Delhi High Court

Sanjeev Mittal vs M/S Tirupati Infraprojects Pvt. ... on 4 March, 2014

Author: Rajiv Sahai Endlaw

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                               Date of decision: 4th March, 2014.

+      CS(OS) 2638/2013 & IA No.20999/2013 (u/O 39 R-1&2) & IA
       No.3945/2014 (u/O 1 R-10) & IA No.3946/2014 (u/O 39 R-1&2)

       SANJEEV MITTAL                                              ..... Plaintiff
                           Through:     Mr. Rajat Wadhwa with Ms. Chiral
                                        Dugar, Ms. Sonakshi Awasthi and Mr.
                                        Honey Jain, Advs.

                                      Versus

       M/S TIRUPATI INFRAPROJECTS PVT. LTD.
       & ANR                               ........ Defendants
                           Through:     Mr. Rajiv Aneja with Mr. Asit Tewari,
                                        Advs. for D-1&2.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.

The plaintiff has instituted this suit for permanent injunction, pleading:

(i) that the defendant No.1 Company of which the defendant No.2

Mr. Adarsh Mohan is the Director, is the owner of Shopping

Mall/Complex D Mall at Plot No.D, District Centre, Outer Ring Road,

Paschim Vihar, New Delhi-110063;

(ii) that the plaintiff is engaged in the business of running liquor

shop in and around Delhi and had approached the defendants for

taking two showrooms/shops on the ground floor of the said Mall on

lease and the defendants had issued an "Exclusive No Objection

Certificate" dated 10th April, 2011 to the plaintiff certifying that the

plaintiff will be given exclusive right for opening of wine and beer

shop under license issued by the Department of Excise, Government

of Delhi and further gave him an assurance that the defendants would

not give any permission of opening another wine and beer shop in the

said Mall under any license whatsoever to anyone else in future;

(iii) that the plaintiff took the aforesaid two shops on rent on the

aforesaid assurance and entered into a Lease Deed dated 18th April,

2011 with the defendant No.1 with respect to shops No.8 & 9 for the

period starting from 15th June, 2011 till 14th June, 2020 with a lock-in

period of 24 months;

(iv) that the plaintiff was asked to pay a higher rent amount than the

normal rate in the said Mall owing to being conferred an exclusive

right as aforesaid;

(v) that the defendant No.1 Company, after letting aforesaid shops

to the plaintiff, sold shop No.8 to one Mr. Om Prakash (not a party to

the suit) and the plaintiff has thereafter entered into a registered Lease

Deed with the said Mr. Om Prakash with respect to the said shop;

(vi) that the defendant No.1 also sold shop No.9 to one Mr. Jagdish

Ahuja and Mrs. Simmi Ahuja (not parties to the suit) and the plaintiff

has entered into a registered Lease Deed with respect to shop No.9

with the said Mr. Jagdish Ahuja and Mrs. Simmi Ahuja;

(vii) that the plaintiff in October, 2013 learnt that the defendants

were negotiating with third parties having interest in opening liquor

shop in the said Mall in violation of the "Exclusive No Objection

Certificate" dated 10th April, 2011 issued to the plaintiff.

Hence, the suit for injunction to restrain the defendants from selling,

letting, assigning or parting with possession of any showroom/shop for the

purpose of opening and operating wine and beer/liquor shop in the Mall

aforesaid.

2. Summons of the suit were issued to the defendants and though no ex-

parte ad-interim relief as sought by the plaintiff, granted but it was ordered

that the action taken by the defendants shall be subject to further orders in

the suit and application.

3. However, after the defendants appeared before this Court, vide ad-

interim order dated 5th February, 2014, the defendants were directed to

maintain status quo with regard to opening of another wine and beer/liquor

shop in the Mall.

4. The plaintiff thereafter filed I.A. No.3945/2014 to implead M/s. HBN

Dairies & Allied Ltd. as a party to the present suit, contending that the

defendants, to defeat the interim orders in this suit against them have

transferred a shop in the Mall to the said M/s. HBN Dairies & Allied Ltd.,

which is a sister concern of the defendant No.1 Company with the defendant

No.1 Company and the said M/s. HBN Dairies & Allied Ltd. are having

common Directors, together with I.A. No.3946/2014 to restrain the said M/s.

HBN Dairies & Allied Ltd. also from opening a liquor shop or letting out the

shop transferred to them for the purposes of vending liquor therefrom.

5. The aforesaid applications came up before this Court first on 28 th

February, 2014, when the entitlement of the plaintiff to maintain a suit for

injunction as claimed, was enquired into and it was further enquired as to

how the "Exclusive No Objection Certificate", even if an enforceable

agreement, was not in restraint of trade and anti competition and how the

same could be enforced. It was also enquired as to how the Certificate,

issued by the defendants being developers/builders of the Mall, was

enforceable against persons to whom the defendants transferred different

shops/spaces in the Mall and whether not such persons were entitled to carry

on any business/trade therefrom including of vending liquor.

6. On the request of the counsel for the plaintiff, the matter was

adjourned to today and in the meanwhile, notice of the applications was also

issued to the defendants as well as proposed defendants.

7. The report of service of the notice issued is awaited. However, the

counsel for the defendants appears. He states that he is not the counsel for

the proposed defendant M/s. HBN Dairies & Allied Ltd.

8. The counsel for the plaintiff has been heard on the aspect of

entitlement of the plaintiff to the injunction claimed.

9. The counsel for the plaintiff has argued:

(a) that Section 6(d) of the Transfer of Property Act, 1882 provides

that property of any kind may be transferred except as otherwise

provided by the said Act or by any law for the time being in force and

makes all interest in property restricted in enjoyment to the owner

personally, non-transferable. On the basis thereof, it is contended that

the defendants, while transferring different shops/spaces in the Mall to

others, were / are obliged to restrict enjoyment thereof in terms of the

Certificate issued by them to the plaintiff;

(b) attention was next invited to Section 55(1)(a) of the Transfer of

Property Act dealing with rights and liabilities of buyer and seller--in

the absence of a contract to the contrary, and providing that the seller

is bound to disclose to the buyer any material defect in the property or

in the seller's title thereto of which the seller is, and the buyer is not,

aware. On the basis thereof also it is argued that the defendants as

sellers of different shops/spaces in the Mall were / are bound to

disclose to the transferees/purchasers that the shops/spaces transferred

to them could not be used for the purpose of vending liquor;

(c) that the question whether Agreement aforesaid between the

plaintiff and the defendants as contained in the "Exclusive No

Objection Certificate" is anti competitive or not, can be determined

only by the Competition Commission of India established under The

Competition Act, 2002 and the jurisdiction of the Civil Court to go

into the said question is barred. Reference in this regard is made to

Sections 3, 19 & 61 of the said Act;

(d) that Section 3 of the Competition Act prohibits agreement

which causes or is likely to cause an appreciable adverse effect within

India and will have no application to competition within the Mall;

(e) that the plaintiff in equity, is entitled to the injunction claimed.

Reliance in this regard is placed on the judgment dated 16th January,

1889 of the Supreme Court of Alabama in Clay Vs. Powell ET AL;

(f) that the plaintiff agreed to pay a higher rent for the said shop in

consideration of the "Exclusive No Objection Certificate";

(g) that the aforesaid "Exclusive No Objection Certificate" in the

form of a negative covenant can be enforced;

(h) that Section 27 of the Indian Contract Act making the

agreements in restraint of trade void, would also not apply as the trade

of the defendants is of selling/leasing spaces and the plaintiff is not

restraining the defendant from doing so and the defendants from the

other shops/spaces in the said Mall can carry on businesses other than

of vending liquor;

(i) that since the leases of the plaintiff are subsisting, the negative

covenant has to be enforced, during the subsistence thereof;

(j) that an affidavit of the Advocate for the plaintiff is also handed

over to argue that the defendant No.1 Company and M/s. HBN Dairies

& Allied Ltd. have as many as four common Directors;

10. During the course of hearing, attention of the counsel for the plaintiff

was also invited to Section 11 of the Transfer of Property Act which

provides that where, on a transfer of property, an interest therein is created

absolutely in favour of any person, but the terms of transfer direct that such

interest shall be applied or enjoyed by him in a particular manner, the

transferee shall be entitled to receive and dispose of such interest as if there

was no such direction, and it was enquired from the counsel for the plaintiff,

whether not a condition if imposed by the defendants, while

selling/transferring other shops/spaces in the Mall, that the same will not be

used or permitted to be used for vending liquor, would be in contravention of

Section 11 of the Act.

11. The counsel for the plaintiff has responded by referring to Bhagwat

Prasad Vs. Damodar Das AIR 1976 Allahabad 411 and has argued that such

a restriction would fall within the second part of Section 11 of the Transfer

of Property Act which provides that where such restriction has been made in

respect of a piece of immovable property for the purpose of securing the

beneficial enjoyment of another piece of such property, the first part of

Section 11 shall not apply.

12. The counsel for the plaintiff, after close of hearing has also submitted

copies of the judgment in M/s. Gujarat Bottling Co. Ltd. Vs. Coca Cola

Company AIR 1995 SC 2372 and Vijaya Minerals Pvt. Ltd. Vs. Bikash

Chandra Deb AIR 1996 Calcutta 67 and Joseph George Vs. Chacko

Thomas MANU/KE/0323/1991 (DB), with special reference to Section 40

of the Transfer of Property Act.

13. I have during the hearing also enquired from the counsel for the

plaintiff as to how the suit for injunction is not barred by Section 41 of the

Specific Relief Act, 1963 which bars an injunction from being granted where

the contract of which performance is claimed by injunction, is not

specifically enforceable. It was further enquired from the counsel for the

plaintiff whether not the remedy if any of the plaintiff is by seeking either a

reduction in rent or by claiming damages.

14. It was yet further enquired from the counsel for the plaintiff, whether

not the grant of injunction in such a case, would be against public interest by

forcing all visitors/customers of the said Mall to purchase liquor only from

the plaintiff and who would thus be deprived of making a choice.

15. No cogent answers have been forthcoming.

16. The counsel for the defendants has not made any submissions on the

aforesaid aspect.

17. I have considered the matter. At the outset, I may clarify that though

the summons of the suit have been issued and the defendants have not filed

written statement as yet but the counsel for the plaintiff has been heard on

the aforesaid aspects, since the same do not entail any factual controversy

and further since it has been felt that if the plaintiff is, for the reasons

aforesaid, not found entitled to the relief of injunction, no purpose would be

served by putting the suit through the rigmarole of procedures.

18. I conclude that the plaintiff is not entitled to the relief of permanent

injunction restraining the opening/setting up of any other liquor shop in the

aforesaid Mall, inspite of the defendants, being the developers/builders

thereof, having issued the Exclusive No Objection Certificate aforesaid to

the plaintiff, for the following reasons:

(I) The "Exclusive No Objection Certificate" dated 10th April, 2011

on which the claim of the plaintiff is based, is as under:

"Exclusive No Objection Certificate This is to certify that Tirupati Infraprojects Pvt. Ltd., has given exclusive right to Mr. Sanjeev Mittal for opening of wine and beer shop under licence issued by Department of Excise, Govt. of Delhi, at D Mall, Plot No.„D‟ District Centre, Paschim Vihar, New Delhi 110063. The company has given full commitment and assurity to Mr. Sanjeev Mittal that we will not give permission for opening of another wine and beer shop in the mall under

any licence whatsoever to any one else in future and fully understands that Mr. Sanjeev Mittal has taken the shops on lease in the mall on this condition only.

For Tirupati Infraprojects Pvt. Ltd.

Sd./-

Director.

Place : New Delhi Date : 10.04.2011"

(II) Lease of shops No.8&9 was granted by the defendant No.1

Company to the plaintiff vide unregistered Deed dated 18th

April, 2011. The said Lease, though was for a period of nine

years, but being unregistered was a tenancy from month to

month, terminable by either party by a fifteen days notice;

though the same provided for a lock-in period of 24 months

but with a further stipulation that in the event of breach

thereof, the rent for the full period would have to be paid.

Thus, as per the unregistered Lease Deed also, the plaintiff

was entitled to terminate the Lease at any time and could not

be injuncted from doing so and the only liability would be for

payment of damages. The said Lease also required the

plaintiff to obtain all licenses required to open a wine and

beer shop in a Mall and did not contain any stipulation, as in

the "Exclusive No Objection Certificate" aforesaid.

(III) The registered Lease Deeds executed by the plaintiff with the

persons to whom the defendant No.1 Company has

transferred the shops and in the tenancy of the plaintiff, also

do not contain any such clause as in the "Exclusive No

Objection Certificate" aforesaid. Rather, the said Lease

Deeds do not contain any reference to the earlier Lease Deed

dated 18th April, 2011 granted by the defendant No.1

Company to the plaintiff and are for a period of nine years

with effect from 1st January, 2012.

(IV) The business of vending wine and beer/liquor is regulated by

the Delhi Excise Act, 2009 and the license obtained by the

plaintiff and copy of which has been filed before this Court is

not found to contain any such condition that there will be no

other liquor shop in the vicinity. No law/regulation also to

the said effect has been cited.

(V) Section 21 of the Delhi Excise Act enables the Government

only to grant exclusive privilege inter alia of sale by retail

within any local area. Rule 22 of the Delhi Excise Rules,

2010 vests the power to determine the number of liquor shops

in any area, depending upon the necessity to meet the

reasonable requirement of the population. Vide Rule 50,

every licensee, as the plaintiff claims to be, is bound by the

provisions of the Act and the Rules.

(VI) The plaintiff and the defendants, it thus appears, cannot be

permitted by Agreement among themselves to wrest the

power which under the Act and the Rules aforesaid vests in

the Government i.e. to determine a number of liquor shops in

any area and to grant exclusive privilege to retail liquor in

any local area, as would be the effect of granting the

injunction sought by the plaintiff.

(VII) Rule 53(6)(b) of the Rules aforesaid also suggests that a

licensee can deal in liquor of one brand only. The effect of

granting the injunction claimed by the plaintiff would be to

force the buyers, visitors and consumers of the subject Mall

to buy liquor only of the brand stocked by the plaintiff.

(VIII) The Agreement of the defendants with the plaintiff as

contained in the "Exclusive No Objection Certificate"

aforesaid was only to not give permission for opening of

another wine and beer shop in the Mall to anyone else in

future. Though the said Agreement was a precursor/part and

parcel of the contract of letting between the plaintiff and the

defendants but upon the defendant No.1 Company

selling/transferring the shops let out to the plaintiff to others

and the plaintiff attorning to the said others as landlord and

entering into fresh Lease Deeds with the others, the

relationship between the plaintiff and the defendant No.1

Company has ceased to exist and I am unable to see as to

how the contract as contained in the "Exclusive No Objection

Certificate" issued by the defendant No.1 to the plaintiff

would survive such attornment by the plaintiff of others as

landlord in substitution of the defendant No.1 Company.

(IX) Even if the contract as contained in the Exclusive No

Objection Certificate of the plaintiff with the defendant No.1

Company were to be held to survive the attornment by the

plaintiff of others as landlord, the said contract as aforesaid,

was only not to give permission for opening of another wine

and beer shop in the Mall. The question of granting such

permission by the defendants would arise only if the

permission of the defendant No.1 Company were to be

required.

(X) In my view, no permission of the defendant No.1 as

developer/builder of the Mall for opening of such liquor

shops would be required, if the transferees of other

shops/spaced in the Mall were to desire to open a liquor shop.

(XI) The agreement/contract aforesaid did not require the

defendant No.1 Company to, while transferring such

shops/spaces impose on the transferee, any such condition,

not to use shop/space for the purpose of vending liquor.

(XII) The practice of the developers/builders of such commercial

buildings/malls entering into an agreements to transfer spaces

therein, even prior to the completion of construction is

common to the trade. It is highly unlikely that the defendant

No.1 Company, prior to issuing the "Exclusive No Objection

Certificate" dated 10th April, 2011 to the plaintiff, had not

transferred any other shops/spaces in the Mall to others. No

such restriction in any case could be placed on such

transferees and the said transferees would be entitled to,

without seeking any permission from the defendant No.1, use

the shops/spaces acquired by them for any purpose including

of vending liquor. It is not the case of the plaintiff that the

defendant No.1 Company till 10th April, 2011 had not

transferred any other shop/space in the said Mall. Once, it is

held that such transferees could not be restrained and more

than one liquor shops could thus find its way in the Mall, I

fail to see the purpose in granting the injunction against the

defendant.

(XIII) I also do not find any merit in the argument of the counsel for

the plaintiff that the defendant No.1 Company as

developer/builder of the Mall is entitled to, while

selling/transferring the shops/spaces in the Mall, impose any

such condition on the transferee. In my view, such a

condition would clearly be unenforceable under the first part

of Section 11 of the Transfer of Property Act and the second

part thereof relied upon by the counsel for the plaintiff has no

application. The counsel for the plaintiff has not able to

show as to how the same is for beneficial enjoyment of

another piece of such property or with respect to which

portion of the property, the direction/restriction has been

made; the second part of Section 11 is to deal with the

situations as the right of way etc, as was the case in Joseph

George supra. The reliance placed by the counsel for the

plaintiff on Section 6(d) and Section 55(1)(a) of the Transfer

of Property Act, is found to be misplaced;

(XIV) I am further of the view that the Agreement aforesaid, is

clearly in restraint of trade and anti competition and void for

the said reason. The invocation of the exception to Section

27 of the Contract Act is again misplaced. Section 3 of the

Competition Act also provides that no agreement inter alia

for provision of services which causes or is likely to cause an

appreciable adverse effect on competition, shall be entered

into and if entered into, shall be void.

(XV) The grant of such an injunction is also found to be contrary to

the public interest and such an Agreement is also not found to

be specifically enforceable for the reason of compensation in

money being adequate relief therefor;

(XVI) The judgment in M/s. Gujarat Bottling Co. Ltd supra on

Section 27 of the Contract Act and the other judgments cited

by the counsel for the plaintiff are found to have no

applicability. The judgment of the Supreme Court of

Alabama in Clay Vs. Powell ET AL is of an era prior to the

provisions such as in Section 27 of the Contract Act and the

Competition Act, also can have no application. Rather, the

same also holds that the agreement not to allow another to

carry on the business of tobacco in the hotel could not be

enforced against the transferees of the persons who had so

contracted.