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2010 DIGILAW 65 (DEL)

Kashyap’s v. Bata India

2010-01-16

RAJIV SAHAI ENDLAW

body2010
Judgment :- Rajiv Sahai Endlaw, J. 1. The plaintiff has instituted this suit for mandatory injunction directing the defendant to remove itself and its products and to stop displaying and selling its products from the basement, ground and first floors admeasuring 5900 sq. ft. in property No.E-16, South Extension Part-II, New Delhi and/or from using the said property in any manner whatsoever and for damages/mesne profits from the date of institution of the suit till the defendant uses the said portion of the property, together with interest thereon, pleading: (i) that the parties on 9th December, 1989 entered into a Joint Retail Venture Agreement in terms of which the plaintiff had allowed the defendant’s products to be sold from the basement and ground floor of the said property for a period of 15 years renewable for another 5 years on mutually acceptable terms with either party being entitled to terminate the Agreement by giving six months prior written notice; (ii) that the terms and conditions were changed in terms of defendant’s letter dated 19th July, 1999 which inter alia extended the term of the Agreement by 12 years with effect from 1st October, 1999 and made the Agreement terminable by a 12 months prior notice; (iii) that the terms and conditions were again changed in terms of defendant’s letter dated 2nd August, 1999; (iv) that the plaintiff vide letter dated 27th August, 2001 gave 12 months notice of termination; (v) that fresh negotiations were held between the parties and a fresh offer was made by the plaintiff to the defendant vide letter dated 14th January, 2003 and which was accepted by the defendant; (vi) that again modifications were made in the terms and conditions vide plaintiff’s letter dated 31st January, 2003 and which the defendant accepted vide its reply dated 1st February, 2003; (vii) that the defendant in its reply dated 1st February, 2003 supra suggested certain other changes qua termination but which were not accepted by the plaintiff; (viii) that the plaintiff gave six months notice dated 11th April, 2011 of termination with effect from 31st October, 2011; (ix) that the defendant vide its reply dated 27th May, 2011 inter alia took a stand that only the defendant could terminate the Agreement by one year notice and the plaintiff had no right to termination; and hence this suit. 2. 2. Summons of the suit and notice of the application for interim relief were issued. The defendant has contested the suit filing a written statement pleading: (a) that the defendant is in exclusive possession of the said 5900 sq. ft. area in the basement, ground and first floors since 1st February, 2003 and the suit as framed is not maintainable; (b) that the arrangement contained in the Agreement dated 9th December, 1989 continued till 14th January, 2003 when the plaintiff vide letter dated 14th January, 2003 offered to enter into the Joint Retail Venture Agreement for a period of 20 years effective from 1st February, 2003 for the aforesaid area of 5900 sq. ft. with minimum guaranteed commission of Rs.5,25,000/- per month or 5% of the turn over whichever was higher with increment of guaranteed commission by 15% after every 5 years and with only the defendant having right of termination of the Agreement; the defendant vide its reply dated 14th January, 2003 accepted the said offer and a binding Agreement came into existence; (c) that the plaintiff in consideration of enhanced commission and huge advance/security deposit and other terms and conditions had given up the right of termination; (d) that certain other changes were made vide letter dated 31st January, 2003; (e) that a fire broke out in the basement on 12th November, 2008 and the plaintiff vide letter dated 14th November, 2008 threatened to wriggle out of the Agreement which was binding for 20 years; (f) that CS(OS) No.2426/2008 was filed by the defendant in this Court in this regard and which was disposed of vide order dated 22nd May, 2009 after the plaintiff restored status quo ante as before the fire and in terms of the Agreement; (g) that the plaintiff agreed to the aforesaid being fully aware that it had no right of termination of the Agreement under the garb of fire incident; (h) that thus the termination vide letter/notice dated 11th April, 2011 is bad as the plaintiff has no right of termination of the Agreement; (i) that the plaintiff by its conduct has accepted the counter offer of the defendant in the letter dated 1st February, 2003. 3. The plaintiff has filed replication controverting the contents of the written statement and thereafter has filed application being I.A. No. 16518/2012 for decree insofar as for the relief of mandatory injunction on admissions. 3. The plaintiff has filed replication controverting the contents of the written statement and thereafter has filed application being I.A. No. 16518/2012 for decree insofar as for the relief of mandatory injunction on admissions. The counsels have been heard. 4. As would be obvious from aforesaid, the only defense of the defendant insofar as for the relief of mandatory injunction is that the agreement between the parties is for a period of 20 years i.e. till 13th January, 2023 and the plaintiff has no right of termination. 5. The entire transaction between the parties is documented and qua which there is no dispute and which is considered herein below. 6. Clause 13 of the first Agreement, dated 9th December, 1989 between the parties was as under: “13) This arrangement may be terminated by either side at any time by giving six months prior written notice in this behalf. If the termination is by us that event the owner of the place will not be liable to refund any amount paid under clause (5). If the owner terminates this arrangement, then only you will pay the amount referred to under clause (5).” 7. Clause 3 of the letter dated 19th July, 1999 of the defendant to the plaintiff was as under: “3) That, the J.R.V. Agreement in question may be terminated by either side, at any time, giving 12 months’ prior written Notice, in this behalf.” 8. The letters dated 2nd August, 1999 and 27th August, 2001 are not relevant for the present purposes. 9. Clauses 1, 7, 8 & 9 of the letter dated 14th January, 2003 of the plaintiff to the defendant were as under: “1. The agreement would be a JRV as per the original agreement dt. 9/12/1989 except clause No.2,3,5 and 6 will no longer be applicable. 2…… ……… 7. The JRV would be for a period of 20 years. 8. There will be no lock-in period except for the first year. 9. Bata India Limited can terminate the agreement by giving one year notice.” 10. The defendant by its letter dated 14th January, 2003 confirmed the aforesaid terms. 11. The letter dated 31st January, 2003 of the plaintiff is again not relevant for the present purposes. 12. 8. There will be no lock-in period except for the first year. 9. Bata India Limited can terminate the agreement by giving one year notice.” 10. The defendant by its letter dated 14th January, 2003 confirmed the aforesaid terms. 11. The letter dated 31st January, 2003 of the plaintiff is again not relevant for the present purposes. 12. The defendant vide its letter dated 1st February, 2003 intimated the plaintiff as under: “It has also been agreed upon between yourselves and ourselves that the termination clause No.13 of the previous agreement dated 09.12.89 will be replaced by Clause 9 of your letter dated 14.01.2003.” 13. No response was sent by the plaintiff thereto. 14. The counsels for the parties have argued on the aspect, whether in the aforesaid state of correspondence, the agreement between the parties was of the termination Clause 13 supra in Agreement dated 9th December, 1989 permitting termination of the Agreement by either side at any time by giving six months prior written notice to the other or not; with the senior counsel for the plaintiff contending that the Agreement as contained in the letter dated 14th January, 2003 was the same as in the Agreement dated 9th December, 1989 except Clauses 2, 3, 5, & 6 and the senior counsel for the defendant contending that the Clause 13 of the Agreement dated 9th December, 1989 stood substituted by Clause 9 of the letter dated 14th January, 2003 and as reiterated in the letter dated 1st February, 2003 supra. 15. The senior counsel for the plaintiff contends that the right to terminate is a valuable one and cannot be inferred to have been given up. 16. Per contra, the senior counsel for the defendant argued that the defendant agreed to enhance the minimum guaranteed commission and the security deposit for the reason of the plaintiff having given up the right of termination and the same is also borne out from the parties having in the Agreement dated 14th January, 2003 agreed to there being no lock-in period. It is yet further argued that out of the agreed security deposit under the Agreement of Rs.80 lakhs, defendant till 31st January, 2003 had paid only Rs.40 lakhs and the balance security deposit of Rs.40 lakhs was paid and accepted by the plaintiff after 1st February, 2003 owing to the plaintiff having not controverted the contents of the defendant’s letter dated 1st February, 2003, of the plaintiff having no right of termination. It is yet further argued that the plaintiff in the written statement in CS(OS) No.2426/2008 filed by the defendant did not take the stand of the Agreement dated 9th December, 1989 providing for six months notice to be still valid and rather pleaded the Agreement to be terminable by a 15 days notice only. Relying on Section 9 of the Indian Contract Act, 1872, it is contended that the plaintiff by remaining quiet after the letter dated 1st February, 2003 of the defendant unequivocally asserting that the plaintiff had no right of termination, impliedly accepted the same to be a part of the contract. The senior counsel for the defendant in the alternative contends that evidence is required to be led to determine the contract between the parties and the application for decree on admissions is thus liable to be dismissed. 17. The senior counsel for the plaintiff in rejoinder drew attention to para 8 of the written statement of the plaintiff in CS(OS) No.2426/2008 pleading that both the parties under the Agreement dated 14th January, 2003 had a right to terminate the Agreement with the obligation on the part of the plaintiff only being to give one year notice. It is further argued that the defendant in that case did not rely on the letter dated 1st February, 2003. 18. It was during the hearing enquired from the senior counsel for the defendant whether not all agreements, irrespective of a clause therein of termination, are terminable in nature unless specifically enforceable in law. 19. All that the senior counsel for the defendant could respond was that neither any such plea nor any such argument has been raised by the plaintiff. 20. 19. All that the senior counsel for the defendant could respond was that neither any such plea nor any such argument has been raised by the plaintiff. 20. Even if it be so, the Court is to decide the lis as per the law and if it were to be found that the Agreement is not specifically enforceable, in my view it matters not, whether the clause about termination exists in the Agreement or not. 21. As far as the contention of the defendant of the plaintiff having not taken such plea is concerned, I am of the view that once the plaintiff has terminated the Agreement and sought the relief of mandatory and permanent injunction on the basis of such termination, it was for the defendant to in defense thereto plead the Agreement being specifically enforceable and to claim the said relief and which admittedly has not been done. 22. Chapter VI of the Contract Act deals with the consequences of breach of contract and in Sections 73 to 75 thereof provides for the remedy of compensation therefor. The same nowhere provides for specific performance of the contract. The said subject is dealt with in the Specific Relief Act, 1963, Chapter II whereof deals with specific performance of contracts. Section 10 thereunder prescribes specific performance of the contract, when there exists no standard for ascertaining actual damage caused by the non-performance or when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief. As aforesaid, no such defense has been raised by the defendant. Though the explanation to Section 10 requires the Court to presume that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money and though in law a lease is a transfer of immovable property but neither is the Agreement between the parties of a lease nor is it the plea of the defendant that the contract between the parties is of transfer of any immovable property. Section 14 of the Specific Relief Act while describing the contracts which cannot be specifically enforced provides that a contract, a) which runs into such minute or numerous details; or, b) which is so dependent on the personal qualifications or volition of the parties; or, c) which otherwise from its nature is such, that the Court cannot enforce specific performance of its material terms; or, d) which in its very nature is determinable; or, e) performance of which involves a continuous duty which the Court cannot supervise, cannot be specifically enforced. 23. The New Shorter Oxford English Dictionary defines determinable to inter alia mean “liable to come to an end”. Jowitt's Dictionary, Second Edition explains determinable: "an interest is said to determine when it comes to an end, whether by limitation, efflux of time, merger, surrender or otherwise". The agreement between the parties, according to the defendant also is till 13th January, 2023 only and is thus determinable in nature. 24. This Court in Classic Motors v. Maruti Udyog Ltd. 65 (1995) DLT 166 relying on Indian Oil Corporation Ltd. v. Amritsar Gas Company (1991) 1 SCC 533 held that in private commercial transaction the parties can terminate a contract even without assigning any reasons and the argument that there could be no termination of an agreement even in the realm of private law without there being a cause was held to be fallacious and was rejected. The Division Bench of this Court in Rajasthan Breweries Ltd. v. The Stroh Brewery Company AIR 2000 Delhi 450 not only upheld the said view but further held that even in the absence of a specific clause authorizing and enabling the party to terminate the agreement, from the very nature of the agreement which is a private commercial transaction, the same can be terminated and incase ultimately it is found that termination was bad in law or contrary to the terms of the agreement or any understanding between the parties, the remedy would be to seek compensation for the wrongful termination and not a claim for specific performance. A subsequent Division Bench in Indian Railways Catering & Tourism Corp. A subsequent Division Bench in Indian Railways Catering & Tourism Corp. Ltd. v. Cox & Kings India Ltd. 186 (2012) DLT 552 not only followed the said view but further held the Joint Venture Agreement in that case to be in the realm of contractual agreement with no statutory flavour and no element of public law and not specifically enforceable. The Supreme Court in the judgment there against reported as Cox and Kings Ltd. v. Indian Railway Catering and Tourism Corporation Ltd. (2012) 7 SCC 587 not only dismissed the special leave petition but further held that the mere fact that the party had invested large sums of money would not entitle it to claim injunction in the nature of specific performance once the agreement had been terminated. Yet another Division Bench of this Court in North Eastern Handloom and Handicraft v. Sports Station India Pvt. Ltd. also referring to Amritsar Gas Company (supra) held that a remedy for breach of termination of contract which is inherently and intrinsically terminable in nature is not by way of its specific or continued enforcement but by an action for damages. 25. Though there is no plea of the defendant in this regard but a perusal of the agreement between the parties shows the agreement to be inter alia of, i) the plaintiff agreeing not to display or sell from the said premises products overlapping with the products marketed by the defendant; ii) proceeds of the sale of the defendant’s products being credited to the plaintiff’s account and the plaintiff crediting the defendant’s account after deducting the minimum commission to which the plaintiff is entitled; iii) the accounts being reconciled/settled periodically; iv) the defendant indemnifying the plaintiff sales tax, provident fund, ESI and other statutory liabilities; and, v) the plaintiff providing access to the defendant and its products to the premises. Further, the Agreement expressly provides that the defendant “shall not have any right, title or interest as assignee, tenant, sub-tenant or otherwise of the said shop”. 26. It cannot be lost sight of that the parties are commercial men who have minutely negotiated the agreement amongst themselves and having expressly agreed and declared to all authorities including the taxation authorities that the relationship between them is not in relation to the premises or of transfer of premises but of Joint Retail Venture Agreement, cannot here be permitted to contend otherwise. Further, it is found that the functioning of the Agreement by crediting of the sale proceeds directly in the account of the plaintiff and thereafter being credited by the plaintiff to the account of the defendant on a daily basis with accounts being required to be reconciled periodically is such which falls in the trap of Section 14(1)(d) of Specific Relief Act i.e. being a contract which involves continuous performance which cannot be supervised by the Court. 27. Once it is found that the Agreement between the parties is not specifically enforceable, the question of the terms agreed between the parties as to termination thereof is irrelevant. To refuse the relief claimed by the plaintiff of mandatory injunction would amount to specifically enforcing the agreement which is neither pleaded to be specifically enforceable nor found to be specifically enforceable. 28. However, it is expedient to, for the sake of completeness, also render findings on the respective contentions of the parties. 29. The agreement between the parties, right since inception in 1989 till 2003 i.e. for nearly 14 years was terminable by either party, whether it be by a six months’ notice or a twelve months’ notice. The agreement of the year 2003 reiterated the arrangement as commenced in the year 1989 except Clauses 2, 3, 5 and 6 of the Agreement dated 9th December, 1989 which did not deal with termination. Termination as aforesaid was dealt with in the Clause 13 of the Agreement dated 9th December, 1989 which was not excluded in the 2003 agreement. The parties thus in the agreement contained in the letters exchanged on 14th January, 2003 incorporated by reference therein the Agreement dated 9th December, 1989 which in Clause 13 provided for termination by either side by six months’notice. Notwithstanding the same, Clause 9 of the letter dated 14th January, 2003 provided that the defendant can terminate the Agreement by giving one year notice. What falls for adjudication is whether Clause 9 of letter dated 14th January, 2003 providing for termination only by the defendant and not by the plaintiff can be said to have overridden/superseded Clause 13 of the 9th December, 1989 Agreement. 30. In my opinion, no. If the agreement between the parties were to be of the plaintiff having waived the right of termination which it earlier had as aforesaid, nothing prevented the parties from expressly providing so. 30. In my opinion, no. If the agreement between the parties were to be of the plaintiff having waived the right of termination which it earlier had as aforesaid, nothing prevented the parties from expressly providing so. This is evident from the fact that though the agreement dated 14th January, 2003 was agreed to be for a period of 20 years but the parties chose to expressly provide that there would be no lock-in period except for the first year. The only inference from the said term can be that it was only for the period of first year that both the parties were prevented from terminating the agreement and there was no such embargo thereafter, save that if the defendant were to terminate the agreement, it was so required to give one year notice. 31. Judge Learned Hand as far back as in James Baird Co. v. Gimbel Bros., Inc. 64 F.2d 344, 346 said that in commercial transactions it does not in the end promote justice to seek strained interpretations in aid of those who do not protect themselves. The same sentiment was echoed in Allied Communications Corporation Vs. Continental Cellular Corporation where it was observed that when the transaction is commercial, the parties sophisticated, and the contract itself detailed, it is wise for the Courts to rely on express language than to imply a promise on their own. 32. As far as the plea of the defendant of implied agreement is concerned, the defendant in its letter dated 1st February, 2003 in response to the letter dated 31st January, 2003 of the plaintiff, no doubt stated the Agreement between the parties to be of replacement of Clause 13 of the Agreement dated 9th December, 1989 by Clause 9 of the letter dated 14th January, 2003. The defendant even then did not state that the right of termination prior to the expiry of the agreed term was to be only of the defendant or that the plaintiff had given up such right of termination. Clause 9 of the letter dated 14th January, 2003 also does not use any word as ‘only’ which would have been indicative of only the defendant being entitled to terminate the Agreement by giving one year notice and the plaintiff being not so entitled. Moreover, a concluded contract had already come into being between the parties on 14th January, 2003. Clause 9 of the letter dated 14th January, 2003 also does not use any word as ‘only’ which would have been indicative of only the defendant being entitled to terminate the Agreement by giving one year notice and the plaintiff being not so entitled. Moreover, a concluded contract had already come into being between the parties on 14th January, 2003. The letter dated 31st January, 2003 of the plaintiff merely reworded the contents of the letter dated 14th January, 2003. The defendant vide its letter dated 1st February, 2003 while confirming the same did not refer to any discussion subsequent to 14th January, 2003 and in the earlier response dated 14th January, 2003 had not taken any such stand that Clause 13 of the Agreement dated 9th December, 1989 would be replaced by Clause 9 of the letter dated 14th January, 2003. The defendant in the written statement also has not pleaded any subsequent discussion. For this reason also I am unable to decipher from the documents any agreement as pleaded by the defendant or from the pleadings any case for leading of evidence on this aspect. 33. As far back as in S.M. Bholat v. Yokohama Specie Bank Ltd. AIR 1941 Rangoon 270 it was held that silence to a letter is not acceptance of the terms proposed in it. Similarly the Bombay High Court in The Bank of India Ltd. v. Rustom Fakirji Cowasjee AIR 1955 Bombay 419 held that mere silence cannot amount to a representation unless there is a duty to make some statement or to do some act and that mere silence cannot amount to any assent. This view of the Bombay High Court was followed by this Court in Urmila and Co. Pvt. Ltd. v. J.M. Baxi and Co. AIR 1986 Delhi 336. Recently a Division Bench of this Court also in Zoom-Toshali Sands Consortium v. Indian Railway Catering & Tourism Corporation Ltd. held that a request for new terms to be negotiated would not imply the party making the request to be having a right to unilaterally change the terms of the contract which had earlier been settled. AIR 1986 Delhi 336. Recently a Division Bench of this Court also in Zoom-Toshali Sands Consortium v. Indian Railway Catering & Tourism Corporation Ltd. held that a request for new terms to be negotiated would not imply the party making the request to be having a right to unilaterally change the terms of the contract which had earlier been settled. Similarly in Gaddar Mal v. Tata Industrial Bank Ltd. AIR 1927 All 407 it was held on an interpretation of Sections 7 to 9 of the Indian Contract Act, 1872 that the same do not permit import into Indian law the English law as to acceptance by conduct. 34. As far as the plea of the defendant of the plaintiff having withdrawn the termination effected earlier after the incident of fire is concerned, neither in the proceedings in the suit instituted by the defendant at that stage is there any finding to that effect nor can the withdrawal of a termination effected can imply an admission of the party which had effected the termination having no right of termination nor can such a party be thus precluded in the future from again terminating the agreement. 35. Resultantly, the application succeeds. A decree is passed in favour of the plaintiff and against the defendant, (i) for mandatory injunction directing the defendant to remove itself and its products from the basement, ground and first floors admeasuring 5900 sq. ft. of property No.E-16, South Extension Part-II, New Delhi; and (ii) for permanent injunction restraining the defendant from using the aforesaid property for any purpose whatsoever. 36. However, considering that the defendant has been in use of the said property for over 20 years, it is deemed fit to grant time to the defendant of three months to remove itself and to stop using the premises. The decree will accordingly be executable after three months herefrom. 37. Decree sheet be drawn up. 38. As far as the claim of the plaintiff for mesne profits/damages for use and occupation is concerned, an enquiry under Order XX Rule 12 of CPC is ordered and the following issues are framed: (i) To mesne profits from which date and at what rate is the plaintiff entitled to from the defendant? 37. Decree sheet be drawn up. 38. As far as the claim of the plaintiff for mesne profits/damages for use and occupation is concerned, an enquiry under Order XX Rule 12 of CPC is ordered and the following issues are framed: (i) To mesne profits from which date and at what rate is the plaintiff entitled to from the defendant? OPP (ii) If the plaintiff is found entitled to any mesne profits, whether the plaintiff is entitled to any interest on arrears thereof and if so from which date and at what rate? OPP 39. Ms. Manmeet Arora, Advocate (Mob. 9811333871) is appointed as the Court Commissioner to hold the enquiry aforesaid. Her fee is fixed at Rs.1 lakh to be borne initially by the plaintiff and subject to final order as to costs. 40. The parties to file their list of witnesses within fifteen days. 41. The plaintiff to file affidavits by way of examination-in-chief of all its witnesses within six weeks. 42. The parties to appear before the Court Commissioner on 2nd September, 2013 for fixing the dates of enquiry. 43. The Registry is directed to send the file of the suit at the place and time fixed by the Court Commissioner for the enquiry aforesaid. 44. The Court Commissioner is requested to complete the enquiry on or before 31st January, 2014. 45. List awaiting report on 25th February, 2014.