Judgment:
ORDER
H.L. Gokhale, J.
1. The Plaintiffs are a public limited company carrying on business amongst others of manufacturing oval tin containers. The Defendants are also a public limited company and are an Indian subsidiary of a multinational company which is a world leader in dental products.
2. The Plaintiffs herein are seeking through prayers (a) and (b) specific performance of the Agreement allegedly entered into between the Plaintiffs and the Defendants. Alternatively through prayer (c) they are seeking a declaration that the Defendants are estopped from refusing to purchase and lift oval tin containers from the Plaintiffs to the extent of 51.5 lakh tins/ containers per month.
3. In paragraph 3 of the plaint, it is stated that the Plaintiffs were incorporated in the year 1971 and from 1975 onwards they were supplying aluminium collapsible tubes to the Defendants. In 1983, the Defendants were faced with serious irregularities in the supply from M/s Metal Box (India) Pvt. Ltd., their then suppliers of oval tin containers for the tooth powder and therefore it is the case of the Plaintiffs that the Defendants turned to the Plaintiffs and suggested the Plaintiffs to set up a dedicated plant/unit for the manufacture/supply of oval tin containers to the Defendants. It is the further case of the Plaintiffs that they made substantial initial investment to the tune of Rs. 7.20 crores for setting up of the said plant sometimes in January 1989 at Hyderabad. The said investment included the purchase and import of specialised machinery from Italy. For this purpose, the Plaintiffs approached various banks and financial institu-tions. The financial institutions asked the Plaintiffs to produce a letter of assurance from the Defendants. In order to enable the Plaintiffs to raise the funds and in pursuance of the said understanding/Agreement, the Defendants issued a letter of comfort dated 21st November 1983 confirming that the Defendants would be sourcing their requirement of cans from the Plaintiffs subject to their requirement for cans and the Plaintiffs' quality, delivery and price being satisfactory.
4. This letter is very much crucial for deciding as to whether any such understanding/Agreement was arrived at between the parties and hence the same is reproduced herein below in its entirety.
November 21, 1983
Dear Prakash,
Thank you for your letter of November 16.
We confirm that we shall be interested in buying from you approximately two million cans in three sizes (for 180 gin, 90 gm and 45 gm Colgate Tooth Powder), subject to quality, delivery and price being satisfactory. This estimate is based on our 1984 requirement.
You will appreciate that this letter is to be treated as only an indication of our requirement and not a guaranteed commitment; our actual purchase volume will be determined by your ability to keep to your time schedule for starting manufacturing if cans (indicated by you as June 1984), production capability, quality, price, ability to meet our delivery requirement and of course, our requirement at the relevant time.
We trust this letter will serve the purpose of your obtaining necessary clearance from Financial Institutions and we took forward to your speedy implementation of the project.
With best regards.
Sincerely yourssd/-(K. A. Warrier)'
5. It is the further case of the Plaintiffs that from the commencement of the production in the year 1985 till the filing of the suit i.e. for about 15 years, the Plaintiffs' entire production has been supplied to and purchased exclusively by the Defendants. That has been so done by the Defendants' manufacturers situated at Hyderabad and Aurangabad. They however say that this has been so supplied to and purchased exclusively by the Defendants (except for small sample orders undertaken for Ponds India in 1996 and 1997). Thereafter it is contended that in 1997 the supply level had reached to 36.5 lakh tins per month and that the units of the Defendants at Hyderabad and Aurangabad were purchasing 40 to 45% of their requirement of oval tin containers from the Plaintiffs and that the quality was always excellent. It has also been pleaded that the Plaintiffs had set up their plant initially at Taloja on the basis of the representation of the Defendants in the year 1984-85. It is specifically averred in paragraph 3(viii) of the plaint that pursuant to the Defendants' representation the plant at Taloja had been shifted to Hyderabad in its entirely and relocated in the year 1989 adjacent to the plant of the Defendants' main manufacturer of tooth powder one M/s Crystal Cosmetics.
6. The problem arose in this relationship from 1997 onwards and, as disclosed in the correspondence annexed to the plaint, for the first time bytheir letter dated 2nd September 1997 the Plaintiffs made grievance to the Defendants that as against the normal supply of 45 to 50 lakh of cans per month to Aurangabad and Hyderabad, they had received an order of supply of only 7 lakhs cans to Hyderabad and nil for Aurangabad. In that letter, they sought that an order of atleast 15 lakhs cans of different sizes be issued for Aurangabad. This was followed by further letters by the Plaintiffs dated 10th September 1997. 16th April 1999, 19th May 1999 and 20th May 1999. Thus the case made out by the Plaintiffs all throughout is that they had set up a dedicated plant from which the entire production was to be lifted by the Defendants and that was on the basis of the alleged understanding amounting to a contract, alternatively a representation by which the Defendants were bound.
7. The Defendants replied the Plaintiffs' letters by their letter dated 28th May 1999. In that, they stated that they had not committed to purchase any specific quantity of oval cans and that the purchase was purely on commercial considerations. They have further stated that they could not source oval cans from the Plaintiffs during 1999 since the rates quoted by the Plaintiffs were far in excess of the rates quoted by the other suppliers. They however offered to exhaust the imported tin plates then procured by the Plaintiffs. Accordingly they placed an order for 10 lakh cans on 10th June 1999. In their letter dated 20th July 1999 however the Plaintiffs, who were seeking orders of even 15 lakh cans by their earlier letter, changed their approach and declined to execute that order by subsequently stating as follows :-
' ............ as informed to you verbally, we do hereby confirm again now in writing that your orders dated June 10, 1099 for a mere 10 lacs cans cannot be executed.'
In that letter, they have also stated that the Defendants intentionally failed to give them orders for the last 15 months in breach of their assurance and diverted their orders to various newly developed parties.
8. The averment in the plaint with respect to the specific performance of the alleged Agreement/Understanding is seen in paragraph 2(A) and paragraph 5(A) thereof. It is stated therein that the Plaintiffs are entitled to a declaration that there exists a valid and existing Agreement between the parties (allegedly evidenced inter alia by the consistent conduct of both parties over a period of 15 years), that the Defendants would purchase the entire production of oval containers produced by the Plaintiffs' dedicated plant/unit subject only to the Defendants' requirement [production needs) and the Plaintiffs' price and quality being satisfactory. In paragraph 6 of the plaint, the Plaintiffs have contended that the said agreement to purchase and lift the entire production from the dedicated manufacturing unit necessarily implies a negative covenant not to source/buy oval containers from any other manufacturer to the extent of the Plaintiff's production i.e. to the extent of 51.5 lakh tins per month. It is on the basis of these assertions that prayers (a) and (b) are made in the plaint seeking specific performance of the agreement to lift at least 51.5 lakh oval containers from the Plaintiffs.
9. By way of an alternative submission, it is submitted in paragraph 7 of the plaint that the Plaintiffs have altered their position upon the representation made by the Defendants that they would purchase the entireproduction at the dedicated unit. On the basis of the said representation, the Plaintiffs have set up the dedicated unit and shifted the entire unit to Hyderabad and hence the Defendants are estopped from unilaterally and arbitrarily resiling from their said representation and refusing to buy/lift the oval containers to the tune of 51.5 lakh tins per month, which is prayer (c). Prayer (d) of the plaint is the interim prayer for a permanent injunction restraining the Defendants from purchasing oval containers for their tooth powder from the persons other than the Plaintiffs to the extent of 51.5 lakh tins per month. The same interim prayers is made in the motion and Mr. Seervai states that the interim prayers is relatable independently and separately to both these prayers (a) and (b) on the basis of the alleged contract and to prayer (c) on the basis of estoppel. Prayer (e) in the plaint is for the compensation of Rs. 64.97 crores with interest at the rate of 18% per annum in the event the Court is not inclined to grant prayers (a) to (d) in the alternative and without prejudice to these prayers.
10. After this suit was filed, the Plaintiffs moved for an ad-interim order, but that was declined by the learned Judge who heard the matter on 9th February 2000. That was essentially on the basis of the fact that the last supply was made in April 1999 and by a communication dated 28th May 1999 the Defendants made it clear that they had not committed to purchase any specific quantity. Since the Plaintiffs had chosen not to approach the Court immediately, ad-interim injunction was declined. An appeal was preferred against that order, but that was withdrawn in view of the direction that the motion be heard at the earliest. Thereafter the plaint was amended by moving a chamber summons and a sentence has come to be added at the end of paragraph 5(C) of the plaint to the effect that 'The Plaintiffs say and submit that the Plaintiffs have at all material time been and are ready and willing to fulfil and perform their obligation under the said agreement'.
11. Subsequently on 10th April 2000 the Defendants filed their reply to this motion through one Sanker Parmeswaran, Associate Director (Legal). In paragraph 3 of this reply, the Defendants took up the issue of delay. It is submitted therein that although the alleged breach occurred more than two years ago according to the Plaintiffs, and admittedly since June 1999, the Plaintiffs are seeking interlocutory reliefs much later thereafter by moving this motion in February 2000. It is also submitted in this paragraph that the balance of convenience weighs heavily against the Plaintiffs. In paragraph 5 of this reply, the Defendants have placed their denial squarely on record. Since this paragraph sets out the defence of the Defendants in clear terms, the paragraph is taken verbatim which reads as follows :-
'5. At the outset and for the purpose of putting the same in issue. I deny there was any request/suggestion by the Defendants to the Plaintiffs to set up a dedicated plant/unit for manufacture/supply of cans to the Defendants as alleged or at all, that there is or ever was any contract that the Defendants would purchase the entire production of cans of the Plaintiffs as alleged or at all, that there was any request by the Defendants to the Plaintiffs to shift the Plaintiffs' plant from Taloja to Hyderabad as alleged or at all, and that there is or ever was any negative covenant/agreement, express or implied, that the Defendants would not or could not source/buy cans from any manufacturer other than the Plaintiffs to the extent of the Plaintiffs' production, as alleged or at all. I put thePlaintiffs to strict proof of the above. I submit that the Plaintiffs' claim for specific reliefs is misconceived and not maintainable. The alleged contract for supply of cans by the Plaintiffs to the Defendants cannot be specifically enforced.'
Thus as can be seen from this par graph, the Defendants denied the submission of the Plaintiffs that there was ever any contract that they would purchase the entire production of cans as claimed by the Plaintiffs or that there was any negative covenant, express or implied, that they would not source cans from any other manufacturer.
12. In paragraph 6 of the reply, the Defendants have again specifically placed it on record that for seeking specific performance of an oral agreement, the following ingredients have to be established :
(a) the persons as between whom the contract is alleged to have been entered into;
(b) the date on which the said contract was entered into:
(c) the price at which the cans are alleged to be sold by the Plaintiffs and purchased by the Defendants:
(d) the duration of the contract, whether in perpetuity or for a limited period.
And then it is submitted that ex-fade the Plaintiffs would not be entitled to any reliefs at the final hearing much less at an interlocutory stage.
13. Thereafter in paragraph 8 of the reply, the Defendants have placed their factual position on record. In paragraph 8(a), the Defendants have pointed out that they had by their letter dated 21st November 1983 indicated to the Plaintiffs their interest in buying approximately 2 million cans during 1984 subject to quality, delivery and price being satisfactory. The said letter has specifically provided that it was not to be considered as a guaranteed commitment to purchase. In sub-paragraph 9(d) of the reply, the Defendant have specifically disputed the contention of the Plaintiffs that the Plaintiffs' factory was intended to be and was dedicated to the requirements of the Defendants. The Defendants have pointed out that this statement was false to the knowledge of the Plaintiffs and was belled by the statements made by them in the prospectus dated 21st February 1994. The specific statements from the prospectus have been referred to in this affidavit in reply and, as pointed out to me by Mr. Chagla, learned senior counsel appearing for the Defendants, the prospectus on the first page itself states that the 'Established clientele base of the company was to supply its products to reputed multinational companies like Colgate Palmolive (India) Ltd., Hindustan Lever Ltd., etc. Thereafter on page 14 of the prospectus under the heading 'COMPANY, MANAGEMENT AND PROJECT', it is specifically provided as follows :
'In 1989, the Company set up a unit at Hyderabad to manufacture Tin Containers by shifting part facilities from Taloja.'
Then in the subsequent paragraph, it is stated as follows :
'The Company over the years has established itself in the field of metal packaging and since inception has been supplying its products to reputed companies like Colgate Palmolive (India) Ltd., Hindustan Lever Ltd., Balsara Hygiene Products Ltd., Roussel India Ltd-, etc. to name a few.'
Then on page 17 of the prospectus under the heading 'PROJECTS', the following relevant information is supplied :-
'(A) Diversification
(i) The Company is setting up a new unit at M.I.D.C., Taloja. Dist. Raigad on land adjacent to the existing unit, for manufacture of OTS Cans with an installed capacity of 20 Million Nos. per annum.
(B) Expansion
The Company is expanding its installed capacity to manufacture Tin Containers (Round and Oval) from present 48 Million Nos. to 63 Million Nos. per annum by installation of one imported Body Maker at the existing works at Taloja. District Raigad, Maharashtra.'
Then on page 21 of the prospectus under the heading 'MARKETING & SELLING ARRANGEMENT', it is stated as follows :-
'As the Company is already supplying tin containers to Colgate Palmolive (India) Ltd.. Balsara Hygiene Products Ltd., etc. and has established contacts with many user industries, it is confident of marketing its additional production.'
Mr. Chagla, learned senior counsel for the Defendants, has in this behalf emphasised this fact that this prospectus is of 21st February 1994, i.e. much after the alleged shifting of the entire plant in the year 1989.
14. In paragraph 8(f) of the reply, the Defendants have pointed out that during the period commencing 1997, the Defendants faced an increased competition from their competitors like Hindustan Lever Ltd. and Dabur Ltd. and hence a commercial decision was required to be taken by them to identify new suppliers of cans. The Defendants found that except one M/ s India Containers, the prices quoted by the Plaintiffs were considerably higher than that of the other suppliers and to the reply a chart is annexed at Exhibit-1 enclosing the basic price per 1000 cans as made available by different suppliers.
15. In paragraph 19 of the reply, it is again denied specifically that any request was made by the Defendants to the Plaintiffs to set up a dedicated unit as claimed by the Plaintiffs. In paragraph 20 of the reply, it is again specifically averred that the Plaintiffs had set up their unit for the manufacture of cans on the basis of their own assessment of the potential market for the same in view of the difficulties faced by Metal Box (India) Ltd. as set out in paragraph 3(ii) of the plaint.
16. This Mr. Sanker Parmeswaran has filed an additional affidavit affirmed on 6th May 2000 and even that affidavit was made to bring out further evidence which disapproves the Plaintiffs' averments in paragraph 3(viii) of the plaint that upon relocation of the Plaintiffs' plant in Hyderabad, the Plaintiffs closed down their operation in Taloja. Mr. Parmeswaran craved leave to refer to the invoices, gate passes for removal of excisable goods from the factory showing supply of cans made by the Plaintiffs to the Defendants from their plant at Taloja after the year 1989.
17. The Plaintiffs filed their rejoinder to the affidavit in reply of the Defendants on 20th April 2000. It is affirmed by one Shri B.L. Bagaria, Vice President (Works and Administration) and Manager of the Plaintiffs. In paragraph 6 of this rejoinder, the Plaintiffs submitted that although the said agreement was never recorded in a formal contractual document, the same is clearly established both by contemporaneous correspondence and by the conduct of the parties over a period of as much as 15 years. Mr. Seervai, learned counsel for the Plaintiffs, has specifically submitted thatthe Plaintiffs were making out their case both ways, namely on the basis of an alleged contract and also on the basis of estoppel arising out of the conduct of the Defendants. As far as the alleged contract is concerned, it is in this paragraph that the Plaintiffs stated that the suit agreement was arrived at between the Plaintiffs' Managing Director Mr. Prakash Mohta and the Defendant Vice President (Manufacturing) Mr. K.A. Warrier. It is stated that in 1983 Mr. Warrier had repeatedly requested the Plaintiffs to undertake the manufacture of oval tin cans as the same were in short supply. Several discussions had ensued between the parties. The Plaintiffs pointed out that heavy investment was involved and a tie in arrangement subject to reasonable pricing and meeting the Defendants' quality requirement was necessary. It is further submitted that the letter of comfort dated 21st November 1983 annexed at Exhibit-B to the plaint was issued in pursuance to these discussions. Subsequently, in this paragraph, it is specifically stated as follows :-
'Insofar as the price at which the cans were to be sold is concerned, I say that the same was never fixed but was negotiated from time to time between the parties.'
Thereafter it is stated that it was understood that the subject to quality and price requirements being met, the Defendants would continue to lift the Plaintiffs' entire production of oval tine cans. Thus the Plaintiffs accepted that the price was never fixed. The quality requirements were to be satisfied by the Plaintiffs, but subject to these two undecided factors the entire production was however to be lifted by the Defendants. That was the contract arrived at and pleaded by the Plaintiffs in this paragraph.
18. In paragraph 11 of this rejoinder, it is again averred that supplies to the Defendants have constituted approximately 98% of the Plaintiffs' total production/supplies. To this rejoinder, two more letters are annexed which were not annexed to the plaint. As seen earlier, the Plaintiffs have annexed the letter of comfort dated 21st November 1983 as Exhibit-B to the plaint. Now, to this rejoinder, the Plaintiffs have annexed two letters, i.e. one of 14th March 1983 which is prior to 21st November 1983 and one which is subsequent thereto and which is of 15th June 1984. This letter of 14th March 1983 sent by the Plaintiffs again emphasises that the project will be financed only if the parties have a tie up arrangement and hence detailed discussions were sought for clarification on the following points :
(1) To ascertain the quantities required by the Defendants
(2) Technical aspects
(3) Pricing policy
The letter of 15th June 1984 annexed to this rejoinder states that the Plaintiffs will be commencing the commercial production very shortly and they will be getting in touch with the Defendants so as to have negotiations regarding price and other consideration. In paragraph 26 of the rejoinder, the Plaintiffs have slightly departed from what they have stated earlier in the plaint and have stated that 'the major tin container operations were shifted to Hyderabad'. Thereafter it is stated 'The Defendants are however relying only on the statement that thereafter the Taloja operations were shut down. What was meant was that it was ultimately shut down.' When the operations were shut down is however not stated. In any case, it is clear that they were not shut down until 1994 inasmuch as prospectus ofFebruary 1994 clearly talks about expansion and does not mention that any plant or any part thereof was shutdown at Taloja on account of shifting to Hyderabad in the year 1989.
19. The Plaintiffs have filed one more affidavit of one Prakash Kumar Mohta dated 22nd April 2000 to support the statements made in the plaint and the rejoinder. This was principally because he was a party to the alleged negotiations on behalf of the Plaintiffs. The Defendants have disputed this through the affidavit of one Sanjeev Shrivastav affirmed on 8th June 2000 and in paragraph 7 thereof have stated that 'for the first time the Plaintiffs have claimed in the rejoinder that oral contract was arrived at between Mr. Prakash Mohta and Mr. Warrier'. It is submitted that that allegation was now made to plug the gaping holes in the Plaintiffs' story knowing fully well that Mr. Warrier expired in 1993 and will not be in a position to contradict these allegations.
Stop
20. Mr. Seervai, learned counsellor the Plaintiffs, firstly dealt with the question of delay inasmuch as the learned Judge, who heard the motion at the ad-interim stage, had declined ad-interim relief by his order dated 9th February 2000 since the Plaintiffs, according to the learned Judge, had chosen not to approach the Court immediately for enforcement of their rights. Mr. Seervai submitted that even though ad-interim injunction was declined, it could still be granted at the stage when the motion was finally heard. He drew my attention to two Judgments of the Apex Court. Firstly, in the case of Satyanarayana v. Yelloji Rao, he particularly referred to paragraph 11 of the judgment wherein the Apex Court has observed as follows :-
'While in England mere delay or laches may be a ground for refusing to give a relief of specific performance, in India mere delay without such conduct on the part of the plaintiff as would cause prejudice to the defendant does not empower a Court to refuse such a relief.'
He then referred to another judgment of the Apex Court in Dr. Kashinath G. Jalmi v. The Speaker,. In that judgment, a writ petition concerning the action of the Speaker had come to be dismissed by Goa Bench of this Court and after considering various Judgments on this issue, the Apex Court held that the High Court was in error in holding that the petitions were liable to be dismissed merely on the ground of laches.
21. Mr. Seervai submitted that the letter at Exhibit-B to the plaint had to be read in its proper perspective. His submission was that the Plaintiffs needed finance to set up the plant at Hyderabad and for that purpose they had approached the Defendants for the letter of comfort. When the Defendants state in that letter that their letter is to be treated as only an indication of their requirement and not a guaranteed commitment, it cannot be read as a statement made only for the year 1984. The submission of Mr. Seervai was that this meant a commitment for alt time to come inasmuch as the Plaintiffs were persuaded by the Defendants to shift to Hyderabad adjoining to the factory of their supplier. The request was made because of thedifficulties faced by the Defendants on account irregularity of the supplies by their previous supplier M/s. Metal Box (India) Ltd. and therefore this letter will have to be looked into in its proper perspective. The submission of Mr. Seervai was that this letter along with the discussions between Mr. Mohta and Mr. Warrier led to a contract which had been acted upon over a period of 15 years. The submission of Mr. Seervai was that undoubtedly the price was not specified, quality was to be to the satisfaction of the Defendants, but one thing was clear namely that entire production was to be lifted by the Defendants. This submission is on the footing that it was at the behest of the Defendants that the Plaintiffs were required to set up the plant and that they were required to shift to Hyderabad and were required to put in a huge investment to the tune of Rs. 7.20 crores as claimed in the plaint. Mr. Seervai submitted in this behalf that section 114 of the Evidence Act will have to be pressed into service to understand the conduct of the parties over the years and from this natural conduct, the existence of a prior contract has to be read as existing between the parties.
22. Mr. Seervai heavily relied upon the order of my brother A.P. Shah, J. dated 4th May 1999 in a notice of motion taken out by one India Containers in their suit bearing No. 2153 of 1999 against the present Defendants. Those Plaintiffs had shifted their factory at Waluj near Aurangabad, next to the Defendants' plant. This was on an assurance by the Defendants that they would lift the entire production. The Defendants had issued a certificate specifically to coincide with the public issue of M/s India Containers stating that their entire production will be purchased by them and the Defendants had also given loan to the Plaintiffs. Thereafter there was an abrupt termination of agreement on 20th February 1999 which led to that motion and to the order passed on 4th May 1999. The submission of the Plaintiffs was that they had altered their position by establishing a new plant investing huge capital and therefore the Defendants were estopped from withdrawing from their promise to buy the entire production.
23. Apart from a positive expectation as above, an implied negative covenant was also read into that contract by the Plaintiffs, and based thereon the injunction was sought. The learned Judge has referred to different Judgments in his order, viz. (1) Courage & Co. Ltd. v. Carpenter, (2) Foley v. Classique Coaches Ltd.,, (3) Sky Petroleum Ltd. v. VIP Petroleum Ltd., (4) Jairam Valjee v. Indian Iron & Steel Co. Ltd., and (5) Vijaya Minerals Pvt. Ltd. v. Baikash Chandra Deb,, Mr. Seervai referred to the facts of these Judgments and submitted that they were similar to that of India Containers and also of the present case. Relying upon those judgments, my brother A. P. Shah, J. had come to the conclusion that a representation had been made by the Defendants that the Defendants would buy from the Plaintiffs all the cans manufactured by them and hence an injunction as sought was granted.
24. With respect to the submissions based on estoppel. Mr. Seervai submitted that this was a case of estoppel by convention and relied upona Judgment of a Court of Appeal in Amalgamated Investment & Property Co. Ltd. a Texas Commerce International Bank Ltd. He particularly drew my attention to the observations recorded at pages 120 and 121, wherein the Court observed -
'Although subsequent conduct cannot be used for the purpose of interpreting a contract retrospectively, yet it is often convincing evidence of a course of dealing after it. There are many cases to show that a course of dealing may give rise to legal obligations. It may be used to complete a contract which would otherwise be incomplete. ...... It may be use so as to introduce terms and conditions into a contract which would not otherwise be there. ...... If it can be used to introduce terms which were not already there, it must also be available to add to, or vary, terms which are there already, or to interpret them.'
Mr. Seervai therefore submitted that looking at it either way, either there is a contract arrived at between the parties or in any case the Defendants ought to be estopped in view of their conduct and the injunction as sought ought to be granted. Mr. Seervai submitted that irreparable damage is already being caused to the Plaintiffs and there is no reason why it should be continued any further by declining injunction as sought by the Plaintiffs.
25. Mr. Chagla, learned senior counsel for the Defendants, submitted that firstly the reliance on the interim order passed by A. P. Shah. J. in the above-referred case was wholly misconceived. He pointed out that whatever interim relief was granted by the learned Judge in that order had been modified in appeal in the order passed by Y.K. Sabharwal, C.J. (as he then was) & S.H. Kapadia, J. on 30th June 1999 arising from the order passed by the learned Single Judge. In the last paragraph of the Appeal Court order, the Division Bench has observed -
'Prima facie, we are of the view that as an interim measure, the appellants should not be asked to purchase the production of the sister concern of the respondents.'
Yet as an appropriate arrangement, the learned Judges thought it fit to continue the order for a period of one year i.e. till the end of July 2000, that too subject to the modification that the appellants would be required to take the supply maximum to the extent of 25 lakhs pieces per month, and after the expiry of one year the Plaintiffs in that suit were to compete with other tenderers if so advised. The submission of Mr. Chagla therefore was that the Division Bench had clearly expressed a contrary opinion to that of the learned Single Judge in the Appeal Court order. It had however continued the arrangement in a modified form for a limited period. The submission therefore was that the order of the learned Single Judge will have to be taken as reduced in its effect not only with respect to the operative part of the order, but on the proposition laid down therein when the Division Bench specifically observed that prima facie they were of the view that as an interim measure, the appellants should not be asked to purchase the production of the sister concern of the respondents. Mr. Chagla also pointed out that it is this particular party, namely M/s India Containers, being aggrieved by the Appeal Court order, carried the matter to the Apex Court. During the pendency of the S.L.P., a settlement was arrived at between theparties and therefore M/s India Containers withdrew their S.L.P. The submission of Mr. Chagla therefore was that the criticism of the Division Bench on the order passed by the learned Single Judge remains as existing in the Appeal Court order.
26. That apart, Mr. Chagla relied upon the observations of the Apex Court in Empire Industries Ltd. v. Union of India, on the forces of interim order as precedents. In paragraph 58 of that judgment, the majority judges speaking through Sabyasachi Mukharji (as he then was) observed -
'Different Courts sometimes pass different interim orders as the Courts think fit. It is a matter of common knowledge that the interim orders passed by particular Courts on certain considerations are not precedents for other cases which may be on similar facts.'
It is however relevant to note that Varadarajan J. has expressed his inability to subscribe to that view in his descanting one para order in that very judgment which refers to this para 58. In any event, the fact remains that majority view of the Apex Court in that judgment was that interim orders could not be treated as precedents, and Mr. Chagla submitted that in the instant case when that order had been commented upon by the Appeal Court adversely and when that observation has remained undisturbed, surely such an interim order could not be used as a precedent.
27. That apart. Mr. Chagla laid more emphasis on the distinguishing features in the two cases of M/s India Containers and the present one. As recorded in the order of A.P. Shah. J, in para 4, upon an assurance given by the Defendants to Mr. Munshi (of Plaintiffs) that if he opened a new plant at Waluj, right next to the Defendants' plant, then the Defendants would ensure full upliftment of the Plaintiffs' production. Mr. Munshi purchased a land for the new plant at Waluj in 1987. In the instant case, Mr. Chagla pointed out that the letter at Exhibit-B to the plaint issued by the Defendants on 21st November 1983 clearly stated that the Plaintiffs were being informed about their expectations for the year 1984 and that it was only an indication of their requirement and not a guaranteed commitment. Then in the case of M/s India Containers, as can be seen from para 5 of the order of A.P. Shah, J., the Defendants had issued a certificate specifically to coincide with the public issue of M/s India Containers categorically stating that the Plaintiffs' entire production of oval tin containers was being purchased by them. In the present case, there was no such assurance. On the contrary, the statements of the Plaintiffs in their prospectus in February 1994 clearly showed that they had in fact not closed down their factory at Taloja as claimed by them initially in their plaint and as in fact admitted by them in the rejoinder. Mr., Chagla also pointed out that in the case of M/s India Containers, it is the Defendants who had given loan of Rs. 30 lakhs initially to the Plaintiffs as recorded in para 12 of the order of the learned Single Judge. In the instant case, the Plaintiffs were expected to make their own financial arrangement. It is on the strength of these salient features that the learned Judge at the end of para 12 has observed -
'In view of these facts and circumstances prima facie 1 find considerable substance in the Plaintiffs' case that there was a clear understanding betweenthe parties whereby the defendants had agreed to lift the entire product of the plaintiffs. If we read the various letters and documents in the light of the subsequent conduct of the parties, there is very little doubt that the plaintiffs' unit has functioned almost as a captive unit of the defendants.'
28. Mr. Chagla then commented on the cases which were referred to in the order passed by A.P. Shah. J. In Courage & Co. Ltd. v. Carpenter, there was a specific covenant not to sell on the demised premises any malt liquors other than such as shall have been purchased from the landlord. In Sky Petroleum Ltd. v. VIP Petroleum Ltd., the Defendant Company under a contract had agreed that for a minimum period of 10 years it would buy all the petrol and diesel fuel that it needed for its filling stations from the Defendants. As far as the Judgment in Foley v. Classique Coaches Ltd., is concerned, Mr. Chagla pointed out that the distinguishing feature was that there was an arbitration clause regarding price and nothing was left uncertain. In that judgment, there was specific reference to sections 8 and 9 of the English Sale of Goods Act corresponding to sections 9 and 10 of the Indian Sale of Goods Act. In the judgment of Lord Buckmaster, there is a specific reference to the arbitration clause in the contract which was intended to cover the question of price. Viscount Dunedin in his Judgment observed -
'This case arises upon a question of sale, but in my view the principles which we are applying are not confined to sale, but are general principles of the law of contract. To be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. .... We are here dealing with sale, and undoubtedly price is one of the essentials of sale, and if it is left still to be agreed between the parties, then there is no contract.'
Mr. Chagla submitted that in the case of Foley u. Classique Coaches (supra), there was an arbitration clause about the price and it was in that context that there was a certainty and the Judgment was rendered. In the present case, he submitted that price is not determined and that being so, specific performance cannot be granted. Even in the case of Jairam Valjee v. Indian Iron & Steel Co. Ltd. (supra). In the correspondence there were specific words about total requirements and all their future requirements. Mr. Chagla therefore submitted that the cases relied upon by the learned Judge as also the case before the learned Judge itself was distinguishable from the matter in hand wherein there was no such specific assurance nor could it be spell out contrary to Exhibit-B to the plaint. Besides, in the present case, there was no agreement whatsoever either on quantity or on price.
29. Mr. Chagla then relied upon a judgment of a Division Bench of this Court in Shree Ambarnath Mills Corporation v. D.B. Godbole, Custodian of Evacuee Property. In that matter, there was a breach on the part of the displaced persons who had taken over the particular mill and who were to make payments in particular manner. The property was therefore soughtto be taken over by the custodian. An injunction was sought contending that there was a negative covenant and that the custodian could not lease out the property to anybody else. In para 14 of that judgment, the Division Bench observed -
'It is true that the liability (disability) of the Court to compel specific performance of an affirmative covenant does not preclude the Court from enforcing a negative covenant contained in the agreement. The negative covenant need not be express: it may be implied from the tenure of the agreement. But the covenant to be negative must be one by which a party to the agreement undertakes either expressly or by necessary implication not to act in a particular manner. Whether an agreement is affirmative or negative is a matter of substance and not of mere form and the negative stipulation, whether it is express or implied must be distinct; and an affirmative agreement does not by itself imply a negative agreement not to do something inconsistent herewith. Otherwise, of every affirmative agreement a breach would be restrained by an injunction even if the Court is unable to compel specific performance of that affirmative covenant. An agreement to sell property to be a certain person does not necessarily imply a negative agreement that it will not be sold to another person. If breach of an agreement to sell property is to be restrained by an injunction, reliance cannot be placed upon the negative implication of the affirmative covenant to sell the property. There must be something in the agreement, apart from the affirmative agreement, which shows that the promisor has expressly or by necessary implication agreed not to sell the property to any person other than the purchaser. There is no such covenant in this case and we do not think that the agreement to sell or allot the properties to the plaintiffs implies an agreement that the properties will not be sold to other persons. We are, therefore, unable to hold that the plaintiffs can sustain their right to obtain an injunction relying upon the agreement for sale of the properties in their favour.'
Mr. Chagla therefore submitted that as held by the Division Bench, a covenant to be negative must be one to which the party to the agreement undertakes expressly or by necessary implication not to act in a particular manner, and that whether an agreement is affirmative or negative, whether it is express or implied, it must be distinct, and an affirmative agreement does not by itself imply a negative agreement not to do something inconsistent therewith. The submission of Mr. Chagla was that the view taken by the learned Single Judge in the case of M/s India Containers was contrary to the judgment of the Division Bench and for that reason also could not be pressed into service.
30. Mr. Chagla lastly submitted that when it conies to the kind of injunction that the Plaintiffs have sought, it would amount to granting a mandatory injunction in favour of the Plaintiffs. This is because as admitted by the Plaintiffs themselves, their factory has already been closed and the workers have left the work. Mr. Chagla drew my attention to the chart annexed to the plaint at Exhibit-E and pointed out that it was only in two months of April and May 1997 that the Plaintiffs could say that the necessary target of 51.5. lakhs tins had been attained. The Plaintiffs' letter dated 2nd September 1997 (Exhibit-F to the plaint) itself states that in that month they had received orders for only 7 lakhs cans for Hyderabad and nil for Aurangabad. In the letter dated 20th July 1999, the Plaintiffs havethemselves stated that the Defendants have failed to give orders in breach of their assurance for a period of 15 months prior thereto. Apart from the clear delay of 8 months from the date when orders were completely stopped, there was a clear fall in the orders placed for over 2 years resulting ultimately into Plaintiffs shutting down their work and laying of the work. No ad-interim injunction had been granted when the matter was moved in February 2000. Now at this stage to grant an interim injunction as sought by the Plaintiffs would amount to granting a mandatory injunction. Mr. Chagla therefore referred to and relied upon para 14 of the judgment of the Apex Court in the case of Dorab Cawasji Warden v. Coomi Sorab Warden, where the Apex Court had observed that mandatory injunctions are granted generally to preserve or restore the status quo of the last non-contested status which preceded the pending controversy until the final hearing. The first guideline stated in that para is that the Plaintiff has a strong case for trial that it shall be of a higher standard than a prima facie case that is normally required for a prohibitory injunction. In the present case, Mr. Chagla submitted that such a case had not been made out and therefore injunction ought not to be granted.
31. Mr. Seervai, learned counsel for the Plaintiffs, in his rejoinder submitted that what one has to see is the balance of convenience. In the instance case, if an order was passed, the Plaintiffs would be making their supplies to the Defendants. As far as the relief of injunction is concerned, Mr. Seervai submitted that the Plaintiffs have a case to go for a trial and during that period they ought to be protected. On the submission of Mr. Chagla that specific performance itself was difficult and hence injunction was not expected to be granted. Mr. Seervai submitted that the Plaintiffs had pleaded an alternative case of estoppel and on that basis at least an injunction was necessary.
32. In this behalf, one also has to remember that we are essentially dealing with the specific performance of the alleged contract and, as observed by the Apex Court in Ganesh Shet v. Dr. C. S. G. K. Setty, in a suit for specific performance the evidence and proof of the agreement must be absolutely clear and certain. In para 14 of that judgment, relying upon 'Pomeroy on Specific Performance of Contracts', the Apex Court observed
'14. In Pomeroy on Specific Performance of Contract (3rd Edn.), (para 159) it is stated clearly that a greater amount or degree of certainty is required in the terms of an agreement, which is to be specifically executed in equity, than is necessary in a contract which is to be the basis of an action at law for damages. An action at law is founded upon the mere non-performance by the defendant, and this negative conclusion can often be established without determining all the terms of the agreement with exactness. The suit in equity is wholly an affirmative proceeding. The mere fact of non-performance is not enough: its object is to procure a performance by the defendant, and this demands a clear, definite, and precise understanding of all the terms; they must be exactly ascertained before their performance can be enforced.'
33. In a matter which came before me, although, undoubtedly concerning sale of land, in Sharad P. Mote v. Prakash M. Yadav, relying upon the aforesaid observations of the Apex Court. I have observed in para 15 as follows :
' 15. I have gone through the rival submissions canvassed by the appellant as well as by the respondent- The guidelines laid down by the Apex Court in the above cited case of Ganesh Shet are very clear. As laid down by the Apex Court, there is a difference in the action in law founded upon a mere non-observance of terms of an agreement and an affirmative proceeding in the nature of specific performance. To grant a decree for specific performance, the Court has got to be satisfied about the terms of the understanding and they have to be clear and definite. This is because the object of specific performance is to procure a performance by the defendant which has got to be with respect to definite terms. In any case, where there is any conflict of evidence which leaves uncertainty in the mind of the Court as to what the terms of the contracts were, the enforcement of the contract will have to be refused.'
On drawing attention of Mr. Seervai to these guidelines laid down by the Apex Court and followed by me in the above matter, Mr. Seervai submitted that those guidelines are in matters concerning immovable properties. In the present case, we are concerned with the sale of goods and as far as the goods are concerned, there can be future goods and there can be unascertained goods as provided under the Sale of Goods Act. 1930. Mr. Seervai submitted that as far as price of goods is concerned, section 9 of the Act itself provides that they may be determined by the course of dealings between the parties. He therefore submitted that the fact that the price was not determined in the present case need not deter this Court from granting injunction as sought by the Plaintiffs and the observations of the Apex Court on specific performance in the context of immovable property should be read as concerning specific performance in immovable properties only, and a specific performance of a contract concerning sale of goods ought to be dealt with differently. On this however Mr. Chagla again drew my attention to the observations of the Kings Bench Division in Foley's case (supra), wherein the provisions of the English Act have been specifically referred and it was observed that when one was dealing with the sale, and undoubtedly price was one of the essentials of the sale. If it was left still to be agreed between the parties, then there was no contract.
34. Having considered the rival submissions of both the counsel, assuming that the observations of the Apex Court in Ganesh Shet's case (supra) are in the context of immovable property, it cannot be ignored that they are concerning specific performance. Similarly, the requirements expected in the case of a mandatory injunction in the case of Dorab Cawasji (supra) have also to be kept in mind. In the instant case, the Plaintiffs are seeking enforcement of a contract allegedly spelt out in the letter (Exhibit-B to the plaint) and also supported by the discussions between Mr. Mohta of the Plaintiffs and Mr. Warrier of the Defendants. As against that, the Defendants are in terms disputing execution of any such contract. They are relying upon specific terms of the letter at Exhibit-B to the plaint which clearly states that they are not making any commitment whatsoever. Thecase of the Defendants is that the decision was taken by the Plaintiffs as prudent businessman to set up the plant at Hyderabad and, as far as the case of the Plaintiffs initially pleaded in the plaint that the Plaintiffs shifted their entire plant is concerned, they have themselves given it up on the affidavit in rejoinder. The prospectus of the Plaintiffs published in February 1994 is also quite eloquent which shows that the activities of the Plaintiffs continue not merely at Hyderabad but also at Taloja and that they were expanding and supplying to other parties. The facts in the case of M/s India Containers are clearly distinguishable when in that matter the public issue of M/s India Containers was supported by the present Defendants. The present Defendants had given a loan of Rs. 30 lakhs (with a further release of Rs. 50 lakhs as working capital) and, as recorded by the learned Judge in para 4 of his judgment, there appeared to be a clear commitment to lift the entire production. In the present case, there is no such commitment at least in writing. As far as the discussions between Mr. Mohta and Mr. Warrier are concerned, that is a matter of evidence. As observed by the Apex Court in the case of Ganesh Shet (supra) by quoting Pomeroy on Specific Performance of Contract, the greater amount or degree of certainty is required in the terms of agreement, which is to be specifically executed in equity. The action in equity is wholly an affirmative proceedings which requires a stronger evidence. This is because the object of specific performance is to procure a performance by the Defendants which has to be with respect to definite terms. In any case, where there is any conflict of evidence, which leaves uncertainty in the mind of the Court as to what were the terms of the contract, the enforcement of the contract will be very difficult.
35. The Plaintiffs do not dispute that the price was never certain or fixed. They also accept that the purchase was subject to the requirement of quality control. The only thing in their favour is that they established a plant at Hyderabad adjacent to the Defendants' supplier and continuously their supplies were taken up by the Defendants. On that basis, alternatively the case of estoppel is also sought to be made. In my understanding, when a case is sought to be made on the basis of estoppel, surely equally stronger evidence is required and, at a prima facie stage when one is looking into the material, unless that is clear, one cannot grant mandatory injunction of the kind that is sought by the Plaintiffs.
36. Hence, on the basis of the material before me, I cannot hold that the Plaintiffs have made out a case for injunction. The motion is therefore dismissed. The parties will bear their own costs.