TMI Blog1999 (5) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondents to deposit the damages with this honourable court or in the alternative to furnish security for the said amounts recoverable and the damages by furnishing bank guarantees. 2. The brief facts giving rise to this petition are : Respondent No.1 and its affiliated companies originated and own a distinctive restaurant operation system (the Pizza Hut system ), which they license directly or through affiliates throughout the world. Respondent No.1 has the exclusive right within India to use and to sublicense the use of the Pizza Hut system. On October 27, 1997, three agreements, namely development agreement, technology licence agreement and trademark franchise agreement were executed by the petitioner and respondent No.1, whereunder respondent No.1 granted to the petitioner non-exclusive right to operate 25 Pizza Hut outlets for the territory of Mumbai and Navi Mumbai. The terms and conditions of the licence were specified in the said agreements. The aforesaid agreements provided for termination of the contract by respondent No.1 on the happening of any of certain specified events. These agreements also provided for adjudication of any dispute or difference of any nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted therein. Further, the petitioner committed breaches of the contract inasmuch as certain cheques issued by the petitioner bounced when presented for encashment. Respondent No.1 also discovered that the petitioner's financial position was not sound and further the managing director of the petitioner-company, namely, Dr. Viral Shah was also involved in a criminal case. It is also alleged that the development agreement dated October 27, 1998, contemplates the execution of a further contract of trade mark franchise between the petitioner, and respondent No.2, namely, Pizza Hut Inc. In this view of the matter, the petitioner is not entitled to the interim relief inasmuch as neither the outlet agreement nor the trade mark franchise agreement has been executed between the petitioner and respondent No.2, who is the owner of the trade mark Pizza Hut . As per the development agreement, no outlet can be operated for trade prior to the execution of the trade mark licence agreement between the developer (the petitioner) and respondent No.2. It is further alleged that the development agreement dated October 27, 1997, falls in the category of contracts, the specific performance of which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Singhvi appearing for the petitioner contended that since the petitioner has not committed any breach of the contract, its termination by respondent No.1 was not valid and further the disputes between the parties with respect to the agreements dated October 27, 1997, have been referred to the Arbitral Tribunal, the termination of the agreement by the respondent cannot be treated as finality and, therefore, the petitioner is entitled to interim protection till the matter is decided by the Arbitral Tribunal. According to him, respondent No. 1 was not legally entitled to exercise the right of termination of the contract with respect to outlets developed by the petitioner at Hyde Park and Juhu as they were substantially completed and were to be ready to go into operation in January, 1999. Reliance was placed on Clauses 9.1 and 6.5 of the development agreement dated October 27, 1997, in support of the said submission. On the other hand, it is contended by learned senior counsel Mr. Arun Jaitley that the petitioner having itself acted in violation of the terms of the development agreement dated October 27, 1997, and having breached the contract, cannot legally claim any interim protec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fically enforced because it is covered by Section 14 of the Specific Relief Act, no injunction can be granted to prevent breach of such contract. On the contrary, learned senior counsel for the petitioner submitted that the agreements executed by the parties do not fall within the mischief of Section 14 of the Specific Relief Act inasmuch as clause 13.11.1 of the development agreement empowers arbitrators to order specific performance of the contract. It is significant to mention that admittedly the contract was terminated by respondent No.1 vide notice dated December 14, 1998. The dispute between the parties has been referred to the Arbitral Tribunal in accordance with the arbitration agreement. The petitioner can be adequately compensated for the loss caused by award of damages in the event of it succeeding in the arbitral proceedings. Moreover, if the interim reliefs sought by the petitioner are granted it would have the effect of practically granting a decree for specific performance of the contract. 10. Next it was contended by Mr. Singhvi that respondent No.1's letter dated March 23, 1998, constitutes a contract conferring exclusive right on the petitioner to operate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foregoing standards and policies in conjunction with the trade marks, service marks and trade names provides the basis for the valuable goodwill and wide acceptance of the system. Moreover, the establishment and maintenance of a close personal working relationship with the licensee in the conduct of its restaurant business, its accountability for performance of the obligations contained in this agreement, and its adherence to the tenets of the system constitute the essence of the licence provided for herein. The licensor and licensee have entered into a development agreement dated October 27, 1997 (the development agreement) pursuant to which and subject to the terms whereof, the licensor granted to the licensee certain nonexclusive rights to establish outlets in the territory. To allow the licensees to use the marks in the operation of the outlets developed thereunder a trade mark license agreement dated the date hereof has been entered into between the licensee and Pizza Hut Inc. ('PHI') The licensee desires the use of the system to operate the outlets developed under the development agreement and the licensor is entitled to grant to third parties the right to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternational (I) Pvt. Ltd. was a 100% subsidiary of PepsiCo Restaurants Inc., USA. Subsequent to a global business restructuring, the restaurant business of PepsiCo Inc, was hived off into a separate company called Trion Global Restaurants Inc. Effective October 6, 1997, the name of PepsiCo Restaurants International (I) Pvt. Ltd. has been changed to Trion Restaurants (I) Pvt. Ltd., which is an ultimate subsidiary of Trion Global Restaurants Inc. Trion Restaurants (I) Pvt. Ltd. had granted Shubh mangal Merchantile (P) Ltd. all rights and obligations under the development, trademark and franchise agreement for Pizza Hut, exclusively for the territory of Mumbai and Navi Mumbai. Accordingly, Shubh mangal Merchantile (P) Ltd. is authorised to open a chain of stores selling products under the brand name 'Pizza Hut' in Mumbai and Navi Mumbai. Thanking you, Yours faithfully, (Sd.) Tricon Bhansali, Director--Finance and Planning. 16. According to Mr. Singhvi, the said letter has to be construed as a written contract between the parties superseding Clauses 1.1 and 1.4 of the technology licence agreement and Clause 1.2 of the development agreement and since it contains exclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xclusive licence to the petitioner to operate 25 'Pizza Hut' outlets within the territory of Mumbai and Navi Mumbai. As per the agreements, the aforesaid terms of the agreements can be changed only in writing signed by both the parties. Undisputedly, the letter dated March 23, 1998, was not signed by the respondents. Consequently, the letter dated March 23, 1998, does not satisfy the requirements of the aforesaid clauses of the main contract and, therefore, cannot override the main contract or otherwise create any obligation or liability independently of the main contract pertaining to grant of non-exclusive right to the petitioner to operate Pizza Hut outlets within the territory of Mumbai and Navi Mumbai. 19. Even assuming for a moment that the letter dated March 23, 1998, can be construed as a concluded contract, the question that arises for consideration is whether it contains a negative covenant restraining the respondents from granting licence to a third party for operating Pizza Hut outlets within the territory of Mumbai and Navi Mumbai. Mr. Singhvi learned senior counsel, has laid much emphasis on the expression exclusively for the territory of Mumbai and Navi M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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