Delhi High Court
Inox Leisure Limited vs Pvr Limited on 18 May, 2020
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 18th May, 2020
+ CS(OS) No.196/2018, IA No.2291/2019 (of the plaintiff u/O XI
R-12&14 CPC) & IA No.5775/2018 (of the plaintiff u/O
XXXIX R-1&2 CPC).
INOX LEISURE LIMITED ..... Plaintiff
Through: Mr. Amit Sibal, Sr. Adv. with Mr.
Saransh Kumar, Ms. Riddhi Jad,
Mr. Sahil Narang and Mr. Ambar
Bhushan, Advs.
Versus
PVR LIMITED .... Defendant
Through: Mr. Arvind K. Nigam, Sr. Adv.
with Mr. Ajit Warrier, Mr. Angad
Kochhar, Mr. Abhishek Sharma,
Mr. Pratishth Kaushal, Mr.
Vaibhav Aggarwal and Mr.
Mehtaab Singh Sandhu, Advs.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1.
The sole plaintiff has instituted this suit against the sole defendant,
for (i) permanent injunction, to restrain the defendant from attempting to
procure and/or attempting to induce a breach/termination of any
agreement/arrangement between the third parties and the plaintiff in
respect of non-functional properties of the plaintiff across India; (ii)
permanent injunction, to restrain the defendant from entering into any
agreement or arrangement with any third party in relation to any
right/interest of the defendant with respect to non-functional properties
across India i.e. where an agreement/arrangement for grant of property
rights to the plaintiff has been executed but multiplex operations have
not commenced; and, (iii) recovery of nominal damages of
Rs.2,25,00,000/-.
2. It is inter alia the case of the plaintiff, (i) that the plaintiff is
engaged in the business of running and operating multiplex cinemas at
various locations in India and the defendant is a competitor of the
plaintiff; (ii) that the plaintiff has been expanding its footprint to new
locations, where the market of multiplex cinema is maturing and is thus
presenting viable business opportunities for the plaintiff; (iii) that the
plaintiff, on learning of development underway of a property by the
name of Suraj Chanda Tara Cinemas in Amritsar, undertook a feasibility
study of running a multiplex in the said locality and found it to be a
financially profitable business opportunity; (iv) accordingly in or about
July, 2017, the plaintiff entered into negotiations with the developer of
the said property at Amritsar, for a long term agreement with respect to
the property and held various meetings with the said developer; (v) the
defendant was also negotiating with the said developer for entering into
an agreement/arrangement with respect to the property under
development; (vi) however subsequently it was the plaintiff which
entered into a binding term sheet with the developer whereunder the
developer agreed to lease the said property to the plaintiff for a period of
15 years; (vii) though the said term sheet provided for a main
Transaction Document to be subsequently executed, but the same was a
mere formality and the term sheet was otherwise binding on the plaintiff
and the developer and the plaintiff also paid security deposit to the
developer; (viii) the plaintiff thereafter, besides proceeding with drawing
up of the main Transaction Document, also started to make investments
in the project; (ix) the plaintiff learnt that the defendant was actively
pursuing the developer for the purposes of entering into an agreement for
the same property, despite the fact that the plaintiff had already executed
a binding term sheet therefor; (x) though the plaintiff informed the
defendant of having executed a binding term sheet with the developer at
Amritsar and also asked the defendant to desist from pursuing the
developer but the defendant did not respond and continued to induce the
developer to breach the binding term sheet with the plaintiff; (xi) the
defendant, in the past also had indulged in similar acts of interfering in
agreements entered into or proposed to be entered into by the plaintiff
with others, especially with respect to (a) property at Madurai and with
respect whereto the plaintiff had also instituted a suit in New Delhi
District Court and which suit was pending adjudication; and, (b) property
at Juhu, Mumbai with respect whereto also the plaintiff had entered into
a term sheet and paid security deposit and was in the process of
obtaining possession when the defendant starting influencing and
inducing the owner thereof to renege from its binding obligations under
the term sheet executed with the plaintiff and of which also the plaintiff
had informed the defendant and called upon the defendant to desist from
interfering; (xii) that at the time when the plaintiff had started
negotiating with respect to the property at Amritsar, neither the
defendant nor the developer thereof had informed the plaintiff of any
agreement already entered into by the defendant with the developer with
respect thereto and the plaintiff learnt of the same from market sources
much later; (xiii) that immediately after the plaintiff learnt of the
agreement entered into by the developer at Amritsar with respect to the
same property, with the defendant, the developer who had been
remaining quite since the signing of the term sheet with the plaintiff,
informed the plaintiff that the term sheet stood automatically terminated
on account of plaintiff's failure to execute the main Transaction
Document within the stipulated time; (xiv) the plaintiff believes that it
was the defendant which illegally induced the developer at Amritsar to
terminate the term sheet executed with the plaintiff; (xv) but for the
defendant, the developer at Amritsar could not have terminated the term
sheet with the plaintiff; (xvi) the defendant has thus interfered in the
contractual relationship of the plaintiff with others, inspite of being
aware of such contractual relationship; (xvii) the defendant is attempting
to piggyback on the success of the plaintiff in identifying and procuring
the agreements with respect to properties of others across India; (xviii)
the conduct of the defendant has resulted in grave injury to the plaintiff,
as a multiplex space is not substitutable and the plaintiff in each of the
cases had already initiated steps for procuring manpower and equipment
required for the proposed multiplex; (xix) the plaintiff has apprehension
that the defendant would interfere with the legal rights of the plaintiff
with respect to the non-functional property of the plaintiff at Juhu,
Mumbai also; and, (xx) the plaintiff has also reliably learnt that the
defendant is also attempting to procure breach of other existing
agreements between the plaintiff and owners of various other properties
of the plaintiff.
3. The suit, accompanied with an application for interim relief came
up first before this Court on 1st May, 2018 when the defendant, on seeing
the matter in the cause list appeared; though summons of the suit were
issued but after hearing the counsels and giving detailed reasons, ad
interim relief sought was declined.
4. The defendant has since filed a written statement and to which a
replication has been filed by the plaintiff.
5. The suit, ripe for framing of issues, came up before the
undersigned on 5th February, 2019. On understanding the nature of the
claim in the suit from the senior counsel for the plaintiff, inter alia the
following order was passed:-
"3. I have enquired from the senior counsel for the
plaintiff, how such an injunction restraining the
defendant from attempting to acquire the same
property which the plaintiff intends to acquire and/or
with respect to which the plaintiff may have also
entered into an agreement, can be granted. It appears
that if the agreement entered into by the plaintiff is
specifically enforceable, the remedy of the plaintiff
would be of specific performance of such agreement
against the other party thereto. Conversely, if the
agreement is not specifically enforceable, the right,
neither of the defendant nor of the other party to the
agreement, to enter into an agreement can be
curtailed. Merely by entering into
agreement/arrangement, competition cannot be
curtailed.
4. The senior counsel for the plaintiff contends that
inducement to breach a contract is a recognised tort
and has in this regard referred to Aasia Industrial
Technologies Ltd. Vs. Ambience Space Sellers Ltd.
1997 SCC OnLine Bom 681 (DB).
5. However, the same was a case of injunction against
the other party to the agreement and was not a case of
injuncting a third party from inducing a party to a
contract to breach it vis-à-vis the other party thereto.
6. Though the plaintiff in the plaint, in addition to
injunction, has also claimed the relief of recovery of
damages but it appears that if the plaintiff were to have
no right, the question of recovering damages would not
arise.
7. Though the senior counsel for the plaintiff states
that he has some other judgments vis-à-vis third
parties but also states that since this issue had not
arisen till now and this Court desires it to be addressed
at this stage, the suit be posted for hearing on the said
aspect.
8. List on 9th May, 2019."
The senior counsel for the plaintiff and the senior counsel for the
defendant were thereafter heard on 9th May, 2019 and 13th May, 2019
and orders as to the maintainability of the suit reserved
6. This order/judgment being on the maintainability of the suit and
which has to be judged as per averments contained in the plaint only and
at which stage the defence of the defendant is not to be looked at, the
need to record the same is not felt.
7. The senior counsel for the plaintiff, in his arguments took me
through the contents of the term sheet entered into by the plaintiff with
the developer at Amritsar, to contend that the same constituted a binding
enforceable agreement. It was also suggested that the prior agreement
entered into by the said developer, with the defendant and of which the
plaintiff learnt later, was not a binding agreement. Reliance was placed
on Kollipara Sriramulu Vs. T. Aswatha Narayana AIR 1968 SC 1028
holding that if all the essential terms of a contract are contained in the
document which also provides for signing of a further formal agreement,
it is not always that without the formal agreement being signed, the
document already signed is not enforceable. Reference was also made to
V.B. Dharmyat Vs. Shree Jagadguru Tontadrya (1999) 6 SCC 15
holding that an agreement agreeing to lease immovable property is not
itself compulsorily registrable and that it is merely a promise to execute
a lease deed in future and is specifically enforceable.
8. It was however enquired from the senior counsel for the plaintiff,
how the judgments aforesaid were relevant, inasmuch as neither the
developer of the Amritsar property nor the owner of the Juhu, Mumbai
property, with respect whereto only the averments in the plaint are
confined (inasmuch as with respect to Madurai property a separate suit is
stated to be pending), are not parties to the present suit and in their
absence it cannot be determined whether the plaintiff had a binding
agreement with respect to the Amritsar and the Juhu, Mumbai properties.
It was further enquired, whether not as per V.B. Dharmyat supra also, an
agreement to do something in future i.e. to grant lease or license, is itself
not a lease or license, and only entitles specific performance thereof. It
was yet further enquired, whether not the remedy of the plaintiff, in the
event of having binding agreements with respect to Amritsar and/or the
Juhu, Mumbai properties, was to sue for specific performance of the said
agreements and if the said developer/owner had already transferred the
property to the defendant, to implead the defendant also as a party to the
said suit and to claim specific performance against the defendant also,
under Section 19(b) of the Specific Relief Act, 1963,
9. It was then, that the senior counsel for the plaintiff on 5th
February, 2019, dropping the aforesaid line of arguments, had turned to
Aasia Industrial Technologies Ltd. supra dealt with in the order of that
date reproduced above.
10. The senior counsel for the plaintiff thereafter, in support of
maintainability of the suit, referred to:-
A. Balailal Mookerjee & Co. (P) Ltd. Vs. Sea Traders Private
Ltd. 1990 SCC OnLine Cal 55, where at the stage of
deciding an application under Order XXXIX Rules 1&2 of
the Code of Civil Procedure, 1908 (CPC), it was held (i) in
English Law, 'A' commits a tort, if without lawful
justification, he intentionally interferes with the contract
between 'B' and 'C', by persuading 'B' to break his
contract with 'C' or by some other act prevents 'B' from
performing its contract; and, (ii) though a member of the
family carrying on business is entitled in law to, after
leaving the family business, establish a rival business, but is
not entitled to interfere in the family business or to procure
a breach of agreements of the family business with others;
B. "Tortious Interference with Contract: A Reassertion of
Society's Interest in Commercial Stability and Contractual
Integrity" authored by John Danforth, Colombia Law
Review, Volume 81, No.7 (1981) pp. 1491-1524 opining
that tort liability for interference with contract is well
established; that the motive of the interferer is irrelevant;
that it is in the interest of society that there is integrity of
contracts; contractual remedies only promise broad
commercial stability to the extent that they reflect and
protect the measurable interest of particular contracting
party; tort protection against interference with the contract
promotes society's interest in commercial stability in two
areas not adequately protected by the existence of
traditional remedy against breach; tortious interference
liability provides a threshold level of anti competitive
protection, without which some contracts would not be
formed; contract breaches may have a ripple effect that can
undermine the economic efficiency and disrupt the
expectations of persons far removed from contracting
parties; it is the formation of the contracts that the tort seeks
to facilitate - if the tort is to enhance to reliability of
contracts, it cannot require close initial scrutiny of the
enforceability of a given contract; so long as the contract
contracting parties had arguably intended to bind
themselves, had believed themselves to be bound, and that
formally expressed an intention to perform, society's
interest in the formal integrity of contract should be
protected by creating potential tort liability for third party
interference;
C. Ambience Space Sellers Ltd. Vs. Asia Industrial
Technology Pvt. Ltd. 1996 SCC OnLine Bom 586 noticing
that tort of inducing breach of contract, as now developed in
England, is that if the act of third party, either by
persuasion, inducement or procurement results in breach of
a contract, the third party would have committed an
actionable interference with the contract; the act of the third
party may be against the will of both and without the
knowledge of either; it must however be with the
knowledge of the contract;
D. Tata Sons Ltd. Vs. Mastech Corpn. 1995 SCC Online Mad
368, where injunction restraining the defendant from
inducing employees of the plaintiff to leave their
employment was granted;
E. Pepsi Foods Ltd. Vs. Bharat Coca-Cola Holdings Pvt. Ltd.
1999 SCC Online Del 530, where injunction restraining the
defendant from inducing the employees of the plaintiff to
leave their employment was refused reasoning that the
injunction if granted would certainly curtail the freedom of
employees for improving their future prospects and service
conditions by changing their employment and that a
situation of once a Pepsi employee always a Pepsi
employee, of bonded labour, could not be created;
F. Zimmerman Vs. Bank of America 191 Cal. App. 2d 55,
where the Court of Appeal of California held that a tort of
interference with an advantageous relationship or with a
contract does not, however disintegrate because it relates to
a contract not written or an advantageous relation not
articulated in a contract; actionable wrong lies in the
inducement to break the contract or to sever the
relationship, not in the kind of contract or relationship so
disrupted, whether it is written or oral, enforceable or not
enforceable.
11. Per contra the senior counsel for the defendant contended, (i) that
though the plaint contains averments qua the property at Juhu, Mumbai
but no mention is made thereof in the cause of action paragraph of the
plaint; thus the same is not to be considered; (ii) that the documents filed
by the plaintiff itself show that the developer of the property at Amritsar,
vide letter dated 31st January, 2018 to the plaintiff informed the plaintiff
that the term sheet had automatically lapsed and refunded the security
deposit received from the plaintiff; the plaintiff accepted the said refund
without any demur and did not impugn such termination and once has
done so, there ceased to be any binding contract between the plaintiff
and the developer of the property at Amritsar and the plaintiff is not
entitled to seek relief with respect thereto in this Court; (iii) that across
India, the defendant has 767 screens in 164 properties as against 583
screens in 145 properties of the plaintiff - it thus cannot be stated that
the defendant is in any dominating position or is capable of indulging in
any anti competitive practice; (iv) that the defendant had a term sheet of
a date earlier than the date when the plaintiff signed the term sheet with
the owner of the property at Juhu, Mumbai and the owner, even
otherwise in law, had the discretion to enter into the agreement with
whomsoever he desired and the plaintiff cannot claim any exclusivity;
(v) attention was drawn to the term sheet signed by the plaintiff with
respect to the property at Amritsar and as filed by the plaintiff along with
its documents to contend that the same was not a binding agreement; (vi)
attention was similarly invited to the term sheet filed by the plaintiff with
respect to the property at Juhu, Mumbai to show that the same was also
not binding and had no mutuality; (vii) that it is the plaintiff who has
filed this suit and the suit at New Delhi District Court, with a view to
stifle competition; (viii) that the relief of injunction claimed in the suit is
barred by Sections 41(e) and (j) of the Specific Relief Act; (ix) that the
plaintiff, in the suit is seeking a blanket order all across India, without
even producing any agreements with respect to specific property and in
an attempt to stifle the defendant's choice as a competitor of the
plaintiff; (x) that the damages claimed in the suit are only for Amritsar
property but termination of term sheet with respect whereto the plaintiff
has accepted; and, (xi) if the claim of the plaintiff is thereunder, the foras
constituted thereunder have to be approached.
12. The senior counsel for the defendant handed over a compilation
of:
A. Pepsi Foods Ltd. supra to contend that injunctive relief
cannot be obtained by a party in order to curtail competition
and freedom in a free economy;
B. The Indian Performing Right Society Vs. Badal Dhar
Chowdhry 2010 SCC OnLine Del 1361 to contend that
vague and general injunction of anticipatory nature cannot
be granted;
C. Mirabai Films Pvt. Ltd. Vs. Hathway Cable and Datacom
Pvt. Ltd. (2003) 103 DLT 698 to contend that unfounded
and baseless allegations cannot form the basis of claiming
an equitable relief before a Court of Law;
D. Pharmasivam Vs. T.N. Electricity Board 1999 SCC Online
Mad 623 to contend that injunctive relief cannot be granted
merely on the basis of an apprehension;
E. S.P. Chengalvaraya Naidu Vs. Jagannath (1994) 1 SCC 1
to contend that a person whose case is based on falsehood,
has no right to approach the Court and his case is to be
summarily thrown out;
F. Speech and Software Technologies (India) Private Limited
Vs. Neos Interactive Ltd. (2009) 1 SCC 475, Dresser Rand
S.A. Vs. Bindal Agro Chem Ltd. (2006) 1 SCC 751 and
Hansa V. Gandhi Vs. Deep Shankar Roy (2013) 12 SCC
776, to contend that an agreement to enter into an
agreement is neither enforceable nor confers any right upon
the parties, including the right to seek specific performance;
G. Jagir Singh Vs. Ranbir Singh (1979) 1 SCC 560 to
contend that what may not be done directly cannot be
allowed to be done indirectly;
H. Lindsay International Pvt. Ltd. Vs. Laxmi Niwas Mittal
2017 SCC OnLine Cal 14920 to contend that a breach of an
existing contract is a sine qua non for the tort of
inducement;
I. Bimal Chandra Sen (Dr.) Vs. Kamla Mathur 1982 SCC
OnLine Del 153 (DB) to contend that in the absence of
principal offender having been found guilty of the offence,
the question of an aider and abettor being guilty of the said
offence does not arise;
J. J.S. Yadav Vs. State of Uttar Pradesh (2011) 6 SCC 570
and Mumbai International Airport Private Limited Vs.
Regency Convention Centre & Hotels Private Limited
(2010) 7 SCC 417 to contend that impleadment of a
necessary party is mandatory and in the case of non-joinder
of necessary party, the plaintiff may not be entitled to the
relief sought;
K. West Bengal Housing Board Vs. Pramila Sanfui (2016) 1
SCC 743 to contend that if the effect of an injunction would
be to restrain the free choice and will of a third party, who is
not a party to the proceeding, then such an injunction would
not be granted lightly; and,
L. I.S. Sikandar Vs. K. Subramani (2013) 15 SCC 27 to
contend that where an agreement has been terminated, in the
absence of a prayer to declare the termination illegal, an
action for specific performance cannot be held to be
maintainable.
13. The senior counsel for the plaintiff, in rejoinder referred to
Gujarat Bottling Co. Ltd. Vs. Coca Cola Co. (1995) 5 SCC 545 where
injunction against termination of contract was granted and contended
that it is thus not as if the remedy for breach of contract is specific
performance and/or damages only. Attention was invited to the order
dated 1st February, 2018 when the suit had come up first before this
Court and when senior counsel for the defendant had appeared on seeing
the matter in the cause list, to contend that the same records the
admission of the senior counsel for the defendant with respect to the
principle of law involved and as argued by the senior counsel for the
plaintiff relying on Tata Sons Ltd. and Aasia Industrial Technologies
Ltd. supra and the defendant is thus bound by such admission. It was
further argued that the factum of the developer of the property at
Amritsar sending a termination notice to the plaintiff itself, it is evident
that there was a binding agreement. It was however admitted that
security deposit refunded was accepted. It was contended that for suing
the defendant for the tort of interference with contract, impleadment of
the developer of the property at Amritsar or the owner of the property at
Juhu, Mumbai is not necessary and if at all necessary, the suit cannot be
defeated for the said reason and the Court always as held in Yusuf
Mohamed Lakdawala Vs. Sudhakar Kashinath Bokade 2007 SCC
OnLine Bom 939 (DB) has discretion to add any party to the lis. It was
also informed that the defendant entered into the agreement with respect
to the Amritsar property, within one month of the date of issuance of the
termination notice to the plaintiff. Attention is invited to the documents
filed by the defendant to contend that the same disclose the defendant to
have also paid the same amount of security deposit to the developer of
the property at Amritsar, as paid by the plaintiff. With respect to the
contention of the senior counsel for the defendant, of freedom of
contract, it is contended that after entering into a contract, there is no
freedom left. It was informed that in Balailal Mookerjee & Co. (P) Ltd.
Supra, injunction was granted inspite of termination having been
effected and the plaintiff was not compelled to sue for specific
performance. With respect to Pepsi Foods Ltd. supra, it was contended
that what has been held therein applies only with respect to employees
and not with respect to competitors. It was controverted that the relief
with respect to Mumbai is speculative and it was contended that it is by
way of quia timet action and it was informed that the owner of the
property at Mumbai is in liquidation/insolvency. It was also argued that
all the said questions as to maintainability, as has been raised, are a
matter of trial. With respect to the argument of remedy if any of the
plaintiff being under the competition law, it was contended that there is a
competition law in United Kingdom (UK) and United States of America
(USA) also but inspite thereof the courts there have held liability under
the tort to exist. With respect to I.S. Sikandar supra, it is contended that
what has been held therein has been diluted in the subsequent judgments.
14. Having heard the senior counsels for the parties, the doubt
expressed in the order dated 5th February, 2019 with respect to the
maintainability of the suit, remains. No merit is found in the contention
of the senior counsel for the plaintiff, of the defendant being bound by
any admission contained in the order dated 1st February, 2018 and
admission of law does not bind any party to a lis less a counsel. Rather it
appears that the suit as framed, is directed not only against the defendant
but also against others who have not been impleaded. During the hearing
it emerged that besides the plaintiff and the defendant there are only one
or two others carrying on same business but on a much smaller scale
than the plaintiff and the defendant. The effect of granting injunction as
sought against the defendant, would be that the defendant even if has
entered into agreements with the developer/owner of the Amritsar and
Juhu, Mumbai properties, would be unable to proceed under the said
agreements, leaving the developer/owner aforesaid in a lurch with
respect to their properties meant for running and operating multiplex
cinemas and who will have no option but to accept whatever commercial
terms the plaintiff offers. Such damage is also sought to be inflicted on
the owners of other multiplex properties across India, without affording
them even an opportunity to be heard. It is not for the Court to make out
a case for the plaintiff by impleading such owners as parties to this suit.
In fact this Court would not have territorial jurisdiction also over them.
Reliance on Gujarat Bottling Co. Ltd. also is not apposite. The
contention that the question as has been raised with respect to
maintainability of the suit is subject matter of trial is also meritless.
15. The case of the plaintiff in a nutshell is, that it had binding
contracts with the developer/owner of the properties at Amritsar and
Juhu, Mumbai and which contracts were breached/broken or are
threatened to breached/broken, by the developer/owner of the said
properties, at the instance of the defendant. The defendant is sought to be
restrained from doing so and also from doing so with respect to other
properties with respect whereto the plaintiff has existing contracts or
may have contracts in future. In my opinion the plaintiff even if believed
to be having existing binding contracts and even if the defendant is
indeed interfering therein or causing breach thereof, is not entitled to so
restrain the defendant. No trial is required in this regard inasmuch as the
same is purely a question of law.
16. The law with respect to contracts, immovable property and
specific performance, as far as India is concerned is codified in the
Indian Contract Act, 1872, Transfer of Property Act, 1882 and the
Specific Relief Act. Interpreting the said law, it has been held, (i) that
any right in immovable property, whether by way of sale or lease, can be
transferred or created only by a registered document and in the absence
of registration, the deed of sale even if executed, at best constitutes an
agreement to sell and the deed of lease even if executed with delivery of
possession, at best is a lease from month to month, terminable by a 15
days' notice; a deed of lease even if executed and registered, but without
delivery of possession, entitles the lessee only to sue for possession; an
unregistered deed of lease, even if executed, till delivery of possession
does not constitute a month to month lease even and at best can be
construed as an agreement to lease; (ii) an agreement to, in future, create
a right in immovable property by way of sale or lease, confers on the
agreement purchaser or the proposed lessee, only a right to seeks specific
performance and does not confer any right in the immovable property
subject matter thereof; reference in this regard can be made to Jiwan
Dass Rawal Vs. Narain Dass AIR 1981 Del 291, Sunil Kapoor Vs.
Himmat Singh (2010) 167 DLT 806, Satish Kapoor Vs. Km. Ishwari
Assudani 2012 SCC OnLine Del 1808 (DB) [SLP (Civil) 21561/2012
preferred whereagainst was dismissed on 3rd August, 2012], Cement
Corporation of India Ltd. Vs. Life Insurance Corporation of India Ltd.
2014 SCC OnLine Del 4536 (DB), Chander Dutt Sharma Vs. Prem
Chand 2018 SCC OnLine Del 9903 and Ravinder Singh Vs. Saresh
Chand Punj 2019 SCC OnLine Del 8112; and, (iii) that specific
performance may be claimed not only against the agreement seller/lessor
but also against any other person claiming under him by a title arising
subsequently to the contract of which specific performance is sought.
17. Applying the aforesaid law, (i) if according to the plaintiff, it had a
binding lease with the developer/owner of the properties at Amritsar and
Juhu, Mumbai and had not been put into possession of the property, the
remedy of the plaintiff in law was to seek to be put into possession of the
property; (ii) on the contrary if according to the plaintiff it did not have a
binding agreement or a lease but only an agreement to lease, the remedy
of the plaintiff was to sue for specific performance thereof; (iii) yet
further, if according to the plaintiff the plaintiff only had a promise from
the developer/owner of the said properties to grant a license to the
plaintiff of the said properties and the developer/owner were in violation
thereof, the remedy of the plaintiff was to claim damages from them, as
held by me in Keventer Agro Limited Vs. Kalyan Vyapar Pvt. Ltd.
MANU/DE/1479/2013, Gesture Hotels and Food Pvt. Limited Vs. The
New Delhi Municipal Council AIR 2014 Del 143 (DB), Mohd. Haroon
Vs. New Delhi Municipal Council 2016 SCC OnLine Del 2616 and
A.N. Kaul Vs. Neerja Kaul MANU/DE/2303/2018 [SLP No.13083/2019
preferred whereagainst was dismissed vide order dated 2nd August,
2019]; (iv) the plaintiff did neither; (v) on the contrary the plaintiff,
without any demur accepted refund of the security deposit paid with
respect to the Amritsar property, signifying its acceptance of the
termination of the arrangement, whatsoever it was with the developer of
the said property; (vi) in the absence of the developer/owner of the
properties at Amritsar and Juhu, Mumbai, it cannot also be determined
whether it was the plaintiff who was in breach/violation of its obligations
under the agreement entered into with respect to the said properties or it
was the said developer/owner; (vii) the said parties were necessary
parties to the suit considering the nature thereof and the plaintiff cannot
hide behind the plea of the Court being always entitled to implead any
party; the Court once finds the necessary party and in whose absence
there can be no adjudication, to have been not impleaded, is not required
to do the work of the plaintiff and has no option but to dismiss the suit;
(viii) the reliefs claimed with respect to other properties across India are
indeed vague and there can be no general injunction as sought; though
the Courts have recognized a quia timet action but against a specific
party and with respect to specific facts and not in vacuum; and, (ix) there
is a merit in the contention of the senior counsel for the defendant, that
considering that the fact that the plaintiff and the defendant are perhaps
the only two major players in the country with respect to the business of
multiplexes, the relief as claimed is designed to not only drive the
defendant out of competition but also to the prejudice of owners of
certain kinds of properties of which the plaintiff and the defendant are
the only dominant consumers in the country and who on grant of
injunction as sought by the plaintiff would be left with no option but to
deal with their respective properties with the plaintiff only, enabling the
plaintiff to beat down the prices.
18. As far as the claim of the plaintiff on the basis of tort of, liability
for unlawful interference in business and contracts of others is
concerned, I have recently in Modicare Limited Vs. Gautam Bali 2019
SCC OnLine Del 10511 had an occasion to deal with the claim of the
plaintiff therein for injunction restraining its ex-employees from enticing
the customers and consultants in the marketing network of the plaintiff.
It was the argument therein also that interference with contractual
relations has been identified as a tort and the relief of injunction and
damages claimed by the plaintiff were for the said tort. Reliance as here,
there also was placed on the English judgments. It was however enquired
from the senior counsel for the plaintiff therein, whether there is any
equivalent of Section 27 of the Indian Contract Act in the law in UK
inasmuch as once the law of this country is that there can be no restraint
by contract against an employee, from competing with the ex-employer,
the effect thereof cannot be whittled down by holding that the said
employee, while carrying on his competing business, would not be
entitled to offer terms to other employees or the customers of the ex-
employer which would attract him to enter into a contract with the
employee and break the existing contracts with the ex-employer. The
senior counsel therein was also reminded that Section 27 of the Indian
Contract Act had been held to be within the domain of Article 21 of the
Constitution of India and would thus have a better claim for enforcement
than of a tort of interference with contractual relations. After hearing the
counsels therein it was held:
"29. Section 27 of the Contract Act makes void i.e.
unenforceable, every agreement by which anyone is
restrained from exercising a lawful profession, trade or
business of any kind. Thus, even if the defendants or any of
them, under their agreement with the plaintiff, had
undertaken not to carry on or be involved in any capacity
in any business competing with the business of the plaintiff,
even after leaving employment with/association of the
plaintiff, the said agreement, owing to Section 27 supra,
would be void and unenforceable and the plaintiff on the
basis thereof could not have restrained any of the
defendants from carrying on any business or vocation,
even if the one which the defendant had agreed not to
carry on. I find it incongruous that the law, on the one
hand would disable a plaintiff from enforcing a contract
where the defendant had voluntarily agreed not to do
something, by going to the extent of declaring such
contract void, but on the other hand, enable the same
plaintiff to the same relief under the law of tort. To hold so,
would make the law look like an ass.
30. Section 27, in Taprogge Gesellschaft MBH Vs.
IAEC India Ltd. AIR 1988 Bom 157, Sharp Business
System Vs. The Commissioner of Income Tax 2012 SCC
OnLine Del 5639, and Pepsi Foods Ltd. supra has been
held to have been enacted as a matter of public policy of
India, and does not create any personal right, which can
be waived. If it is the public policy of India that there can
be no restraint on any one exercising a lawful profession,
trade or business, not even when such person has
voluntarily agreed not to, it belies logic that such public
policy would not apply when the mischief sought to be
prevented is sought to be practiced invoking law of torts. It
is not as if different reliefs are being claimed, in
enforcement of contract on the one hand and invoking the
law of torts on the other hand. The reliefs are the same. In
my opinion, what is not contractually enforceable is also
not enforceable invoking law of torts.
31. Inspite of specific query, whether there is equivalent
in UK, of Section 27 of the Contract Act, no response has
come. I find Supreme Court in Gujarat Bottling Co. Ltd.
supra (referred to by the senior counsel for the plaintiff
herein also) to have held that while under the common law
in England, restraints of trade, whether general or partial,
may be good if they are reasonable or reasonably
necessary with reference to public policy or for protection
of interest of covenantee, in India, agreements in restraint
of trade are governed by Section 27 and the question of
reasonableness of restraint is outside the purview of
Section 27. This explains, the law of tort of unlawful
interference in business, in UK. However the same, in my
view, has no place in India, at least in the context of
present facts. I find the Supreme Court, in
Superintendence Company of India (P) Ltd. supra, to
have also held that principles of English Law cannot be
imported once the Parliament has codified the said
principles in the Contract Act; it is the language of the
statute which alone has to be considered to ascertain its
true meaning and scope.
32. Section 27, contained in a legislation of the year
1872, on promulgation of the Constitution of India in the
year 1950, conferring the right to practice any profession
or to carry on any occupation, trade or business, the status
of a Fundamental Right, under Article 19(1)(g) thereof,
today has a different connotation. Article 19(6) only
clarifies that nothing contained in Clause (g) shall affect
the operation of any existing law or prevent the State from
making any law, imposing in the interest of general public,
reasonable restrictions on the exercise of right conferred
by the said clause. Thus, restrictions, in the interest of
general public and if reasonable, to the Fundamental
Right to practice any profession or to carry on any
occupation, trade or business, can be imposed only by law.
The law of tort of unreasonable interference in carrying on
business, in view of Section 27 of the Contract Act in force
since 1872, was not the existing law within the meaning of
Article 19 (6) of the Constitution.
33. I have in Independent News Service Pvt. Ltd. Vs.
Sucherita Kukreti (2019) 257 DLT 426, in the context of
Section 27 of the Contract Act held the right saved thereby
to be a facet of Article 21 of the Constitution of India. The
judgment of the Division Bench of Allahabad High Court
of the year 1930 [Bholanath Shankar Das Vs. Lachmi
Narain AIR 1931 All 83 (DB)], after the right sought to be
curtailed has been conferred the status of a Fundament
Right and a facet of Article 21 of the Constitution of India,
does not persuade me to hold that such Fundament Right
of the defendants can be subject to the law of tort of
enticement to commit breach of contract or of unlawful
interference with business.
34. After the coming into force of the Constitution of
India, the restriction if any on the fundamental right to
carry on any trade or business or to practice any
profession can be imposed only by making a law i.e. a law
prohibiting unlawful interference in business and enticing
another to commit breach of existing contractual
obligations, and the constitutionality of which law if
challenged would be tested on the anvil of Article 19(6) of
the Constitution of India.
36. Else, I find a Full Bench of the High Court of
Hyderabad to have in Holloor Gopal Rao Vs War Nasi
Shiv Ramiah AIR 1953 Hyd 1 held that a suit for
establishing exclusive right to 'purohitgiri' in a village,
axiomatically prohibiting others from acting as purohits,
could no longer continue after coming into force on 26th
January, 1950 of the Constitution of India. It was held that
any order declaring the exclusive right of the plaintiff
would amount to laying a restraint upon others to carry on
the same profession in the village.
37. In fact, during the hearing on both days, I have also
been asking the senior counsel for the plaintiff, that even if
the argument of the senior counsel for the plaintiff were to
be accepted, where should the Court draw the line,
between what constitutes enticement to commit breach of
contract and unlawful interference in business on the one
hand and competition on the other hand. Any new entrant
in the market, to be able to create a niche for itself, in spite
of the existing players, has to compete with the existing
players, by approaching the same customers and the same
cache of employees who over the years have acquired
expertise in that particular field. When launching the same
product/service, the new entrant to the business cannot
possibly create a new set of customers for that product or
service. Thus, the consumers to be approached by the new
entrant would be the same who were earlier having
contractual relationships with the existing players.
Similarly, a new entrant cannot possibly compete if does
not have the requisite expertise/finesse, required for
launching a particular product or service and to be able to
provide the same class or quality of service, has to
necessarily have with it, hands which have been making
the subject product and/or providing the said service in the
past, may be under contract with the existing players. In
my view, it is practically impossible to draw a line between
such persons, on their own approaching the new entrant,
and the new entrant approaching them. The process is
quite complex and no precise rules can be made with
respect thereto. The Courts would not lay down the law in
the name of being a matter of evidence, in respect of
matters which are incapable of determination by Courts.
38. Attention of the senior counsel for the plaintiff has
also been drawn to the widespread business of
headhunters and employment brokers, who sometimes are
approached by employees/customers and sometimes by the
new entrant and also sometimes on their own make the two
meet. I have enquired from the senior counsel for the
plaintiff, whether it will make any difference, that the new
entrant in the market approaches a headhunter for hiring
employees with the specialty and instead of the new
entrant, it is the headhunter who approaches employees
having contracts with existing players. It is virtually
impossible, even if evidence were permitted to be led to
draw a line, as to what caused the employee to breach an
existing contract of employment and enter into a new
contract i.e. whether it was on own violation or on being
enticed by the new entrant in the market.
39. No line which can be drawn in this respect has been
suggested.
40. A new entrant obviously has to offer better terms to
employees having expertise and having contract with other
players, to woo them to itself. I have wondered, whether
offering such better terms would amount to the tort of
enticement to commit breach of contract and unlawful
interference with the business of an existing player. Again
no clarity has emerged.
41. I thus hold that a claim founded on unlawful
interference with business or of enticement to commit a
breach of contract with the plaintiff is not enforceable in a
court of law, neither contractually nor invoking the law of
tort. Such a claim is thus not required to be put to trial."
19. What was held in Modicare Limited supra, in a suit by an
employer against an ex-employee, to restrain the ex-employee from
interfering in the contractual relationships of the employer with its
customers, clients and associates, though was held in the context of a
contractual relationship between an employer and ex-employee but
would apply equally to competitors. Once Section 27 of the Indian
Contract Act declares agreement in restraint of exercising lawful
profession, trade or business of any kind to be void, it would be
incomprehensible to say that while inspite of entering into a contract
with the ex-employer to not practice the trade or profession which the
employer is practicing, an employee is still entitled to do so owing to the
law declaring such a contract to be void, but a person who does not have
any contractual relationship with his competitor, is not entitled to, in
advancement of its own trade and business, not approach the prospective
clients, customers and associates approached by the competitor. The tort
recognized in England, of unlawful interference in contractual
relationships would equally not be available in the present situation also.
20. The Division Bench of this Court in Akuate Internet Services Pvt.
Ltd. Vs. Star India Pvt. Ltd. 2013 SCC OnLine Del 3344 (DB), in the
context of a claim for injunction restraining the defendants from
disseminating contemporaneous match information in the form of ball by
ball account or minute to minute score updates/match alerts, for a
premium and without obtaining licence from plaintiff, rejected the
argument, of defendants unfairly competing with the plaintiffs, holding
(i) that in doing so, the Courts would be granting protection to certain
intangibles not covered by the specific statutory regimes; (ii) the basic
economic rule is that competition is not only lawful but a mainspring of
the economy; (iii) the legislature has recognized that there should be
exceptions-it has laid down the rules for these; the laws of patents,
trademarks, copyrights and designs have all been fashioned for the
purpose; each of them have rules for their existence... each has their own
justification; (iv) it is not for the judges to step in and legislate into
existence new categories of intellectual property; (v) it is not open for
the Courts to create such judicial remedies to remedy what the Courts
consider unfair; it is not open to the Court to legislate in this way; (vi)
recognition of a general action for "unfair competition" involves not
more than recognition of the fact that the existence of such an action is
inconsistent with the established limits of the traditional and statutory
causes of action which are available to a trader in respect of damage
caused or threatened by a competitor; those limits, which define the
boundary between the area of legal or equitable restraint and protection
and the area of untrammelled competition, increasingly reflect what the
Parliament has determined to be the appropriate balance between
competing claims and policies; (vii) neither legal principle nor social
utility requires or warrants the obliteration of that boundary by the
importation of cause of action whose main characteristic is the scope it
allows, under high-sounding generalizations for judicial indulgence of
idiosyncratic notions of what is fair in the market place; (viii) the recent
trend internationally to accord protection to rights in information in
varying degrees or to accept the doctrine of unfair competition,
especially in the European Union, is pursuant to legislative action by the
European Council, and not as a judicial extension; (ix) once we
recognize that mere information cannot be the subject matter of
protection under common law, it becomes apparent that other means
continue to remain available to protect such information: by way of an
action for breach of the common law duty of confidence, which is a right
in personam against an individual who has come across such information
under confidence, and crucially, is distinct from a propriety right in such
information itself, opposable in rem; (x) there exists another cogent
reason for denying the existence of any general misappropriation or
unfair competition theory - i.e. that it would create a non-existent
distinction between copying which is actionable under the Copyright Act
and appropriation or misappropriation which is actionable under the
doctrine of unfair competition; (xi) under the Copyright Act, the copying
or reproduction of match information is permitted; to say that the
doctrine of unfair competition prohibits the misappropriation of match
information would either mean that misappropriation under common law
can supplant the Copyright Act or that copying and misappropriation
refer to two distinct acts, which would be a distinction without a
difference; (xii) claims based on alternate common law remedies in
respect of what is in the domain of a statute cannot be permitted; and,
(xiii) claim on the basis of unjust enrichment is the same as a claim on
basis of the doctrine of unfair competition.
21. Mention may also be made of another judgment of this Court in
Emergent Genetics India Pvt. Ltd. Vs. Shailendra Shivam 2011 SCC
OnLine Del 3188. Therein, in the context of a suit brought by the
plaintiff against its ex-employees/ex-directors for permanent injunction
to restrain them from selling similar seeds as the plaintiff was involved
in breeding during the term of employment of the defendants, and after
finding the invention claimed by the plaintiff to be not falling in the
ambit of the Copyright Act, 1957 or Patents Act, 1970 or the Protection
of Plant Varieties and Farmers' Rights Act, 2001, while denying interim
injunction it was held (i) the danger of enclosing as a monopoly, under
the umbrella of trade secret or confidential information, what is clearly
commonly shared information and resources, in the absence of a
statutory regime is, that the Courts of law would at one fell stroke, not
only make policy choices which would impact livelihoods of millions,
but would be ordaining, unwittingly, legislation, which cannot be tested
for its reasonableness; (ii) an inventor or innovator undoubtedly should
be provided a fair regime which protects his creative efforts and rewards
him but in the absence of thought out policies, which weigh the
advantages as well as the drawbacks, that may manifest in the
unhindered enforcement of such impulses, there is a danger of imperiling
the right to occupation, guaranteed by Article 19 (1) (g) of the
Constitution of India and the right to livelihood, so emphatically held to
be an intrinsic part of Article 21; and, (iii) another broader perspective
cannot be lost sight of; the Courts are enjoined to interpret the law and
the Constitution keeping in view the directive principles of State Policy
embodied in the Constitution of India and which is inter alia require the
State to ensure that the ownership and control of the material resources
of the community are so distributed as best to subserve the common
good; if this Court, without any statutory regime were to accept the
plaintiffs' blanket assumption that it is possessed of confidential
information in something, which plainly is part of the material resource
of the community, the Court would overstep the mandate of the
Constitution, in its anxiety to protect such a perceived right.
22. I may mention, that the claim of the plaintiff herein also is, to
monopolize land and buildings thereon, across India, and just like
agricultural produce was held to be natural resource, so is land a natural
resource. Moreover yet another directive principle is, that the operation
of the economic system does not result in the concentration of wealth
and means of production to the common detriment and the monopoly
sought to be created by the plaintiff by seeking the injunction in this suit,
to exclude the defendant from its forays to procure real estate for its
business across India, would be against the said directive principle of
State Policy. I have in Independent News Service Pvt. Ltd. supra, in the
context of a suit filed, again by a television channel to prevent its news
presenter from leaving its employment and becoming a news presenter
of a rival television channel, held that the injunction sought was against
the right of the said news presenter to advance her career and grant of
such injunction by the Court would be in violation of the directive
principles of State Policy.
23. I reiterate that the grant of injunction claimed by the plaintiff on
the premise of the actions of the defendant comprising a tortious act of
interference with contractual relations of the plaintiff, would be in
violation of the fundamental right of the defendant, its promoters and
directors to carry on trade and business, without any law having been
enacted by the State in this respect in the interest of general public,
within the meaning of Article 19 (5) of the Constitution of India. The
law as enacted entitles the plaintiff in such case to the reliefs of specific
performance if entitled thereto against those with whom the plaintiff has
contractual relationship and with which contractual relationship the
defendant is alleged to be interfering. The plaintiff cannot be permitted
to expand its remedies beyond that provided for in law.
24. Resultantly I hold, that the plaintiff, on the averments contained in
the plaint, had no cause of action for the relief claimed against the
defendant and the relief claimed by the plaintiff against the defendant is
barred by law.
25. Axiomatically the suit is dismissed. The plaintiff having indulged
in judicial adventurism, is also burdened with costs of Rs.5,00,000/-,
payable to the defendant within 90 days hereof.
Decree sheet be prepared.
RAJIV SAHAI ENDLAW, J.
MAY 18, 2020
'pp'
