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PETITIONER: M/S GUJARAT POTTLING CO.LTD. & ORS.

       Vs.

RESPONDENT: THE COCA COLA CO. & ORS.

DATE OF JUDGMENT04/08/1995

BENCH: AGRAWAL, S.C. (J) BENCH: AGRAWAL, S.C. (J) AHMAD SAGHIR S. (J)

CITATION:  1995 AIR 2372            1995 SCC  (5) 545  JT 1995 (6)     3        1995 SCALE  (4)635

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T S.C. AGARWAL. J. :      Special leave granted.      In  the   past  nations  often  went  to  war  for  the protection and  advancement  of  their  economic  interests. Things have  changed  now.  Under  the  international  order envisaged by  the Charter  of the  United Nations  war is no longer an  instrument of  State policy. Now-a-days there are wars between  corporations, more  particularly  corporations having multi-national  operations, for  the  protection  and advancement of  their economic  interests.  These  wars  are fought on  the economic  plane but some of the battles spill over to  courts of  law. The  present case is one such legal battle.  The  combatants  are  two  American  multi-national corporations  dominating   the  soft   drink  market  having operations in a number of countries. On the one side is Coca Cola Company  (respondent No. 1), hereinafter referred to as "Coca Cola",  and on  the other  side is  PEPSICO INC.  (for short "Pepsi"), and its subsidiaries and subsidiaries of the subsidiaries which are under, direct or indirect, control of Pepsi. There  is a  long history  of trade  rivalry  between these two multi-national corporations.      Coca Cola  had been operating in this country till 1977 when on  account of  change of  policy of the new Government Coca Cola  had to  close its  operations in India. After the departure  of   Coca  Cola  the  products  of  the  domestic manufactures filled  the vacuum.  A substantial share of the market came to be controlled by the parle group of companies owned and  controlled by  Mr. Ramesh Chauhan and Mr. Prakash Chauhan, respondents  Nos. 3  and  4.  The  said  group  was manufacturing under  trade marks  bearing  the  names  "Gold Spot", "Thums  Up", "Limca",  "Maaza", "Rim Zim" and "Citra" as well  as "Bisleri"  club soda. They had arrangements with bottlers in  different parts  of the  country whereunder the bottlers prepared  beverages from the essence/syrup supplied

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by the Parle group and after bottling the same the beverages were sold under the names for which trade marks were held by the Parle  group. In  late 1980s Pepsi started operations in India and introduced beverages under their trade marks. Coca Cola followed  suit thereafter. Under the Deed of Assignment dated November 12,1993, the Parle group assigned their trade marks in the beverages bearing the names "Gold Spot", "Thums Up", "Limca",  "Maaza", "Rim  Zim" and "Citra" to Coca Cola. On January  6, 1994,  Coca Cola  applied to the Registrar of Trade Marks  for being  recorded as subsequent proprietor of the trade marks which had been assigned to it by the various Parle entities.      Gujarat  Bottling   Company  Ltd.,   appellant  No.  1, (hereinafter referred to as ‘GBC’) is a company incorporated under the Companies Act, 1956. 21% of its shares are held by Ahmadebad  Advertising   and  Marketing   Consultants  Ltd., respondent No.  7. The  remaining 79% of shares were held by Mr. Pinakin K. Shah, respondent No. 2 and his family members and business  associates and  respondents Nos.  3 and  4 and their family  members and associates in the ratio of 78% and 22% respectively.  The shares  of respondent No. 7 were also held  by  respondent  No.  2  and  his  family  members  and associates and  respondent  No.3  and  4  and  their  family members and  associates in  the same  ratio of  78% and  22% respectively. GBC  has  bottling  plants  at  Ahmedabad  and Rajkot in  Gujarat.  GBC  was  having  an  arrangement  with respondents Nos.  3 and  4 whereunder licence had been given to GBC  to prepare,  bottle, sell  and distribute  beverages under the  trade marks  "Thums-Up",  "Limca",  "Gold  Spot", "Maaza", "Citra",  "Rim Zim",  and "Bisleri"  club soda.  In anticipation of  the assignment of the rights in trade marks by Parle  group in  its favour,  Coca Cola, on September 20, 1993, entered  into an agreement (hereinafter referred to as the "1993  Agreement") with  GBC whereby Coca Cola permitted and authorised  GBC, upon  the terms  contained in  the said agreement, to  bottle, sell  and  distribute  the  beverages known and  sold under  the trade  marks "Gold  Spot", "Thums Up", "Limca",  "Maaza" and "Rim Zim". The trade mark "Citra" was excluded  from this agreement for the reason that a suit for ‘passing  off’ was  pending  against  the  Parle  entity concerned in  the Delhi High Court and there was uncertainty of the outcome of this litigation. The 1993 Agreement was to come into  effect on the date Coca Cola indicated in writing to GBC  that all  trade marks  related to the said agreement have been  assigned and  transferred to  Coca Cola. The 1993 Agreement is  to  operate  till  November  17,  1998  unless earlier terminated  as provided in the said agreement. Under paragraphs 4(a), 6, 18, 19, 20 and 23 Coca Cola is empowered to terminate  the  said  agreement  without  notice  and  in paragraph 21  provision is  made for termination of the said agreement by  either  side  on  giving  one  year’s  written notice. The said period of notice could be reduced by mutual consent in  writing between  Coca Cola and GBC. Paragraph 14 of the  1993 Agreement  contains a negative convenant by GBC not to  manufacture, bottle,  sell,  deal  or  otherwise  be concerned with  the products,  beverages of any other brands or trade  marks/ trade  names during  the subsistence of the agreement including  the period  of  one  years’  notice  as contemplated in  paragraph 21.  Under paragraph 19 Coca Cola has the right to dis-continue supplying to GBC with essence/ syrup and/ or other materials on the happening of any of the events  mentioned   in  clauses  (a)  to  (e)  of  the  said paragraph. Clause (b) of paragraph 19 relates to transfer of stock, share  or interest  or other  indicia of ownership of GBC resulting  in effective  transfer of control without the

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prior  express  written  consent  of  Coca  Cola.  The  1993 Agreement came  into force  on November  12, 1993  when  the trade marks  related to the said agreement were assigned and transferred to  Coca Cola. Two such agreements were executed - one  pertaining to  Ahmadabad town and other pertaining to Rajkot town.  In addition,  Coca Cola  also entered into two separate agreements  under letters  dated September 20, 1993 in respect  of permission  to use  the trade mark "Citra" by GBC for  Ahmedabad and  Rajkot  towns.  Two  other  separate agreements were  entered by  Coca Cola  under letters  dated September 20,  1993 for  Ahmedabad and  Rajkot towns for the use of  the trade mark "Bisleri" club soda by GBC. All these four letter  agreements are  operative for two years and can be renewed  by  mutual  consent.  These  agreements  can  be terminated by  giving three  months notice  by either  side. These agreements were also to come into effect from the date indicated by  Coca Cola  in writing  to GBC  that all  trade marks related  to the said agreements have been assigned and transferred to Coca Cola.      On April  30,  1994  Coca  Cola  entered  into  another agreement (hereinafter  referred to as the "1994 Agreement") with GBC  whereby Coca  Cola granted  to GBC a non-exclusive licence to  use the trade marks mentioned in the schedule to the agreement,  namely, "Gold  Spot", "Limca",  "Thums  Up", "Maaza", "Citra",  etc. in  relation to goods prepared by or for  the  licensee  (GBC)  from  concentrates  and/or  syrup supplied  by  the  licensor  (Coca  Cola)  and  packaged  or dispensed  in  accordance  with  standards,  specifications, formulae, processes and instruction furnished or approved by the licensor  from time  to time  and only  so long  as such goods are  manufactured within  such territory  of India and sold within  such territory  of India and in such bottles or other containers  as shall  be approved by the licensor from time to time. In the said agreement it is provided that both the parties shall make application to the Registrar of Trade Marks  under   the  Trade  &  Merchandise  Marks  Act,  1958 (hereinafter referred  to as  ‘the Act’)  or  any  statutory modification or  enactment thereto  or thereof  for the time being in  force to  procure the registration of the Licensee (GBC) as  a registered  user of  the  said  trade  marks  as aforesaid as soon as the said trade marks are registered and shall sign  and execute all such documents as are reasonably proper and necessary to secure such registration and for any change thereof  in the  future. The  said agreement  is  not limited to any particular period and is to continue in force without limitation  of period  but can  be terminated at any time by  either party  upon giving  ninety days’  notice  in writing to  the other or by mutual consent. But in the event of either party committing a breach of any of the provisions of the  said agreement  it shall  be lawful  for  the  other party,  by   giving  thirty  days’  notice  in  writing,  to terminate  the   agreement.  In  accordance  with  the  1994 Agreement an  application was submitted by Coca Cola on July 12, 1994  under Section 48 and 49 of the Act to register the said agreement as a Registered User Agreement.      After the  execution  of  these  agreements  steps  for upgradation of  the plants  of GBC  at Ahmedabad  and Rajkot were taken  and when  the upgradation of the said two plants was near  completion Coca  Cola  advised  GBC  that  it  was necessary for  GBC to  provide for  aditional investments in marketing  arrangements,   purchase  of   crates  and  other equipments and  trucks etc.  GBC was,  however, reluctant to make further  investment and respondent No. 2 requested Coca Cola to give its consent in advance for transfer of interest of respondent  No. 2  in GBC. Coca Cola declined to give its

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consent to  such transfer  in advance without being aware as to who  the prospective  purchaser was  and informed GBC and respondent No. 2 that the transfer can be permitted provided GBC does  not lose controlling power or management in favour of an  outsider. On  January 20,  1995, the share holding of respondent No.  2 and  his family  members and associates as well as respondent Nos. 3 and 4 and their family members and associates in  GBC and  respondent No.7  were transferred to appellants Nos. 2 to 5 which are concerns closely associated and  connected  or  affiliated  to  subsidiaries  of  Pepsi, respondent No. 6, and Pepsi Foods Limited, respondent No. 5, a subsidiary  of Pepsi.  As a  result Pepsi acquired control over GBC. On January 25, 1995 GBC gave a notice to Coca Cola under clause  7 of  the  1994  Agreement  whereby  the  said agreement was  terminated. In  the said  notice it  is  also stated that without prejudice to the contentions of GBC that the 1993  Agreement stands  replaced by  the 1994  Agreement and/or that  the termination period under the 1993 Agreement in any  event stands  reduced to  90 days  and that the said letter dated  January 25,  1995 be  treated, as  a matter of abundant caution, as termination notice also under clause 21 of  the  1993  Agreement.  On  January  25,  1995  GBC  also addressed a  letter to  Coca Cola informing them that shares representing 70.6%  approximately  of  the  paid  up  equity capital of  GBC had  been acquired  by  and  transferred  in favour of  appellants Nos.  2 to  5. On January 31, 1995 GBC addressed a  letter to the Director (F&VP), Ministry of Food Processing Industries,  Government of India, for approval of crown cap designs pertaining to beverages of which the trade marks are held by Pepsi.      On January  30, 1995  Coca Cola  filed a suit (Suit No. 400 of  1995) in  the  Bombay  High  Court  seeking  various reliefs. In  the said  suit Coca  Cola took  out  Notice  of Motion No.  316 of  1995 seeking  interim relief. During the course of  hearing on  the said  Notice of Motion before the learned single  Judge of  the High  Court (Dhanuka  J.)  the learned counsel for Coca Cola sought interim relief in terms of prayers  (a)(i), (a)  (ii), (a)(iii) and (a)(viii) of the Notice of  Motion. By  his order dated February 22, 1995 the learned single  Judge declined  the application for grant of interim relief  in terms  of prayers  (a)(i),  (a)(iii)  and (a)(viii) but  issued an  interim injunction restraining GBC from manufacturing,  bottling or selling or dealing with the products, beverages  of any  brand or  trade mark  owned  by respondents Nos.  5 and  6 or  any one  else other than Coca Cola. GBC  was permitted  to pursue  its  application  dated January  31,   1995  pending  before  the  Director  (F&VP), Ministry of  Food Processing  Industries, in accordance with law but  GBC was  directed not to act upon the permission of the said  authority or  any  other  authority,  if  granted, without obtaining  prior leave  of the  court.  Two  appeals (Appeals Nos.  183 and  191 of  1995) were filed against the said order  of the  learned single Judge before the Division Bench of  the High  Court - one was by GBC abd the other was by Coca  Cola. During  the course  of hearing  of  the  said appeals the  parties, through  their counsel, submitted that as decision  in the  appeals would have impact on the Motion pending before  the learned  single Judge,  it was desirable that Notice  of Motion No. 316 of 1995 should be taken up on board and disposed of finally by the Division Bench so as to avoid one more appeal. In view of the said submission and by consent of  the parties the Motion was heard and disposed of finally by the Division Bench by the impugned judgment dated March 31,  1995. By  the said  judgment Notice of Motion No. 316 of  1995 was  made absolute  in  terms  of  prayer  Nos.

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(a)(ii) and  (a)(iii) as modified. Prayer (a)(ii) was for an injunction  restraining   respondent  No.   1  (GBC)  either directly or indirectly by itself or through its shareholders from concerning  itself with  the products, beverages of any other brand  or trade  mark of  the plaintiffs  (Coca Cola). Under prayer  (a)(iii) as  modified an  injunction has  been granted in the following terms:      "That in the event of the sale of shares      having   taken    place    before    the      institution of  the suit,  the  deponent      No.1 and  those to  whom the shares have      been   sold    and    also    subsequent      transferees,  their   servants,  agents,      nominees,     employees,      subsidiary      companies,     controlled     companies,      affiliates or associate companies or any      person acting  for and  on their  behalf      are restrained  by an interim injunction      from using  the plants of respondent No.      1   at    Ahmedabad   and   Rajkot   for      manufacturing, bottling  or  selling  or      dealing with or concerning themselves in      any manner whatsoever with the beverages      of any person till January 25, 1996."      Feeling aggrieved  by the said judgment of the Division Bench of the High Court dated March 31, 1995, GBC (defendant No.1)  and  the  four  transferees  of  the  shares  of  GBC (defendants Nos.7 to 10) have filed these appeals.      By the  said interim  order the  High Court  has  given effect to the negative stipulation contained in paragraph 14 of the 1993 Agreement which is in the following terms:-      "As such  the Bottler covenants that the      Bottler will  not  manufacture,  bottle,      sell, deal  or  otherwise  be  concerned      with  the  products,  beverages  of  any      other brands  or trade marks/trade names      during   the   subsistenance   of   this      Agreement including  the period  of  one      year’s   notice   as   contemplated   in      paragraph 21."      On behalf  of the appellants submissions have been made assailing the  validity of  the said  negative covenant. For that purpose  it is  necessary to determine whether the 1993 Agreement subsists  or has been legally terminated. The case of GBC,  in this  regard, is  that the  1993 Agreement is no longer in operation since it has been superseded by the 1994 Agreement and  the 1994  Agreement has  been  terminated  by notice dated  january 25, 1995 and that, in the alternative, the requirement  regarding  giving  of  one  year’s  written notice for  terminating the  1993 Agreement  as contained in paragraph 21  of the  said agreement  was reduced  by mutual consent by  the parties  by the 1994 Agreement wherein under clause 7  the period  of such  notice  for  terminating  the agreement is  90 days  and that  by notice dated January 25, 1995 the  1993 Agreement  stands terminated on the expiry of 90 days  from the date of the said notice. These submissions require an  examination of  the nature  and contents  of the 1993 and  1994 Agreements  but before we proceed to do so we may briefly  refer to  the relevant law governing the use of trade marks in India.      The  first   enactment  whereby   the   machinery   for registration and  statutory protection  of trade  marks  was introduced in  this country  was the  Trade Marks Act, 1940. Prior to  the said enactment the law relating to trade marks in India was based on common law which was substantially the

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same as  was applied  in England  before the  passing of the Trade Marks  Registration Act, 1875. At common law the right to property  in a  trade mark  was in the nature of monopoly enabling the  holder of  the said  right to  restrain  other person from  using the  mark. For being capable of being the subject  matter   of  property   a  trade  mark  had  to  be distinctive. This  right was an adjunct of the goodwill of a business and was incapable of separate existence dissociated from that  goodwill. [See:  General Electric  Co. V. General Electric Co.  Ltd., 1972  (2) All  E R 507]. The Trade Marks Act, 1940,  which was  based on the Trade Marks Act, 1938 of U.K., has now been replaced by the Act. The Act has codified the law  relating to  Trade and  Merchandise Marks  and is a comprehensive  piece   of  legislation   dealing  with   the registration and  protection of  trade  marks  and  criminal offences relating  to trade  marks  and  other  markings  in merchandise. Under  the Act  registration of  trade marks is not compulsory and as regards unregistered trade marks, some aspects are governed by the Act while others are still based on common  law. In  respect of a trade mark registered under the provisions of the Act certain statutory rights have been conferred on  the registered  proprietor which enable him to sue for  the infringement  of the trade mark irrespective of whether or  not that  mark  is  used.  The  Act  also  makes provisions whereunder  registered proprietor of a trade mark can permit  any person  to use the mark as a registered user and for that purpose provision are made in Sections 48 to 54 of the  Act. In  clause (m)  of  Section  2  the  expression "permitted use"  in relation to a registered trade mark by a registered user  of the trade mark in relation to goods- (a) with which  he is  connected in the course of trade; and (b) in respect  of which  the trade  mark remains registered for the time  bing; and  (c)  for  which  he  is  registered  as registered user; and (ii) which complies with any conditions or restrictions to which the registeration of the trade mark is subject". In sub-section (i) of Section 48 it is provided that a person other  than a registered proprietor of a trade mark may  be registered  as the  registered user  thereof in respect of  any or  all of the goods in respect of which the trade mark is registered otherwise than as a defensive trade mark and in the said Section the Central Government has been empowered to  make rules  providing that  no application for registration  as   such  shall  be  entertained  unless  the agreement between  the parties  complies with the conditions laid down  in the  rules for preventing trafficking in trade marks. Under  sub-section (2)  the permitted  use of a trade mark shall  be deemed to be use by the propriter thereof and shall be  deemed not  to by  used by a person other than the proprietor, for  the purpose  of Section 46 or for any other purpose for  which such use is material under the Act or any other law.  Section 49  makes provision  for  submission  of application for  registration of  trade mark  as a registred user  and   one  of   the  requirements  is  that  the  said application shall be accompanied by the agreement in writing or a  duly authenticated  copy thereof  entered into between the registered  proprietor and  the proposed registered user with respect  to permitted  use of  the trade mark and it is further required  that the  registered  proprietor  or  some person authorised  to the  satisfaction of  the Registrar to act on  his behalf  give an  affidavit  in  respect  of  the matters set  out in sub-clauses (a) to (d) of clause (ii) of sub-section  (1)  of  Section  49.  Section  51  empowers  a registered user  of a trade mark to call upon the proprietor to take proceeding to prevent infringement of the trade mark and if  the proprietor  refuses or  neglects to do so within

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three months after being so called upon, the registered user may institute  proceedings for  infringement in his own name as if  he were  the  proprietor,  making  the  proprietor  a defendent. Section  52 deals with power of Registrar to very or cancel  registration as registered user. Under Section 53 a registered  user does  not have the right of assignment or transmission of  the right  to use  the trade  mark. Further provisions relating  to registered  user  are  contained  in Chapter V  (Rules 82  to 93)  of the  Trade and  Merchandise Marks Rules,  1959 (hereinafter  refered to as "the Rules"). Rules 83  provides the  particulars which are required to be stated in  the agreement  between the  registered proprietor and  the  proposed  registered  user  with  respect  to  the permitted use  of  the  trade  mark.  The  said  particulars include "the particulars specified in sub-clauses (a) to (d) of clause  (ii) of  sub-section (1)  of Section  49"  and  a provision about  ’means for bringing the permitted use to an end when the relationship between the parties or the control by the registered propretor over the permitted user ceases."      The abovementioned  provisions contained in the Act and the Rules  indicate that the use of registered trade mark by a registered  user  is  subject  to  fulfilment  of  certain conditions  and   for  the  purpose  of  registration  of  a registered user it is necessary for the registerd proprietor of the  trade mark  and  the  proposed  registered  user  to execute an  agreement  which  must  contain  the  prescribed particulars and  must be submitted alongwith the application for registration  as a  registered user. The registration as registered user  enables the  use of  the trade  mark by the registered user as being treated as use by the proprieter of the trade  mark  and  enables  a  registered  user  to  take proceedings in  his own  name to prevent infringement of the trade mark.      Apart from  the said  provisions relating to registered users, it  is permissible  for the  registerd proprited of a trade mark   to  permit a  person to use his registerd trade mark. Such licensing of trade mark is governed by common law and is  permissible provided  (i)  the  licensing  does  not result in  causing  confusion or deception among the public; (ii)it does  not destroy  the distinctiveness   of the trade mark, that  is to  say, the  trade mark,  before the  public eye,continues  to   distinguish  the  goods  connected  with others; and  (iii) a  connection  in  the  course  of  trade cosistent with  the definition  of trade  mark continues  to exist between  the goods and the propriter of the mark. [see : P.  Narayanan =  Law of  Trade Marks and passisng-Off, 4th Ed., para  20.16,p.335]. It  would thus appear that use of a registered trade  mark can be permitted to a registered user in accordance  with provisions  of  the  Act  and  for  that purpose the  registered proprietor  has  to  enter  into  an agreement with the proposed registered user.  The use of the trade mark  can also  be permitted dehors  the provisions of the Act  by grant of licence by the registered proprietor to the proposed  user.   Such a  licence is  governed by common law.           We may  now examine  the two agreements, viz., the 1993 Agreement and 1994 Agreement. In the 1993 Agreement, in paragraph 2,  Coca Cola  has agreed  to permit and authorise GBC, upon  the terms  contained in  the said  agreement,  to bottle, sell  and distribute the beverages known as and sold under the  trade marks  set forth  in  Annexure  ii  to  the agreement. Under  paragraph 3  it is required that beverages shall be  manufactured in  a plant  approved by Coca Cola in accordance with  the formula  and procedure provided by Coca Cola. In  clause (a)  of paragraph 4 GBC expressly covenants

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to consistently maintain the quality of the sid beverages in all respects  and to  strictly adhere  and  conform  to  the technical specification  and standards  as  provided,  using only such  ingredients   and of  such quality as provided by Coca Cola.  GBC also  undertakes to  exercise great care and caution to  see that  sub-standard, inferior  or unwholesome beverages will  not be  manufactured/marketed by  GBC or its agents directly or indirectly and if Coca Cola observes that the quality of the beverages is not maintained consistently, and/or there  are persistent  complaints  from  the  market, dealers,  outlets,   consumers,  etc.,  concerning  the  low standard   or    inferior   quality    of   the    beverages manufactured/marketed by GBC, Coca Cola retains the right to forthwith  terminate   the  agreement.   In  clause  (b)  of paragraph 4,  in order  to assure compliance by GBC with the above requirments, it is permissible for the representatives and/or agents  of Coca  Cola to  inspect  at  any  time  the premisesof GBC,  the  finished  beverages,  the  methods  of preparation there  of and  the bottling  process,  and  full cooperation in this regard is to be extended by GBC. GBC has also agreed  to submit  samples of the finished beverages to Coca Cola every month for analysis and approval by Coca Cola who is  the sole  judge to determine and certify the quality of the  said beverages  as fit  for marketing  . Paragraph 5 relates to  keeping  by  GBC  of  complete  records  of  all chemical tests  carried out as specified by Coca Cola and of production, sale   and  distribution of  the  beverages  and furnishing of  monthly reports  about the same to Coca Cola. Under clause  (a) of  paragraph 6 GBC undertakes to buy only from Coca  Cola   or a  manufacturer approved  by Coca  Cola essences and  beverages bases  (ingredients for  making  the said  beverages).  Under  clause  (b)  of  paragraph  6  GBC undertakes  to   buy   bottles,crowns   lables   and   other ingredients of the quality, standard and specifications laid down by  Coca Cola preferably from the suppliers approved by Coca Cola  and in  case GBC  chooses to  buy the above items from a  supplier/suppliers other  than the  one approved  by Coca Cola,  GBC is  required to submit the itens so procured to  Coca   Cola  to  determine  the  quality,  standard  and specifications before  they are  put to  use to manufacture, bottle or  sale of  the said  beverages. Under clause (c) of paragraph 6  GBC has  agreed to use only bottles, lables and crowns for  the said  beverages of  a type,  style, size and design approved by Coca Cola. The breach of clauses (a), (b) and (c)  of paragraph  6 would constitute an infringement of the agreement  for which  Coca Cola  reserves its  right  to terminate the  agreement. Under pragraph 7 GBC has agreed to vigorously and  deligently promote  and solicit  the sale of the said beverages and assure full and complete distribution of the  said beverages  to   meet the  market demand for the said  beverages.   Under  clause  (a)  of  paragraph  8  GBC covenants and  agrees not  to manufacture, bottle, sell,deal in or  otherwise be concerned with any product under any get up or  container used  by Coca Cola or which is likely to be confused or  used in unfair competition therewith or passed- off therefor.  Under clause  (b) of pragraph 8 GBC covenants and agrees  not to  manufacture, bottle  , sell,  deal in or otherwise be concerned with any product under any trade mark or  other        cdesignation  which   is  an  imitation  or infringement of  these trade  marks or  is likely  to  cause passings-off of  any product which is calculated to lead the public to  believe that it originates from Coca Cola because of  GBC’s   association  with   the  business  of  bottling, distributing  and   selling  the   beverages.  In  the  said clause,it is  provided that  the use of the said trade marks

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in  any   form  or  fashion  or  any  words  graphically  or phonetically similar  thereto or in imitation thereof on any product other  than that  of Coca Cola. would constitiute an infringement of  the trade  marks  or  be  likely  to  cause passing-off. Under  clause (c)  of paragraph 8 GBC covenants and agrees  that during  the continuance of the agreement it will not  manufacturer, bottle, sell deal in or otherwise be concerned with any beverages put out under any trade mark or name or style being same or deceptively similar to the trade marks owned  by Coca  Cola or having similar or near similar phonetic rendering  and any beverages put out under the said trade marks  or otherwise  which  is  an  imitation  of  the essence, syrup or beverages or is likely to be a  substitute thereof. In  paragraph 9  it  has  been  provided  that  the decision of  Coca Cola  on all  matters concerning  the said trade mark  shall be final and conclusive and not subject to question by  GBC and  Coco Cola  in the  defenc above  trade marks at  its sole cost and expenses and GBC will co-operate fully with  Coca Cola  in the  defence and protection of the said trade  marks in  use in  the territory  infringing Coca Cola’s trade  marks. In  paragraph 10  GBC has  assured Coca Cola that  it will  safeguard that no spurious beverages are manufactured, marketed,  sold or otherwise dealt with in the bottles registered  with Coca  Cola’s trade  name  or  trade marks and  GBC has  further undertaken to take all necessary steps to  prevent any  spurious or imitation beverages being filled in the bottles registerd under Coca Cola’s trade name or trade  marks.   In pragraph  11 GBC  has recognised  Coca Cola’s ownership  of the  trade marks  and has agred to only use the  said trade  marks in  the manner lawfully permitted and not  to take any action which would cause breach or harm the trade  marks or Coca Cola’s ownership thereof in manner. In paragraph 12 it is provided that nothing contained in the Agreement   shall be  construed as  conferring upon  GBC any right, title  or interest  in the  above trade  marks, or in their registration  or in any designs, copy rights, patents, trade names,  signs, emblems, insignia, symbols, slogans, or other marks  or devices  used in  connection with  the  said beverages. In  paragraph 13  GBC has  agreed to  sell    and distribute the  said beverages under Coca Cola’s trade marks strictly  on   its  own   merits,   and   make   only   such representation concerning  the said  beverages as shall have been previously  authorized in writing by Coca Cola and that GBC will  not use  coca Cola’s trade marks or any other such name/names which  are deceptively  similar or  have phonetic resemblance or  can be confused with Coca Cola’s trade mark, as part  of its  name, nor  will GBC use in connecetion with any drink  any trade  marks or  design which  is deceptively similar to  Coca Cola’s trade marks or any other trade marks which Coca  Cola may  acquire.In paragraph 14 GBC recognises that Coca Cola has awarded the territory on the assurance of GBC, that  it will work vigorously and deligently to promote and solicit  the sale  of  the  products/beverages  produced under the  trade marks  of Coca Cola and has further assured full   and    complete   distribution    of   Coca    Cola’s products/beverages to  meet the  demand from  the  consumers because of  the  goodwill  enjoyed  by  Coca  Cola  and  its products/beverages and  GBC also  recognises that  Coca Cola has incurred  heavy expenditure  by way  of  advertisements, periodic training  of the  sales,  marketing  and  technical staff of  GBC as  well as the protection of its goodwill and GBC recognises  that it  is imperative that it must maintain with full vigour the continuity of the supply of Coca Cola’s products/beverages for  safeguarding  the  interest  of  the consuming public  and thus  maintaining the goodwill of Coca

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Cola. At  the end  of paragraph  14 there  is  the  negative stipulation which  has already  been  set  out  earlier.  In paragraph 15  GBC has  agreed that it will not sell the said beverages to the retailers in the territory on prices higher than the  price agreed  to or  recommended by  Coca Cola  in writing. In  paragraph 16  Coca Cola  reserves its rights to grant at  any time  one or  more additional licence near the area where GBC plant is located, if in the judgement of Coca Cola situation  warrants commissioning of further/additional licence. In  paragraph 17 it is provided that nothing in the agreement  shall   create  or   be  deemed   to  create  any relationship of agency, partnership or joint venture between Coca Cola  and GBC  and further  that GBC  will assume  full responsibility or  liability for  and will  hold  Coca  Cola harmless from  any loss, injury, claims or damages resulting from or  claimed  to  result  from  acts  of  commisions  or omissions on  the part  of the  GBC. In paragraph 18 GBC has agreed not  to sell,  assign,  transfer,  pledge,  mortgage, lease, licence  or in  any other  way or  manner encumber or dispose of,  in whole  or in  part,  the  agreement  or  any interest herein,  either directly or indirectly, nor to pass by operation  of law  or in  any other  manner without  Coca Cola’s prior  written consent. Under  paragraph 19 Coca Cola has to right to cancel and terminate the agreement forthwith by written  notice to  GBC upon  the happening of any one or more of  the events  mentioned in  clauses (a) to (e) of the said paragraph.  The said  power is in addition to all other rights and  remedies  which  Coca  Cola  may  have.  In  the concluding part of paragraph 19 it is provided that upon the happening of  any one  or more of the foregoing events, Coca Cola shall  also have the right to discontinue supplying GBC with essence/syrup and/or other materials for such length of time as  Coca Cola  may in  its sole judgment deem necessary without thereby  cancelling or prejudicing Coca Cola’s right to cancel  or terminate  the agreement for the said cause or for any  one or  more other cause or causes. In paragraph 20 it is  prescribed that  the  said  agreement  shall  expire, without notice,  on November  17, 1998  unless it  has  been earlier terminated  as provided  in the agreement. Paragraph 21 makes  provision for  termination  of  the  agreement  by either side on giving one year’s written notice which period may be  reduced by  mutual consent  in writing  between Coca Cola and  GBC. Paragraph  23 deals  with partial  invalidity resulting from  any of the provisions of the agreement being held  invalid   for  whatever   reason  by   any  of  court, governmental agency,  body  or  tribunal.  In  paragraph  25 provision is  made for  supersession of all prior contracts, agreements or commitments, either written or oral, which are rendered mull  and void  and  of  no  effect.  Paragraph  29 provides that  the agreement  shall come  into effect at the date on which Coca Cola indicates in writing to GBC that all trade marks related to the said agreement have been assigned and transferred  to Coca  Cola, provided that if such notice is not  issued by  the first  anniversary of  the agreement, then the agreement shall be void ab initio and of no effect. In paragraph  30 GBC  represents and  warrants to  Coca Cola that  GBC  acknowledges  that  the  trade  marks  listed  on Annexure II  will be,  as of  the  effective  date  of  this agreement, the property of Coca Cola, that GBC has no right, title or  interest to  such trade  marks, except pursuant to the licence  granted by  the agreement  and the  GBC has  no existing claims  or basis for claims against parle (Exports) Limited or  any of  its affiliates  which would  affect  the rights of Coca Cola under the agreement.      A perusal  of the  various provisions  contained in the

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1993 Agreement  shows that  by this  agreement Coca Cola has agreed to  grant a  licence to GBC  for the use of the trade marks in  respect of  beverages mentioned  in Annexure II to the agreement  which were  to be  acquired shortly  by  Coca Cola. A  number of provisions in the agreement relate to the use of the said trade marks by GBC so as to ensure that such user of  the trade  marks by  GBC is  strictly in accordance with the  common law governing user of trade marks. The 1993 Agreement was,  therefore,an agreement  for grant of licence under common  law for  user by  GBC of the trade marks which were to  be acquired  by Coca  Cola. The 1993 Agreement also contains various  provisions governing preparation, bottling and sale  of the  beverages covered by the said trade marks. In that  sense the  1993 Agreement  can be  regarded  as  an agreement for grant of a franchisee, whereunder GBC has been permitted to  manufacture, bottle  and  sell  the  beverages covered by  the trade marks referred to and mentioned in the agrement in the area covered by the agreement subject to the conditions laid down in the agreement.      We would  now come  to  the  1994  Agreement.  In  this agreement Coca  Cola has  been described as the Licensor and GBC as  the Licensee.  In clause  (a) of the preamble to the agreement it  is stated  that the  licensor has acquired the trade marks  specified in  the schedule  to the agreement by virture of  Deeds of  Assignment dated  November 12, 1993 in respect of  the goods  specified in  the said  schedule.  In clause (b)  of the  preamble reference  is made  to the 1993 Agreement and  it is  stated that  the parties have arranged for the  prepration, packaging  and sale of the goods by the Licensee and for the use of the said trade marks in relation thereto, and  may enter  into further  arrangements  in  the future, within  the scope  of the  1994 Agreement. In clause (c) of  the preamble it is stated that the Licensor holds no equity interest  in the Licensee and wishes to enter into an agreement for  the use  of the  said trade marks on a purely contractual basis.  Thereafter, the  agreement  provides  in paragraph 1  for grant  of a  non-exclusive license  by  the Licensor to  the Licensee  to use  the said  trade marks  in relation to  goods prepared  by or  for  the  Licensee  from concentrate and/or  syrup supplied  by the  Licensor or  its nominee and prepared and packaged or dispensed in accordance with  standards,  specifications,  formulae,  processes  and instruction, furnished or approved by the Licensor from time to time  and so  long as  such goods are manufactured within such territory  of  India  and  in  such  bottles  or  other containers as shall be approved by the Licensor from time to time. In  paragraph 2  of the  agreement it is provided that the Licensor  and the Licensee shall make application to the Registrar of  Trade Marks  under the  Act or  any  statutory modification on  enactment thereto  or thereof  for the time being in  force to  procure the registration of the Licensee as a registered user of the said trade marks as aforesaid as soon as  the said  trade marks are registered and shall sign and execute  all such documents as are reasonably proper and necessary to  secure such  registration and  for any  change thereof in  the future.  In  paragraph  3  the  License  has undertaken to prepare and package or dispense the said goods strictly  in   accordance  with   standars,  specifications, formulae, processes  and instructions  furnished or approved by the  Licensor from  time to  time to  use the  said trade marks in  relation  only  to  such  goods  so  prepared  and packaged or dispensed and also agreed to permit the Licensor or its  authorised representative at all reasonable times to inspect at  the Licensee’s  premises and  elsewhere  as  the Licensor  may   consider  appropriate   to  implement  these

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convenants to  ensure quality  control of the said goods and the methods  of preparing,  packaging or dispensing the said goods and  the Licensee will, if called upon by the Licensor to do  so, submit  samples  of  the  said  goods,  including packages and  the  markings  thereon,  for  the  inspection, analysis and  approval of  the licensor. Paragraph 4 records the undertaking  that the  licensee shall  not be  the  sole licensee/permitted  user   of  the   said  trade  marks.  In paragraph 5  the Licensee  has agreed that whenever the said trade marks  are used  by the  Licensee   in relation to the said goods,  the marks  shall be  so described as to clearly indicate that  the trade marks are being used only by way of permitted use.  In paragraph  6 the  Licensee recognises the Licensor’s title  to the  said trade  marks and the Licensee agrees that it shall not at any time do or suffer to be done any act  or thing which will in any way impair the rights of the Licensor  in and   to  the  said  trade  marks  and  the Licensee shall  not acquire  and shall  not claim any right, title or  interest in and to the said trade marks adverse to the Licensor  by virture  of the  licence granted  under the agreement to  the Licensee  or through the Licensee’s use of the trade  marks. In  paragraph 7  it is  provided that  the agreement shall  continue in  force without  limit of period but may  be terminated  at any  time by  either  party  upon giving 90  days notice  in writing to the other or by mutual consent and  further that  in  the  event  of  either  party committing  a  breach  of  any  of  the  provisions  of  the agreement it  shall be lawful  for the other party by giving 30 days’  notice in  writing to  terminate the agreement. In paragraph 8 the Licensee convenants that upon any amendments that the  Licensor may  request the  Licensee to execute for the purpose of applying for variation or cancellation of the entry of the Licensee as a registered user of the said trade marks and  that in  the event  of cancellation, the Licensee will not make any further use of the said trade marks.      A perusal  of the  provisions  contained  in  the  1994 Agreement, more  particularly paragraph  2 and  8, indicates that the  said agreement  has been  executed with  a view to comply with  the requirements  of the  Act and the Rules for registration of  GBC as  the registered  user of  the  trade marks specified  in the  Schedule to the agreement which had been acquired by Coca Cola. This agreement has been executed as per  the requirements  of Rule  83 of the Rules read with sub-clauses (a) to (d) of clauses (ii) of sub-section (1) of section 49.  This is evident from paragraphs 1, 3, 4, 5, and 6 which contain partculars referable to sub-clauses (a), (b) and (c)  and paragraph 7 which contains partculars referable to sub-clause  (d) of  clause (ii)  of  sub-section  (1)  of section 49.  The 1994  Agreement must, therefore, be treated as an agreement for registration of GBC as a registered user as contemplated  by Section  49 of  the Act. In other word’s 1994 Agreement is a statutory agreement which is required to be executed under Section 49 of the Act read with Rule 83 of the Rules  for registration  of GBC  as a registered user of the  trade  marks  held  by  Coca  Cola.  It  is  true  that provisions similiar to these contained in 1994 Agreement are also contained in the 1993 Agreement. But that is so because a licence  to use  a trade  mark in  common law  can only be granted subject to certain limitations which are akin to the requirements for  an agreement for registered user under the Act. But, at the same time, the 1993 Agreement is much wider in its  amplitude than  the 1994 Agreement in the sense that the 1993  Agreement includes  various terms  regulating  the exercise of  the right of franchise that has been granted by Coca Cola  to  GBC  in  the  matter  of  the  manufacturing,

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bottling and  selling of  the beverages which provisions are not found in the 1994 Agreement. The 1994 Agreement canot be construed as  wiping  out  the  said  terms  and  conditions regarding exercise  of franchise granted by Coca Cola to GBC as  contained  in  the  1993  Agreement.  In  this  context, reference may  also be  made to  paragraph 25  of  the  1993 Agreement  which   contains  an   express   provisions   for superseding all  prior contracts/agreements  or  commitments either written  or oral.  No similar provision regarding the supersession of  the 1993 Agreement is contained in the 1994 Agreement. We  are, therefore,  of the opinion that the 1994 Agreement cannot  be  construed  as  supersending  the  1993 Agreement and  the learned  single Judge  and  the  Division Bench of the High Court have rightly rejected the contention urged on behalf of GBC that 1993 Agreement was superseded by the 1994 Agreement.      Shri  Shanti   Bhushan,  the   learned  senior  counsel appering for  the appellants,  however, laid emphasis on the alternative  submission   that  the  period  of  notice  for terminating the  agreement as  contained in  paragraph 21 of the 1993  Agreement was  reduced by  mutual consent from one year to  90 days’by  paragraph 7  of the  1994 Agreement. We find it  difficult to accept this contention. It is no doubt true that  pragraph 21  of the  1993 Agreement  enables  the termination period  to  be  reduced  by  mutual  consent  in writing between.Coca  Cola and  GBC. There  is, howecer,  no such agreemdnt  which expressly reduces the daid termination period under  paragraph 21  of the  1993 Agreement.  What is suggested is that paragraph 7 of the 1994 Agreement. What is suggested is that poaragraph 7 of the 1994 Agreement is such an agreement  which, by implication, reduces the termination period prescribed  in paragraph  21 of  the 1993  Agreement. Since we  are  of the view that the nature and scope of  the two agreements  , i.e.,  1993 Agreement  and 1994 Agreement, are not  the same  and that  while the  1993 Agreement is an Agreement for  grant of  licence in  common law and the 1994 Agreement is   executed  as per  the reguirements of the Act and the  Rules for the purpose of  registration of user, GBC as registered user of the trade marks under the Act, clause7 of the 1994 Agreement has to be confined tin its application to that  agreement only and it cannot be construed as having modified the termination period contained in paragraph 21 of the 1993  Agreement. Moreover,  papragraph 21  of  the  1993 Agreement requires  that reduction of the termination period has to  be by mutual consent of both the parties, viz., Coca Cola and  GBC. Mutual  consent postulates  consensus ad idem between  the parties. There is no material on record to show that there  was such  a consensus ad idem between  Coca Cola and GBC  regarding reducing  the termination  period for the notice under  paragraph 21 of the 1993 Agreement. The notice dated January  25, 1995  that was  given by GBC to Coca Cola does not  lend support to the case of the appellants. In the said notice it is stated:      "without prejudice  to  our  contentions      that the   so  called Licence  Agreement      dated September  20, 1993  (herein  ‘the      Livense Agreement’)  stands replaced  by      the Trade  Mark License Agreement and/or      that the  temination  period  under  the      License Agreement   in  any event stands      reduced  to   90  days  ’  please  treat      termination notice  also under clause 21      of the License Agreement."      In the  said notice,  it is not stated that the parties had mutually  agreed to  reduce the  termination period from

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one year to 90 days by the 1994 Agreement. What is stated in the notice  is the contention of GBC that the 1993 Agreement is replaced  by the 1994 Agreement and that in any event the limitation period  had been  reduced to  90 days.  If it was mutualy agreed  by Coca  Cola and  GBC that  the termination period for  notice under  paragraph 21 of the 1993 Agreement is being   reduced  from one  year tp  90 days  by the  1994 Agreement, there  was no  reason  why  GBC  would  not  have mentioned about the said  mutual understanding in the notice dated January  25, 1995.  The fact  that there is no mention about such  mutual understanding in the notice dated January 25, 1995.  and what  is stated  in  the  said  notice  about reduction of  the termination  period of thenotice is by way of contention  of GBC  negatives the case put forward by the appellants that  the termination period for the notice under paragraph 21 of the 1993 Agreement had been reduced from one year to  90 days.  it must, therefore, be held that the 1993 Agreement can  be terminated  only by giving a notice of one year as  required by paragraph 21 of the said agreement. The Question whether  the notice  dated january  25, 1995 can be treated as  a notice  terminating the  1993 Agreement on the expiry of  period of  one year from the date the said notice has not  been examined by the High Court. we do not proposes to go  into the  same and leave it to the High Court to deal with it,  if raised. For the present, we will proceed on the basis that the 1993 Agreement subsists and it does not stand terminated on  the expiry of 90 days from the date of notice dated January 25, 1995.      We may  now  examine  the  submission  of  Shri  Shanti Bhushan that the negative stipulation contained in paragraoh 14 of  the 1993  Agreement, being  in restraint of trade, is void in  view of the provisions of Section 27 of the  Indian Contract Act,  1872. For  that purpose,  it is  necessary to consider whether and, if so, to what extent the law in India differs from trhe common law in England.      Under the  common law  in England  a man is entitled to exercise any  lawful trade or calling as and where he wills. The law  has always regarded jealoulay any interference with trade, even  at the  risk of  interference with  freedom  of contract, as  it is  public policy to opposse all restraints uopn liberty of individual action which are injurious to the interests oif  the State.  A person  may be  restrained from carrying in  his trade by reason of an agreement voluntarilu entered into  by him with that object and in such a case tha general principle  of freedom  of trade must be applied with due regard to the principles that public policy requires for persons of  full age and understanding the utmost freedom to contract. Traditionally  the doctrine  of restraint of trade applied   to covenants whereby an employee undertakes not to compete with  his  employer  after  leaving  the  employer’s service and  covenants by  which a  trader who  has sold his business agrees not thereafter to compete with the purchaser of the  business. The  doctrine is, however, not confined in its  application  to  these  two  categories  but  covenants falling in  these two categories are always aubjected to the test or  reasonableness. Since  the doctrine  of restrint of trade is  based on  public policy  its application  has been influenced by  changing views  of what  is desirable  in the public interest.  The decisions on public policy are subject to change  and development   with the change and development of trade  and the  means of communications and the evolution of enconimic  thought. The general principle once applicable to agreements  in restraint  of trade  has consequently been considerbly modified  by later  decisions in England. In the earliest times  all contracts in restraint of trade, whether

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general  or   partial,  were  void.  The  severity  of  this principle was gradually relaxed, and it became the rule that a partial  restraint might be good if reasonable, although a general restraint  was of  necessity void.  The  distinction between  general  and  partial  restraint  was  subsequently repudiated and  the rule now is that the restraints, whether general or  partial, may  be good if they are reasonable and any restraint  on the freedom of contact must be shown to be reasonably necessary  for the purpose of freedom of trade. A covenant in  restraint of  trade  must  be  reasonable  with reference  to   the  public  policy  and  it  must  also  be reasonably necerssary  for the protection of the interest of the covenantee  and regard  must be  had to the interests of the covenantee  and regard  must be  had to the interests of the covenantor.  Contracts in  restraint of  trade are prima facie void  and the onus of proof is on the party supporting the contract to shoe that the restraint goes no further than is reasonably  necesary top  rpotect  the  interest  of  the covenantee and  if this  onus  is  discharged  the  onus  of showing that the restraint is nevertheless injurieous to the public is on the party attacking the contract. The court has to decide,  as a matter of law, (i) whether a contract is or is not  in restraint  of trader,  and (ii)  whether,  if  in restraint of  trade, it is reasonable. The court takes a far stricter and  less favourable view of covenants entered into between employer  and  employee  than  it  does  of  similar covenants between  vendor and  purchaser or  in  partnership agreements, and  accordingly a restraint may be unreasonable as between  employer and  employee which would be reasonable as between  the vendor  and purchaser  of a business. [See : Halsbury’s Laws of England, 4th ?Edn., Vol. 47, paragraphs 9 to 26;  N.S. Golikari V. Century Spuinning Co., 1967 (2) SCR 378 at  PP. 384_85].  Instead of  segregating two questions, (i) whether  the contract  is  in  restraint  of  trade,(ii) whether, if  so, it  is "reasonable,"  the courts have often fused the  two by  asking whether  the contract is in "undue restraint of  trade" or by a compound finding that it is not satisfied that this contract is really in restraint of trade at all but, if it is, it is reasonable. [See: Esso Petroleum Co. Ltd.  V. Harper’s Garage (Stourport)Ltd., 1968 Ac 269 at p. 331 Lord Wilberforcel].      In India  agreements in  restraint of trade are govrned by Section  27 of  the Indian Contract Act which provides as follows:      "Section 27.  Every agreement  by  which      any one  is restrained from exercising a      lawful profession,  trade or business of      any kind, is to that extent void.      Exception 1.- One who sells the goodwill      of a  business may  agree with the buyer      to refrain  from carrying  on a  similar      business, within specified local limits,      so long  as the  buyer,  or  any  person      deriving title to the goodwill from him,      carries  on  a  like  business  therein:      Provided that  such limits appear to the      Court reasonable,  regard being  had  to      the nature of the business."      The said provision was lifted from Hon.David D. Field’s Draft Code for New York which was based upon the old English doctrine of  restraint of  trade, as  prevailing in  ancient times. The  said provision wa, however, never applied times. The said  provision was, however, never applied in New York. The adoption  of this  provision has been severly criticised by Sir  Frederick Pollock  who has observed that "the law of

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India is  tied down  by the  language of  the section to the principle, now  exploded in England, of a hard and fast rule qualified by  strictly limited exceptions." While construing the provisions  of Section  27 the High Courts in India have held  that  neither  the  test  of  reasonableness  not  the principle that the restraint beoing partial or reasobale are applicable to  a case governed by section 27 of the Contract Act,  unless   it  falls   within  the  exception.  The  Law Commission in its Thirteenth Report has recommended that the provision  should   be  suitably   amended  to   allow  such restrictions  and  all  contracts  in  restraint  or  trade, generaql or partial, as were reasonablke, in the interest of the parties  as well  as  of  the  public.  No  action  has, however,   been    taken   by   Parliament   on   the   said recommendation. [See:  Superintendence Company  of India (P) Ltd. V. Krishan Murgai, 1980 (3) SCR 1278, at pp.1291, 1296- 98, per A.P.Sen J.J.      We do  not propose  to go  into  the  question  whether reasonableness of  restraqint  is  outside  the  purview  of section 27  of the  Contract Act  and for the purpose of the present case  we will  proceed on  the basis that an enquiry into reasonableness  of the  restraint is  not envisaged  by Section 27.  On that  view  instead  of  being  required  to consider two  questions as  in England,  the courts in India have only  to consider  the question whether the contract is or is not in restraint of trade. It is, therefore, necessary to examine  whether the  negative stipulation  contained  in paragraph 14  of the  1993 Agreement  can be  regarded as in restraint of  trade. This  involves the  question,  what  is meant by a contract in restraint of trade?      In Attorney-General of the Commonwealth of Australia v. Adelaids Steamship  Co.Ltd., 1913  Ac 781,  Lord Parker  has said:      "Monopolies and  contracts in  restraint      of trade  have this in common, that they      both, if enforcved, involve a derogation      from the  common law  right in virtue of      which any  member of  the Community  may      exercise  any   trade  or   business  he      pleases and  in such manner as he thinks      best in his own interests." [p.794] Referring to  these observations Lord Reid in Esso Petroleum Co. Ltd. (supra) has said:      "But that  cannot have  been intended to      be  a  definition  :  all  contracts  in      restraint  of   trade  involve   such  a      derogation   but   not   all   contracts      involving   such    a   derogation   are      contracts   in   restraint   of   trade.      Whenever a  man agrees  to do  something      over a  period he thereby puts it wholly      or partly  out of his power to ’exercise      any trade or business he pleases’ during      that  period.   He  may   enter  into  a      contract of service or may agree to give      his exclusive  service to  another: then      during the  period of the contract he is      not entitled to engage in other business      activities.  But   no   one   has   ever      suggested that  such  contracts  are  in      restraint  of   trade  except   in  very      unusual circumstances."[p.294]      In   McEllistrim   v.   Ballymacelligott   co-operative Agricultural and  Dairy Society  Ltd.,  1919  Ac  548,  Lord Finlay  after  referring  to  the  principle  enumerated  in

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Herbert Morris  Ltd v. Saxelby, 1916 (1) Ac 688, that public policy requires  that every  man shall be at liberty to work for himself  and shall  not be at liberty to deprive himself or the  State of  his  labour,  skill  or  talent  by  every contract that  he enters  into, had  stated "This is equally aplicabl;e to  the right  to sell  his goods." Douibting the correctness of  this statement  Lord Reid in Esso POetroleum Co. Ltd. (supra) has said:      "It would  seem  to  mean  that    every      contract by  which a  man (or a company)      agrees to sell his whole output (or even      half of it) for any future period to the      other  party   to  the   contract  is  a      contract in  restraint of  trade because      it restricts  his liberty  to sell as he      pleases, and  is therefore unenforceable      unless his agreement can be justified as      being reasonable.  There must  have been      many ordinary  commercial  contracts  of      that kind  in the  past but  no one  has      ever  suggersted   that  they   were  in      restraint of trade." [p.296]      In Petrfina  (Great Britain)  Ltd. v.  Martin, 1966 ch. 146, Diplock L.J. (as the learned Law Lord then was), in the Court of Appeal, has said:      "A contract in restraint of trade is one      in  which   a  party  (the  convenantor)      agrees  with   any  other   party   (the      convenantee) to  restrict his  lberty in      the future  to carry on trade with other      persons not  parties to  the contract in      such manner as he cjhooses."[p.180]      In  the same case, Lord denning M.R. has      said:      "Every  member   of  the   community  is      entitled  to   carry  on  any  trade  or      business be  chooses and  in such manner      as he  thinks most  desirable in his own      interests, so  long as  he does  nothing      unlawful: with  the consequence that any      contract which  interferes with the free      exercise of  his trade  or business,  by      restricting him  in the  work he  may do      for others, or the arrangements which he      may make  with others,  is a contract in      restraint  or   tyrade.  It  is  invalid      unless it  is reasonable  as between the      parties and  not injurious to the public      interest."      After referring  to these  observations,      Lord Morris  in Esso  Petroleum Co. Ltd.      (supra) has said:      These are  helpful expositions  provided      they are  used reationally  and not  too      literally. Thus  if A  made  a  contract      under which he willingly agreed to serve      B on  reasonable terms  for a  few years      and to give his whole working time to B,      it would  be surprising  inmdeed  if  it      were sought to descrisbe the contract as      being in restaint of trade. In fact such      a  contract  would  likely  be  for  the      advancement of the trade." [p.307]      These  observations   indicate  that   a      stipulation  in   a  contract  which  is

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    intended for  advancement of trade shall      not be regarded as being in restraint of      trade. In Esso Petroleum Co.Ltd. (supra)      the question whether the agreement under      consideration was  a mere  agreement for      the  promotion   of  trade  and  not  an      agreement in  restraint of  it, was thus      answered by Lord Pearce:      Somewhere there  must be  a line between      those contracts  which are  in restraint      of trade  and whose  reasonableness can,      therefore, be  considered by  the courts      and   those   contracts   which   merely      regulate    the     normal    commercial      realations between  the parties and are,      therefore, free from doctrine." [p.327]      "The doctrine does not apply to ordinary      commercial contracts  for the regulation      and  promotion   of  trade   during  the      existence of the contract, provided that      any  prevention   of  work  outside  the      contract, viewed as a whole, is directed      towards the  absorption of  the parties’      servives and  not  their  sterilisation.      Sole agencies are a normal and necessary      incident  of   commerce  and  those  who      desire the  benefits of  a  sole  agency      must deny  themselves the  opportunities      of other agencies."[p.328]      In the  same case,  lord wilberforce has      observed:      "It  is   not   to   be   supposed,   or      encouraged, that  a bare allegation that      a contract  limits a trader’s freedom of      action exposes  a party  suing on  it to      the burden  of justification. There will      always be  certain general categories of      contracts as  to which  it can  be said,      with some degree of certaintly, that the      ’doctrine’ does  or does  not  apply  to      them. Positively, there are likely to be      certain sensitive  areas as to which the      law will  require in every case the test      or reasonableness to be passed : such an      area has  long been and still is that of      contracts between  employer and employee      as  regards   the   period   after   the      employment has  ceased. Negatively,  and      it is  this that concerns us here, there      will be  types of  contract as  to which      the law  should be  prepared to say with      some confidence  that they  do not enter      into the  field of restraint of trade at      all." [p.332]      "How, then,  can such  contracts be defined or at least identified? No  exhaustive test  can be  stated-probably  np precise non-exhaustive  test. But the development of the law does seem to show that judge have been able to dispense from the necessity  of justification  under a public p[olicy test of reasonableness  such contracts or provisions of contracts as, under  contemporary conditions,  may be  found  to  have passed into  the accepted  and normal currency of commercial or contractual or conveyancing relations."[pp.332-33]      There is  a growing  trend to  regulate distribution of goods and  services through  franchise agreements  providing

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for grant  of franchies  by the  franchiser on certain terms and conditions  to the  franchiseee. Such  agreements  often incorp;orate a  conditionm that  the francxhisee  shall  not deal with  competing goods. Such a condition restricting the right of  the franchisee to deal with competing goods is for facilitating the distribution of the goods of the franchiser and it cannot be regarded as in restraint of trade.      If the  negative stipulation  contained in paragraph 14 of the  1993 Agreement  is considered  in the  light of  the observations in  Esso Petroleum Co. Ltd. (supra), it will be found that  the 1993  Agreement is an agreement for grant of franchise by  Coca Cola  to GBC to manufacture, bottle, sell and distribute  the various  beverages for  which the  trade marks were acquired by Coca Cola. The 1993 Agreement is thus a commercial  agreement whereunder  both  the  parties  have undertaken obligations  for promoting the trade in beverages for their  mutual benefit.  The purpose underlying paragraph 14 of  the said  agreement is  to promote  the trade and the negative stipulation  under challenge  seeks to  achieve the said purpose  by requiring  GBC to  wholeheartedlky apply to promoting the  sale of  the products  of Coca /Cola. In that contextr, it  is also  relevant to  mention  that  the  said negative stipulation  operates only  during the  period  the agreement is  in operation because of the express use of the words "during  the subsistenance of this agreement including the period  of one year as contemplated in paragraph 21," in paragraph 14.  Except in  cases where  the contact is wholly one sided, normally the doctrine of restrain of trade is not attracted in cases where therestriction is to operate during the period the contract is substriction is to operate during the period  the contract  is subsisting  and it  applies  in respect  of   a  restriction   which  operates   after   the termination of  the contract.  it has  been so  held by this Court in N.S. Golikari (supra) wherein it has been said:      "The result  of the  above discussion is      that considerations  against restrictive      covenants are  different in  cases where      the restriction  is to  apply during the      period  after  the  termination  of  the      contract than those in cases where it is      to operate  during  the  period  of  the      contracts. Negative  covenants operative      during the  period of  the  contract  of      employment when the employee is bound to      serve  his   employer  exclusively   are      generally not  regarded as  restraint of      trade and  therefore do  not fall  under      Section  27   of  the  Contract  Act.  A      negative  covenant   that  the  employee      would not engage himself employed by any      other master  for whom  he would perform      similar or  substantially similar duties      is not  therefore a  restraint of  trade      unless  the  contract  as  aforesaid  is      unconscionable opr  excessively harsh or      unreasonable or one sided as in the case      of W.H. Milsted and Son Ltd." [p.389]      Similarly, in  Superintendence Company (supra) A.P. Sen J., in his concurring judgement, has said that "the doctrine of restraint  of trade  never applied during the continuance of a  contract of  employment;  it  applies  only  when  the contract comes to an end."(p.1289)      Shri  Shanti   Bhushan   has   submitted   that   these observations  must   be  confined   only  to   contracts  of employment and  that this  principle does not apply to other

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contracts. We are unable to agree. We find no rational basis for confining  this principle  to a  contract for employment and  excluding  its  application  to  other  contracts.  The undelying principle  governing contracxts  in  restraint  of trade is  the same and as a matter of fact the courts take a more restricted  and less  favourable view  in respect  of a covenant entered into between an employer and an employee as compared to  a covenant  between a vendor and a purchaser or partnership  agreements.  We  may  refer  to  the  following observations of Lord Pearce in Esso Petroleum (supra);      "We a  contract only  ties  the  parties      during the  continuance of the contract,      and the  negative ties  are  only  those      which are  incidental and  normal to the      positive  commercial   arrangements   at      which the  contract  aims,  even  though      those ties  exclude  all  dealings  with      others, there  is  no  restrine  and  no      question of  reasonablness arises.  If ,      however, the  contract ties  the trading      activities od  either  party  after  its      question   of   reasonablness   arises."      [p.328]      Since the  negatice stipulation  in paragraph 14 of the 1993 Agreement  is confined in its application to the period of subsistence  of the agreement and the restriction imposed therein  is  operative  only  during  the  period  the  1993 Agreement is subsisting, the said stipulation cannot be held to be  in restraint  of trade  so as  to attract  the bar of section 27 of the Contract Act. We are, therefore, unable to uphold the  contention  of  Shri  Shanti  Bhushan  that  the negative stipulation  contained in  paragraph 14 of the 1993 Agreement, being  in  restraint  of  trade,  is  void  under Section 27 of the Contract Act.      Shri Shanti Bhushan has urged that even if the negative stipulation contained  in paragraph 14 of the 1993 Agreement is found to be valid it is confined in is application to the preceding part of paragraph 14 which reads as under:      "The  Bottlker  recognises  that  is  is      imperative   that   the   Bottler   must      maintain   with    full   mvigion    the      products/beverages for  safeguarding the      interest of  the  consuming  public  and      thus maintaining  the  goodwill  of  the      company."      Laying emphasis  on the  wpord"As such" in the negative stipulation, Shri  Shanti Bhushan  has  contended  that  the negative stipulation  must be read as relatable to this part of paragraph 14 which means that the said stipulation can be invoked only  if GBC  is not  able to maintain the continued supply of the products and beverages to Coca Cola. According to Shri Shanti Bhushan such an eventuality has not arisen in view of  the fact  Coca Cola  has refused  tosupply  to  GBC essence/syrups and/or other materials which are required for preparing the products and beverages. The submission of Shri Shanti Bhushan  is that  in these circumstances the negative stipulation contained  in paragraph  14 cannot be invoked by coca Cola.      Shri T.R.  Andhyarujina,  the  learned  senior  counsel appearing for Coca Cola, has, on the other hand, pointed out that in  paragraph 14 the part commencing with the words "As such" is  independent of  the preceding sub-paragraph and is not a  part of the preceding sub-paragraph referred to above and that  the negative stipulation must be read with all the earlier sub-paragraphs  contained in  paragraph 14  and  its

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application  cannot   be  confined   to  the   sub-paragraph immediately preceding  the wqord  "As such"  as contended by Shri shanti  Bhushan. We  are in  agreement  with  the  said submission  of   Shri  andhyarujina.  In  our  opinion,  the negative stipulation  contained at  the end  of paragraph 14 must be  read as  applicable to  all the  sub-oparagraphs of paragrpah 14  preceding the  said stipulation  and, if it is thus read.  it is  apparent that the purpose of the negative stipulation in paragraph 14 is that GBC will work vigorously and deligently  to promoite  and solicit  the  sale  of  the products/beverages produced  under the  trade marks  of Coca Cola as  mentioned in  the first  sub-paragraph of paragraph 14. This  would not  be possible if GBC were to manufacture, bottle, sell,  deal or  otherwqise  be  concerned  with  the products, beverages or any other brands or trade marks/trade names.      We are,  therefore, unable  to agree  with Shri  Shanti Bhushan that the negative stipulation contained in paragraph 14  of   the  1‘993   Agreement  must  be  confined  in  its application to  the immediately  preceding sub-paragraph  of paragraph 14 of the 1993 Agreement.      Shri Shanti  Bhushan has next contended that clause (b) of paragraph  19 of  the 1993  Agreement  wqhich  imposes  a restraint in  the matter of transfer of the shares of GBC is void inasmuch  as transfer  of shares of a company registere under the  Companie\s Act  is governed  by Section 82 of the said right  to transfer the shares of a company. Shri Shanti Bhushan has placed reliance on the decision of this Court in V.B. Rangaraj  v. V.B.  Gopalakrishnan &  Ors., 1992 (1) SCC 160, and has submitted that if clause (b) of paragraph 19 is held to  be void then Coca Cola cannot invoke the concluding part  of   paragraph  19  and  dis-continue  the  supply  of essences/syrup and/or  other materials to GBC while the 1993 Agreement susbsiste. The relevant part of paragraph 19 is as under:      "Paragraph 19. Upon the happening of any      one or  more of the folloowing events in      additon to  all have the right to cancel      and terminate  this Agreement  forthwith      by written notice to the Bottler.      (a) x        x           x             x      (b)  Should  Bottler  be  other  than  a      natural person, no charge shall be m,ade      in its  structure nor shall any transfer      be made  of any  of its  stock, share or      interest or  other indicia  of ownership      which  would   result  in  an  effective      transfer of  control without  the  prior      express written  consent of the Company.      The  Company   reserves  the   right  to      terminate this  Agreement  at  eill  for      failure to  notify it of suchj change or      transfer.      (c) x               x                  x      (d) x               x                  x      (e) x               x                 x      Upon the happening of any one or more of      the foregoing  events, the Company shall      also  have   the  right  to  discontinue      suplying the  Bottler with essence/syrup      and/or other  materials for  such length      of time  as the  Company may in its sole      judgm,ent   deem    necessaary   without      thereby cancelling  or  prejudicing  the      Company’s right  to cancel  or terminate

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    the AGReement  for the said cause or for      any one or more other cause or causes."      Clause (b)  does not  appear to be very happily worded. Since the  parties to  the 1993 Agreement were Coca Cola and GBC only and the shareholders of GBC were not parties to the agreement,  it   cannot  have   any  binding  force  on  the shareholders of  GBC. Clause  (b) of  paragraph  19  cannot, therefore, be  constructed as  placing any  restraint on the right of  the shareholders  to transfer their shares. It can only  be  construed  to  mean  that  in  the  event  of  the shareholders of  GBC. Clause  (b) of  paragraph  19  cannot, therefore, be  construed as  placing any  restraint  on  the right of  the shareholders  to transfer their shares. It can only  be   construed  to  mean  that  in  the  even  of  the shareholders of  GBC  transferring  their  shares  and  such transfer resulting  in an  effective transfer  of control of GBC, Coca  Cola has  a right  to terminate the agreement and even without  terminating the  agreement Coca  Cola has  the additional  right   to  dis-continue   supplying  GBC   with essence/syrup and/or other materials for such length of time as Coca Cola may in its sole judgment deem necessary without thereby cancelling or pejudicing Coca Cola’s right to cancel or terminate the Agreement for the said cause or for any one or more  other cause or causes. In other words, in the event of effective  transfer of  control of  GBC as  a  result  of transfer of shares by the shareholders, apart from its right to cancel  the agreement  Coca Cola has also been goiven the right to  cancel the agreement Coca Cola has also been given the right  to  dis-continue  the  supply  of  essences/syrup and/or other  materials to  GBC.  This  clause  governs  the relationship between  Coca Cola  and GBC  inter  se  and  it cannot be  constued as  placing a  restraint on the right of the shareholders  to transfer  their shares.  V.B.  Rangaraj (Supra) on  which reliance  has been  placed by  Shri Shanti Bhushan has, therefore, nop application.      Shri Shanti  Bhushan has  next urged  that in the facts and circumstances  of  the  case  the  High  Court  was  not justified, in law, in issuing an interim injuction enforcing the negative  stipulation contained  in paragraph  14 of the 1993 Agreement.  The submission  of Shri  Shanti Bhushan  is that as  a result  of the said injuction and dis-continuance by Coca  Cola of  the supply  of essence/syrup  and/or other materials by exercising oits right under paragraph 19 of the 1993 Agreement,  the plants  of GBC  at Ahmedabad and Rajkot would remain  idle and  a large  number of  workers who  are employed in  those plants  would be  rendered unemployed and GBC would  be saddled  with heavy liabilities leading to its closure and  therby  resulting  in  irreparable  loss  which cannot be  compenbsated in  the event  of suit filed by Coca Cola being dismissed. Shri Shanti Bhushan has also submitted the on  the other  hand Coca  Cola would not suffer any loss because it  has already  made alternative  arrangements  for supply of  its products  in  areas  covered    by  both  the Agreements between  GBC and Coca Cola by arranging supply of their products  from other  licensees  in  the  neighbouring areas. Shri  Shanti  Bhushan  has  placed  reliance  on  the decisions of  Gujarat high Court in M/s Lalbhai Dalpatbhai & Co. v.  Chittaranjan Chandulal Pandya, AIR 1966 Guj. 189,and that of  Delhi High  Court in  Modern food  Industries India Ltd. v.  M/s Shri  Krishna Bottlers(p)  Ltd, AIR  1984 Delhi 119, as  well as  on the  observations of  Lord  Diplock  in Amrican cynamid Co. v. Ethicon Ltd., 1975 Ac 396.      In the  matter of  grant of injuction, the p[ractice in Enland is  that where  a contract  is negative in nature, or contains an  express nagative  stipulation, breach of it may

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be restrained by injuction and injuction is normally granted as a matter of course, even though the redy is equitable and thus in principle a discretionary one and a defendant cannot resist an  injuction simply on the ground that observance of the contract is burdensome to him and its breach would cause little or  no prejudice  to the plaintiff and that breach of an express  negative  stipulation  can  be  restrained  even though the  plaintiff cannot show that the breach will cause him any  loss. [See : Chitty on Contracts, 27th Edn., Vol.1, General Principles,  para 27-040  at p.1310; Halsbury’s laws of England, 4th Edn. Vol. 24, para 992]. In India section 42 of  the   specific  Relief   Act,   1963   prescribes   that notwithstanding anything  contained in  cluse (e) of Section 41, where  a contract  copmptises an  affirmative agreement, express  or   implied,  not   to  do   a  certain  act,  the circumstances that  the court  is unable  to compel specific performance of the affirmative agreeement shall not preclude it from  granting  an  injuction  to  perform  the  negative agreement. This  is subject to the proviso that the plantiff has not  failed to  perform the  contract so  far as  it  is binding on him. The Court is, however, not bound to grant an injuction in  every case  and  an  injuction  to  enforce  a negative covenant  would be  refused if  it would indirectly compel the  employee either  to idleness  or  to  serve  the employer. [See:  Ethrman v.  Bartholomew. (1927)  W.N.  233; N.S.Golikari (supra) at p. 389].      The grant  of an  interlocutory  injuction  during  the perdency of  legal proceedings  is a  matter  requiring  the exercise of  discretion of  the court.  While exercising the descretion the  court. While  exercising the  discretion the court  applies   the  following  tests  -  (i)  whether  the plaintiff has  a prima  facie case; (ii) whether the balance of convenience  is in  favour of  the plaintiff;  and  (iii) whether the  pliantiff would suffer an irreparable injury if his prayer  for interlocutory  injuction is  disallowed. The decision whether  or not to grant an onterlocutory injuction has to  be taken  at a time when the existence of the leagal right assailed  by the  plaintiff and  its alleged violation are both  contested and  uncertain and its alleged violation are both  contested and  uncertain and remain uncertain till they are established at the trial on evidence. Relief by way of interlocutory  injuction is  granted to mitigate the risk of injustice  to the plaintiff during the period before that uncertainty  could   be  resolved.   The   object   of   the interlocutory injuction  is to protect the plaintiff against injury by  violation of  his right for which he could not be adequately compensated  in damages recoverable in the action if the uncertainty were resolved in his favour at the trial. The need  for such  protection has,  however, to  be  weghed against the  corresponding  need  of  the  defendant  to  be protected against  injury resulting  from  his  having  been prevented from  exercisising his  own legal rights for which he could not be adequately compensated. The court must weigh one need against another and determine where the ’balance of convenience’ lies. [see:Wander Ltd.& Anr. v,. Antox India P. Ltd., 1990  (suoo) Scc  727 at  pp.  731-32].  In  order  to protect  the  defendent  whiloe  granting  an  interlocutory injuction in  his favour the Court can require the plaintiff to furnish  an undertaking  so that  the  defendent  can  be adequately compensated  if the  uncertainty were resolved in his favour at the trial.      Shri Shanti Bhushan has contended that Coca Cola can be adequately compensated for the loss caused to it by award of damages in  the event  of it succeeding in the suit and that if the  impugned injuction  granted by the High Court is not

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reversed the  loss suffered  by GBC would be irreparable and incalculable inasmuch  as the plants at Ahmedabad and Rajkot would remain  idle and  large number  of workmen employed in those plants would be rendered unemployed and it may lead to closere of  the undertaking  of GBC.  Shri Nariman  and Shri Andhyarujina, on  the other  hand, have submitted that Pepsi in taking  over  GBC,  took  a  calculated  commercial  risk knowing  fully   well  the   effect  of  negative  convenant contained in  the 1993  Agreement and  that if  GBC  is  not restrained from manufacturing and selling Pepsi products for the stipulated  period of  one year,  the goodwill  and  the market share  which Coca Cola has for its own products would be effectively  destroyed by  a rival which has captured GBC and that  damages would  not be an adequate compensation for the injury which would be irreparable and that in respect of the loss that may be sustained by it, GBC would be protected by the undertaking that is required to be given by Coca Cola under Rule  148 of  the Bombay  High Court  (Original  Side) Rules, 1980.      We are  inclined to  agree with the submission of Shrki nariman and Shri Andhyarujina. Having regard to the negative covenant contained  in paragraph  14 of  the 1993 Agrreement which is  subsisting, Coca  Cola has  made out a prima facie case   for grant  of an  injuction. As regards the other two requirements for  grant of  interlocutory  injuction,  viz., balance of  convenience and orreparable injury, we find that as a  result of the transfer of shares of GBC and respondent No.7 in favour of the appellants Nos, 2 5, the plants of GBC at Ahmedabad  and Rajkot are now under the control of Pepsi. The 1993 Agreements were entered into by Coca Cola to ensure that the plants of GBC at Ahmedabad and Rajkot are available for manufacture  of the  beverages bearing  the trade  marks that were acquired by Coca Cola. The negative stipulation in p[aragraph 14  was inserted  in order  to preclude  the said plants being  used for  manufacture of  products  of  opther manufacturers during  the period  the 1993  Agreements  were subsisting. Pepsi  by taking  control  over  GBC  sought  to achievce  a   dual  purpose,  viz.,  reduce  the  production capacity of  beverage bearing  the trade  marks held by Coca Cola by  denying use  of the  plants of GBC at Ahmedabad and Rajkot for manufacture of those products and to increase the production capacity  of Pepsi  products by  making available these plants  for manufacture of Pepsi products. As a result of the  interim injuction  granted by the High Court the two plants of  GBC cannot  be  used  for  manufacture  of  Pepsi products till  January 25,  1996 and  the effort of Pepsi to gain  an   advantage  over   Coca  Cola   by  reducing   the availability of  products of  Coca Cola  and increasing  the availability of  Pepsi products  in the areas covered by the 1993 Agreement  has been  frustrated  to  a  certain  extent inasmuch as  the  increase  in  the  availability  of  Pepsi products has been prevented. In the absence of such an order Pepsi would  have been  free to  use the  plants of  GBC  at Ahmedabad and  Rajkot for the manufacture of their products. This wqouild have resulted in reduction of the share of Coca Cola in  the Beverages  m,aket and  the  resultant  loss  in goodwill and  profits could not be adequately compensated by damages. In  so far  as loss  that may be caused to GBC as a result of  grant of  interim injuction,  we are  of the view that the  loss that  may be sustained by GBC can be assessed and GBC  can be compensated by award of damages which can be recovered from  coca Cola  in view  of the  undertaking that Coca Cola  is required  to give under Rule 148 of the Bombay High Court  (Original Side)  Rules, 1980.  It has  not  been suggested that  Coca Cola do not have the financial capacity

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to pay the amount that is found payable.      The interim  injuction granted  by the  High Court  has been assailed  by the  appellants on  the ground  that as  a result of  refusal by  Coca Cola to continue with the supply of essence/syrup and/or materials the bottling plants of GBC at Ahmedabad and Rajkot would remain idle and a large number of workmen  who were  employed in  the said  plants would be rendered unemployed.  We cannot  lose sight of the fact that this complaint  is being  made by Pepsi through the mouth of the appellants.  it is difficult to appreciate how Pepsi can ask coca  Cola to  Part  with  oits  trade  secrets  to  its business rival by supplying the essence.syrup etc. for which Coca Cola holds the trade marks to GBC which  is under effective control of Pepsi. Pepsi took a deliberate  decision  yto  take  over  GBCX  with  the  full knowledge of the terms of the 1993 Agreement. It did so with a view  to paralyse  the operations  of Coca  Cola  in  that region and  promote its  products .  In view of the negative stipulation contained  in paragraph 14 of the 1993 Agreement which has  been enforced  by the  High Court,  Pepsi has not succeeded in  this effort  and it  cannot assail the interim injuction granted  by the  High Court by invoking the plight of the  workmen who  are employed  in the bottling plants of GBC.      In this  context, it  would be relevant to mention that in the  instant case  GBCX had approached the High Court for the injuction  order, granted earlier, to be vacanted. UNder order 39 of the Code of Civil Procedure, jurisdiction of the Court  to  interfere  with  an  order  of  interlocutory  or temporary injuction  is purely equitable and, therefore, the Court,  on   being  approached,   will,  apart   from  other considerations, also  look  to  the  conduct  of  the  party invoking the  jurisdiction of  the Court,  and may refuse to interfere unless  his conduct was free from blame. Since the relkief is  sholly equitable  in nature,  the party invoking the jurisdictionb of the court has tro show that he himselff was not at fault and that he himself was not responsible for bringing about the state of things complained of and that he was not  unfair or  inequitable in  his  dealings  with  the partyh against  whom he  was  seeking  relief.  His  conduct should be  fair and  honest. These considerations will arise not only  in respect  of the  person who  seeks an  order of injuction under  order 39  Rule 1  or Rule  2 of the Code of Civil  Procedure,   but  also   in  respect   of  the  party approaching  the   Court  for  vocating  the  ad-interim  or temporary injuction  order already  granted in  the  pending suit or proceedings.      Analysing the  conduct of  the GBC  in the light of the above principles,  it will be seen that GBC, who was a party to the  1993 Agreement, has not acted in conformity with the terns set  out in  the said  agreement. It was itself, Prima facie, resposible  for the breach of the agreement, as would be evidenmt  from the  facts set  out earlier.  neither  the consent of  Coca Cola was obtained for transfer of shares of GBC not  Coca Cola  informed of the names of persons to whom the shares  were proposed  to  be  transferred.  coca  Cola, therefore, had  the right  to terminate the agreement but it did not do so. On the contrary, GBC itself issued the notice for terminating the agreements by giving three months notice      It is  contended by  Shri nariman  And, in our opinion, rightly, that  the GBC,  having itself acted in violation of the terms  of agreement  and ahaving  breached the contract, cannot legally  claim that the order or injuction be vocated particularly as  th GBC  itself is  primarily reponsible for having brought  about the  state of  things complained of by

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it. Since GBC has acted in an unfair and inequitable m,anner in its  dealings with  Coca Cola,  there was  hardly and any occasion to  vacant the injuction order and the order passed by the Bombay High Court cannot be interferred with not even on  the   ground  of   closure  of  factory,  as  the  party responsible, prima  facie, for  breach of contract cannot be permitted to raise this grievance.      Shri Shanti  bhushan has  lastly urged that the interim injuction granted  by the  High Court  is in very wide terms because not  only GBC but also those to whom the shares have been sold  and also subsewquent trnasferees, their servants, agents nominees, employees, subsidiary companies. controlled companies. affiliates  or associte  companies or  any person acting for  and on  their  behalfd  are  restrained  by  the interim injuction  from using  the plants  of GBC.  It is no doubt true  that the  interim injuction  is widely worded to cover the  persons aforementioned  but in  its operation the order only  restrains them  from using  the plants of GBC at Ahmedabad anbd RAjkot for manufacturing, bottling or selling or dealing  with or concerning in any manner whatsoever with the beverages  of any  person till  January  25,  1996,  the expiry of  the period  of one  year from  the date of notice dated January  25,  1995.  The  interim  injuction  is  thus confined to the use of the plants at Ahmedabad and Rajkot by any of  these persons  and it  is  in  consonance  with  the negative  stipulation  contained  in  paragraph  14  of  the agreement dated September 20, 1993.      For the  reasons aforementioned  we  do  not  find  any infirmity in  the impugned  order of  the high  Court  dated March 31,  1995 granting  an interim  injuction in  terms of prayers (a)  (ii) and  (a) (iii)  of the Notice of motion as amended. The  appeals, therefore,  fail and  are accordingly dismissed. No costs.