IN THE HIGH COJRT 01' JUDICATURE AT BOMI3AY

O.O.C.J.
APPEAL 183 01' 1995
IN
NOTICE OF ;,',OTIQ\! NO. 316 OF 1995
IN
SUIT NO. 400 O!' 1995
i'il/s Gujarat Bottling Company Ltd. ,
a Company incorporated under the
Companies Act 1956 and having its
registered office at Ring Road,
Rakhial Ahmedabad 380 023, State of
Gujarat and at Bhogilal and Co. ,
310, Perin street,
B o,]lba y ,'DO 001
vis
1. The Coca Cola Company, a
Corporation organised and existing
under the Laws of the state of
Delaware and having its offices
at 1, Coca Cola Plaza, N.W.Atlanta,
30313, U.S.A.
2. ;.fir Pinakin K. Shah cia Bhogilal.
and Co., 310, Perin Nariman street,
''3omoay-400 001
3. Chauhan.
residing at 3rp9, Shanti Niketan,
.. Appellants
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New Delhi, also at Shanti Kunj,
47, Tejpal Marg, Vile Parle (E),
8ombay-400 057
4. ,':\r Prakash Chauhan,
residing at Shanti Kunj, 47,
Tejpal Marg, Vile Parle Coast),
:Jombay-400 057
5. PEPSI FOODS LID., a Company
incorporated under the Companies
Act 1956 and having its offices
at 21, Guru Road, ]ombay-50
6. PEPSICO n:c., having its principal
offices at 700 Hoad,
Purchase, York 10577-1444,
u. S .A.
7. Aradhana Soft Co.,
having futs address at 16, Aradhana,
R.K.Puram, sector 13, Ring Road,
:'-Zew De 1 hi
8. Aradhana Snack Co"
having its address as 16, Aradhana,
R.K.Puram, Sector 13, Ring Road,
I,!ew 'Jelhi
9. Pepsico India
having its address as Pepsi
Ltd., Off Sion Tr0mbay Road, Chembur,
Jombay-400 088
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la. Aradhana Fruit and Food Products
Co., having its address as 16,
Aradhana, R.K.Puram, Sector 13,
Ring Road, New Delhi
11. Ahmedabad Advertising and
l:.arketinc, Consultants Ltd., a
company incorporated under the
provisions of the Companies Act,
1956, having its office at Ring
Hoad, Rakhial, Ahmedabad 380 023
state of Gujarat .. Respondents
Shri F..A.Kapadia with Shri :-lemant Sahai and
Shri S.S.Kalantri i/b r.l/s Federal and l:\ash:nikant
for appellants.
Shri with Shri V.V.Tulzapurkar,
Shri Virag V.Tulzapurkar, shri Aspi Chinoy,
Shri :l.J.:\iadon, Smt P.S .Shroff and Shri H.srinivasan
i/b :A/s Amarchand and Mangaldas and Hiralal Shroff
and Co. for respondent No.l.
shri D.Shroff with Shri 3.R.Joshi and shri F.D.
sorabjee i/b i1/s 'lhaishankar Kanga and Girdharlal
for respondent 110.2.
Shri C.L.Sareen ilb Ms Rita D'Souza for respondent
>1os.3 and 4.
Shri S.H.Doctor with Shri P.E.Devitre and Shri :l.J.
Khambatta i/b Shri Srikant Doijode for respondent
[,105.3 and 6.
shri 2.?Jharucha with Shri i/b
Shri srikant Doijode for :':os.7 to 11.
APPEAL NO.191 OF 1995
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NOTICe OF ;mHO:', :<e. 316 0;;: 1995
SUIT .:0.400 OF 1995
The Coca Cola Company,
a corporation organised and existing
under the laws of the state of
and having its offices at 1, Coca Cola
Plaza, N.W. Atlanta, Georgia 30313,
U.:3 .A. . .. A.Jpe.llants
v/s
1. Gujarat 30ttling Company Ltd.,
a Company incorporated under the
,\ct 1956 and having its
registered 0ffice at Rio]
Rakhial, Ahmedabad 380 023, State
of Gujarat and at shogilal l Co. ,
310, Perin street,
30m'Jay 400 001
2. :vlr Pinakin K. Shah
C/o Jhogilal and Co., 310, perin
:rariman street, 30m')ay-400 001
3. Ramesh Chauhan,
residin; at 3/9, shanti
;\Ie'N Del:'1i, also at Shanti Kunj,
47, Tejpal ;,',arg, Vile ParIe (East),
Jomba y-400 057

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4. Mr Pralcash Chauhan,
residing at Shanti Kunj, 47, Tejpal
:Aarg, Vile Parle (East), Bombay-57
5. Pepsi Ltd.,
a Company incorporated under the
Companies Act, 1956, and having its
registered office at Plot No.2A,
sector 2GA, Chandigarh 1S0 002 and
its office and plant at Off.
S ion Tromba y F:oad, Chembur,
6. PepsiCo Inc.
having its offices at
700, Anderson iiill
New York 10577-14444, U.S.A.,
7. Aradhana Soft ::Jr inks Co.
having its address as 16, Aradhana,
R.K.?uran, Sector 13, Ring Road,
"'ew Jelhi
8. Aradhana Snack Foods Co.,
having its address as 16, Aradhana,
R.K.?oram, Sector 13, Ring Road,
New 0elhi
9. PepsiCo India i!0lding,
havi:'):.J its address as clo Pei)si
Foods Ltd., Off. Sion Trombay R0ad,
Chembur, Jombay-400 088
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10. Aradhana Fruit and Food Products Co.,
having its address as 16, Aradhana,
Sector 13, Ring Road,
ne';",; Jelh i
11.' Ahmedabad Advertising anJ ,,\arketinq
Consultants Ltd., a Company
incorporated under the provisions
of the Companies Act, 1956, having
its oHice at;'{ing .'\oad,
AhnK'dabad 380 023, state)f (3ujarat ... Resp'Jnden-:s
Shri with Shri Virendra
Shri Virag V.Tulzapurkar, Shri Aspi Chinoy, Shri D.D.
,("don, Snlt P.S.Shroff and Shri H.Srinivasan i/b
:.\Is Amarch3.nci and ;'\anga1das and '\ira1a1 Shroff and Co.
for appellants.
S!1ri K.A.Kapadia with Hemant Sahai and S.3.
i/b.'t/s Fede':'al and P.asll'ni.kant for resp:;ndent
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Shri D.Shroff with Shri and Shri F.D.
Sorabjee i/b . .:Is 8haishankar Kanqa and Girdhar1a1
for res pondent:'Jo. 2. - .
Shri C.L.Sareen i/b !v\S Rita D'Souza for respondent
lios.3 and 4.
Shri S.H.Doctor with Shri F.E.Devitre and Shri D.J.
Khambatta i/b Shri Srikant Doijode for respondent
\,os.5 and 6.
Shri E.9.8harucha with Shri S.J.yathawala i/b
Shri Srikant Doijode for respondent Nos.7 to 11.
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1. These two cross appeals are directed
against ad-interim order dated February 22, 1995
passed by. learned Single Judge on Notice of M o ~ i o n
No.316 of 1995 in Suit No.400 of 1995. ay detailed
speaking order, the learned Single Judge granted
ad-interim relief in terms of prayer (a) (ii) of
Motice of [ .. totion. The learned Judge observed that
detail scrutiny is necessitated at the hearing of
the ."lotion. l3eii,g aggrieved by ad-i:1terimorder,
defendant i)0.1 has preferred appeal ::0.183 of 1995
while the plaintiffs have preferred appeal No.191
of 1995.
The parties through their counsel
submitted that as decision in the appeals would
have impact on the :lotion pending bei"ore the learned
Single Judge, it is desirable that Notice of ~ o t i o n
,:0.316 of 1995 should be taken up on board and
dispose of finally by this Bench,so as to avoid
one more ap,)eal. The suggestion made by the counsel
was extremely reasonable and by consent of parties,
the :.lotion was taken up on board and called out for
hearing. ay this judgment, we are disposing of the
[/lotion finally. Shri Andhyarujina, learned counsel
appearing on behalf of the plaintiffs, sought

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amendment of prayer (a) (Hi) of the Notice of
Motion in terms cif draft handed in and marked 'Y' .
Though the prayer for amendment of the ',\'Jti0n was
resisted by the respondents - defendants, the prayer
was granted.
2. The controversy in this litigation
reveals the cut-throat competi ti:m between two
multi-national giants carrying on business in
beverages. The plaintiffs- Coca Cola Company
is a public corporation incorporated under the
laws of state of Delaware, C.S.A. and is t largest
soft drink co::r:any in the world, with the operations
in 195 countries. The Company is engaged in the
manufacture arId sale 'Jf concentrates and beverage
bases which are used in the preparation of certa in
non-alcoholic beverages and which beverages are
available for sale in bottles and other containers.
The defendant No.1 - Gujatat Bottling Company Ltd
is an authorised bottler and owns two plants at
Ahmedabad and Rajkot in the state of Gujarat.
The plants have licence to prepare, package,
and distribute finished beverages under the trade
marks 'Thumps UP', 'Limca', 'Gold spot', 'Maaza'
etc. 7he defendant - Shri Pinakin Shah
and his family members and business associates are
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the majority shareholders of defendant No.l Company
and own and con trol approxima tel y 78% of the shares.
The defendant Nos.3 and 4 - Ramesh Chauhan and
Prakash Chauhan hold the balance shares of 22%,
of the defendant No.l Company. The defendant
Nos.3 and 4 were engaged in the manufacture and
sale of carbonated bev2rages under the trade marks
'Thumps UP', 'Limca', 'Citra', ';:',aaza', etc.
On November 12, 1093 the defendant and 4
sold the business which inter alia com;rised of
licensing of the trade rnarks and preparation of
the beverages bases, concentrates, focmulations
and intellectual property rights as as business
of marketin'? in the beverage bases, t:) Coca Cola
Company. The defendant Nos.3 and 4 in pursuance
of sale, entered into various agreement-s for
a5,siqnrnent of trade marks, transfer of know-how,
assignment of goodwill/confidentiality on receipt
of substantial consideration. In of the
said transaction, Coca Cola b=came the
owner of the trade marks also.
Prior to the sale of busine5s alongwith
the trade marks, the defendant Nos.3 and 4 had
operated the business through various franchises!
licensed bottlers and one of such bottler was
defendant :;').1. After the business Vias taken over
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by Coca Cola C0mpany, the defendant 'Io.l I',as
desirous of continuing the business relationship
and entered into two licence agreements
with the plaintiff C0mpany. The defendant No.l
agreed to cancel the existing franchise agreements
with the Company controlled by defendant Nos.3
and 4 and the period of the new agreements was
the balance ceriod left under the original agreements.
The agreements were entered on September 20,

the tw'J agre2ments, plaintiff
C0;npany permitted and authorised defendant :D.l
to bottle, sale and c:istribute the beveraqes lcn0wn
and sold under the trade iJarks whic:! tile plaintiff
Company had purc:,ased fr0m defendant :.i:ls.3 and tl .
Clause 6(a) of the agreement provided that defendant
i:0.1 un:::iertekes to buy only from the plaintiff
COdlpany or approved by the :::;8m;:>any,
essences beverage bases an:::i other ingredients
of the quality, standard specifications as laid
:b.:n by the plaintiff Company. fjy clause 8(a),
t:le defend&:lt "!o.l Co:npany PE . '-'.ca 3 cl agreed
not to bottle, sell, deal in or
otherwise ce concerned with any rroduct is
likely to be confused or used in unfair competition.
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Clause 11 sets out that the defendant No.1
rec0gnises the. plaintiff C0mpany's o\,mership of
the trade marks and will only use the said trade
marks in the manner lawfully permitted. Clause 14
inter alia provides that the defendant No.l Company
will not manufacture, bottle, sell, deal or
otherwise be c'Jncet'ned with the products, beverages
or any other brands or trade marks during the
subsistence of the agreement including the period
of one year's notice as contemplated in paragraph 21.
The agreement was to ref'lain in operation till
November 15, 199B unless earlier termination takes
place as prescribed under clause 20. Clause 19
inter alia provides that the plaintiff company
shall have right to cancel and terminate the
agreement by written notice to the bottler if
(a) the defendant No.1 company failS
to perform or comply with any terms
and conditions of the agreement;
(b) the defendant No.l C0mpany'changes
its structure or transfer the stock,
share 0r interest 0f ownership which
would result effective transfer
of control without a prior express
written consent o'f the Company;
(c) the discontinuance of tile bottling
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by d,efandant :,0.1 Company f':H" any
reason whatsoever for a peried of
30 consecutive days;
(d) the insolvency of defendant No.1
COClpany; and
(e) the loss of defendant company's
management or of bottling
business, by of any law,
decree, order, rllle,
ordinance or any cause.
Clause 19 further provides that upon
happening of anyone or more of t:1e fo;;e"oin9 events,
the plaintiff Company shall have right to discontinue
supply of essence, syrup ani/or materials
for such L-ength of time as the c:r:.pany may in its
sole judgment deem necessary, without cancelling
or prejudicing the COGlpany's rig:-:t to cancel or
terminate the aC;reem('nt. clause 21 reads as follows :-
";lotwithstanding anyt:-.ing conta ined in
this agreement and prejudice
to the of ter::>ination of the
:.ompany/ c"Jntc.i:;2:j. in clause L:(a) , 6) le,
19, 20 and 23, this aQree::>2nt can be
terminated by eith'r side on giving one
year's written notice. i-lo\'Jever, the
termination period be reduced by
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mutual Clnscnt in writing between the
Company and the Bottler."
4. On April 30, 1994, the plaintiff Conlpany
entered into another agreement.
agreement sets out that the
plaintiff Company hal acquired the trade marks
by virtue of deeds of assignment entered into with
defendant and 6 The plaintiff Company and
defendant \0.1 !lave preparation,
packaging and sale of the goods by defendant No.l
and for the use of tlle trade mar!cs. The plaintiff
Company i,')lds n) eq'_;ity interest in defendant t!o.l
and to enter into an agreemont for the use
of trade on a purely contractual basis.
Clause 1 of this agreement sets out that the
;::>laintiff Company grants to defendant n'J.1 a non-
excluSive licence to use the trade marks in relation
to goods prepared by defendant No.1 from concentrate
and/or syrup supplied by the plaintiff Company.
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Clause 2. sets out that the plaintiff Company and
defendant ;.)0.1 shall an application to the
hec,istrar ')f Trademarks under the Trade and '.\erchandise
Act 1958 to procure the registration of
defendant No.l as a registered user of the trademarks.
Clause 7 ;Jrovides that the shall continue
in force with Jut limmt of period but can be terminated
a t any t be by either party by giving 90 days' notice
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in writing or by mutual consent. The clause
furt.her pr.ovides that in the event of either
party committinc:.! a breach of any other provisiOl s
of the agreement, then it shall be lawful for the
other party to terminate the by giving
notice of 30 days. Clause B sets that the
defendant No.l will execute any document that
the plaintiff Company may request for the purpose
of applying for or cancellation of the
entry of defendant as re=istered user of the
trademarks.
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The defendant >;0.1 Co;npany sought
the assistance of the plaintiff COGpany for
organising the business plans and for upgradation
of the plants at Ahrnedabad and The
upgradation was done with the assistance and
supervision of qualified technical oersonnel of
the plaintiff company. The plaintiff company
advised defendant No.l Company in 1994
that as the of the two plants was
nearing completion, it is necessary for defendant
conpany to provide for additional investments
in n1a,rketing ar-rangemsnts t purchase of crates and
other equipments and trucks etc. 7Me defendant
company Vias reluctant to make further investment
and defendant [-10.2 in pursuance of the provisions
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of-clause 19{b) of the first agreement (hereinafter
recerred to as 1993 agreement) requested the
plaintiff Company to give consent in advance for
transfer of interest of defendant No.2 in defendant
Company. The plaintiffs declined to give
advance consent without being aware as to who is
the pL'ospect iV0 purchaser. The pla intiffs inf '')rmed
the defendant >!os.l and 2 that the transfer can be
permitted pr:Jvided the Company does n')t lce
controlling power or management in faVOUL' of an
rhe Company subsequently
realised that defendant No.2 had negotiated with
one Oeepak Sanghvi for transfer of rights in relation
to both the plants by sale of shares. The negotiation
betV'12cn defendant NIJ.L and 5anghvi did not progress.
The plaintiff Company then became aware
that defendant ;\Jos.l and 2l'l propose to transfer the
control and management of defendant No.l Company in
favour )f defendant Nos.S and 6. rhe defendant No.S
is a domestic subsidiary company of defendant No.6
and defendant is Pepsico Inc. and is the
cO'lIpetitor and trade rival of the plaintiff company.
The defsndant ;'0.6 is a fXEOign ;:oClpany and through
defendant sells and carbonated
beverages under the trademark 'Pepsi'. The defendant
is also a mul ti-naticmal giant 2nd the battle
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between Coca Cola and l?epsi is all over
the world for over several years.
Thc plaintiff company learnt during
the pendency of thc Motion before the learned
Single Judge that in an alleged meeting held on
January 20, 1995, the shareholding of defendant
No.1 was transferred to defendant Nos.7 to 10,
which arc concerns closely associated and connected
or affiliated or subsidiaries of defendant Nos.5
and 6. The plaintif fs realised thc;t the transfer
effect2d was in v:blation of the express negative
covenants contained in 1993 The
realised that breach of the negative
covenants contained in 1993 was committed
by defendant Nos.2 *0 11, acting in concert with
one another. The plaintiffs also realised that
defendant il'J.1 Company is claiming that 1993 agreement
was terminated by notice of termination dated
January 25, 1995. The notice purports to invoke
clause 7 of trademarks licence agreement dated
April 30, 1994 (hereinafter referred to as the
1994 agreement) by clairninc; that the notice of
duration of 00 days is sufficient to terminate the
agreement.
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The plaintiffs realising the l102l'1\!.\:l' .. er
done by the defendant 1l'JS1 an::! 2 on one han;:l and
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defendant ;,)os.5 and 6 on the other with a view
to defeat the agreements and takeover the management
and control of defendant No.l Company by ?epsi,
instituted suit No.400 of 1995 on tr.e original Side
of this Court on January 30, F
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9S, seeking diverse
reliefs. The plaint was amended as defendant
Nos.l anJ 2 disclosed several facts at the time
)'.'totion for
of of/ad-interim reliefs. plaintiffs,
after institLtion of the suit, took out
of .',otbn !!'o.3i:) of 199::' seeking interim reliefs.
The learned Single Jujge granted ad-interim relief
in terms of prayer (a)(ii) arid als0 jirected that
the defendant ::0.1 who had filed application 'on
January 31, 1995 before t'1e Dir2ctor, :iinistry
of Food Processing Industries for for
b'ottling of beverages like Pe:.:lsi', 'Leher
Teem', 'Lehar ::,irinda', 'Lehar 31ice' , and' Lehar
7 UP' which are the beverages c0ntrolled ty Peosi,
may proceed with the application but shall not act
upon the permission if eranted :;ithot.:t obtaininq
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prior leave of the Court. As mentioned hereinabove,
the appeals were preferred against the
order and in view of the request of the c=unsel,
vle are disposing of the :.;otioo on ",erits.
6. 3hri Andhyarujina, learned counsel
on behalf of the plaintiffs, submitted
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that the negative covenants set out in 1993
agreement are bindin; on defendant No.l and
it is not open for defendant No.l to take the
plaintiff Company for a ride by flouting the
terms of the agreement and join hands with Pepsi -
the competitor. The learned counsel submitted
that defendant No.l company had c.ommitted breaches
of clause 19 of 1993 agreement and even assuming
that :Ii?fendant iJo.l has issued notice dated
January 25, for termination of the a:reemant,
the flotice is not valid in view of clause 21 of
1993 agreemE:nc which clearly provides tha:t the
can be terminated by either side on
giving one year's written nJtice.The learned
counsel urged t:,at it is not open fJr defendant
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No.1 to flout the requirement of clause 21
and proceed to carry the business of bottling with
Pepsi. Shri learned counsel appearing
.on behalf of the defendant No.1 and the other
counsel appearing for the remaining defendants,
contended that 1992 agreement stands superseded
by 1994 agreement which was entered into by the
parties on April 30, 1994. It was contended that
the period of one year's notice orescribed under
clause 21 of 1993 agreement cannot be relied upon
in vL?w of the sa id agreement being superseded by
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1994 agreement. Shri Kapadia con tended that
1994 agreement provides for notice of only 90 days
and such nr)tice being given by ::lefendant :'J0.1,
the plaintiffs are not entitled to any relief.
It was further urged on behalf of the defendants

should be held that the period prescribed
under clause 21 of the 1993 agreement stands
reduced in view of clause 7 of 1994 agreement.
:;hri Kapadia then contended chet be plaintiff
C'J"ipany is not entitled to equitabl'2 relief in
view of the fact that 1994 agreement was not
referred to in the plaint and that amounts to
suppression of a relevant fact. It was further
urged that negative in 1993 aJraement
shoi,ld not ue per ,Iitted to QB enf:Jrced in view
of the pL''JvLio,',s of secti:m /,,2 of specific
Act. Finally, it ';"as contended that balance of
convenience demands tnat the plaintiffs should be
denied any interim relief and even assuming that

there are any on the part of the defendant
fl0.1, the propel' remedy is to award damages.
7. In view of these rival
first question which requires determination
is ','hether the 1993 agre<?ment was superseded by
1994 agreement and consequently the negative
covenants and clause 21 which provides for
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of agreement by either party by one year1s notice
are no longer available and in operation.
wish to make it clear at the outset the
proceedings at stage, the findincs
recorded hereafter are only prima facie and will
not conclude either of the parties the trial
of the suit. Shri Kapadia did not dispute that
1)93 agreement permitted and authorised defendant
No.1 to bottle, sell and distribute the beverages
under the trademarks which ware by the
plaintiff C')mpany from defend2nt .-')s.3 CJnd 4.
Shri also did not dispute that the negative
set out in 1993 agreement are on
defendant Company. It not seriously
disputed that pepsi have almost taken over defendant
Jo.1 Company by transfer of
made serious grievance about the manner in wllich
the 5 ha :c e 5 a [' e e_ :c, ::' l"i ::1_' :;t; :::l:J ia!""'l t ran s fer re d
" in fav')ur of defendant 7 to 1.1. and urged that
an is made to sucgest that the transfer
has ta icen place V,e i:lstitutbn of the su.i t.
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It to examine this facet at this
juncture. ]efore adverting to the negative
it would be useful to 2xaGine the nature of 1993
agreement. The agreement is a franchise agreement
and franchis ing htis experienced huge gro'.'Jth thr oughoL' t
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Europe and even in this country. Franchise
agreem;.mts provide <.:nothar vehicle whereby goods
are
or distributed. Tha supplier or
manufacturer is known as 1 franchisor' and the
appointee as an independent enterpriser is known
as 'franchisee'. The franchisee is required to
comply with the standard operational structure
which the business is conducted. The
franchfusor generally authorises other businesses
(the to supply certain products or
services. In return for paying a franchlse fee,
tne franchisee benefits from the goodwill generated
by the franchise and the franchisee operates in a
manner that is closely regulated by the franchisor
accordance the agreement. Schmitthoff's
Agency and Distribution Agreements, a publication
of year 1992, sets out on page 16 various
that are normally imposed on the franchisee. Some
of the restrictions are :-
(i) Ihe franchisee shall not sell the
franchise to a third party withQut
franchisor's consent;
(ii) The franchisee be prohibited
from dealing with goods;
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(iii) The franchisee may be required to
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restraint of trade clause
for a certain period following the
termination of the franchise agreement.
Clause 14 of the 1993 agreement
specifically sets out that defendant covenants
not to bottle, sell, deal or otherwise
be concerned with the products, beverages of any
other brands or trademarks durin,? the subsistance
of the agreement including the pariod of one year's
notice as contemplated in paragraph 21. The
negative covenant as set out in clause 19 and
inter alia provides tilat in case the defendant
:"'0.1 Company effects chan'Je in the structure Ol'
transfers its shares which would result in effective
transfer of cOntrol without an express prior written
consent of the plaintiffs, then the plaintiffs as
have right to cancel and terminate the agreement.
The right to cancel and terminate the agreemant
is als-o available to the Company if the managem:mt
or control of the bottling is lost by any law,
decree, order, rule or any other cause. There is
hardly any doubt that defendant ,;0.1 COll1pany 'nad
acted in clear breach of the terms of 1993
agreement and has joined hands "Iith the competitor
of the plaintiff Company with open eyes. The
def endant NQ.l company in pursuo nee of the wrongful
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activities, has exercised the right to terminate
the 1993 agreement by resortinq to clause 7 of
1994 agreement. The resort to 1994 agreem,ont
is obviously to avoid the period of one year's
notice as prescribed in clause 21 of 1993 agreement.
shri Kapadia therefore had to contend that the
termination was not under clause 21 but under
clause 7 of the 199
4
agreement and the notice
of 90 days is suff icient. In SUppOl:' t of the
sulxnission, it '.vas contended that 1993 a"reement
stands superseded by 1994 and is
defence
the principal/ld&xl!I&x to the interim relief sought
by the plaintiffs. It is therefore necessary to
examine ehe submission of the learned counsel.
o
u. It was urged that the agreement of
year 1993 was a complete agreement and so also
the agreement of year 1994. Shri Andhyarujina
on the other hand submitted that the two agreements
are separate and distinct and the second agreement
of year 1994 \'Ias entered into only for the purpose
of enabling defendant (,)0.1 to be l'egistered user
of the trademarks in accordance with the provisions
of section 48 of Trade and Merchandise :';\arks Act
1958. ':.le are unable to accede to the SUbmission
of Shri Kapadia that the agreement of year 1993
stands superseded by agreement::>f year 1994. The


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1993 agreement is a franchise agreement for
the purpuse of bottling while 1994 is
oriy f,or the purpose of enabling t;;l;;;;l jefendant
to get the rights of registered user of trademarks
as prescribed by section 48 of the Trade and
Merchandise Act, 1958. The perusal of 1994
agreement leaves no manner of doubt that the oieject
was t'J provide for grant of non-axcLs ive licence
to use the trademarks in relation to the goods
prepared by the defendant No.l from
syrup supplied by the 1994 agreement
specifically ref0rs to the earlier a2re0m;mt and
then sets out that 1994 agreement is entQred into
for the use of the trademarks on a contractual
basis. It would be convenient at this juncture to
refGr to section 48 of the Trade and ,'.',erchandise
Act. The section inter alia provides that
a other than the registered proprietor of
the trademark may be registered as a registered
user thereof. It is not in dispute that the
plaintiffs are the registered proprietors of
various trademarks which purchased from defendant
iJos.3 and 4 and defendant No.l was permitted under
1993 agreEment to make use of those
The r:"12re p0r:nission to use the trade:-.-.c.rks w"'Juld
not automatically make defendant a registered
to
\lser and/secure that advantage, a9plicatbn is
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required to be filed in accordance with Rule 85
of P.ules frame::; under the Trade and ;;terchan dise
I,',)rks Act, 1958. The advant2.ge of being registered
as registered user under section 4S of the Act
is two-fold. In the first instance, the registered
proprietor will not be faced v.ith the charge that
the nlark is not used as the user by registered user
Av
is treated as one 0<1 the recistered pr Jprietor.
Secondly, the registered user will be entitled
to institute .. 'l'oceedinc,s in case there is a breach
lor violatioil of trademark by any other perSJn.
The 1994 was obviously for the purpose
of enabling defendent ,,;0.1 to :11ake a;) applicatio;)
to L',e '.2gistrar of Trade:nar\(s f,Jr being enrolled
as registered user and such an ap?lication is
required to be made jointly ::,oth :,y
proprietor a;)d proposed registered user.
Shri Ka:"Jadia contended that 1993 agree'11ent refers
to the user of the trademarks by defendant No.1
a;)d therefore there was no occasion to enter into
1994 agreement unless it was with a view to
supersede the earlier agreement. The submission
is devoid of any merit. Clauses 8, 9, 10, 12 and
13 of the 1993 deal the user of
the but permiSSion to use the tradel7larks
do not automatically confer status of registered
user 0')) defandant No.l and 1994 agreemffit was
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entered into only with a view to enable the
parties to file joint application before the
Re;istrar: ef Tradec1arks far recordirl<} defendant
as the registered user. The requirement of
Rule 85 and sectien 48 of the Act demand that
the parties must enter into an agreement fJr
being registered as a registered user and that
is the for entering int) 1994 agreement.
The 3hri ttlat the
of yeaL' 1993 c'Jver(i.di/i two t",rri-;:xiGs of
and while 1?94 agreement refers
to entire country is misconceived. The 1994
agreement refers t!le entire c8untry in respect
of the of defendant No.l as a registered user
and surely not far of bottling the
beverages. A faint submission was urged that the
1993 agreement was for a fixed while 1994
agreement was without any limits. It is difficult
to ap,xeciate how that can lead to the conclus ion
that 1993 agreement which was for a separate and
distinct purpose can stand superseded by 1994
agreement. The 1994 agreement consists of only
eight clauses and ,:'-oes not deal wit:' the franchise
as exhaustively set out in 1993 agreemento
Shri SUbmitted that the clause
provided in the two agreements is Ijiff erent and
cannot stand together. The submission is not correct
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because clause 21 of 1993 agreement provides
that either party may terminate the agreement by
giving one year's notice while 1094 agreemant
which only entitles defendant No.1 to be recorded
as registered user provides that the right to uSe
the tr.ademarks as registered user can be terminated
with notice of period of 90 days. It is
to find any merit in the contention that the ,Jerbd
of termination provided under clause 21 stands
reduced t:> period of 90 days because of 1994
agreement. The entice proceeds on a
misconception that 1994 agreement the
ear-lier agreement. .;e are unable to find any :11erit
in the c'Jni;enticm. In 'Jur judg::ent, the 1993 agreement
is not affected in any manner by 1994 agreemant)
which is merely a supplamental agreement for purpose
of enabling defendant '.1'J.1 to usethe trademarks
as registered user.
9. Shri Andnyarujina pointed out that
the defendant N'J.1 all along accepted that the
1993 agreement remained in operation and the steps
tal,en by defendant lio.1 from tir:1e to time clearly
demonstrate that fact. The learned counsel referred
to letter dated 12, 1994 addressed by the
plaintiffs to defendant No.2 and which sets out
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that defendant Nos.l and 2 sought permission to
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transfer the shares 'I'lai:iib:fts in accordance
with clause 19 of 1993 agreement. Sec:Jndly, on
January 2:), 1995, the defendant :!0.1 notH ied to
the plaintiff company that shares representing
70';,; approximately of defendant ,'<0.1 Company were
transferred in favour of Aradhana Soft Drinks co.,
Aradhana Snack fOods Co., PepsiCo India
and Ar8dhana and Pr0ducts Go. This
in t i":18 t ion was Si ven in accor::'.ance w:!. th clause 19
of 1593 agreement. On the same date i.e. January 25,
199j, the defendant served notice of termination
and the subject referred Licence
Agreement'. The notice recites that clause 7 of
trademark licence agreement dated April 30, 1994
provides that the agreement can be terminated by
either party upon giving 90 days' notice and
accordingly notice is given. The notice then recites
that \','ithout prejudice to t!'e contentions, the 1993
agreement stands replaced by 1994 agreement. The
defendant No.1 claims that the period of one year
under clause 21 of 1993 agreement stands
to 90 days. Snri An:hyarujina sub.-nits, alld in our
judgment with considerable that thase actions
on 1:':\8 part of defendant ::05.1 and 2 are tell-tale
circumstances to indicate that tC'le contention that
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1993 agreement stands superseded, is nothing but
figment of imagination and false pleas are taken
only to aV0id rigour of clause 21 of 1993 agreement.
. ('1.J:
In this connection, it was pointed that defendant

No.2 has filed affidavit sworn on 6, 1995
and there is not even a whisper in the said
affidavit that 1993 agreement stands superseded.
One more circumstance was to 0Ur attenti0n
and that is reflected in letter dated January 31,
IS9:.\ addressed by defendant No.'! to the ::lirector,
;:,in is try 0 f Food Process in':! Indus t r :es . A copy
of the letter is taken on record by consent of
parties and marked 'X' in appeal. The letter
recites that notice of termination of existing
franchise agreement has already been given to
Coca Cola Company. Shri Andhyerujina submits that
the franchise agreement referred to is one of
year 1993 and even
t:o.l never thought
in January 1995 the defendant

that the superseded.
In our judgment, the contention of the lear:led
counsel is correct am deserves acceptance. ':Ie
are unable to accede to the submission of 3hri Kapadia
that 1993 agreement stands superseded or in
alternative the period prescribed under clause 21
of 1993 agreement stands reducec, to 90 days.
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10. Shri Kapadia then c::>ntended that the
equitabLe relief sOL\S,ht by the plaintiffs during
the pendency of the suit be denied because
the plaintiffs are guilty of suppression of 1994
agree:::ent at t:1e time of )f the suit.
It was urged with reference t::> decisi::>n of supreme
court ref)Orted in AIR 1994 S.C. 853 (S.P.Ghengalvara.ya
Naidu vis Jagannath and ors) that a ;:>arty guilty
of suppressing material inform.ation should be denied
equitable relief. We are unable to find any merit
in the contenti::>n for more than one reas::>n. In
the first instance, it is difficult to appreciate
how 1)94 agreement was relevant to be disclosed
when the have come to the court for
enforcing negative covenants under 1993 agreement.
Secondly, the 1994 agreement came to the notice of
learned trial Judge at the time of conSideration
of relief and certainly was highlighted
by defendant No.1 at the hearing of the notice of
motion. It is not possible to deny relief to a
party when the facts have corne to the kr.owledge of
the Court before consideration for grant of relief.
It also cannot be overlooked that the 9art ies
litigating in these proceedings are commercial
giants and the rights to enforce are in respect
of commercial transactions. The defendant no.l
has obviously acted with desire to make more profits
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CUI,
by joining hands <lIi the competitor of the
plaintiffs and in breach of trust and confidence
in which the agreement was entered into. It
hardly lies iri the mouth of defendant No.l to
claim that interim relief should be denied
because 1994 agreement was not initially disclosed
in the pla int.
11. Shri Kapadia then submitted that
section 42 of Specific Relief Act inter alia
prJvides that though the Court is not precluded
r08 any injunction to perform the
negative agreement, the same can be done provided
the plaintiff has not failed to perform the
c0ntract so far as it is binding on him. It Vlas
are
urged that even if the plaintiffu ix/desirous of
enforcing the notice period contained in clause 21
of 1993 agreement, the perform
their part of the agreement. ,'le enquired from the
learned counsel as to what part is to be performed
by the ?laintiffs and the answer was that the
;Jlaintiffs must c":lntinue te> supply concentrate/syrup
as stated in 1993 agreement till expiry e>f perie>d
one year the date of notice of
served by :iefert::'ant :'0.1. It is impossible t'J
accede to the submission of the learned counsel.
In the first instance, the defendant No.l had
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clearly committed breach of the agreement by
various covenants. Secondly, clause 19
entitles the plaintiffs to discontinue supply aT
concentrates, essences and syrups for such length
of time as the plaintiffs may in its j
ud
C)!:lent
.
necessary without cancelling
the right to terminate the agreer.lent.
Shri ina was right in subnitting that
C:eem
the defc"ndant ::0.1 is guilty of of agreement
and cannot insist that the negative c)venant can be
enforced only if concentrates are supJlied to
defendant for a duration of one ygar. The
reliance on of section 16(c) of Specific
Relief Act the decisi')n 'Jf ::\adras :ligh Cou:-t
Naidu and anr vis Haji Dadsha Sahib and ors) in
this connectLn is It is impossible
accept the that plaintiffs must
the concentrates to defendant 'h.l when the defendant
'0.1 had openly entered into an agreement to
manufacture and bottle the products of Pepsi.
The defendant :lo.l had
agreed not to manufactu"e
. iko:t
other the
or bottle the products
for a duration of one year after service of notice
of termination and that undertaking cannot be
ilouted by claiming that the plaintiffs must supply
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concentrates \,'Jhile the defendant No.l will enter
into Cl contract with Pepsi t:> E1anufacture and
bottle Pepsi's products.
Shri submitted that in case
def endant 1'10.1 is not permitted to manufacture and
bottle Pepsi's products and at the Same time,
defendant ,;r).l is restrained fU)m on
bottlina business b\f non-suo)l\'
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by plaintiffs, then th2t \':Ollld cause undue
hardship to the interest of defendant The
submission is dev:>id of any merit. ;he defendant
;00.1 cannot complain of when defendant
l,a5 openly flouted the terms
and acted in breach of 2nd every clause.
The defend:ont ';0.1, v:ith open eyes, has entered into
agreement with of the plaintiffs and
must accept t'c,e c)nsequences F,ereof. It is not
to deny the enforceQ2nt of negative
covenants by claiming hardships. Pepsi is a giant
mUlti-national and Pepsi is desirous of takins
over bottling pJ.ant of defendant i':o.l to conpete
with the plaintiffs. The defendant must thank
itself and avoid the terms of 1993
12. Finally, it was contended by
Shri Kapac:ia that balance :Jf convenience lies in
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favour of defendant W).l and negative covenants
should not be enfol'ced if damages can be awarded.
It was urged that plaintiffs have demanded damages
the learned
and therefore as held by/R Single Judge of
Delhi ':igh Court in the decisbn repol'ted in
AIR):5!84 (:.:.)dern :-nod Industries Ltd. v/s
::/s Shri Krishna Dottlers (p) Ltd.) t'1e interim
relief should be refused. "le are afraid we cannot
accept the contention. The observation. of the
learned Sinc;le Judge of Delhi ili;J'1 Cm;rt that
reli2f of injunction can be denied in respect of
negative damaJ8s is a
is not accurate. A can be usefully
mede to the passage under the heading 'Negative
Contracts' at paragraph 27-040 on paqe 1310 of
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Chitty on Contracts, 27th Edition. The ?aSS2 ;;e
rea ds : -[:
III
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"'nhere a contract is negative i.n natu re,
or contains an express negative
stipulation, breach of it may be
restrained by injunction. In such
cases an injunction is normally granted
as a matter af course, even the
is an aquitable and thus in
principle a discretionary one. A
defendant cannot, in particuler, resist
an injunction on the ground that
35
observance of the con;;ract is burdensome
to hin and that its breach would cause
little or no prejudice to the plaintiff.
breach of an express negative
stipulation can be restrained even
though the pLaintiff cannot show that
the breach cause him any loss.
In such cases, the is not concerned
the balance of c=nvenience or
in C'J nV(.'l) ie nee. 11
In our judgment, it is {utile to
suggest that the damages are propert remedy and
whictl damages can be determined passage of
several years vlhen the suit viill- ':3 :\ecided.
The parties have entered into corn::arcial transactions
wi th full kno-'Iledqe of the contents and consequences
and cannot be permitted to avoid t:ce s3",e.1"0 allow
a party to defeat the terms -agreed in eX1:nercial
contract, would lFad to disastrous results as
"1'0,-:>--'1- (-'--0 I
the commerce international commerce v:ould
be entirely in jeopardy. A party can then very
well flout any agreement and openl-,- com:nit breach
to gain monetary advantage. The Court should be
strict in such casesto ensure that the agreements
are performed properly. In the
plaintiffs have made out sufficient case for grant
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of interim relief. In our judgment, the plaintiffs
are entitlej to interim relief in terms of prayers
(a)(ii) and (a)(iii) with modification. Prayer
(a)(ii) is an injunction restraining the
defendant No.l either directly or indirectly, by
itself through its shareholders from
itself with the products, bEverages of any other
brands or trademarks than the plaintiffs. Prayer
(a)(ii) is required to be in view of specific
terms of covenant contained in clause 14 of 1993
agreement. The orayer sought under (a)(iii) of
the amended :::ltice of ",'otion is required to be
gra nted \\'i th ',lodif ica tion Cl nd the inj uncti'Jn
granted is in the terms '-
"that in the event of the sale shares
taken place institution
of the suit, the defendant No.l and
those t'o w!':orn the shares 'nave been sold
and also subsequent transferees, their
servan ts, a gents, n0minees, employees,
subsidiary companies, controlled
affiliates 0r associate
co,11panies or any per'son acting and -t-
"" ..;.;:1:..;.,....., 4,"""lZvn
on their frOm using tne plants of
defendant No.l at Ahmedabad and Rajkot
f0r r:lanufacturing, bottling or se.,lin9
or dealing with 0r concerning themselves
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in any manner whatsoever with the
beverages of any person till 25th
.January 1996."
Accordingly, !'1otice of ;\otion No .316
of 1995 is made absolute in terms of prayers
(a)(ii) an-' (a)(iii) as modified hereinabove.
The defendants shall pay the costs of the Notice
of ';lotion. In view of disposal of Notice of
both the appeals stand disposed of with
no order as to costs.
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