Smt. Sunita Mohapatra v. Suresh Dhanuka

SANJU PANDA, J:

1. This appeal arises out of an Order Dated 22.5.2008 passed by the Learned District Judge, Khurda in ARB. (P) No.576 of 2007 filed by the present Respondent under Section 9 of the Arbitration and Conciliation Act, 1996 (in short, “the Act”).

2. The brief facts of the case are as follows:

On or about 1st April, 1999 an agreement was executed between the Appellant (Sunita Mohapatra) and the Respondent (Suresh Dhankuka ) to carry on business in the name and style of “Abhilasha”. Sunita Mohapatra carries on business in the name and style of “Nature pro Biocare Inc.” as the sole proprietress thereof. The said agreement was for a period of five years from lst April, 2004 to 3lst March, 2004. It was further extended on 1st April, 2004 to 31st March, 2009 by mutual consent of both the parties. As per the said agreement, it was agreed that the Respondent would have sole marketing and distribution rights of the products manufactured by the Appellant. The Respondent would not take up marketing of any other product in the same range or in the same name “Naturoma Herbal”. The names of both the Respondent and the Appellant would appear on the products manufactured by the Appellant and’ sold by the Respondent. While the matter stood thus, on lst October, 2000 a deed of assignment was executed whereby the Appellant (assignor) transferred in favour of the Respondent (assignee) fifty per cent of the right, title and interest of trademark “Naturoma Herbal” along with proportionate goodwill of the business concerned absolutely and forever on the terms and conditions as mentioned therein on payment of consideration money to the Appellant.

Some of the terms and conditions of the said deed of assignment are as follows:

“(i) All goods manufactured by the assignor under the trademark “Naturoma” will be solely marketed by the assignee.

(ii) The said trademark “Naturoma” shall be used only in relation to the goods in the course of trade by both the parties.

(iii) That on the termination of the joint venture neither the assignor nor the assignee would be entitled to use or register the mark in its own name or jointly with some other party.

"(iv) Both the assignor and the assignee will not market or cause to market any product of similar nature in the same or substantially similar price bracket whether with or without any brand or trademark"

A request on Form TM 16 was filed by the Respondent before the Trade Mark Authorities for amendment of the trademark application. Since the Appellant was making direct sales of the products manufactured by her under the mark “Naturoma Herbal” by wrongfully deleting the name “Abhilasha” from packaging of the said products and by putting a sticker over the name “Abhilasha”, the Respondent filed an application under Section 9 of the Arbitration and Conciliation Act before the Learned District Judge, Alipur, Calcutta, but the said application was dropped due to lack of territorial jurisdiction. The Appellant filed Civil Suit No.26 of 2007 under Sections 134 and 135 of the Trade Marks Act, 1999 before the Learned District Judge, Khurda praying, inter alia, for an order of injunction restraining the defendants in the said suit from using the mark “Naturoma Herbal” and obtained an ex parte order of injunction. The present Respondent was impleaded as Defendant No.3 and his proprietorship firm “Abhilasha” was impleaded as proforma Defendant No.5 in the said suit. After filing of the suit, the Appellant terminated the agreement dated 1 st April, 1999 and revoked the permanent deed of assignment dated 151 October, 2000 after filing of the suit. The Learned District Judge, Khurda by Order Dated 22nd December, 2007, as an interim measure of protection, directed the Appellant not to sell/market/distribute/advertise the products under the trademark “Naturoma Herbal” by herself or through any other person save and except through the Respondent and after hearing both the parties the said order was confirmed on 22nd May, 2008. Hence this appeal.

3. The Learned Counsel appearing for the Appellant submitted that the court below has not at all discussed the law relating to grant of injunction and more specifically the law relating to grant of injunction in case of termination of contracts and a series of Judgments rendered by the High Courts and the Supreme Court on the subject have not been considered at all. The court below has made a peculiar approach, as if once there is an arbitration clause in the contract between the parties, the court is empowered to deal with the application filed under Section 9 of the Act. Therefore, injunction is to be granted. He further submitted that the agreement dated 1.4.1999 clearly reads under the heading ‘subject matter’ that first party, i.e. the Appellant has been manufacturing Cosmetics and Ayurvedic preparations in the name of “Naturoma Herbal”. The Respondent is distributing and marketing the products of the Appellants by the said agreement. Clause-7 of the agreement clearly mentioned that Sunita Mohapatra applied for registration of the brand name “Naturoma Herbal” before the Trade Mark Authorities and the same was granted in her favour who is the sole and absolute owner of the said marking, label, name and style. Clause-8 clearly mentioned that the manufacturing procedure, production, packaging, etc., solely belongs to the Appellant. Clause-9 clearly provides for prohibition against the Respondent that he would not use or take up marketing of any other product in the name of “Naturoma Herbal”. Clause 19 contained a provision for termination of the contract by the parties. The Trade Mark Authorities granted registration in favour of the Appellant. The Learned Counsel appearing for the Appellant also filed an affidavit on 30.9.2008 stating therein that the Trade Mark Authorities have already cancelled the publication made on 1.7.2008 in favour of the Respondent recognizing him as a partner along with the cancellation Order Dated 26.9.2008 passed by the Asst. Registrar of Trade Marks. As the Respondent admitted to have misused the agreement, interim injunction was granted in the suit and in the meantime the agreement has been terminated. The court below without discussing the law on the subject and without going into the law relating to grant of injunction, allowed the prayer even after knowing the contentions of the parties. He stated that since the agreement was terminated, no injunction should be granted in favour of the Respondent as there is a bar under the Specific Relief Act. In support of his contention he cited decisions of the Supreme Court in the case of Indian Oil Corporation Ltd. v. Amritsar Gas Service and others reported in 1991(1) SCC 533, M/s. Kalinga Mining Corporation and another v. M/s. Arbind Construction Company Pvt. Ltd. and others reported in 2007 (I) OLR 256, M/s. Arvind Constructions Co. Pvt. Ltd. v. M/s. Kalinga Mining Corporation & others reported in AIR 2007 SC 2144 and Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd. reported in AIR 2007 SC 2563 wherein it was held that in regard to termination of contract it is necessary to find out whether the contract is a determinable one or not. A contract determinable by nature means, a contract which either by efflux of time or by a specific provision therein would stand terminated. According to him, in the present case since as per Clause 19 of the contract itself is determinable by nature and it contains a provision for termination and as the contract is determinable by nature, no injunction should be granted on account of the provisions contained in the Specific Relief Act in Section 14(1)( c) read with Section 41(e).

4. The Learned Counsel appearing for the Respondent submitted that following the terms of the agreement the Appellant has purported to make sales of the products manufactured by her under the mark “Naturoma Herbal” directly in the market and has also started selling the products under the mark “Naturepro Biocare Inc.”. The Respondent has never been involved in selling or marketing any product under the mark “Naturoma Herbal” of any other proprietor. He has also not violated the agreement. As the Trade Mark Authorities accepted the application of the parties as per the deed of assignment of the year 2000 wherein the Appellant accepted the Respondent as fifty per cent share holder of right, title and ownership of “Naturoma Herbal” and on the said acceptance the Respondent filed an application in Form TM 16 before the Registrar of Trade Marks and has been allowed without any objection on 1st July, 2008 by the Registrar, Trade Marks accepting the proprietor of the trademark. Hence, the Appellant should be injuncted from selling directly the products violating the agreement and the Appellant is not entitled to terminate the contract unilaterally as his intention is bona fide and the Appellant has terminated the contract after filing of the suit. He further submitted that ,notwithstanding anything contained in Clause-C of Section 41 of the Specific Relief Act a contract which compromises an affirmative agreement to do such an act coupled with negative agreement either express or implied not to do certain act, the circumstances that the court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative covenant. In the present case, the Respondent has performed all its obligations under the agreement by incurring expenditure in promoting the said brand “Naturoma”, but the Appellant has violated the said agreement in selling the products directly in the market. He cited a decision of the Apex Court in the case of Gujarat Bottling Co. Ltd. and others V. Coca Cola and others reported in AIR 1995 SC 2372, wherein it has been held that the restrictive covenants which are not opposed to public policy or do not impose restraint in trade are enforceable in law. He also cited a decision of the Calcutta High Court in the case of Board of Acting Governor of the La Martienere & others v. National Engineering Industries Ltd. & others reported in (2005)2 CHN 207, wherein it has been held that against the breach of negative covenant the statutory remedy available is that of injunction under Section 42 of the Specific Relief Act, 1963, and submitted that in view of the aforesaid decisions and the provisions of the Specific Relief Act, the Learned District Judge has rightly granted injunction in favour of the Respondent. Therefore, the impugned order need not be interfered with in this appeal.

5. A close reading of Section 9 of the Act would show that the power of the Court is limited. The Court cannot enter into the area of dispute raised by the parties as those disputes are to be adjudicated by the arbitrator in arbitration proceeding and any opinion expressed by the Court in that regard would be premature and may cause prejudice to the parties during the arbitration proceedings. The only thing that the Court can examine is whether interim relief till the finalization of the arbitration proceeding is required to be made or not. It is well settled that the principle, which applies to the grant of temporary injunction under Order 39 Rules 1 and 2 of the Civil Procedure Code in a civil proceeding, also applies to a proceeding under Section 9 of the Act. Therefore, in order to obtain an interim arrangement under Section 9 of the Act the party seeking the interim arrangement must establish the three essential ingredients, namely, (a) prima facie case, (b) balance of convenience and (c) irreparable loss if the interim measure prayed for is not granted. The Court has to consider whether the contract is terminable as per the terms and conditions stipulated in the contract or whether it would continue till terminated by mutual consent of the parties is a matter to be decided by the Arbitrator. However, for the sake of finding out if the Respondent has a prima facie case, a cursory glance into the facts and circumstances of the case is necessary and discussed hereunder.

6. From the rival submissions of the parties, it appears that the Appellant made an application before the Trade Marks Authorities to use the words “Naturoma Herbal Device Leaf (Label)” and the Trade Marks Authorities granted the said brand name “Naturoma Herbal” in favour of the Appellant as per the document filed by the Appellant in First Appeal No.88 of 2008. Therefore, it prima facie appears that the Appellant is the sole and absolute owner of the said trademark, label, name and style and fifty per cent of the share holder of the Respondent to recognize the Respondent as fifty per cent share holder of the said mark allowed by the Trade Mark Authorities. The Appellant has already terminated the contract on 6.9.2007 as per Clause 19 of the agreement and the parties have already filed applications to refer the matter to the Arbitrator for deciding the said issue. At best, the Respondent will get compensation in the arbitration proceeding if there is any illegality in terminating the contract. Therefore, he will not sustain any irreparable injury. However, if the Appellant will be prevented from selling and marketing its products then she will sustain irreparable injury as the products creates goodwill in the market and effect of such goodwill will be destroyed and the products of the company will lose its importance among the customers and the company will be closed till the closure of the arbitration. Therefore, the Appellant will sustain irreparable injury and the same status the Appellant may not be able to revive after arbitration proceeding is over.

7. So far as balance of convenience is concerned, if the industry will be closed down without any reason, the products already manufactured by it may perish in course of time, as cosmetics and medicinal products do perish by their expiry date. On the other hand, if Respondent succeeds in the arbitration proceeding, he can be compensated in terms of money and if by way of injunction the industry itself is closed down, it will not be beneficial to anyone. Therefore, the balance of convenience is in favour of the Appellant. The court below has not examined all these aspects.

Section 14(1) of the Specific Relief Act specifically provides that a contract, which is in its nature determinable, cannot be specifically enforced and no injunction can be granted. The same position is reiterated under Section 41 (e) of the Specific Relief Act, which provides that injunction cannot be granted to prevent the breach of a contract, the performance of which would not be specifically enforced. The Apex Court in the case of Percept D Mark (India) Pvt. Ltd. v. Zaheer Khan & another reported in 2006 (3) Supreme 186 has clarified that in a case of contract for a specific period or in a contract which is terminable on the happening of a particular event, it would be presumed that the contract has come to an end and interim arrangement or injunction would not normally be made after efflux of the period of contract or after happening of the events stipulated. If ultimately it would be found that the termination of contract is bad in law or contrary to the terms of the agreement, the remedy would be to seek compensation for wrongly termination, but not by claiming specific performance of agreement and for that reason in such a situation no injunction is to be granted.

Section 14 of the Specific Relief Act provides that in case of a contract for the non-performance of which compensation in money is an adequate relief, injunction should not be granted. The court below has directed that the Appellant, if she wants to do business, should do business with the Respondent only. Since the products are numerous, they are of different quality and variety and the transactions would require minute details to be maintained between the parties, it can never be possible for the court to monitor the same and in case the performance of contract is to be continued, it will involve supervision by the court which is not possible for the court to monitor all the details with an expert hand and in case of violation of the contract, it is not yet practically possible for the court to monitor the same.

8. Apart from the above, since prima facie case, balance of convenience and irreparable loss or injury are not in favour of the Respondent, considering the facts and circumstances of the case, this Court sets aside the impugned Order Dated 22.5.2008 passed by the Learned District Judge, Khurda in ARB. (P) No.576 of 2007. The parties will get their remedy for violation of the contract in the arbitration proceeding.

9. The arbitration appeal is accordingly allowed. No costs.