TMI Blog2007 (12) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... and day to day affairs of the First Respondent in respect of media, advertisement and related activities. By a Deed of Assignment dated 1st April 2007 all the rights and obligations of the Second Petitioner under the first agreement were duly assigned in favour of the First Petitioner. Clause 9 of the agreement provided that during the contractual term, the First Respondent shall not engage any other person for or in relation to or in connection with the subject matter of the Agreement including the rights granted inter alia under clause 4.2. Clause 17 of the agreement defines the term of the Agreement. Under clause 17.1, the agreement came into force and effect on 16th October 2003 and was to continue to remain in force for a period of four years from the date of the execution of the agreement or till the conclusion of the ICC World Cup 2007, whichever was later. 3. According to the Petitioners, the agreement was executed on 12th December 2003 and though it has come into force from an anterior date, agreement being valid for four years from the date of the execution would continue to subsist until 11th December 2007. On the other hand, according to the First Respondent, part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommence discussions with a view to the extension of their relationship beyond the Term. For sixty (60) days thereafter, Yuvraj agrees to negotiate in good faith only with Percept, and not with any third party, concerning the renewal /extension of the arrangement contemplated under this Agreement and/or for the right after the Term to the use of his endorsement or for the arrangement contemplated by this Agreement in association with any goods or services. Only after such sixty days (60) day period, Yuvraj shall have the right to negotiate with other persons, subject however to subclause 19.2. 19.2 Right to First Refusal. After the Term of this Agreement, in the event the good faith negotiations initiated under clause 19.1 fail to result in mutually agreeable terms of extension of the agreement, Yuvraj shall be free to negotiate with any third party. Provided always that Yuvraj agrees not to accept any offer for his endorsement, promotion, advertising, or other affiliation with regard to any goods or services or for arrangement similar to the transaction hereunder including the appointment of another agent without first providing Percept with written notice of such offer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by such third party. If the Petitioners fail to accept such an offer, the First Respondent would thereafter have a right to enter into an agreement with the third party. 7. Clause 19.2 contains a negative covenant. The negative covenant is that upon the expiry of the term of the agreement, the First Respondent would, in the event that negotiations with the Petitioners fail to result in a concluded contract in pursuance of clause 19.1, be free to negotiate with a third party subject to the condition that before the contract is awarded to a third party, the Petitioners would have the right of first refusal. The First Respondent is precluded from concluding an agreement with a third party until an opportunity is granted to the Petitioners to match the offer. Should the Petitioners agree to match the offer of the third party, the First Respondent is under an obligation to award the contract only to the Petitioners. Interlocutory Relief: 8. Where an application is made for an interlocutory injunction during the pendency of a suit, the exercise of discretion by the Court is guided by (i) Whether the Plaintiff has a prima facie case; (ii) Whether the balance of convenience ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... j hereby irrevocably appoints Percept and its directors and employees as his duly constituted attorneys, to represent him in respect of the subject matter of this agreement, execute all necessary contracts and other documents in relation thereto and take all necessary actions in this regard on his behalf pursuant to or in connection with this Agreement. Yuvraj further agrees to unconditionally ratify all actions of Percept and its directors and employees taken by them under or pursuant to this Agreement. The services which the First Petitioner is required to provide under the agreement are defined in clause 3 of the agreement as follows: It is clarified that Percept will prepare all the material for the advertising, marketing and management of all agreements, legal paperwork and profile for Yuvraj in respect of the Services provided by Yuvraj. Percept shall market and manage the endorsements, events, public appearances, social/charity events, entertainment event, sports management marketing, internet marketing, radio interviews, brand, all intellectual property rights, public relations activities, broadband publicity, worldwide merchandising rights, legal rights and oblig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting. And marketing is what translates individual success on the field into commercial success off the field. The Promotion agreement between the Petitioners and the First Respondent is to provide an interface of the First Respondent with the world outside. The agreement covers almost the entire gamut of the public life of a modern day cricketer - events, media, intellectual property, even fan clubs and domain names. An agreement of this kind is founded on trust, confidence and the basic principles which underlie a fiduciary relationship. The agreement is an instrument to provide an exposure to the public persona of the sportsperson. The public image of the sportsman is what the agreement is inextricably involved in generating. And the agent who represents the sportsman, negotiates on his behalf and deals as his sole and exclusive representative is a vital link in the creation of a public image. Such agreements are founded on trust and confidence. Where trust and confidence have ceased to exist in a relationship, the relationship cannot survive. The law will not enforce and compel parties to observe a relationship such as this where the foundation upon which it exists disappears. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : (1981)ILLJ 121 SC (per A.P. Sen, J.); and Gujarat Bottling co. Ltd. v. Coca Cola Co. (1995) 2 SCC 545 13. The question, in so far as the Petitioners are concerned, is considered in a decision of the Supreme Court in Percept D'Mark (India) (P) Ltd. v. Zaheer Khan AIR 2006 SC 3426 . The clause in the agreement that was entered into by the Petitioner in that case - clause 31(b) - contained a negative covenant under which the parties had initially agreed to enter into negotiations for the renewal of the existing contract by a stipulated date. The contract provided, as in the present case, that negotiations will exclusively take place for a stipulated period between the parties alone and upon the expiry of the period, the Respondent would be entitled to negotiate with other persons. The contract, however, contained a right of first refusal. In a petition under Section 9 of the Arbitration and Conciliation Act, 1996, a Learned Single Judge of this Court granted an ad interim injunction restraining the Respondent there from entering into an agreement or arrangement with any third party without first complying with his obligations under clause 31(b) of the Agreement. A Divisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty with whom he did not desire to deal; (v) The grant of injunctive relief in a contract of a personal or fiduciary nature such as management and agency contracts for sportsmen or performing artistes would result in serious hardship notwithstanding the fact that there was a loss of confidence in a manager or agent who has been engaged in a fiduciary capacity. The clause was considered to be in restraint of trade and hit by Section 27 of the Contract Act: Clause 31(b) contains a restrictive covenant in restraint of trade as it clearly restricts Respondent 1 from his future liberty to deal with the persons he chooses for his endorsements, promotions, advertising or other affiliation and such a type of restriction extending beyond the tenure of the contract is clearly hit by Section 27 of the Contract Act and is void. The said covenant, as noticed earlier, curtails the liberty of Respondent 1 Zaheer Khan even though the contract has been completed to accept any offer for his endorsement, promotion, etc. even by dealing with any person of his own. 14. The judgment of the Supreme Court is, however, sought to be distinguished in the submissions which have been urged on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a negative covenant is valid, it would be appropriate for the Court to grant an injunction to enforce it, at the interim stage. In the present case, clause 19.2 begins with the words after the term of this agreement , meaning thereby that the clause contemplates an eventuality of enforcement upon the expiry of the term of the contract. The effect of the negative covenant is that upon the expiry of the term of the contract, the First Respondent is precluded from entering into a contract with a third party without offering a right of first refusal and should the First Petitioner agree to match the offer received by the First Respondent from a third party, the First Respondent is bound to award the contract to the First Petitioner alone. It is exactly this kind of negative covenant which operates beyond the term of a negotiated agreement between the parties that has been held by the Supreme Court to be void as being in restraint of trade. 16. The submission that clause 19.2 constitutes an independent agreement cannot be accepted for more than one reason. Clause 19.2 is a constituent part of clause 19 which deals with 'negotiation and the right of first refusal'. Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s unable to compel specific performance. Lifting of the bar is not a mandate to the Court to grant an injunction for performance of a negative covenant in every case. Whether as a matter of fact an injunction should be granted for performance of a negative agreement is to be assessed on the application of sound judicial principles, on the circumstances of each case. Where as in the present case, the negative agreement would amount to a clause in restraint of trade, the Court would be justified while discharging its judicial function in declining to grant an injunction for the performance of a negative covenant of that nature. Finally it must be noted that in the concluding part of the judgment in Zaheer Khan, the Supreme Court observed that its observations were for deciding a prima facie case for interim relief. Zaheer Khan follows a line of precedent beginning with Golikari and including Murgai and Gujarat Bottling (supra). 19. In these circumstances, I am view that the relief that has been sought in the Arbitration Petition cannot be granted. However, it would be necessary to conclude the judgment by recording the statement of the First Respondent that without prejudice to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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