Delhi High Court
Western International ... vs Modi Apollo International Group ... on 20 July, 2009
Author: S. Muralidhar
IN THE HIGH COURT OF DELHI AT NEW DELHI
IA Nos. 7849/09, 8725/09 in CS (OS) 1123/2009
Reserved on : 17th July 2009
Decision on : 20th July 2009
WESTERN INTERNATIONAL UNIVERSITY INC.
..... Plaintiff
Through Mr. Rajiv Nayar, Senior Advocate with
Mr. Dhruv Wahi, Mr. K.V. Singh, Ms. Reeta
Mishra, Mr. Rajeev Nanda and Mr. Manish
Dimbla, Advocates
versus
MODI APOLLO INTERNATIONAL GROUP PVT LTD. & ANR
..... Defendants
Through Mr. Rajiv Sawhney, Senior Advocate
with Mr. Pravin Bahadur, Mr. S.Patro, Ms. Kanika
Gomber, Ms. Mallika Joshi, Mr. Rajat Bhardwaj
and Mr. Rajan Narain, Advocates for D-1.
CORAM:
HON'BLE DR. JUSTICE S.MURALIDHAR
1. Whether Reporters of local papers may be
allowed to see the judgment? Yes
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported Yes
in Digest?
ORDER
20.07.2009
1. IA No.7849/2009 by the Plaintiff Western International University Inc.
(„WIU‟) under Order XXXIX 39 Rules 1 and 2 of the Code of Civil
Procedure 1908 (CPC) is an application seeking an interim injunction
restraining the Respondents/Defendants from representing to the public at
large and the students in particular that Defendant No.1 Modi Apollo
International Group Pvt. Ltd. („MAIGPL‟) is offering the Plaintiff WIU‟s
programs and courses of study and/or accepting or fee for enrolment in
respect of such programs and/or courses and from taking out or continuing
to maintain any advertisement with respect to the above in any newspaper or
other print/electronic media or by way of any hoardings/billboards using
Plaintiff‟s trade name/trade mark and other intellectual property.
2. The Plaintiff WIU is an Arizona Corporation having its principal place of
business at Phoenix, Arizona. It is a private university in the United States
of America („USA‟) accredited by the Higher Learning Commission
(„HLC‟) of the North Central Association of Colleges and Schools
(„NCACS‟), Illinois. It is accredited to offer courses and programmes
leading to certificates, bachelor degrees in arts and sciences and professional
curricula and master degrees (professional curricula) and associate degrees.
According to the Plaintiff WIU it is a wholly owned subsidiary of Apollo
Group Inc. („AG‟), an Arizona Corporation having its principal place of
business at the same address as WIU.
3. AG entered into a Master Agreement with Apollo International Inc.
(„AI‟), Defendant No.2 herein, on 15th October 1999 whereby AG granted to
AI the non-exclusive right to use the word "Apollo" as part of its trade name
and business during the term of Master Agreement. Inter alia, AI was to
enable AG to establish campuses, learning centers, distance education
programmes, training programmes and other educational offerings of AG
and its subsidiaries outside of the United States, Canada and Puerto Rico
through its subsidiaries and to provide faculty, personnel and curriculum for
each such location. It was mentioned in the said agreement that the
educational programmes offered would include that of the University of
Phoenix („UOP‟) another wholly owned subsidiary of AG. Clause 2
indicated that the parties would form and use subsidiaries to achieve the
objectives of the Master Agreement. This agreement also contained an
arbitration clause.
4. It is stated that pursuant to the said Master Agreement, AI approached
WIU to offer WIU‟s educational courses/programmes at the campuses of AI
and its subsidiaries and joint ventures in India through regular class room
instruction. On 30th August 2001 AI entered into a Shareholder‟s
Agreement („SHA‟) with K.K. Modi Investment and Financial Services Pvt.
Ltd. (hereafter „Modi‟ or „MIFSPL‟), a company forming part of the Modi
Group, to conduct the business of higher education services in India. Inter
alia, the SHA provided for the formation of a new entity to be registered
under the Companies Act, 1956 having its registered office in New Delhi.
Under the agreement MIFSPL was to create a special purpose vehicle
(„SPV‟) for making investments into the new company i.e. MAIGPL.
MAIGPL was to have flexibility to raise funds from other investors
including but not limited to an initial public offer („IPO‟) subject to Modi
retaining the control of the SPV. Among other clauses were those
specifying the respective responsibilities of AI on the one hand and Modi on
the other. Among AI‟s responsibilities under Article 5.1 were the following:
"(f)primary supervision and implementation
responsibility for negotiating the necessary changes that
may be demanded by the Higher Learning Commission,
NCA-the body that accredits Western International
University ("WIU")-in order to make possible the
establishment of WIU campuses and programs in India.
In addition, Apollo will provide to the Company (i) the
educational expertise in curriculum development of
Apollo based on and adapted from the University of
Phoenix, WIU and/or Apollo‟s subsidiaries in order to
develop new courses, degree programs, and certificates,
and to maintain current all established courses and degree
and non-degree programs and (ii) mutually agreed upon
degree and non-degree programs and the administrative,
technical, and marketing expertise and services of Apollo
based on and adapted from those of the University of
Phoenix, WIU and other Apollo Group, Inc. subsidiaries,
under the conditions established in the relevant
agreements to be negotiated between Apollo and the
Apollo Group, Inc. and, to the extent necessary, between
Apollo and the Company.
It is understood, however, that courses, curriculum and
programs developed and/or used for the Indian market by
the Company will not be disclosed, divulged or shared
with any other entity or third party in India without the
approval of the Board."
5. On its part Modi was to be responsible for complying with the statutory
requirements of the regulatory bodies in India and supervise and implement
the adaptation of programmes provided by AI to suit Indian conditions and
environment. The duration of the agreement was specified in Article 10
which reads as follows:
"10.1 Subject to earlier termination as set forth in
Section 10.3 below, this Agreement shall be in force as
of the date of its execution and shall remain valid and
bind the Shareholders and their respective successors and
assignees (i) for thirty (30) years and (ii) for so long as
both Shareholders, including its Affiliates, each hold at
least a forty percent (40%) equity interest in the
Company.
10.2 At the end of the term set forth in Section 10.1,
this Agreement shall be deemed automatically extended
for an additional ten (10) years, unless any of the
Shareholders manifests its intention not to have it
extended, through a written notice sent to the other
Shareholder at least six (6) months before the end of the
term of thirty (30) years.
10.3 The Agreement may be terminated by the
following:
(a) material breach of any of the material provisions
hereof by any of the Shareholder; or
(b) bankruptcy or dissolution of any of the Shareholders
or the Company; or
(c) by mutual consent of the Shareholders.
10.4 A written notice of termination shall be sent by a
Shareholder to the other within thirty (30) days from the
date of the event which may be a cause for termination
stating the date of effective termination, which may not
be less than thirty (30) days from the receipt of the notice
of termination. In the event of termination due to a
material breach of this Agreement, the breaching
Shareholder shall be allowed thirty (30) days to cure such
breach.
10.5 This Agreement shall be terminated upon the
following :
(a) any Shareholder, including its Affiliates, reduces its
equity interest in the Company below forty percent
(40%), provided, however, that with respect to Section
6.12(b), this Agreement shall not terminate until such
time as Apollo makes full payment to Modi for its shares
of the Company, and with respect to Section 4.1, this
Agreement shall not terminate until the election by Modi
to Exchange pursuant to Section 4.1 and the effectiveness
of an Apollo IPO."
6. Article 11.14 of the SHA contained an arbitration clause which read thus:
"11.14 Arbitration of Disputes. The parties shall attempt
to settle disputes arising out of or relating to this
Agreement or the breach thereof by a meeting of a
designated representative of each of the parties within ten
(10) days after a request by either of the parties to the
other party asking for the same. If such dispute cannot
be settled at this meeting, the parties shall designate a
mediator, or if the parties are unable to agree upon a
mediator, each party shall choose a mediator and the
chosen mediators shall choose a single person to mediate
the dispute. If the matter is not then settled in a manner
satisfactory to the parties, either party may submit the
dispute to binding arbitration by a sole arbitrator chosen
by agreement of the parties, and judgment upon the
award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. Except as otherwise
specifically provided for herein, each party shall bear its
own costs and attorneys‟ fees. The procedures specified
herein shall be the sole and exclusive procedures for the
resolution of disputes between the parties arising out of
or relating to this Agreement; provided, however, that a
party may seek a preliminary injunction or other
preliminary judicial relief if in its judgment such action is
necessary to avoid irreparable damages. All applicable
statutes of limitations shall be tolled while the procedures
specified in this Section are pending. The parties will
take such action, if any, required to effectuate such
tolling."
7. Two separate agreements were entered into between WIU and AI on 6th
September 2002. These were the Implementation Agreement and the
Licence Agreement. As far as the Implementation Agreement was
concerned, it noted some of the clauses of the Master Agreement between
AG and AI and provided that AI would have the non-exclusive right to use
the names, trade marks and/or logos associated with WIU or Western
International University as part of its WIU Branded Offerings during the
term of the agreement. Clause 6 of the Implementation Agreement
specified its term as 24 months subject to extension by mutual agreement for
an additional 24 months provided that such extension was agreed to at least
6 months prior to the scheduled expiration of the agreement. Importantly,
the consequences upon termination of the Implementation Agreement were
spelt out as under:
"Upon termination of this Agreement, the following
conditions apply:
(a) WIU and AI shall continue to satisfy their
respective obligations under this Agreement until all
students enrolled in the educational offerings, as detailed
in Exhibit A, then in session are completed.
(b) Article 2 of this Agreement concerning the parties‟
financial responsibilities shall survive termination of this
Agreement and shall remain the continuing obligations of
the parties for all students who enroll prior to the
termination date of this Agreement.
(c) Representatives of WIU and/or AI shall continue
to have access to office space until all students enrolled
in the educational offerings as detailed in Exhibit A prior
to termination of this Agreement have completed their
enrollment in the Programs or Courses of Study.
(d) WIU and/or AI shall be permitted to examine and
make copies of student enrollment and financial records
pertaining to the educational offerings as detailed in
Exhibit A until all such students have completed their
enrollment. All such student enrollment and financial
records shall remain the sole property of WIU.
(e) WIU shall continue to maintain the official
accounting and student books and records for the
educational offerings as detailed in Exhibit A until all
students enrolled in the relative programs and courses of
study prior to termination of this Agreement have
completed their enrollment."
8. As far as the Licence Agreement of the same date, i.e. 6th September
2002 was concerned it reiterated that WIU‟s logos, trade names, trade
marks, proprietary curricula and other intellectual property rights
collectively referred to as WIU property were the sole and exclusive
property of WIU and that during the term of the Licence Agreement WIU
was granting to AI a non-exclusive licence to use WIU property for the
purposes of promoting and marketing WIU programmes in India. The said
Licence Agreement was terminable on 30 days notice in the event AI
violated the agreement. Clause 5 stated that the Licence Agreement was co-
terminus with the Implementation Agreement. It was stated that upon the
termination or expiration of the Licence Agreement AI agreed to
immediately cease the use of the WIU property.
9. An addendum dated 6th September 2002 to the SHA was executed by
Modi, AI and MAIGPL. Clause 8 thereof mentioned the Implementation
Agreement between WIU and AI and identified it as Exhibit A. The
addendum stipulated as under:
"It is understood by all parties to this Addendum that,
(a) An Implementation Agreement (Exhibit A) exists
between Apollo and WIU related to the Shareholders
Agreement. The term of this Implementation Agreement
is twenty-four (24) months. The Implementation
Agreement includes a provision of advance notice of 6
(six) months . At the termination of this Implementation
Agreement Apollo and WIU can extend the termination
date by mutual agreement.
(b) The Implementation Agreement specifies the
obligations of Apollo Group, Inc. and Apollo, and
therefore of MAIGPL, in case the Implementation
Agreement is not extended (see Exhibit A). In particular,
upon termination of this Implementation Agreement,
(1) Modi and Apollo shall continue to satisfy their
respective obligations under the Shareholders
Agreement and this Addendum hereto until all
students enrolled as of the termination date have
completed their educational program.
(2) Article 5 of this Addendum concerning the
parties‟ financial responsibilities shall survive
termination of the Implementation Agreement and
shall remain the continuing obligation of
MAIGPL, for all students who enroll prior to the
termination date of the Implementation
Agreement.
(3) Apollo shall continue to have access to office
space until all students enrolled in the educational
programs prior to termination of the
Implementation Agreement have completed their
enrollment.
(4) Apollo shall be permitted to examine and
make copies of student enrollment and financial
records pertaining to the educational offerings until
all students who enrolled prior to the termination
of the Implementation Agreement have completed
their enrollment.
(5) MAIGPL shall continue to maintain the
official accounting and student books and records
until all students enrolled in the relevant programs
and courses of study prior to termination of the
Implementation Agreement have completed their
enrollment."
In effect, therefore, the relevant clauses of the Implementation Agreement
specifying the consequences flowing from its termination were incorporated
into the SHA through the Addendum dated 6th September 2002 between AI,
Modi and MAIGPL.
10. Consequent upon the aforementioned agreements a Royalty Agreement
dated 31st January 2003 was entered into between Defendant No.1 MAIGPL,
and Defendant No.2 AI. The recitals of this Royalty Agreement took note of
an addendum dated 13th September 2002 to the SHA in terms of which
MAIGPL agreed to make payment of royalty to Apollo in respect of the
programmes and degrees offered by Apollo and its affiliates related to WIU
in India through MAIGPL. Article 3.1 thereof provided that it would become
effective from 13th September 2002 and would continue to be in full force
and in effect for a period of 2 years subject to a successful negotiation by AI
of the Implementation Agreement in 2004, 2006 and 2008. It was reiterated
that upon expiration of the Royalty Agreement, AI and its associates would
continue to satisfy their respective obligations under the Royalty Agreement
"until all students enrolled in the educational offerings then in session have
completed the course as per the terms and conditions of the Implementation
Agreement."
11. According to WIU on 16th May 2005 the All India Council for Technical
Education („AICTE‟) notified certain regulations relating to foreign
universities. These sought inter alia to regulate the offerings of technical
education by foreign universities through regular class rooms in India.
According to WIU, MAIGPL and AI assured it that no registration with the
AICTE was required. Nevertheless MAIGPL requested WIU to issue an
authority letter in its favour authorising MAIGPL to represent WIU before
the AICTE. WIU issued such a letter on 17th June 2005. WIU states that
thereafter several show cause notices and letters were issued by AICTE in
the name of WIU at the address of MAIGPL and replies were sent by
MAIGPL on behalf of WIU. However WIU was surprised to notice that
AICTE had in its website listed WIU as an unapproved foreign institution
conducting technical education courses in India in violation of the AICTE
regulations. WIU states that AI was not playing an active role vis-a-vis
MAIGPL and WIU was becoming increasingly concerned with the actions
of MAIGPL.
12. Consequently WIU issued a letter dated 27th September 2007 to AI
communicating its intention not to renew the Implementation Agreement
after its expiration on 30th September 2007. It also informed MAIGPL that
in terms of Article 5 of the Licence Agreement, upon expiration of the
Implementation Agreement the Licence Agreement would also terminate.
WIU further stated that it was willing to extend the date of expiration of the
Implementation Agreement for one month up to 31st October 2007 to allow
the impacted stakeholders to discuss the various responsibilities of the
parties towards the existing students of MAIGPL enrolled in WIU‟s
courses/programmes. By a letter dated 29th September 2007 MAIGPL
requested WIU to reconsider its decision. A meeting was held between the
parties on 4th October 2007 whereby MAIGPL persuaded WIU to extend the
Implementation Agreement and Licence Agreement beyond 31st October
2007 on the condition that WIU would have the right to terminate the said
agreement at any time by giving 30 days‟ notice. A letter to this effect was
issued to WIU by AI on 25th October 2007 and AI signed the copy thereof
signifying its acceptance of the terms.
13. According to WIU it was taken aback when it learnt that in response to
AI‟s letter dated 21st April 2008 MAIGPL represented to the AICTE that it
was not conducting any technical programme but was only a facility
provider. MAIGPL had further filed an affidavit with AICTE stating therein
that it was merely a conduit between students in the higher studies and
universities by various modes. WIU states that it was concerned about the
attempt by MAIGPL to disown liability as an educational institution
operating in India contrary to the understanding between AI and WIU. It
was also concerned about the regulatory issues concerning AICTE.
14. Consequently on 22nd April 2009 WIU issued to AI a notice regarding
non-renewal of the Implementation Agreement and Licence Agreement. In
the said notice WIU requested AI to formally advise MAIGPL as well as
Modi that they were not thereafter to offer enrollment to any student in any
of WIU‟s courses/programmes, or publish advertisements in newspapers or
other print/electronic media for enrolment in the WIU‟s programme and not
to use WIU‟s trade mark, logo and other intellectual property in any form or
manner except as absolutely necessary in relation to the completion of the
course/programmes for the existing students. In the said letter dated 22nd
April 2009 WIU undertook that it would continue to satisfy its obligation
towards existing students in the normal way and that those students of
MAIGPL enrolled in WIU‟s programme prior to 22nd May 2009 would be
allowed to complete their respective courses/programmes. A separate letter
was written by WIU to MAIGPL on 22nd April 2009 revoking the authority
granted to MAIGPL to represent WIU before the AICTE. A copy of the said
letter was also sent to AI. WIU also informed AICTE in writing of the
revocation.
15. On 20th May 2009 Modi (MIFSPL) filed in this Court a petition under
Section 9 of the Arbitration & Conciliation Act, 1996 („ACA‟) against AI,
AG, WIU, UOP and MAIGPL. In the said petition it was claimed by Modi
that there was economic unity between the Respondents to the said petition
and therefore notwithstanding the fact that the two parties to the SHA dated
30th August 2001 were Modi and AI, such agreement would be equally
binding on the other parties including WIU, AG and UOP. By an order dated
25th May 2009 a learned Single Judge of this Court dismissed the said
petition as not maintainable. It was held that a contract between Modi and
AI could not be considered to be a contract between Modi and the other
Respondents who were separate legal entities. The argument that there was
economic unity of AI and WIU, was specifically rejected. Aggrieved by the
said order Modi filed FAO (OS) 245/2009 before the Division Bench of this
Court. It is stated that while directing issue notice to issue in the appeal, the
Division Bench directed the appeal to be listed for hearing on 21st July 2009.
16. When it found that despite the expiry of Implementation Agreement on
22nd May 2009, MAIGPL was continuing to offer enrolment in WIU‟s
courses, WIU on 3rd June 2009 filed the present suit against MAIGPL and
AI seeking inter alia, a permanent injunction restraining MAIGPL and AI
from representing to the public at large that they were offering WIU‟s
courses and accepting fees for enrolment in respect of such courses.
Permanent injunction was also sought to restrain MAIGPL and AI and from
advertising WIU‟s courses and using its trade mark, trade name and logos
thereby holding out that MAIGPL was still associated with WIU. Along
with the suit WIU filed I.A. No.7849 of 2009 under Order XXXIX Rules 1
and 2 CPC for an interim injunction. The suit and application were listed
before the Vacation Court on 10th June 2009 and thereafter on 12th June 2009
when summons were directed to issue in the suit and notice in the
application returnable on 10th August 2009.
17. Aggrieved by the denial of an interim order at that stage, WIU filed FAO
(OS) 246/2009 which was disposed of by the Division Bench of this Court
on 7th July 2009 permitting WIU to mention the case before this Court for an
advancement of the date of hearing of its application for interim relief.
Accordingly the case was listed before this Court on 8 th July 2009. While
permitting replies to be filed within four days this Court directed that any
enrolment by MAIGPL of students in WIU‟s courses would be subject to the
orders of the Court. MAIGPL filed its reply to I.A. 7849 of 2009 and also
filed I.A. No. 8725 of 2009 under Section 8 ACA. Arguments on both
applications were heard finally on 16th and 17th July 2009.
18. The submissions of Mr. Rajiv Nayyar, learned Senior counsel appearing
for the Plaintiff and Mr. Rajiv Sawhney, learned Senior counsel appearing
for the Defendant No.1MAIGPL have been heard. It may be mentioned here
that the report of service of notice upon Defendant No.2 AI is awaited. None
appeared for AI.
19. The submissions on behalf of the Plaintiff are that the notice of
termination dated 22nd April 2009 unambiguously stated that the effective
date of termination of the Licence Agreement, and consequently the
Implementation Agreement between WIU and AI, would be 22nd May 2009.
As far as the WIU is concerned the addendum dated 6th September 2002 to
the SHA incorporated the conditionalities attaching to the Implementation
Agreement and Licence Agreement between WIU and AI. Therefore
notwithstanding the term of the SHA between Modi and AI being 30 years,
the offering of WIU‟s courses by MAIGPL was governed by the Addendum
dated 6th September 2002 to the SHA. The addendum having been signed by
MAIGPL was equally binding on it. In the circumstances, there was no
justification for MAIGPL to continue to receive application forms from
prospective applicants for WIU‟s courses after 22nd May 2009. There was
also no justification for MAIGPL to continue to use, after 22nd May 2009,
WIU‟s trade mark, trade name and logo or issue any advertisement using the
trade mark and logo of WIU in the print and electronic media or by way of
any hoarding, thereby holding out that MAIGPL was offering WIU courses
in BBA/MBA. WIU has placed on record photographs of hoardings taken on
1st June 2009 bear out the above contention. Mr.Nayyar also placed on
record photocopies of certain application forms of WIU, distributed by
MAIGPL even after 22nd May 2009, and accepted from the prospective
applicants on 2nd June 2009. It is submitted that although each of the
prospective applicant was asked to pay a sum of Rs.600/- for the application
form, it was reliably learnt that MAIGPL was collecting fees in the range of
Rs.5 to 6 lakhs from each applicant. It is submitted that these activities of
MAIGPL after 22nd May 2009 are illegal and contrary to the Addendum
dated 6th September 2002 to the SHA. Mr.Nayyar reiterated that WIU stood
by the commitment made by it in the notice dated 22 nd April 2009 as regards
students enrolled till 22nd May 2009 who would be allowed to complete their
courses. Course material would be provided to such students by the WIU
and degrees would also be awarded subject to their successful completion of
the course.
20. Mr.Nayyar submits that the remedy for an alleged illegal termination of
a contract can only be damages. He submits that MAIGPL cannot seek
specific performance of the SHA, notwithstanding the addendum thereto
dated 6th September 2002. It is pointed out that WIU was itself not a party to
the SHA whereas MAIGPL was a party to the Addendum to the SHA
whereby it bound itself to abide by the express terms and conditions of both
the Implementation Agreement as well as Licence Agreement between WIU
and AI. A reference is made to Sections 14(1) (b) (c) and (d) of the Specific
Relief Act, 1963 to emphasise that no relief of specific performance could be
granted to MAIGPL vis-à-vis the SHA and certainly not in a suit against it
by the WIIU. Reliance is placed upon the decisions of this Court in Classic
Motors Limited v. Maruti Udyog Limited 65 (1997) DLT 166 and
Rajasthan Breweries v. The Stroh Brewery Company AIR 2000 Del 450. It
was stated by Mr.Nayyar that WIU does not want to associate itself with AI
beyond 22nd May 2009 and that it does not wish to be present in India for
offering its courses. It is prayed that an ad interim injunction restraining the
Defendant No.1 MAIGPL as prayed for should immediately be granted
failing which severe hardship and prejudice would be caused not only to
WIU but numerous applicants who would be mislead into thinking that
beyond 22nd May 2009 WIU courses can still be offered by MAIGPL.
21. On behalf of MAIGPL it is contended by Mr. Sawhney, learned Senior
counsel that WIU is a subsidiary of AG as much as UOP and AI. It is
submitted that it is strange that WIU is seeking a relief against its own sister
concern AI both of whom are part of the same group i.e. AG. It is pointed
out that the employees of AG are also the employees of AI and both entities
operate from the same address. The management of both is by the same
persons. It is submitted that these are proceedings instituted by WIU are in
collusion with AI to avoid any obligation under the SHA. It is contended
that the SHA was entered into by AI as an agent of AG and its subsidiaries,
i.e WIU and UOP. The agency although not expressly stated in the IA, it is
to be implied in terms of Section 187 of the Contract Act, 1872. It is further
submitted that inasmuch as AG, AI, WIU and UOP operate under a singular
command and control of AG, the separate juristic identities of the four
companies is only a matter of internal arrangement of business. A reference
is made to the representation made by AI to the HLC in the USA in April
2001 seeking a change in the Statement of Affiliation to include a provision
to operate in India. It is pointed out that therein WIU stated that it would
open its India campus "through a partnership between WIU, Apollo
International and the Modi Group." Therefore, it is contended, it would be
wholly unfair to permit WIU to escape liability by contending that it is not a
party to the SHA which is valid for 30 years and cannot be terminated
except in the manner indicated therein. It is submitted that throughout Modi
was led to believe that WIU was part of AG and accordingly huge monies
were invested in the SPV (MAIGPL) by Modi. Apart from consequential
financial loss that Modi would have to incur, the future of nearly a thousand
students would be put in jeopardy if the termination of the IA and LA were
to take effect.
22. Various clauses of the agreements in question have been referred to
show that AI, WIU and UOP operate as a single economic unit and therefore
the obligations of AI under the SHA, which includes the arbitration clause
11.14 are equally binding on WIU. It is pointed out that as part of the
documents filed in the suit, WIU has included a draft of the SHA which
could not have been possibly been with it unless it was part of the same
group of which AG was part. It is submitted that the real reason for WIU
abruptly terminating the Implementation and Licence Agreements with AI
was that after Modi had invested several crores of rupees in the joint venture
and developed a goodwill for WIU‟s courses, AG through its agent AI
wanted to wriggle out of its commitments under the SHA and derive the
entire benefit of Modi‟s efforts exclusively for itself and to the exclusion of
Modi. It is submitted that the suit is not maintainable in the present form
since the Plaintiff is a guilty of suppression of material facts concerning the
Master Agreement entered into between AI and AG and the SHA thereafter
between AI and Modi. It is submitted that the suit is bad for non-joinder of
parties since the necessary and proper parties i.e. AG, UOP and Modi have
not been made parties to the present proceedings. It is pointed out that AI is
yet to write to Modi or MAIGPL about the termination of the
Implementation and Licence Agreements. No order should be passed in
these proceedings in the absence of AI who is yet to be served. For all the
above reasons it is submitted that no case has been made out for an ad
interim injunction as prayed for.
23. It is submitted on behalf of MAIGPL that the order dated 25th May 2009
passed by the learned Single Judge dismissing Modi‟s petition under Section
9 ACA is under challenge before the Division Bench. Since similar issues
would arise for consideration in the said appeal, it is apprehended that any
order passed by this Court in the present application for interim injunction
might prejudice the outcome of the said appeal.
24. In the first place this Court wishes to deal with the application under
Section 8 ACA based on the contention of MAIGPL that the suit is not
maintainable in the present form particularly since there is an arbitration
clause in the SHA. A similar contention raised in the petition under Section
9 ACA filed by Modi was rejected by a learned Single Judge of this Court
by the judgment dated 25th May 2009. Although an appeal against the said
judgment is stated to be pending, there is no interim order passed in the said
appeal as of now. Therefore, this Court proceeds on the basis that the
judgment dated 25th May 2009 still holds the field. It does appear prima
facie that with WIU not being a party to the SHA, the arbitration Clause 11.4
thereof cannot be stated to be binding on WIU. Therefore this Court finds no
merit in the application under Section 8 ACA. It is clarified that this is not
intended to influence the outcome of the appeal filed by Modi against the
judgment dated 25th May 2009 of the learned Single Judge.
25. Turning to the application by WIU seeking an interim injunction, the
first issue that arises is whether the SHA between AI and Modi, to which
WIU is not a party, should prevail notwithstanding the termination of the
Implementation and Licence Agreements to which only WIU and AI are
parties. This in turn hinges on the tenability of the case of MAIGPL about
the economic unity of AG, AI, WIU and UOP which incidentally has been
rejected by the learned Single Judge of this Court in the judgment dated 25th
May 2009. It must be appreciated that each of the above entities is distinct in
law. In order to prove economic unity of the entities it is not enough to
demonstrate that WIU, AI and UOP are subsidiaries of AG. Even the
interchangeability of employees and management may not per se decide the
issue. It is not is dispute that none of the agreements referred to, and the
SHA in particular, contains a clause that states that AI while executing any
of them was acting as an agent of WIU or UOP. Understandably therefore it
was urged on behalf of MAIGPL that such agency must be taken to be
implied on a reading of certain other documents like the representation made
by WIU to the HLC in the USA. As regards the question of implied agency,
it would have to be determined in terms of Section 187 of the Contract Act,
and that in turn would require evidence to be led at the trial. From a reading
of the agreements however no such agency is able to be inferred. On the
other hand it appears that specific obligations attaching to each of the
entities have been spelt out in the agreements. It must be recalled that the
addendum dated 6th September 2002 to the SHA was signed by MAIGPL as
well. That document incorporated in toto the respective obligations of the
parties to the Implementation Agreement, i.e. WIU and AI, and the
consequences flowing from the termination of the Implementation
Agreement. It would be plainly contrary to the intention of the parties if
notwithstanding the termination of the Implementation and Licence
Agreements between WIU and AI, and in the teeth of the addendum dated
6th September 2002 to the SHA, the Defendant No.1 MAIGPL should be
permitted to seek continuation of the obligations attaching to AI under the
SHA (to which WIU is not party) minus the addendum.
26. The fact that AI has not been served and has not appeared yet in these
proceedings, cannot make a difference to the situation where one of the
parties to the Implementation and Licence Agreements, viz., WIU, has
terminated the agreements. In terms of those agreements WIU exercised its
option to terminate by giving a month‟s advance notice. The submissions of
MAIGPL regarding non-joinder of necessary parties, or about the alleged
suppression of facts by WIU regarding the Master Agreement, and whether
that makes a material difference to the outcome of the suit, would require to
be examined at a later stage. Prima facie these submissions do not appear to
dilute the Plaintiff‟s case for an interim injunction at this stage. The
contentions advanced by MAIGPL about why WIU terminated the
agreements and the consequential relief that Modi or MAIGPL would be
entitled to if such termination is found to be illegal cannot possibly be
decided in the present proceedings, as constituted, at the instance of WIU.
Those might be issues in the proceedings that Modi seeks to initiate and will
depend on the outcome of the appeal pending before the Division Bench.
This is also the reason why this Court is unable to appreciate the
apprehension expressed by learned Senior Counsel for MAIGPL that any
order in these proceedings would prejudice Modi‟s case before the Division
Bench. It appears that the scope of the proceedings before the Division
Bench is limited to determining the appropriate forum where the dispute
raised by Modi should be adjudicated. Nevertheless it is clarified that the
present order is not intended to influence the outcome of the appeal before
the Division Bench.
27. There is force in the contention of the learned Senior counsel for WIU
that by resisting the grant of an interim injunction restraining it from
continuing to use the WIU trade property MAIGPL is in effect seeking the
continuation of the Implementation Agreement and the Licence Agreement
when both have been expressly terminated by the notice dated 22 nd April
2009 issued by WIU. The facts narrated show that even on 27th September
2007, when it appeared that there was going to be an issue about AICTE not
approving the courses offered, WIU desired to terminate the Implementation
Agreement. That move was deferred when Modi assured WIU that no such
recognition was required. In the light of the subsequent developments and in
particular AICTE‟s insistence that its approval is mandatory, Modi cannot
possibly plead that WIU‟s withdrawal of its courses being offered by
MAIGPL was wholly unexpected. The contention of MAIGPL that its
substantial investment in the joint venture and the consequential losses it is
likely to suffer if the termination of the agreements by WIU is allowed to
become effective, are factors that should weigh against the grant of an
interim injunction does not impress this Court. The contention of MAIGPL
that it is prevented by the `non-compete‟ clauses from offering courses on its
own is contested by WIU which has categorically stated in this Court
through its counsel that it does not want to be present in India and will have
no problem if MAIGPL offers courses of its own, as long as it makes no use
of WIU trade property.
28. In the considered view of this Court all or any of the above factors urged
by MAIGPL do not constitute a strong enough justification for MAIGPL to
continue to sell application forms of WIU courses, and also collect the
completed forms and fees from applicants, after 22nd May 2009. Much less is
there any justification in law for MAIGPL after 22nd May 2009 to continue
to hold out through advertisements in the print and electronic media and
through hoardings that it is offering WIU courses. The fate of students who
have applied till then is already taken care of in the Implementation
Agreement itself. Therefore, any interim injunction restraining MAIGPL
from selling or accepting application forms for WIU courses after 22 nd May
2009 will not prejudice the ones who have applied on or prior to that date.
With the termination having become effective on 22nd May 2009 and the
consequences thereof having been clearly spelt out in the Implementation
Agreement, and carried into the SHA through the addendum, this Court is
satisfied that the WIU has made out a prima facie case for grant of interim
injunction.
29. On the question of balance of convenience, this Court notes that there is
an increasing clamour among the youth, seeking career opportunities, for
courses offered by foreign universities. This notwithstanding the fact that the
fees for such courses are relatively unaffordable, leading many a prospective
student to fund the pursuit of the course by borrowing loans. In this case,
Modi has been charging a sizeable sum as fees for WIU‟s courses. Then
there is the question of recognition by the regulatory body AICTE. Clearly
there is a question mark over that as well. In this background, the sooner a
prospective unwitting young applicant is informed of the withdrawal by
WIU from the offer by MAIGPL of its courses beyond 22 nd May 2009, the
better. Also, very often the enrolment of students to unrecognised courses
takes place notwithstanding the pendency of litigation and thereafter the
court is presented with a fait accompli. Equities are pleaded by placing the
cases of the students whose careers are likely to be jeopardized in the
forefront. Keeping in view all of the above factors, it appears to this Court
that at the present stage, the balance convenience in granting interim
injunction as prayed for is clearly in favour of the Plaintiff WIU.
30. What are the intended consequences that flow from the termination of
the Implementation and Licence Agreements? These have been spelt out in
the former. Consistent therewith, WIU has stated in clear terms that it stands
by its commitment as regards students who have applied till 22 nd May 2009.
To them it will continue to supply course material and grant degrees subject
to successful completion of the course. WIU is bound down by its statement.
The immediate task is to ascertain the exact number of students who have
applied for WIU‟s course up to and on 22nd May 2009. MAIGPL does not
deny that it has been accepting application forms for enrolment to WIU‟s
courses even beyond 22nd May 2009. An affidavit dated 18th July 2009 of
Mr. Dinesh Khosla, Head (Administration) of MAIGPL (which he refers to
as MAII) states:
"4. A prospective student is admitted to the WIU
programme only upon WIU accepting his application.
MAll does not admit any students. The student once
admitted is a student of WIU and gets a WIU ID.
5. As per MA11 records:
* there are 949 active students undergoing various WIU
courses
* the applications of another 17 students, pertaining to
the pre 22nd May period, have been uploaded to WIU and
are awaiting approval of WIU.
* WIU has rejected the applications of 3 students alleging
that they pertain to the period post 22nd May 2009. The
fees paid by these 3 students have been refunded by
MAII.
* 57 students were approved by WIU, however, they
have not joined the concerned WIU programme as yet.
Many of these students had earlier availed of the option
of refund given by the Defendant No.1 in view of the
uncertainty created by the wrongful termination notice
issued by WIU. IT is not known whether these students
will join back or not.
* There are additionally 270 application forms that have
been sold prior to 22nd May 2009. The payment towards
the sale of these application forms have been received by
MAII (Rs.600/300/200), however the submission of the
completed forms by the prospective students are still
awaited. It is the submission of Defendant No.1 that sale
of an application form constitutes the first expression of
intent from the prospective student in joining WIU
programmes."
31. WIU contests the above statements and submits that a court
commissioner should be asked to undertake, at its cost, a verification of the
records of MAIGPL to find out the factual position. Without prejudice to his
contentions, learned Senior counsel for MAIGPL informs that if such an
order is passed MAIGPL will extend its full cooperation by making
available all records to the court commissioner for verification. Accordingly,
this Court appoints Mr. Naveen Nath, learned Advocate having his office at
C-47 (Basement) Nizamuddin East, New Delhi-110013 (Mobile:
9810055157) as Court Commissioner to visit the office of MAIGPL at the
address given in the plaint, between 4.00 and 5.00 pm today i.e. 20 th July
2009 (and as often thereafter as he deems necessary) and ascertain from the
records of MAIGPL, including but not limited to cash and account books,
bank statements, registers and computer records, the number and names of
applicants from whom a completed application form has been collected up to
and including 22nd May 2009. Under the authority of this order, it will be
open to the Court Commissioner to seek information from the bankers and
other institutions involving MAIGPL to the extent it is necessary to carry out
the mandate of this order. It will be open to the Court Commissioner to
associate any other person of his choice to assist him in carrying out the
mandate. Two representatives each of the Plaintiff WIU and Defendant No.1
MAIGPL are permitted to be present when the Court Commissioner carries
out his tasks. A separate list will be prepared of showing the names and
addresses of the applicants from whom the completed application form has
been received including the total amount collected from each such applicant.
A separate list likewise be prepared of those from whom the completed
application form has been received at the office of MAIGPL after 22nd May
2009. In terms of WIU‟s commitment as recorded, those applicants from
whom application forms have been collected up to 22nd May 2009 will be
permitted to complete their courses, and will be supplied course material and
awarded degrees by WIU subject to successfully completing the course and
fulfilling all conditions. As regards the students from whom application
forms were received after 22nd May 2009 each of them will be repaid the
total sum collected (including money collected at the time of issuance of
application forms and fees if any) from each of them and a proper receipt
obtained. This exercise should be completed by MAIGPL within a period of
four weeks and a proper compliance shown to the satisfaction of the Court
Commissioner. MAIGPL will extend its full cooperation to the Court
Commissioner to enable him to carry out the directions contained in this
order.
32. An appropriate clarification will be prominently published by MAIGPL,
within two days, in the print and electronic media and on its website that in
terms of the present order such of those applicants who have applied till 22 nd
May 2009 will be permitted to complete their course and such of those who
have applied thereafter will be returned the full sum collected from each of
them.
33. An ad interim injunction is issued restraining the Defendant No.1
MAIGPL from representing to the public at large and the students in
particular that Defendant No.1/MAIGPL is offering the Plaintiff WIU‟s
programs and courses of study and accepting any application or fee for
enrolment in respect of such programmes and/or courses and from taking out
or continuing to maintain any advertisement with respect to the above in any
newspaper or other print/electronic media or by way of any hoardings/
billboards using Plaintiff‟s trade name/trademark and other intellectual
property. In particular, Defendant No.1 will remove from its website the any
WIU course application form, and any announcement that it continues to
offer WIU courses. Defendant No.1 will forthwith remove all hoardings
from the roads (including those on the DND Expressway photographs of
which have been placed on record) and also withdraw forthwith all
advertisements in the print/electronic media which hold out that MAIGPL it
continues to offer WIU‟s courses. Compliance in this regard will be shown
to the Court Commissioner by MAIGPL. As regards the notice outside its
office MAIGPL is permitted to indicate that students enrolled up to 22nd
May 2009 will be supplied WIU course material and will be conferred
degrees upon successful completion of the course and fulfilling all other
conditions. The wording of this notice will be got cleared in advance by
MAIGPL from the Court Commissioner.
34. The fees of the learned Advocate Commissioner is fixed at Rs.75,000
which will be paid by the Plaintiff within one week. The learned Advocate
Commissioner is requested to file interim and/or final reports to indicate
whether the directions have been complied with. It is open to the parties to
seek further directions for this purpose.
35. The interim injunction is made absolute in the aforementioned terms.
I.A.No. 7849 of 2009 is disposed of. IA No. 8725 of 2009 under Section 8
ACA is dismissed.
CS(OS) 1123/2009
36. List on 10th August 2009, the date already fixed.
37. Order be given dasti to the parties. A certified copy along with a
complete set of papers be supplied to the learned Advocate Commissioner
by the Registry forthwith.
S. MURALIDHAR, J
JULY 20, 2009
dn/rk
