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Multichannel (India) Limited, Rep. by Its Director, 301, Sheetal Lehren, Dr. Ambedkar Road, Khar (West), Mumbai-400 052 Vs. Kavitalaya Productions Pvt., Limited, 17-a Karpagambal Nagar, Mylapore, Chennai-4 and Two Others - Court Judgment

LegalCrystal Citation
Subjectcontract
CourtChennai High Court
Decided On
Case NumberO.S.A.No. 109 of 1998 and C.M.P.No. 9036 of 1998
Judge
Reported in1998(2)CTC689; (1998)IIIMLJ708
ActsCode of Civil Procedure (CPC), 1908 -- Order 39, Rule 1 and Order 43, Rule 1; Specific Relief Act, 1963 -- Sections 41 and 42
AppellantMultichannel (India) Limited, Rep. by Its Director, 301, Sheetal Lehren, Dr. Ambedkar Road, Khar (We
RespondentKavitalaya Productions Pvt., Limited, 17-a Karpagambal Nagar, Mylapore, Chennai-4 and Two Others
DispositionPetition dismissed
Cases ReferredCharles Osenton and Company v. Johnton
Excerpt:
contract - temporary injunction - order 39 rule 1 of code of civil procedure, 1908 - scope of granting temporary injunction - document prima facie appears to be proposal and not concluded contract - reference to future contract is made and parties do not intend to be bound until formal contract is signed - entire terms and functional methods yet to be worked out - validity of contract disputed - right of parties to contract not clear - held, no ground made out to grant injunction. - - considering the background of that case that all the partners had agreed to the terms of the contract, possession was handed over, cinema theatre was put up, only mode of payment to be settled, and later on there was a non-cooperation to execute the document, in that context, the apex court took the.....orderjudgment pronounced by c. shivappa, j.1. this appeal is directed against the order dated 23.6.1998 passed on o.a.no.254 of 1998 in c.s.no.375 of 1998, by the learned single judge on the original jurisdiction of this court. 2. the appellant as plaintiff has filed the suit seeking for a declaration that the letter sent by the respondent no.2, dated 4.5.1998, terminating the contract (contract for time-sales) in respect of the telecast of two serials, namely, 'balachander chinna thirai' and 'marmadesam', as illegal and void. the second relief which has been sought for is a consequential declaration that the agreement dated 30.5.1997 entered into between the appellant and the respondent no.2 is valid and subsisting in respect of the above-mentioned serials and further consequently that.....
Judgment:
ORDER

Judgment pronounced by C. Shivappa, J.

1. This appeal is directed against the order dated 23.6.1998 passed on O.A.No.254 of 1998 in C.S.No.375 of 1998, by the learned single Judge on the original jurisdiction of this Court.

2. The appellant as plaintiff has filed the suit seeking for a declaration that the letter sent by the respondent No.2, dated 4.5.1998, terminating the contract (Contract for Time-Sales) in respect of the telecast of two serials, namely, 'Balachander Chinna Thirai' and 'Marmadesam', as illegal and void. The second relief which has been sought for is a consequential declaration that the agreement dated 30.5.1997 entered into between the appellant and the respondent No.2 is valid and subsisting in respect of the above-mentioned serials and further consequently that the appellant is exclusively entitled to sell the free commercial time 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 that 'this matter has now become infructuous because the order of injunction itself was made operative till 10.6.1998. Virtually the appeal filed before the Madras High Court has also become infructuous and it shall be treated as disposed of accordingly' and directed the learned single Judge to hear the application for injunction afresh and after hearing both the parties to decide the application on merits without being influenced by the order of the learned single Judge and also by the order of the Division Bench. The learned single Judge declined to grant the injunction and while dismissing the application, observed that the letter of intent dated 30.5.1997 prima facie appears to be a proposal and not a concluded contract and even otherwise, the comparative mischief or inconvenience which is likely to arise from withholding the injunction will be greater than that which is likely to arise from granting it. Hence, this appeals is before us. Though there is an application in this appeal seeking for an interim injunction, this Court ordered on 14.7.1998 for hearing of the main appeal itself, since hearing of the application for interim order and hearing of the appeal consume more or less the same time. Hence, the appeal is taken up for final hearing.

4. The question for consideration in this appeal is whether the negative covenant or stipulations contained in the letter of intent dated 30.5.1997 can be enforced by grant of an interim injunction disregarding the balance of convenience, irreparable loss or comparative hardship?

5. The learned senior counsel, Mr.P.P. Rao, appearing on behalf of the appellant contended that although Clause (18) of the joint Venture Agreement, dated May 30th, 1997 postulated a further agreement setting out details of procedural, functional and operational issues not later than 7.6.1997 and it was not admittedly executed, it did not stand in the way of operation of the Joint Venture Agreement which is effective for a period of five years from the very date of execution i.e., 30.5.97. Moreover, Clause three or recital in the introductory part of the Joint Venture Agreement expressly mentions about the proposal and its acceptance by respondent No.2 and the Joint Venture Agreement is a complete agreement which is self-operative as it had contained all material terms and was in fact acted upon. Therefore, once the parties havetransacted 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 convenants 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, : AIR1995SC2372 . At the conclusion of his argument, it was submitted that his client is prepared voluntarily to make an offer to deposit Rs. 10 lakhs as security for the due performance of the Joint Venture Agreement and also to deposit a sum of Rs.1,85,000 weekly, subject to accounting without prejudice to the respective rights of the parties and that the appellant be allowed exclusively to market the tele-serials as contemplated in the said Joint Venture Agreement, till the disposal of the suit by this Court.

6. On behalf of respondents 1 and 2, the learned counsel Mr. Mohan Parasaran contended that the Letter of Intent, dated 30.5.1997 which contains a negative covenant cannot be construed as a concluded contract since on reading of the agreement, there is a lack of consensus ad idem with regard to commercial terms. Further he would contend that by the conduct of parties, the Joint Venture was not acted upon and in such an event, the negative covenant cannot be invoked. According to the learned counsel, Clause 18 of the Letter of Intent contemplates detailing the procedural, functional and operational issues to be settled not later than 7.6.1997 and a detailed business plan with cash flow requirements to be worked out and added as an enclosure to the agreement, which event never happened, and, therefore, in the event of not complying with the detailed business plan detailing procedural, functional and operational issues within the time frame, the Letter of Intent remained just as a proposal and never worked as a concluded contract. He further contended that even assuming for a moment that the said Letter of Intent could be construed as a concluded contract, by the conduct of parties, the alleged joint venture was abandoned and in that place, a new arrangement was entered into as evidenced by communication dated 22.1.1998, Statement of Account dated 28.1.1998, communications dated 29.1.1998 4.2.1998 and 6.2.1998, and, therefore, the negative covenant in the Letter of Intent cannot be enforced. The learned counsel submitted that what happened after 30.5.1997 till 4.2.1998 is not pleaded but suppressed and hence, the appellant has not approached theCourt with clean hands, rather has given an impression that Joint Venture Agreement dated 30.5.1997 is still in force. The learned counsel, Mr.P.S. Raman, appearing on behalf of respondent No.3 supported the stand taken by respondents Nos.l 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. Considering the background of that case that all the partners had agreed to the terms of the contract, possession was handed over, cinema theatre was put up, only mode of payment to be settled, and later on there was a non-cooperation to execute the document, in that context, the Apex Court took the view that mere omission to settle mode of payment does not affect the completeness of the contract, because the vital terms of the contract, like the price and the area of the land and the time for completion of the sale, were all fixed. Para 3 of the judgment reads thus:-

'We proceed to consider the next question raised in these appeals, namely whether the oral agreement was ineffective because the parties contemplated the execution of a formal document or because the mode of payment of the purchase money was not actually agreed upon. It was submitted on behalf of the appellant that there was no contract because the sale was conditional upon a regular agreement being executed and no such agreement was executed. We do not accept this argument as correct. It is well established that a mere reference to a future formal contract will not prevent a binding bargain between the parties. The fact that the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent the existence of a binding contract. There are, however, cases where the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed. The question depends upon the intention of the parties and the special circumstances of each particular case. As observed by the Lord Chancellor (Lord Cranworth) in Ridgway v. Wharton, 1857 (6) HLC 238 at p.263, the fact of a subsequent agreement being prepared may be evidence that the previous negotiations, did not amount to a concluded agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the proposition that theycannot be bound by a previous agreement In Von Hatzfeldt - Wildenburg v. Alexander, 1912 (1) Ch.284 it was stated by Parker, J. as follows:-

'It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is 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 the view that the principle of the English law which is summarised in the judgment of Parker, J., in (1912) 1 Ch.284 was applicable in India. The question in the present appeals is whether the execution of a formal agreement was intended to be a condition of the bargain dated July 6, 1952 or whether it was a mere expression of the desire of the parties for a formal agreement which can be ignored. The evidence adduced on behalf of respondent No.1 does not show that the drawing up of written agreement was a pre- requisite to the coming into effect of the oral agreement. It is therefore not possible to accept the contention of the appellant that the oral agreement was ineffective in law because there is no execution of any formal written document. As regards the other point, it is true that there is no specific agreement with regard to the mode of payment but, this does not necessarily made the agreement ineffective. The mere omission to settle the mode of payment does not affect the completeness of the contract because the vital terms of the contract like the price and area of the land and the time for completion of the sale were all fixed. We accordingly hold that Mr. Gokhale is unable to make good his argument on this aspect of the case.'

8. The learned counsel for the appellant invited our attention to several decisions, such as, A.B.C. Laminart Pvt. Ltd., v. A.P. Agencies, Salem, : [1989]2SCR1a ; Jainarain Ram Lundia and another v. Surajmull Sagarmull and others, 1949 FCR.349. Niranjan Shankar Golikari v. Century Spinning and ., : (1967)ILLJ740SC ; Gujarat Bottling Co. v. Coca Cola Co., : AIR1995SC2372 ; and Vijaya Minerals Pvt., Ltd., v. Bikash Chandra Deb, : AIR1996Cal67 and alsoSection 42 of the Specific Relief Act, 1963, to show that once a contract is concluded, the terms are binding on the parties unless and until the contract is rescinded or the terms varied with the consent of both the parties, and that negative covenants contained in the agreement are enforceable by an injunction irrespective of the questions of balance of convenience and irreparable injury. The basis in all these decisions is the existence of a concluded contract without being incomplete or inconclusive regarding the terms of the contract.

9. The question whether the contract was rescinded or varied with the consent of both the parties, treated as incomplete 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 than June 7, 1997. A detailed business plan with cash flow requirements is to be worked out and added as an annexure to the agreement'. Annexure 'B' contains a 'Note' that a detailed business plan with cash flow requirements is to be worked out and added as an annexure to the agreement. In letter dated 14.11.1997 there is a reference that the Joint Venture arrangement between the parties has not lived upto its promise either in terms of the achieved revenues or the promised cash flows for production. In that context, it is stated that the aim of the Joint Venture was that while maximising the yield from our existing programmes should be able to grow, and if this is not happening it would be best for both of us to re-look our association. By letter dated 8.12.1997, a reference is made to certain outstanding dues prior to the Joint Venture arrangement which were reconciled to their respective account and arrived at a figure of Rs.31,59,808, which the respondent would like the appellant to confirm and schedule payment immediately. By another letter dated 22.1.1998, it was agreed that there will be no profit share or joint venture on the episodes telecast from June 9, 1997 to January 29, 1998 as contemplated by the Letter of Intent dated 30.5.1997 and the subsequent amendment letter dated December 8, 1997. By another letter dated 29.1.1998, there is a reference to put an end to the Joint Venture arrangement but a simple underwriting arrangement is suggested. It is also stated that the above arrangement will be in vogue till the end of March and will be reviewed at that point of time on its effectiveness. The letter dated4.2.1998 refers to a Time-Sales arrangement and hundies were sent by the appellant. If it is a joint venture subsisting, there was no necessity to send the hundies. Therefore, this not a case where the terms are settled completely, area of operation defined under the Letter of Intent or the cash flow quantified, all these things are yet to be worked out. The subsequent agreement is not a formal document in this context. Several mutual duties and obligations are to be settled. In such an event, it cannot be said that it is a concluded contract. Only when the contract was concluded earlier, nothing more to be added except formal execution of a document negative covenant has to be enforced and non-execution of a formal agreement will 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 ., : (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 onesided. In such a situation, the Apex Court negatived the contention that the negative covenant contained in Clause (17) amounted to a restraint of trade and, therefore, against the public policy. It was found that the respondent Company apprehended that information regarding the special processes and the special machinery imparted to and acquired by the appellant during the period of training and thereafter might be divulged and such apprehension was justified, and there is nothing to show that if the negative covenant is enforced, the appellant would be driven to idleness or would be compelled to go back to the respondent company; it may be that if he is not permitted to get himself employed in another similar employment, he might perhaps get a lesser remuneration than the one agreed to by the present company. But there is evidence that the appellant was offered a higher remuneration by other companies. In such a situation, the Apex Court thought that he cannot be heard to say that no injunction should be granted against him to enforce the negative covenant. The injunction issued against him restricting him to a time frame is agreed upon in the negative covenant. In such a circumstance, enforcing a negative covenant that he will not be employed elsewhere during the subsistence of the agreement, is really necessary and he has to be injuncted, otherwise, the company will be put to loss and there is every reason to apprehend that the information or trade secret likely to be leaked out.

13. A.B.C. Laminart Pvt., Ltd., v. A.P. Agencies, Salem, : [1989]2SCR1a , is a case where Clause 11 formed part of the agreement and the parties were bound by it and so long the contract had subsisted, it was not open to them to deny the existence of Clause 11 of the agreement.

14. In Vijaya Minerals Pvt., Ltd., v. Bikash Chander Deb, : AIR1996Cal67 , the Calcutta High Court took the view that the negative covenant that are from mines would not be sold to anyone except the buyer under the agreement is binding on the other party and a decree for specific performance can be granted and also opined that injunction can be granted at an interlocutory stage. In this case, the Calcutta High Court has held that the question of balance of convenience and whether damages would be adequate remedy or not becomes immaterial while considering an application for temporary injunction. Clause (12) of the agreement provides that he shall not sell or otherwise part with or dispose of any 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 remedy or not becomes immaterial.

15. Even as per the judgment of the Supreme Court in M/s. Gujarat Bottling Co., Ltd., v. Coca Cola Co., : AIR1995SC2372 , it would be evident from para 45 that in the case of enforcement of negative covenants, it would still be guided by the provisions of Section 42 of the Specific Relief Act and Section 41(e) of the Specific Relief Act apart from construing the usual test governing the grant of injunction. The Court is, however, not bound to grant an injunction in every case and an injunction to enforce a negative covenant would be refused if it would indirectly compel the employee either to idleness or to serve the employer. The statement made in para 48 of the said judgment, wherein the Apex Court after construing the prima facie case has also examined the other two requirements for grant of interlocutory injunction, namely, balance of convenience and irreparable injury. In the present case, unlike the Gujarat Bottling Company Case, : AIR1995SC2372 , respondents 1 and 2 are the producers of tele-serials. The Gujarat Bottling Company was a converse case, where the Coca Cola Company wanted to enforce the negative covenant against the distributorwhich it had appointed originally, which had joined hands with its rival Pepsi. In the present case, the plaintiff/appellant is seeking to restrain the producers of the serials from telecasting the serials only, but never sought for enforcement of negative covenant. Thus, the judgment would support the case of respondents 1 and 2.

16. That having regard to the facts and circumstances of the case as projected, the cases cited by the learned senior counsel, Mr.P.P.Rao, have no bearing, because in all those cases, the basis was that the contract was a concluded contract. In those cases, the terms were settled and binding on the parties and some formal thing not done, the Court took the view that a mere reference to a future formal contract will not prevent the binding bargain between the parties. But, in the instant case, where the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed, it cannot be said that it is a concluded contract. After all, what was proposed has to be understood as an arrangement, and to have its binding nature, it has to culminate itself into an agreement as contemplated under 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 conclusion, the Court has to first look to the strong prima facie. Having regard not only to the strength of the claim but also to the strength of the defence and then to decide whether (1) there is a serious disputed question to be tried in the suit; (2) the Court's interference is necessary to protect the party from the species of injury, which can be called an irreparable injury; and (3) the comparative hardship or mischief or inconvenience can be compensated by way of damages, in other words, cannot be adequately compensated by way of damages.

18. In Shiv Kumar Chadha v. Municipal Corporation of Delhi and others, : [1993]3SCR522 Court indicated as to when an order of injunction should be granted. The relevant portion reads as follows:-

'A party is not entitled to an order of injunction as a matter of right or course. Grant of injunction is within the discretion of the Court and such discretion is to be exercised in favour of the plaintiff only if it is proved to thesatisfaction of the Court that unless the defendant is restrained by an order of injunction, an irreparable loss or damage will be caused to the plaintiff during the pendency of the suit. The purpose of temporary injunction is thus to maintain the status quo. The Court grants such relief according to the legal principles ex-debito justitiae. Before any such order is passed, the Court must be satisfied that a strong prima facie case has been made out by the plaintiff including on the question of maintainability of the suit and the balance of convenience is in his favour and the refusal of injunction would cause irreparable injury to him... Further, the Court should be always willing to extend its hand to protect a citizen who is being wronged or is being deprived of a property without any authority in law or without following the procedure which are fundamental and vital in nature. But at the same time, the judicial proceedings cannot be used to protect or perpetuate a wrong committed by a person who approaches the Court.'

19. The learned counsel for the respondents invited our attention to a decision in M/s Gordon Woodroffe and Co. Madras (P) Ltd., v. C.D. Gopinath and another, : AIR1978Mad374 , where in it has been held thus:-

'We are also satisfied that even if there is a breach of the negative convenant as alleged, it could be compensated in money and, therefore, 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 granted. In support of the said contention, he relied on a decision in M/s Golden Wine Agencies v M/s, Venedela Distilleries (P) Limited, AIR 1984 A.P. 274. He further contended that where the parties to a contract agreed to substitute a new contract for the initial one, or to alter it, then the terms of contract becomes the disputed question of fact to be established in the suit. When the terms had not been modified and agreement had remained the same, which does not admit any dispute on terms, in other words, the original contract had not been altered or rescinded, then alone, the negative covenant can be enforced by way of injunction and not otherwise. To sustain his view, he relied on a decision in Manager Hardware & Tools Limited v. Sara Smelting Pvt., Ltd.,, AIR 1983 All. 329;

21. The learned counsel Mr. Mohan Parasaran also relied on a decision of this Court in H.G. Krishna Reddy & Co., v. MM. Thimmaiah, : AIR1983Mad169 to show that when and under what circumstances a contract cannot be termed as a concluded contract. Paras 9 and 19 of the judgment reads as follows:

'It is now settled that if a document which is entered into between two parties and which is relied on as constituting a contract contemplates the execution of a further regular agreement between the Parties. It is a matter of construction whether the execution of a further contract is a condition of the terms of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the original agreement should be performed. In the former case, there cannot be any enforceable contract unless the condition is fulfilled or on the ground that law does not recognise a contract to enter into a contract. In Ridgway v. Wharton, 1857 (6) HLC 238 Lord Cranworth observed that the fact of a subsequent agreement being prepared may be evidence that the previous negotiations did not amount to an agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the proposition that they cannot be bound by a previous agreement.'

'It is in the light of these principles, we have to consider the question whether the provision in Ex.P. 1 for the execution of a regular agreement is one of the terms of the bargain between the parties under Ex.P. 1. It is also necessary in this context to refer to another settled principle 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 carrying on a similar business within certain limits. A correspondence then followed between the solicitors for the company and for M respecting the terms of the memorandum, and on the 7th June, 1889, M's solicitor wrote withdrawing the offer. In an action by the company against M for specific performance of the contract alleged to be constituted by the two original letters it was held that although these two letters would if nothing else had taken place, have been sufficient evidence of a complete agreement, yet the company had themselves shown that the agreement was not complete by stipulating afterwards for an important additional terms, namely, the restriction on M's carrying on business, which kept the whole matter of purchase and sale in a state of negotiation only; and that M was therefore at liberty to put an end to the negotiations by withdrawing his offer, though within ten days mentioned inhis letter. Kay, J. after referring to the decision of House of Lords observed as follows:-

'In my opinion, the decision of Hussey v. Horne Payne, 1879 (4) AC 311 completely covers this case. I understand it to mean, that if two letters standing alone would be evidence of a sufficient contract, yet, a negotiation for an important term of the purchase and sale carried on afterwards is enough to show that the contract was not complete; and, so far as my own judgment is concerned, I entirely agree in the justice and equity of such a rule'.

The learned counsel also relied on a decision in National Advertisers v. Mysore State Road Transport Corporation, AIR 1964 Mys. 220 to support his view that prima facie case is not really the sole criterion governing the issue of an order of temporary injunction and the appellant can always obtain damages for breach of the agreement, if there has been a breach at the instance of the respondents.

22. From the perusal of several correspondences and looking into the various conditions of the letter of intent dated 30.5.1997 and the conduct of the parties, it appears to us that there is a breach or modification or substitution or something to be done which assumes, either the contract is not concluded or to have been repudiated by the respondents, in which event, the right claimed assumes the character of a disputed nature. The proof of such right depends on the intention of the contracting parties which 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:-

'Renewal from time to time altering the profit-sharing ratio after expressly referring to the joint venture contract that there will not be any profit-sharing or joint arrangement on the episodes telecast from June 9, 1997 to January 29, 1998 as contemplated by letter of intent dated 30.5.1997. Subsequent amendment letter dated 8.12.1997 indicates that the said arrangements have been given a go by and in its place, the parties clearly contemplated only payment of fixed under writing fee for each episode telecast from 9.6.1997 to 29.1.1998 and fixed the said underwriting fee at Rs.1,65,000/- for programme to be telecast in February 1998 and beyond, the parties were to separatelynegotiate and finalise after re-negotiation with Sun T.V. on the telecast fee and Free Commercial Times. Subsequent to this, there was reconciliation of accounts to which both the appellant and respondents 1 and 2 are parties. The reconciled statement signed by both the parties and statement of account is based not on joint venture, but on payment of fixed underwriting fee for each telecast of each episode, right from June 1997 and the total amount due from appellant is shown as Rs.60,49,422.69. Even in the first item, it is mentioned therein that 'Brought forward old outstanding before joint venture' and also otter items, namely, 4, 5, 6 and 7 wherein, only fixed underwriting fee is charged for each episode at RS.1,65,000 and there was no profit-sharing ratio at 60:40 as per the original letter of intent. The fact that joint venture was abandoned and was never implemented is confirmed by another document letter dated 29.1.1998 and even there, only a fixed underwriting fee is mentioned for two serials, namely, Balachander's 'Chinnathirai' and 'Marmadesam' and apart from the fixed underwriting fee, the other modes for securing the interest of the appellant is mentioned, such as, furnishing of a demand note for the underwriting amount, demand note for the additional spots, if any, a hundi for the underwriting fee and telecast certificate provided by M/s. Sun T.V. Apart from hundies, post-dated cheques are also to be sent payable in 90 days as per condition No.3, from the date of telecast of each episode. Further communications dated 4.2.1998 and 6.2.1998 confirm clearly that there was a new time sales arrangement which will completely replace the letter of intent 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 trial Court's exercise of discretion. If it appears to the appellate Court that in exercising its discretion the trial Court has acted unreasonably or capriciously or has ignored relevant facts, then it would be open to the appellate Court to interfere with the trial Court's exercise of discretion.' The Privy Council in Charles Osenton and Company v. Johnton, 1942 A.C.130 held thus:-

'There remains the question whether, assuming that in the circumstances of this case. Tucker, J., had jurisdiction to make the order of reference, his conclusion must stand on the ground that it was reached in the exercise of his discretion and that the exercise of such discretion should not be interfered with on appeal.' It is settled in law that 'the appellate Court must defer to the judge's exercise of his discretion and must not interfere with it merely upon the ground that the members of the appellate Court would have exercised the discretion differently. The function of an appellate Court is initially that ofreview only. It is entitled to exercise an original discretion of its own only when it has come to the conclusion that the Judge's exercise of his discretion was based on some misunderstanding of the law or of the evidence before him, or upon an inference that particular facts existed or did not exist, which although it was one that might legitimately have been drawn upon the evidence, that was before the Judge, can be demonstrated to be wrong by further evidence that has become available by the time of the appeal or upon the ground that there has been a change of circumstance, after the judge made his order that would have justified his according to an application to vary it.'

25. Therefore, it is well settled that it is only if the discretion is not exercised applying the tests on the point, fairly or honestly or according to the rules or reason and justice, then alone, the order can be reversed. Where the conclusion is right and discretion is exercised properly and the crucial facts not ignored and even certain grounds not considered, which are not essential, even then, the appellate Court must defer to the Judge's exercise of his discretion and must not interfere with it. merely upon the ground that the appellate Court would have exercised the discretion differently. It is only if and after the appellate Court had reached a conclusion 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 a plaintiff to an injunction and mere inconvenience is not enough to entitle a party to an injunction. There must be violation of an enforceable right and the violation must be of a substantial character. An injunction will not be granted where the plaintiff has a remedy by way of damages. The injury must be irreparable and it must be continuous. By the term irreparable injury is meant injury which is substantial and could never be adequately remedied or atoned for by damages, not injury which cannot possibly be repaired. If, however, by the conduct of the appellant having regard to the nature of transaction being commercial and the injury complained of is one which may in some way be compensated by money, the Court may decline to grant the injunction. Keeping these principles in view, it has to be noticed that whenever the Court grants an injunction restraining the breach of any express or implied term of the contract, thereby, the Court specifically enforces the performance of the contract. Where the contract contains express terms, negative as well as positive, and positive terms arecapable of specific performance by the Court, the Court may naturally well enforce an injunction. The observations of the negative terms, for by so being, promote the complete performance of the contract as a whole. It may here be noticed that whenever in such cases, a person is compelled by an injunction to observe some negative term of a contract, the whole benefit of the injunction is conditionally upon the plaintiff performing his part of the contract, and the moment he fails to do any acts which he has engaged to do and which were the considerations for the negative term, the injunction is liable to be withheld.

27. In the instant case, there is a condition that operational, procedural and functional methods have to be worked out by executing another agreement. If that is so, there is some aspect of the contract which remained unfulfilled. Whether it is a concluded contract or whether the negative covenant is enforceable, in the absence of adding a subsequent thing agreed to under the joint venture arrangement or rights to be decided, it is not appropriate at an intermediary stage to express any opinion or to form an opinion as to such rights. Where a right is disputed until the trial takes place, presumption of prima facie case may not be proper. Where the validity of the contract is under dispute, it is appropriate to refuse a motion for an injunction restraining the respondents. Where at an an interlocutory stage, the right is not clear and the nature of the contract whether concluded or not is in dispute, injunction has to be refused on the ground of comparative convenience, otherwise, grant of injunction would, if the appellant ultimately failed, do more injury to the respondents than its refusal would occasion to the appellant. This is not a case where there is a dear valid contract. But where the contract is disputed, if, however, on an interlocutory application for an injunction, it would virtually be granting decree for specific performance without trial.

28. In conclusion, we opine to say that it shall not be proper to extend this wide power to grant of injunction where the case admits a disputed term of contract, which fact requires to be established at the trial.

29. Any opinion expressed in this order or in the order impugned is only for the purpose of disposal of the application for injunction and it shall in no way influence while deciding the issued involved in the suit at the trial. The trial Court to decide all questions uninfluenced by these findings, as they are only tentative and based on pleadings and having no evidence regarding the context and circumstances in which those documents relied on were emanated between the parties.

30. In the result, the appeal fails and the same is dismissed. Parties to bear their own costs in this proceeding. In view of the order passed on this appeal, the C.M.P.No.9036 of 1998 does not survive for consideration and the same is also dismissed.


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