- ADVAIT GHOSH[1]
I. INTRODUCTION
This article will attempt to elucidate the bars to seeking interim relief through the prism of The Arbitration and Conciliation Act, 1996 in cases of determinable contracts and will also endeavour to understand if there are any exceptions to this rule as the seeking of Interim reliefs in case of determinable contracts is usually stymied by the provisions of The Specific Relief Act 1963.
II. Determinable Contracts & Specific Relief Act
Determinable Contracts derive their existence from the termination clause envisaged therein. The word determinable used in Clause (c) to sub-section 1 of Section 14 of The Specific Relief Act, 1963, means that which can be put an end to. Literally, the word determinable means to “put an end to”.
The seeking of Interim Reliefs in the case of determinable contracts containing an arbitral clause is commonplace, even though the chances of success are limited due to the obstacles placed by The Specific Relief Act 1963 and other allied Legislations. The General Law concerning the seeking of Interim Reliefs in a determinable contract was settled in the case of Indian Oil Corporation vs. Amritsar Gas Service (2013) 9 SCC 32 wherein the Apex Court held that a distributorship agreement which had a clause which entitled either party to terminate the contract with 30 days prior notice and without assigning any reason was “determinable” in nature and could not be specifically enforced.
III. The approach of the National Courts when dealing with a Section 9 application under The Arbitration and Conciliation Act, 1996 in case of determinable contracts: -
We shall analyse the approach of the National Courts in Section 9 Petitions preferred under The Arbitration and Conciliation Act, 1996 in case of determinable contracts through Judgements of the Delhi High Court and Apex Court as enumerated below.
In this, the Petitioner and the Respondent had entered into a Joint Venture Agreement to jointly organize an event known as “Busworld” in Bangalore. The Respondent, after the successful completion of the event, terminated the JVA with the Petitioner herein. The Petitioner filed an application for Interim Relief in the Delhi High Court under Section 9 of The Arbitration and Conciliation Act, 1996, praying that the Respondents be restrained from terminating the Joint Venture Agreement with the Petitioners herein. The Court concluded that as per Article 7.3 of the Joint Venture Agreement, either party could terminate the agreement, hence the contract is of determinable nature. The Delhi High Court referred to the case of Rajasthan Breweries Ltd. vs. Stroh Brewery (2000 (55) DRJ 68: 2000 (3) ARBLR 509) where the Delhi High Court had remarked that in cases of determinable contracts, specific performance of a determinable contract is statutorily barred under Section 14(1) d of The Specific Relief Act 1963 and also under Section 41(h) which says that “injunction will be refused when there is an equally efficacious relief available to the parties”. On the basis of this decision, the Court declined to give relief to the Petitioner and dismissed the application for Interim relief preferred by them.
The Respondent entered into an agreement with the Petitioner for the sale of its cars in Gujarat. The Petitioner claimed before the Court; there was a mutual understanding with the Respondent that the dealership would be renewed on a yearly basis. The Respondent, due to the Petitioners' inability to meet their yearly targets, terminated the said dealership in the year 2018. The Petitioner filed an application under Section 9 of The Arbitration and Conciliation Act, 1996 (due to the arbitration clause in the dealership agreement) seeking to restrain the Respondents from terminating the said dealership as it was their contention that huge expenditure had been made by the Petitioner to promote BMW in Gujarat, and unilaterally ending the contract would cause huge hardship to them, which cannot be monetarily compensated. The Delhi Court referred to the case of Planet M. Retail vs. Select Infrastructure Pvt Ltd OMP No. 488/2013:2014 (4) ArbLR 348 (Delhi) wherein a Division Bench of the Delhi High Court refused to restrain the termination of a License Deed on the grounds that the License Deed entered into between the parties was terminable in nature, and hence Injunction could not be granted due to the statutory bar under Section 14 and Section 41 of The Specific Relief Act, 1963. Thus, the Court declined to give relief to Parasoli Motors and did not restrain BMW India from terminating the said Agreement.
The above two Case Laws and the cases referred to by them elucidate the approach of the Courts in dealing with Interim Reliefs in case of determinable contracts. Thus, it is quite lucid that the National Courts are disinclined to grant interim relief in case of determinable contracts. We shall endeavour to understand through the next cases discussed herein-below whether there is a possible exception to this rule and if so, in what kind of circumstances does it arise?
The Petitioner and the Respondent entered into a contract for setting up a “Blast Furnance” at Rourkela Steel Plant. The Petitioner shared technical drawings related to the Blast Furnance with the Respondent. The drawings wherein the nature of confidential information and where only to be used for the purpose of the execution of the project. The Petitioner claimed that the Respondent had uploaded the confidential drawings of the Petitioner on a 3rd party website. The Petitioner also filed an additional affidavit before the Court wherein it was affirmed that the Respondent had floated a tender for Operational Tyres, and the drawings of the Petitioner were copied. In light of these circumstances, the Petitioner preferred an application under Section 9 of The Arbitration and Conciliation Act, 1996, to restrain the Respondents from further disclosing or disseminating confidential information to 3rd parties. The Respondent, in reply to the said application, contended that this was a determinable contract for which no injunction could be granted, and damages were sufficient to compensate for the breach in Contract.
The Court referred to the case of John Richard Brady vs. Chemical Process Equipment (AIR 1987 Delhi 372) where the Court invoked General Equity of Breach of Confidence and restrained the Respondents from disclosing technical drawings as the Court was of the opinion that such conduct was a breach of confidence and amounted to the unauthorized use of labour.
The Court also referred to the case of Zee Telefilms vs. Sundial Telecommunication (2003 (5) BomCR 404) where the Bombay High Court had restrained the Respondents from disclosing confidential information even though the Contract between the parties was determinable in nature, as the Court was of the opinion that monetary compensation would not be sufficient to remedy the breach, and hence Injunction was granted to the Petitioner.
Finally, the Court made a reference to the case of Daljeet Titus vs. Adebar and Ors 130 (2006) DLT 330, where it was remarked Court would step in and grant Injunction even in case of determinable contracts to prevent a breach of confidence.
After analysing all the above cases, the Court restrained the Respondents from disclosing the drawings to 3rd parties and opined that damages would not be sufficient to remedy this breach of confidence. Furthermore, the Court said that once a party has obtained information on the basis of contractual terms, it cannot turn around and question the confidentiality of this information. It is estopped from doing so.
IV. Amendment of the Specific Relief Act in 2018
The parliament made significant amendments to the Specific Relief Act in 2018. One of the key amendments was made to Section 10 of the Act. It has made the specific performance of a contract the rule instead of being an alternative in cases where the actual damage for non-performance could not be ascertained or where the compensation for non-performance would not be an adequate relief. Section 10 of the Act has been substituted, and instead the newly inserted Section 10 states that the specific performance of a contract shall be enforced by the court subject to the provisions contained in sub-section (2) of Section 11, Section 14 and Section 16 of the Act.
However, these amendments to The Specific Relief Act have not changed provisions regarding determinable contracts, and the provisions which govern the working of determinable contracts continue to be the same as before.
V. Conclusion
The above-mentioned Case Laws help us understand the Judicial intricacies which the Courts grapple with regard to granting of Interim Relief in Determinable Contracts. The Courts usually do not interfere on account of the statutory bars provided under the Specific Relief Act, 1963 however if there are extenuating circumstances like monetary compensation not being sufficient for the breach as also provided in Section 38 of The Specific Relief Act, 1963 and to prevent a breach of confidential information obtained through a contractual relationship as enumerated through the above cases the Courts will grant Injunction in case of determinable contracts also.
[1] Advait is an Advocate working in the litigation team at Kesar Dass Batra. He deals in matter related to Arbitration, Civil Suits and Criminal. He has argued matters before the District Courts of Delhi and the Delhi High Court. He can be reached at advaitgh@gmail.com
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