Provogue (India) TD Vs Naveen Kholi

S. Ravindra Bhar, J.

LA. No. 525/2008 (Exemption C. Fee)

Learned Counsel states that the balance Court fee would be paid during the course of the day. Let the application disposed in terms of the statement.

LA. No. 524/2008 (Org. Documents)

Allowed, subjected to the petitioner filing the originals within six weeks.

LA. No. 523/2008 (Under Order 39 Rules 1 and 2 CPC)

1. Issue notice Mr. Rajesh Yadav, Advocate accepts notice on behalf of the defendant-respondent. Counsel states that he would not be filing a separate reply to the application and has instructions to oppose it today. With the consent of the counsel for the parties the application was heard finally.

2. The plaintiff-applicant seeks a permanent injunction restraining the defendants, their employees, representatives etc. from interfering and obstructing its uninterrupted use and enjoyment of the its business from premises being G-7, Janak Palace, Janak Puri, New Delhi (hereafter referred to as suit premises). In this application, an ex-parte ad-interim injunction in similar terms is claimed.

3. The plaintiff avers that some time in October-November, 2005 it was on the lookout for premises for running a store from Janak Puri area. The Defendant-Respondent was introduced to it. According to the plaintiff the premises was lease-hold and could not be sub-leased. However, the defendant allegedly assured it that the plaintiff could be in full control of the premises and that he would not interfere with the day-to-day working of the business. In the circumstances, the parties entered into an agreement on 16.12.2005. The defendant/respondent was styled and described as a franchisee.

4. The applicant-plaintiff has relied upon conditions of the agreement which, inter alia, provided that the parties agree that all stocks of product would be the property of the plaintiff; the defendant (franchisee) would have no right or claim (clause 2); the franchisee-respondent was entitled to receive Rs. 1, 25,000/- or 5% of the maximum retail value (after deductions of all taxes, etc) of the products sold in the store whichever was higher. The plaintiff also a greed to pay the franchisee an interest free deposit of Rs. 5 lakhs, the equivalent of four months guaranteed income, (clause 4). By clause 6 parties agreed that if the franchisee respondent failed to refund the security deposit, the plaintiff could, without prejudice to its right to recover any amounts and to legal remedies, be entitled to use the premises till such time the security deposit amounts were adjusted.

5. Other terms included the stipulation concerning increase in guaranteed monthly commission by 15% after every three years (clause 7); that the - Franchisee was to make available the store to the applicant for marketing and selling its goods, subject to the condition that possession of the same for all intents and purposes would remain with the Respondent-Franchisee. Clause 9 stipulated that the Agreement would be effective from 1.1.2006 and would be enforced for three years upto 31.12.2008. Clause 10 entitled the plaintiff applicant to renovate the interior of the shop according to its design, provided that they did not alter the existing structure; clause 11 obliged the plaintiff to ensure the premises were maintained in a clean and neat fashion; clause 13 stipulated that the running, managing and day to day affairs of the outlet would be the sole responsibility of the plaintiff which also was liable, by clause 15 to obtain appropriate sales tax registration etc in its name at its costs.

6. The other important condition embodied in clause 26 is to the effect that the parties i.e. the Franchisee as well as the applicant were not entitled to terminate the agreement for a period of one year, after which termination was possible at any time by giving notice of three months in writing to the other party. It was further provided that if the Franchisee terminated the agreement or it expired because of efflux of time, the plaintiff applicant was to remove its goods from the store within 30 days on receipt of notice.

7. It is averred that the stipulations contemplated that possession was to be that of the plaintiff-applicant. The plaintiff also alleges that it made huge investments by carrying out renovations and interior designing work. It is alleged that the investment was to the tune of Rs. 25 lakhs. The Defendant Franchisee was paid Rs. 5 lakhs as security deposit. On 23.7.2007 the defendant addressed a letter to the plaintiff terminating the agreement. This action is challenged as illegal. According to clause 26 of the agreement three months notice had to be given to the plaintiff. It is averred that even in such contingency the plaintiff had the right to occupy the premises for a further period of one month.

8. The plaintiff avers that after it had applied u/s 9 of the Arbitration and Conciliation Act seeking an interim measure, this Court had by its order dated 14.9.2007 while issuing notice to the defendants, protected its interest. The said Petition u/s 9 was permitted to be withdrawn as there was no arbitration agreement between the parties.

9. The application seeking interim injunction incorporates the averments made in the plaint. It is also alleges that unless the relief is granted, the plaintiff would be put to immense hardship and that balance of convenience would lie in the grant of the interim relief.

10. Mr. Ravi Gupta, learned Counsel relied upon the stipulations contained in the agreement and contended that the parties did not merely contemplate entering into a business relationship or Franchisee Agreement but that in truth and reality the agreement was more like a lease which granted exclusive use of the shop. Counsel relied upon stipulations which imposed an obligation on the plaintiff to maintain the premises, obtain sales tax registration exclusively deal with the products kept there and submitted that these reflected the true intention of the parties, which was to grant possession of the premises and not merely permit the use of it as a business partner.

11. Learned Counsel urged that under the terms of the agreement the defendant could not terminate the arrangement without giving three months notice. It, however, sought to do so abruptly by the impugned notice dated 23.7.2007. The said termination was, therefore, void and in-operative in law. Consequently, the plaintiff was entitled to continue in the premises. Counsel also urged that even otherwise, the arrangement between the parties was effective by clause 9 till 31.12.2008 and that the plaintiff had paid four months advance as security and was entitled to stay on for a period equivalent to it.

12. Learned Counsel relied upon the judgments reported as Intercraft Ltd. Vs. Capital Boot House, and Shri Vipin Mehra Vs. Star India Pvt. Ltd., . He submitted that in the first decision, i.e. Intercraft, the Court formed the opinion that if the intention of the parties was to create a relationship akin to a lease and if the agreement in truth and reality was reflective of that, the Court would protect the possession of the party till the completion of trial. It was submitted that in Vipin Mehra''s case the Court held that where parties enter to a commercial contract for a specific period, every effort should be made by them to abide by its terms and conditions, and that damages would not be an adequate relief to the aggrieved party for the reason that not only does it suffer loss of business and trade reputation, but it may be involved in other litigation also with his franchisee. The Court in such circumstances can pass an appropriate order, and supervise the injunction and enforce compliance of its directions to render effective justice to the parties.

13. Mr. Rajesh Yadav, learned Counsel for the defendant submitted that an overall reading of the agreement discloses that the intention of the parties was only to enter into a Franchisee relationship, whereby the plaintiff Was permitted to use the premises and sell its products with the condition that the defendant was always in physical possession. Learned Counsel relied upon clause 19 and submitted that it stipulated about the store premises belonging exclusively to the Respondent who had agreed to stock and sell the products of the plaintiff without creating any rights, title, interest or tenancy in favour of the application-plaintiff. This condition it was submitted, read along with clause 25 (which declared that the relationship between the parties was not a partnership) and clause 26 which enabled the parties to the agreement to terminate the relationship subject to certain conditions.

14. Learned Counsel relied upon Section 41(e) of the Specific Relief Act and submitted that where a condition exists in the agreement, enabling one or the other party to terminate it, the specific relief cannot be granted, under which circumstances injunction cannot be claimed in law. Counsel submitted that the only exception enacted is Section 42 and that the present case would not be covered by such exception. Learned Counsel relied upon the Division Bench judgment of this Court in Rajasthan Breveries Ltd. v. Storh Breweries Co. AIR 2000 450 where the Court ruled that where a contract by its very nature is determinable, it cannot only be not enforced; and even injunction cannot be granted. Learned Counsel relied upon the decision in Hindustan Petroleum Corporation Ltd. Vs. Sri Sriman Narayan and Another, to say that where a licence in respect of premises is terminated, the relief of interim injunction cannot be granted. Learned Counsel contended that even if it were assumed that the termination was for some reason not valid, nevertheless due to the existence of clause 26, which empowered the parties to determine the relationship, the relief of injunction cannot be granted.

15. An over all reading of the document which would really be determinative of the question raised in the present application, would show the following:

(1) The parties agreed that the Respondent-defendants premises would be stocked and used for selling the plaintiffs products. The duration of the agreement was three years i.e. 1.1.2006 to 31.12.2008;

(2) The plaintiff was given the responsibility of maintaining the premises and ensuring its proper upkeep as well as paying the taxes in relation to its business such as sales tax etc.;

(3) The plaintiff was entitled to adjust the security deposit of four months paid as advance in the event of failure by the respondent to pay it, by continuing to use the store till the time the security deposit amounts were adjusted;

(4) Running, managing and day-to-day affairs of the retail outlet was the responsibility of the plaintiff; the stock of products was always the property of the plaintiff. It was also obliged to ensure appropriate security arrangements at night time.

16. The possession of the shop, for all intents and purposes was to remain with defendant and the plaintiff had agreed not to claim any tenancy rights, as per clause 8. Clause 19 likewise declared that the store premises were exclusively belong to the Franchisee/Defendant without creating, right or title or interest in favour of the plaintiff. Both parties could not terminate the agreement for initial period of one year; thereafter either party who terminated at any time of giving notice of three months in writing. A further condition was that if the defendant terminated the agreement or it expired with efflux of time, the plaintiff was to be given one month''s further time from receipt of notice to remove the goods. An additional stipulation was that if the plaintiff did not remove the goods in that event, the defendant was entitled to damages quantified at Rs. 2,50,000/- per month.

17. One of the recognized rules of interpreting a document is that all its stipulations should be read together, to discern the true intention of the parties. On the one hand the plaintiff-applicant avers and contends that notwithstanding its appellation as a franchisee agreement, the parties intended to create tenancy rights. Various conditions such as the right to carry out renovation/obligation to maintain the premises, security of the premises, sales tax registration etc. are pressed into service. On the other than, the defendants vehemently contend that clause 8 and 19 read together show that the parties never intended to create any tenancy rights or interest in the property akin to a lease. It is also contended that both parties had the right to terminate the agreement by virtue of clause 26 of the one year.

18. At the stage of considering an application under Order 39 Rules 1 and 2 the Court is not expected to conduct a detailed examination on merits. It has to form a prima facie view as to whether the plaintiffs request for interim relief has some merit. Taken together, clauses 8 and 19, in the opinion of this Court, prima facie, negates the plea that the plaintiff was at that point of time granted an exclusive interest in the property. The contention regarding creation of some rights akin to a tenancy or lease in the opinion of the Court is misplaced because even if that were assumed, the agreement is not registered, since the Franchisee fee of Rs. 1,25,000/- would be well above the prescribed limited under the provisions of the Registration Act read with the Transfer of Property Act, which require compulsory registration of any deed which purports to create a lease in respect of property for a period beyond eleven months. Here the agreement was to be enforced for three years. The internal evidence i.e., clause 8 and 19.bear out the intention; besides even if a lease were to be assumed, by reason of Section 107 of the Transfer of Property Act, the arrangement would be reduced to a monthly lease.

19. In these circumstances, this Court is of the opinion that the reasoning in the two decisions cited on behalf of the Petitioner have no relevance. At any rate stipulations similar to clauses 8 and 19 did not exist and do not appear to have been considered in those cases.

20. This Court in its Division Bench ruling in Rajasthan Breveries, while interpreting Section 41(e) of the Specific Relief Act, held that so long as a condition enabling termination of an agreement exists, injunction cannot be granted. The Court adverted to Section 14(1)(c) of the Specific Relief Act to say that if specific relief cannot be granted, injunction too is to be reject. The only exception to this rule is provided in Section 42 which states that if an agreement to do a certain act is coupled with a negative agreement not to do a certain act, the circumstances in the affirmative agreement would not preclude it from being granted injunction to perform the negative agreement. The Court had also relied upon the previous ruling of the Supreme Court in Indian Oil Corporation Ltd. Vs. Amritsar Gas Service and Others, to state that injunction in such circumstances cannot be granted. The other judgment i.e. Hindustan Petroleum Corporation, of the Supreme Court is also an authority on the proposition that there is nothing abhorrent if where the Court called upon to decide an interim injunction application, where a licence is terminated, refuses to grant the relief. In that case, the Court on a conspectus of terns of the dealership agreement between the parties and also after noticing the previous ruling in Amritsar Gas held that the appellant was entitled to revoke the agreement and that the legality of such revocation can only be considered at the stage of interim injunction for the limited purposes of ascertaining if there is a prima face case favouring the plaintiff and in determining it finally. After stating this the Court vacated the interim injunction at the behest of the licensee.

21. In view of the above reasons this Court is of the opinion that the plaintiff has been unable to establish, prima facie, that it was in possession of the premises or had any interest in it with the termination of the agreement on 27.7.2007. Even if its contentions were to be accepted, it ceased to have any right to continue in the premises, after 4 months. As far as its grievance with regard to the validity of the notice is concerned, i.e., its being contrary to clause 26 for want of three months notice; that argument too does not take the matter further. Even if a further three months period with one month period of grace provided for were to be taken into account, the plaintiff, would not have been in any manner entitled to continue in the premises beyond 27.12.2007.

22. At one stage, it was submitted that the defendant cannot take the law into its own hands and dispossess the plaintiff. In this regard it would be appropriate to notice a recent decision of this Court in Thomas Cook (India) Limited Vs. Hotel Imperial and Others, , where a similar question was said to be agitated in the context of refusal by the Court to grant the injunction. This Court stated as follows:

27. This brings me to the second aspect of "due process of law". It was urged by Mr. Kaul that even if the plaintiff was in unlawful possession, it could only be evicted by due process of law and therefore the plaintiff was entitled to an order of injunction preventing the defendants from removing the plaintiff from the said two rooms except through due process of law. It must be made clear that this argument fails in the context of this case because the plaintiff was neve3r in possession and therefore there is no question of dispossession in the sense usually understood. The plaintiff had a mere right to use, such right was revocable, it has been revoked and the plaintiff is entitled u/s 63 of the Indian Easements Act, 1882 to a reasonable time to leave the premises and take away its goods. The argument also fails because by rushing to Court the plaintiff has indeed invited a Judicial determination of its status. If it got an order of injunction it would ensure to its benefit. If it did not, then it cannot be heard to say that this Court has to grant an injunction all the same because otherwise it would give a licence to the defendants to forcibly throw out the plaintiff without filing a suit for possession.

23. For the above reasons this Court is of the opinion that prima facie the materials do not disclose that the plaintiff was in possession of the premises; it always continued to vest with the defendant. The application cannot be granted and therefore has to fail. It is however clarified that the observations made above were for the purpose of considering the merits of the application and not meant to reflect on the merits of the suit. This application is accordingly dismissed.

CS (OS) 68/2008

List on 20th February 2008 before the Joint Registrar for completion of pleadings of the case. List on 3.3.2008.

Caveat No. 5/2008 Mr. Rajesh Yadav, Advocate has appeared for the caveator. Caveat stands disposed of.