TaxTMI 
TaxTMI 
1998 (9) TMI 693
X X X X Extracts X X X X
X X X X Extracts X X X X
....e allocated to the abovesaid Tele Serials on any Television Channel. In the light of the abovesaid prayers, consequential relief of permanent injunction has also been sought for and as an interim measure, prayed for an interim injunction pending trial of the suit. 3. On an earlier occasion, the appellant herein prayed for an order of interim injunction and the matter came up before this Court on 26.5.1998 and interim injunction was granted till 10.6.1998. Aggrieved against the said order, respondents 1 and 2 preferred an appeal before a Division Bench of this Court in O.S.A. No. 86 of 1998. Along with the said appeal, they filed C.M.P. No. 7295 of 1998 to suspend the interim injunction granted by the learned single Judge. The Division Bench, by an order dated 2.6.1998 suspended the interim injunction granted on condition that respondents Nos.l and 2 herein should deposit a sum of Rs. 10 lakhs to the credit of the suit and posted the appeal for hearing on 16.6.1998. Aggrieved against the said order, the appellant herein filed a Special Leave Petition before the Supreme Court in S.L.P. NO. 10225 of 1998. When the matter came up for hearing on 10.6.1998, the Apex Court observed tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sacted the business on the basis of the agreement, they are bound by the agreement as long as the agreement remains in existence. Except the terms relating to profit sharing and manner of payment, which were revised by mutual consent from time to time, there was no variation of remaining terms including the term reading to the duration of the agreement for five years and regarding exclusive marketing rights of the appellant and negative covenants contained in Clauses 14, 15 and 17. He further contended that in the case of negative covenant or stipulation, the Court will usually enforce compliance by injunction without regard to the question of convenience or the amount of damage caused. The learned counsel assailed the reasoning of the learned single Judge, inter alia contending that the joint Venture Agreement dated 30.5.1997 is a contract in itself and it was acted upon from that very dated and the law relating to enforcement of negative covenants and documents and the clauses which contain the negative covenants was not considered in the right perspective in view of the decision reported in Gujarat Bottling Co., Ltd., and others v. Coco Cola Co., and others, AIR 1995 SC 2372 . A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....spondents Nos. 1 and 2 and further contended that the Joint Venture having been admittedly given up by both the parties, the negative covenants alone cannot survive by its very wording, consequently, the injunction application for enforcing the negative covenants is not maintainable. According to him, the prayer in the injunction application is not the one seeking the enforcement of negative covenants but restraining the telecast itself. Such an injunction will result in irreparable loss and hardship not only to respondent No. 2 as Producer but also to respondent No. 3 who has got committed contracts for advertising for the future episodes of the said serials. 7. The learned counsel Mr.P.P. Rao, in support of his contention that where the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in a formal shape, does not prevent the existence of a binding contract, relied upon a decision rendered by the Apex Court in K. Sriramulu v. Ashwatha Narayana, [1968]3SCR387 . In that case, there were important circumstances indicating the oral agreement as highly probable, because negotiations for the purchase were going on for the several years past....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract. In the latter case, there is a binding contract and the reference to the more formal document may be ignored." In other words, there may be a case where the signing of a further formal agreement is made a condition or term of the bargain, and if the formal agreement is not approved and signed there is no concluded contract. In Rossiter, v. Miller, 1878 (3) AC 1124 Lord Gairns said: "If you find not an unqualified acceptance subject to the condition that an agreement is to be prepared and agreed upon between the parties, and until that condition is fulfilled no contract is to arise then you cannot find a concluded contract." In Currimbhoy and Co. Ltd., v. Creet the judicial Committee expressed the view that the principle Committee expressed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plete or inconclusive, depends upon the intention of the parties and the special circumstances of each particular case. It is not proper or permissible to look at one particular point and say that there was a concluded contract. For proper appreciation of the existence or rescission of the contract, as a matter of fact, of the intactness of the negative covenant in the agreement and its binding nature, the conduct and correspondent as a whole has to be looked into. 10. In the instant case, under the Letter of Intent, dated 30.5.1997, the parties expressed their desires to participate in the production and marketing of the tele-serials, by a joint venture agreement, which proposal was accepted by the respondents. The duration, sharing of the net profit in the ratio of 40:60 between MB and MIL after adjusting the cost of the production, marketing, duplicating, advertisement, finance charges and other incidental costs. But, Clause (12)(A), (B) and (C) are left blank. Clause (18) reads thus: "The spirit of this letter of intent will be captured and consummated as a Joint Venture Agreement between the parties, detailing the procedural, functional and operational issues, not later tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not take away the right conferred under the negative covenant. 11. In Jeinarayan Ram Lundia & another v. Surajmull Sagarmutt & others, 1949 F.C.R.379 there was an agreement between the parties on the terms which are necessary in law to constitute a contract of sale and there was an agreement on other terms as well, which they themselves considered material. The question of stamp duty was not one of the terms of the agreement and if Khaitan and Co., mistakenly and quite unnecessarily introduced this matter in the letter referred to above, that cannot affect the completed agreement already arrived at. There was nothing to be done so for as to complete the contract of sale. 12. In Niranjan Shanter Golikari v. Century Spinning and Manufacturing Co., Ltd. (1967)ILLJ740SC , the negative covenant was that the employee would not during the contract period, engage in 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 restraint of trade unless the contract is unconscionable or excessively harsh or one sided .In such a situation, the Apex Court negatived the contention that the negative covena....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny Manganese or Iron ore from the mines and the buyer shall be the sole and only buyer thereof during the continuance of the agreement. It is pertinent to note that under the contract, the defendant is obliged to sell ex-pit mouth manganese ore and iron ore which would be raised by him. The contract is one for sale and delivery of the materials, the operation of the mines remaining entirely in the control of the defendant. The contract contains the procedure for taking delivery and payment of price. After the materials are raised, it is the duty of the defendant to inform the plaintiff as to the analyst or choosing a weigh-bridge or finding a consignee for delivery of the materials. Once the samples are accepted, the analysis of the sample with regard to the manganese ore or iron ore could be binding on both parties. Thereafter, the materials would be weighed. Price would be determined on the basis of such weighment multiplied by the grant price. In commercial contract for sale containing detailed terms mutually agreed upon between the parties, the negative covenant has to be enforced. In such situation, the question of balance of convenience and whether damages would be adequate r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er the arrangement. In such a context, reference in the letter of intent about an agreement to be entered into, cannot be ignored as a formal document, in order to have the terms their binding nature on the parties. As we have mentioned earlier, the entire terms and functional methods are yet to be worked out and to be annexed to the letter of intent, and that makes the distinction between the cases cited and the case on hand. The correspondences, if borne in mind and considered as a whole, it emerges that the arrangement was given a go by. Hence, the cases cited by the learned counsel for the appellant have no application to the facts of the present case. 17. The criteria to grant an injunction as an interim measure was the subject of discussion in several judicial pronouncements, but the consensus opinion is that before the Court exercises its discretion to grant such an interim relief, which is essentially equitable and discretionary remedy, the Court will have to be further satisfied that the comparative mischief or inconvenience which is likely to arise from withholding an injunction will be greater than that which is likely to arise from granting it. To come to such a conc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....refore, S.s. 38(3)(C) and 14(a) will come in the way of the Court granting relief to the appellant by way of an injunction. This is the view taken by the trial Judge and we are in entire agreement with him. It is well established that a contract of service cannot be specifically enforced, as a breach thereof can always be compensated in money. The general rule is that the grant of an injunction is a matter of discretion of the Court and it cannot be claimed as of right. No doubt, the discretion has to be exercised in a judicious manner and in accordance with the provisions relating to the grant of injunction contained in the Specific Relief Act. As already stated, in this case the appellant's prayer for an "interim injunction" is based on S. 42, which is more or less an exception to the general rule contained in S. 41(e). That an injunction cannot be granted to prevent the breach of a contract which cannot be specifically enforced is not disputed." 20. The learned counsel for respondents No. 1 and 2 contended that where the arrangement entered into between the parties is a commercial contract, a breach of which can always be compensated in money, injunction should not be gra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nciple of law, viz., when there is a written document which is followed by further negotiations in the form of correspondence, the entirety of the correspondence has to be looked into to find out whether there has been a completed contract or not. The authority for this proposition is found in Bristol Cardiff and Swansea Aerated Bread Co., v. Maggs, 1890 (44) Ch. D. 616. There, M, a baker, on 29th May, 1889, wrote to G, a director of an Aerated Bread Co., the following letter - "I beg to submit to you from the following conditions for disposal of my business carried on at 15, Duke Street, Cardiff, Lease and Goodwill, 450 (Lease from 29 September 1888 for fourteen years). all fixtures, fittings utensils & stock-in-trade connected with the premises to be taken at valuation. Yours truly, R.M. This offer to hold good for ten days." On the 1st June, 1889 G replied "I accept your offer for shop and lease at C.I5, Duke Street, Cardiff, Yours truly J.G. (for B.C. and S. Aerated Bread Company). Mr.R.M." M's solicitor then sent G a formal memorandum of agreement comprising several terms not expressed in the two letters. The Company's solicitors added a clause restricting M from ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....requires an investigation, inter alia, of the nature of the contract, the attendant circumstances and the motive which prompted the breach of existence of the terms of the contract. Having regard to the exchange of several letters subsequent to the Joint Venture Arrangement, on the facts and circumstances of the present case, we find that the Joint Venture Arrangement initially entered into has been detracted in its force and spirit, as though it had been rescinded or breached, but, we do not wish to express our view, as it may prejudice the case of the appellant and it is a point to be established during trial. 23. The learned single Judge of this Court in his order dated 23.6.1998 passed on O.A. No. 254 of 1998 in C.S. No. 375 of 1998, at paras 8 and 9, has set out the various conditions of the letter of intent, at para 10 has dealt with under what circumstances a negative covenant can be enforced and later recorded a finding that since the parties have been renewing the said arrangement, it cannot be said that they have acted upon the basis of the letter of intent to hold that the letter of intent is binding on them, and the reasons assigned are thus:- "Renewa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t dated 30.5.1997 and as per para 7 of the said communication dated 6.2.1998, which was acted upon by the appellant, the present arrangement was to be in vogue for a period of 13 weeks from February 1st. and will be reviewed at a point of time on its effectiveness. This was never disputed or challenged at any point of time and when it came to an end by efflux of time, the appellant had projected as though it was a termination of existing contract by the communication dated 4.5.1998, which is without reference to the abovesaid document". After forming an opinion that the case on hand involves a disputed question of fact to be tried, and on satisfying that the comparative mischief will be greater in granting than in withholding, declined to grant the injunction. 24. The Apex court in Uttar Pradesh Co-operative Federation Limited v. Sunder Brothers, Delhi, AIR1967SC249 , left a note of caution as to how an order of this nature to be interfered in an appeal, which reads thus:- "If the discretion has been exercised by the trial Court reasonably and in a judicial manner, the fact that the appellate Court would have taken a different view may not justify such interference with the tria....
X X X X Extracts X X X X
X X X X Extracts X X X X
....usion that the Judge's exercise of his discretion be set aside for one or the other of these reasons, then the appellate Court can exercise an original jurisdiction of its own. Since the learned Judge has kept in view the nature of the right, conduct of the parties and the consequences of the grant of injunction, we do not see that it is a fit case to interfere with the impugned order. 26. It is not in every case of breach of contract or covenant that the Court will interfere by way of injunction. In exercising its jurisdiction by way of interlocutory injunction, the Court acts upon the principle of preventing irreparable injury. If a covenant is clear and the breach clear and serious injury is likely to arise from the breach, the Court will interfere before the hearing to restrain the breach; but if the covenant is obscure or the breach doubtful, and no irreparable damage can arise to the plaintiff/appellant, then the question resolves itself into a question of comparative injury, whether the defendant will be more damnified by the injunction being granted or the plaintiff by its being withheld. Mere interference with a legal right does not, however, ipso' facto entitle....