TaxTMI 
TaxTMI 
1997 (1) TMI 546
X X X X Extracts X X X X
X X X X Extracts X X X X
.... into a contract of agency dated July 28, 1994 with the plaintiff which was made effective from 1.3.1994 vide Sidel's letter dated 29.7.1994. (5) One Husky Injection Moulding System SA of Luxembourg (for short Husky) which is also manufacturer of injection moulding systems for pre forms etc. had also entered into another contract of agency dated July 1, 1994. (6) The terms of both the agencies were in identical terms and the agency was for a period of 2 years with renewal clause. (7) The defendant carries on business under the name and style of High Tech Consultants and has a consultant and Manufacturers business, and it is alleged, that he has been involved in various projects and works with the plaintiff company since 1989. (8) For carrying out the work of agency for various clients including Sidel and Husky plaintiff had a subsidiary unit known as Petequip. After these aforesaid two agency contracts were taken, the plaintiff and the defendant agreed to work on certain terms which were reduced into writing vide letter dated 30th July, 1994 on commission basis to be paid by Petequip to the defendant at the rates and terms as specified in this agreement. (9) Afte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....there was subsisting contract between the plaintiff and Sidel and yet the defendant informed the plaintiff vide letter dated 16.7.1996 that he was entering into a direct contract of agency with 'Sidel' and would work directly with them which is in complete breach of trust and in violation of the agreement as contained in letter dated 28.7.1995 and its clause 8 which provided as under:- "8. As a result of the new organization, all involved have agreed not to work directly with PETEQUIP'S clients and principals nor to compete for a period of 3 years after leaving PETEQUIP." (14) plaintiff has accordingly filed the present suit for a decree for permanent injunction restraining defendant directly or indirectly from dealing with or entering into any contract, agreement or understanding with any of the principals of the plaintiff including Sidel and Husky contrary to the agreement dated 28. 7.1995 for a period of 3 years commencing from 1.8.1996 and for a preliminary decree for rendition of accounts in respect of any dealings which might have taken place between the defendant and the said principals of the plaintiff. (15) Defendant has contested the claim of the plai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....12.1995 was not given 6 months prior to its expiry, it was automatically renewed for further two years on 1.3.1996. During the subsistence of this agency with plaintiff, by Article 7(1) of the Agency agreement Sidel was debarred from creating another agency in favor of any one else for their same business. The agreement dated 28.7.1995 between the plaintiff and defendant also provided that the parties would not work directly and indirectly with the plaintiff's clients and principals nor would compete for a period of 3 years after leaving Petequip. And as such the Agency agreement entered into between the Sidel and defendant is in violation of this specific agreement and is not legal and valid and plaintiff is entitled to protection of their rights by an injunction. Learned counsel has relied on Niranjan Shankar Golikari Vs. Century Spinning and Manufacturing Co. Ltd. (1967) ILLJ 740 SC and Sunil Chand C. Mazumdar (orig. Defdt.) Vs. The Aryodaya Spg. & Wvg. Mills Co. Ltd. (Orig. plaintiff) Air 1964 Guj 115. (19) Whereas learned counsel for the defendant has contended that neither of the agency agreements with Sidel and Husky was subsisting nor there was any valid agreement be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ract of agency dated July 1, 1994 had earlier been executed between the plaintiff and Husky which, apparently came into force on its execution. (24) Defendant carries on its business in the name of High Tech Consultants at Bombay. (25) Petequip had also entered into an agreement with defendant for running this agency business on the terms and conditions as incorporated in letter dated July 30, 1994 for this purpose and it was agreed that the defendant had to work for the business of Petequip in Bombay Region on commission basis which was 33.3% of the net commission received from their principals by Petequip with a minimum retainership of Rs. 60,000.00 per year. It was also agreed that this agreement was valid for one year from August 1, 1994. It could be renewable every year by mutual agreement and was also terminable by serving 3 months notice by either party. (26) Terms of agreement with defendant were amended on the terms as jointly agreed in letter dated 14.7.1995 and thereby it was also agreed that the amended agreement was valid for a period of one year from April 1, 1995. (27) Sidel vide their letter dated July 6, 1995 had made some grievances about working of it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ance of this proposal sent by plaintiff. No mention has also been made in the plaint if agency of Husky was continued beyond its expiry on 1.7.1996. Defendant in his written statement has pleaded that Husky had terminated Agency w.e.f. 1.7.1996. This fact has been admitted by the plaintiff in its replication dated 18.9.,1996. It is not the case of the plaintiff that this termination was not valid for any reason. One of the grievance of the defendant is that this material fact was concealed from the Court while seeking ex-parte injunction in the suit. (31) As regards the agency with Sidel, Sidel vide their letter dated December 18, 1995 gave notice to Petequip under Article 10(1) of the Contract of Agency informing it that the contract of agency after its expiry on 28.7.1996 would not be renewed. Their contract of agency with plaintiff thus also stood terminated on or about 28.7.1996. (32) It appears, in the meantime, Sidel has approached defendant for giving their agency to the latter w.e.f. 1.8. 1996 which fact was brought by defendant to the notice of the plaintiff in his letter dated 16.7.1996. Grievance of the plaintiff is against this agency taken by the defendant. (3....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ne to Sidel and the other to Husky to meet the objection raised by Sidel and Husky about unsatisfactory working of their agency business by Petequip. In this letter, inter alia, change in organizational set up was proposed on the following lines: "1. A new company, Petequip India Private Limited is being formed which will be majority employees owned. 2. Both Mr. Bangera and Mr. Bhaduri will be part of this organization and are aware of the changes and are in agreement with it. Adequate compensation has been agreed to. 3. Mr. Bangera will assume day to day control of Petequip India Private Limited. Mr. Bhaduri will assist him not only in the North but elsewhere. 4. We are prepared to add more staff, as necessary. 5. I have told Continental that I will be involved in sales calls for SIDEL. 6. The new Petequip organization will come into effect immediately. 7. We believe the new organization puts in the best blend of strategic inputs, operational strengths, and marketing skills all of which will benefit Sidel in India. 8. As a result of the new organization, all involved have agreed not to work directly with PETEQUIP'S clients and principals nor to compete for a period of 3 yea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rms of alleged agreements was sent under the signatures of three persons to Sidel and Husky. Obviously the company that was so formed was not in accordance with the arrangement arrived at between the parties in letter dated 28.7.1995. Defendant in his rejoinder dated 4.10.1996 has pleaded that the company Petequip India Pvt. Ltd. formed on 16.6.1995 was formed by two persons, namely, K.K. Sood and A.K. Sood, father and son each having 10 shares of Rs. 10.00 each. Obviously, plaintiff and defendant had no right or interest therein as was contemplated in Letter dated 28.7.1995. It also cannot be said that the terms and conditions as mentioned in letter dated 28.7.1995 in itself formed a concluded contract between the parties. As already mentioned the proposal contained in letter dated 28.7.1995 sent to Sidel and Husky was in the nature of proposal to meet their objections about unsatisfactory working of the agency business and to satisfy them so that they may continue the agency business with the plaintiff. Sidel and Husky never conveyed their acceptance of these terms and conditions and as such this proposed arrangement between plaintiff and defendant is not binding either on Sidel ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 31-32 it has been held that the doctrine of restrain as contained in Section 27 of Contract Act does not apply during the period the contract is subsisting but it applies when the contract comes to an end. Thus after the agency of Sidel and Husky came to an end the restrictive covenant contained in clause 8 would be unenforceable under section 27 of the contract. (42) Also as already noticed the arrangement/contract as was arrived at between the plaintiff and defendant on 30.7.1994 and which was modified on 14.7.1995 had already come to an end on 31.3.1996. And there was no subsisting contract between the plaintiff and defendant also and as such clause 8 of the agreement contained in letter 28.7.1995 would not be enforceable against defendant also being in restraint of trade under section 27 of the Contract Act. (43) 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 certain act coupled with 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....