suit for specific performance for an agreement of sale of moveable properties. According to the defendant where damages would be adequate remedy no interlocutory order of injunction would be passed, which will have the effect on decreeing the suit at the interlocutory stage.

76. The contention of the plaintiff, on the other hand, is that denial of an order of injunction will almost amount to dismissal of the suit of the plaintiff at the interlocutory stage and it is the duty of the Court to implement the solemn agreement between the parties. It appears that the defendant has agreed to sell the entirety of the Manganess and Iron ore from his mines to the plaintiff. It will not be in accordance with equity and justice to allow the defendant to flout the agreement with the blessings of the Court during the pendency of the suit on the specious plea that damages would be an adequate remedy at the final hearing of the suit.

77. In any event, there is a negative covenant in the contract, and in such a case, the question of balance of convenience and whether damages would be adquate remedy or not becomes immaterial:

78. In this connection, I may refer to the observation of Lord Cairns L.C and in the case of Richard Wheeler Doherty v. James Clagston Allman and W.C Dowden, reported in (1878) 3 AC 709 All page 719-720. The said report Lord Cairns L.C observed as follows:

“My Lords, if there had been a negative covenant, I apprehend, according to well settled practice, a Court of Equity would have had no discretion to exercise. If parties, for valuable consideration, with their eyes open, contract that particular thing shall not be done, all that a Court of Equity has to do is to say, by way of injunction, that which the parties have already said by way of covenant, that the thing shall not be done; and in such case the injunction does nothing more than give the sanction of the process of the Court to that which already is the contract between the parties. It is not then a question of the balance of convenience or inconvenience, or of the amount of damage or of injury — it is specific performance, by the Court, of that negative bargain which the parties have made, with their eyes open, between themselves.”

The learned Advocate for the defendant has relied upon the judgment and decision in the case of Modern Food Industries India Ltd. v. Shri Kirshna Bottlers (P) Ltd., reported in AIR 1984 Delhi 119.

79. The aforesaid Single Bench decision of the Delhi High Court was concerning a negative covenant in an agreement where-under the plaintiff entered into a franchise agreement with the defendant under which the plaintiff was to supply the concentrate of the aerated water drink “77” and distribute it in Hyderabad, and the defendant was prohibited from manufacturing or selling any product akin to that of the plaintiff in Hyderabad. In dismissing the application of the plaintiff for an injunction restraining the defendant from manufacturing, marketing or in any other manner dealing with the aerated water “Thrill”, the Court held that an injunction such as this ought to be granted only in exceptional cases.

80. It is to be noted the agreement sought to be enforced was such as would amount to restraint of trade. The Court held that in such a case, damage would be a better remedy than granting an order of injunction.

81. Since the Court refused to grant injunction mainly on the ground that the agreement sought to be enforced was really in effect in the nature of restrain of trade, the same is clearly distinguishable. The other decision cited by the learned Advocate for the defendant is the case of Pomal Kanji Govindji v. Vrajlal Karsandas Purohit, reported in (1989) 1 SCC 458 : (AIR 1989 SC 436):

82. In the aforesaid case, decision was in respect of money lent and advanced on terms and conditions contained in a mortgage deed. The Court held that the terms of the mortgage were such that it amounted to a clog on the equity of redemption. In paragraph 33 of the judgment (p. 479) (of SCC): (Para 32, at p. 449 of AIR) the Court formed the view that the long period of redemption, the provision for payment of interest at the rate of half per cent per annum payable on the principal amount at the end of the long period, the clause regarding the repairs, etc. in the Deed of Mortgage and the mortgager's financial condition, all these suggest that there was a clog on the equity.

83. This case has no application in the facts of our instant case. In case of money lent and advanced, the Court always zealously protects the interest of the borrower, particularly if the conditions of the agreement recording the advance are onerous, the Court presumes that the lender was in a position to dominate the will of the borrower, in view of the borrower's stringent financial condition.

84. Judgment and decision in the case of Nalini Kishore Choudhury v. Atul Chandra Chakraboarty Choudhury reported in (1936) 40 Cal WN 561 also cannot be of any assistance to the defendant.

85. The said decision presumed the existence of fraud where the price was grossly inadequate. It is to be noted that at that time explanation Section 1 to Section 20 of the Specific Relief Act had not been incorporated. It has been submitted that if that provision had been there, the decision would have been otherwise.

86. The learned Advocate for the defendant has also relied upon the judgment and decision in the case of Mohd. Latif Choudhury v. Smt. Amritkala Baveja, reported in AIR 1959 Madh Pra 309.

87. In the aforesaid case, the plaintiff sought an order of injunction against the Producers and Distributors from distributing a film. There was no question of enforcement of any negative covenant in this case. In so far as this single Bench decision declares the law that under the Specific Relief Act only a permanent injunction may be granted by way of specific performance of a negative agreement, and the said provision does not apply to temporary injunction in a suit, the same is contrary to the decision of our High Court reported in AIR 1940 Cal 466 referred to above, and ought not to be followed.

88. The other judgment and decision relied upon by the Learned Advocate for the defendant is the case reported in (1989) 3 All ER 103.

89. The said decision was in respect of case of an employment of contract of service, and the Court held that no order of injunction should be passed to compel the servant to perform his positive obligations.

90. The above decision has no application to the facts of our present case, where the plaintiff is seeking to enforce a negative covenant.

91. The judgment and decision in the case of S. Ranganathan v. V. Rama Swami (or Dalpat Kumar v. Prahlad Singh) reported in (1992) 1 SCC 719 : (AIR 1993 SC 276) refers to the principles for granting interim order of injunction which are well settled. However, in case of a negative covenant, the concept of balance of convenience and damages being adequate remedy become less important as has been laid down in the decision of the House of Lords, in the case of Richard Wheeler Doherty v. James Clagston Allman and W.C Dowden, reported in (1878) 3 AC 709 at page 720.

92. Considering the facts and circumstances of the case, in my view, the ad-interim order passed should continue.

93. Cost costs in the cause.

94. Stay prayed for is refused.

95. The hearing of the suit is expedited as follows:— Leave is granted to serve writ of summons by Speed Post upon the defendant. Written statement is to be filed within three weeks after the date of service of the writ of summons. Cross order for discovery within three weeks thereafter. Inspection forthwith thereafter. The suit will appear in the appropriate prospective list two weeks thereafter.

96. All parties concerned including the departments concerned are to act on a signed copy of the operative part of this judgment on the usual undertaking.

Order accordingly.