Full Text
HIGH COURT OF DELHI
Date of Decision: 26.02.2018
M/S. RESBIRD TECHNOLOGIES PVT. LTD. ..... Plaintiff
Through Mr.Virender Mehta and Mr.Gautam Mehta, Advs. with Mr.Tarak Saha/AR
PVT. LTD. & ORS. ..... Defendants
Through Mr.Vaibhav P.Shukla, Mr.Vivek Sarin, Mr.Vijay Jha and Mr.Kishlaya
Shukla, Advs.
IA No.1754/2018
JUDGMENT
1. This is an application filed under Order 39 Rules 1 and 2 CPC seeking to restrain the defendants from using any other GDS of a third party except that of the Amadeus GDS (Global Distribution System). As per the plaint it is stated that the defendants entered into a Subscriber Agreement on 1.11.2016 with the plaintiff. As per the said agreement the term of the agreement was for four years whereby the defendants were obliged to use the Amadeus GDS for the said period. An amount of Rs.3.[2] crores was paid by the plaintiff and received by the defendants which was paid keeping in view the duration of the said agreement and also keeping into account the profits that would be made by the defendants while operating the said 2018:DHC:1426 Amadeus GDS system.
2. The case of the plaintiff is that subsequently the defendant sent an email communication on 21.12.2017 expressing his intention to shift to another GDS Provider on frivolous grounds. Thereafter the plaintiff sent a legal notice to the defendants dated 29.12.2017 intimating the defendants that it was acting in violation of the terms of the Subscriber Agreement dated 1.11.2016. Hence, the present suit was filed by the plaintiff as the defendants did not pay any heed. The plaintiff claims the following relief in the plaint:- “a) to pass a decree of Rs.6,45,00,000/- (Rupees six crore forty five lakh only) with pendente-lite and future interest @ 18% per annum in favour of the Plaintiff and against the Defendants from the date of the institution of the present suit till the reaiization of the said amount; b) to pass a decree of perpetuai injunction in favour of theplaintiff and against the defendants, restraining/ prohibiting the defendants, their employees, associates, agents, etc. from using any other GDS other than Amadeus GDS for its bookings (other than that of Amadeus) for its reservations in violation of the agreement dated 01.11.2016)....................”
3. The defendants have filed their reply. It is the contention of the defendants that as far as the advance payment of Rs.3.[2] crores is concerned, the defendants have already generated enough business in the last 15 months on account of which the defendants are entitled to commission from the plaintiff equivalent to roughly Rs.3.[2] crores. Hence, it is submitted that no amount is due or payable by the defendants to the plaintiff on this account. It is further pleaded relying upon the judgments of the Supreme Court in Indian Oil Corporation vs Amritsar Gas Services & Ors. (1991) 1 SCC 533 and Section 14 of The Specific Relief Act, 1963 that no injunction can be granted restraining the defendants from shifting to any other system and that at best the remedy of the plaintiff would be to seek damages
4. This court on 06.02.2018 had directed the defendants to maintain status quo.
5. I have heard learned counsel for the parties.
6. Learned counsel for the defendants has reiterated relying upon the judgment of the Supreme Court in Indian Oil Corporation vs Amritsar Gas Services and Ors. (supra) and Section 14 of The Specific Relief Act, 1963 contending that no injunction can be passed against the defendant and at best the remedy available to the plaintiff is by seeking a decree of damages. It has also been pleaded that the entire sum of Rs.3.[2] crores given as advance was extinguished by way of providing business to the plaintiff as the consequent commission to the defendant would be around Rs.3.[2] crores itself.
7. Learned counsel for the plaintiff has made the following submissions:-
(i) He firstly submits relying upon clause 8.[3] and 8.[4] of the said
Agreement dated 1.11.2016 that in the event the defendants were to terminate the said agreement it would have to give three months notice whereas no such notice has been given. He has pointed out that in fact there has been no termination of the contract by the defendant as the defendants continue to operate the Amadeus GDS. Hence the reliance of the defendants on an alleged communication dated 18.1.2018 is misplaced as no such notice was sent to the plaintiff. Hence, the defendants are obliged to continue to use the platform of the plaintiff.
(ii) Secondly, he relies upon clause 8.[3] of the Agreement according to which in the eventuality of termination of the contract by the defendants, the defendants were to refund to the plaintiff the entire loyalty incentive, namely, Rs.3.[2] crores. Reliance is also placed on clause 9 of the said Agreement to contend that the plaintiff in the eventuality of an illegal termination of the contract was entitled to liquidated damages of 3.25 crores. Without prejudice, it is contended that the defendants should return the sum of Rs.3.[2] crores.
8. I may first deal with the contentions of the plaintiff regarding the submission that the agreement continues in force.
9. Section 14(1) of the Specific Relief Act reads as follows:- “14. Contracts not specifically enforceable.— (1) The following contracts cannot be specifically enforced, namely:— (a) a contract for the non-performance of which compensation in money is an adequate relief; (b) a contract which runs into such minute or numerous details or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the court cannot enforce specific performance of its material terms;
(c) a contract which is in its nature determinable;
(d) a contract the performance of which involves the performance of a continuous duty which the court cannot supervise.”
10. Hence, a contract for the non performance of which compensation in money is an adequate relief or which is determinable cannot be specifically enforced. The Supreme Court in Indian Oil Corporation vs Amritsar Gas Services & Ors. (supra) noted as follows:- “12......This finding read along with the reasons given in the award clearly accepts that the distributorship could be terminated in accordance with the terms of the Agreement dated 1.4.1976, which contains the aforesaid Clauses 27 and
28. Having said so in the award itself, it is obvious that the arbitrator held the distributorship to be revokable in accordance with Clauses 27 and 28 of the Agreement. It is in this sense that the award describes the Distributorship Agreement as one for an indefinite period, that is, till terminated in accordance with Clauses 27 and 28. The finding in the award being that the Distributorship Agreement was revocable and the same being admittedly for rendering personal service, the relevant provisions of the Specific Relief Act were automatically attracted. Sub-section (1) of Section 14 of the Specific Relief Act specifies the contracts which cannot be specifically enforced, one of which is 'a contract which is in its nature determinate'. In the present case, it is not necessary to refer to the other clauses of Sub-section (1) of Section 14, which also may be attracted in the present case since Clause
(c) clearly applies on the finding read with the reasons given in the award itself that the contract by its nature is determinable. This being so granting the relief of restoration of the distributorship even on the finding that the breach was committed by the appellant-Corporation is contrary to the mandate in Section 14(1) of the Specific Relief Act and there is an error of law apparent on the face of the award which is stated to be made according to 'the law governing such cases'. The grant of this relief in the award cannot, therefore, be sustained.”
11. Similarly, this court in Pepsi Foods vs. Jai Drinks (P) Ltd., 1996 (36) DRJ 711 was dealing with a issue as to whether the company Pepsi Foods India can be compelled to supply the Cold drinks concentrate to the defendants. This court held as follows:- (6) The short point involved for decision of these applications is whether at this stage "PEPSI" can be directed to continue to supply its concentrate to "JAI" so as to enable it to manufacture and market the products for which the "PEPSI" had entered into a franchise agreement with "JAI". Section 14 of the Specific Relief Act enumerates the contracts which cannot be specifically enforced. Under Section 14(i)(c) of the Act, the contract which is in its nature determinable cannot be specifically enforced. Under Section 41(e) of the Act, an injunction cannot be granted to prevent the breach of a contract, the performance of which would not be specifically enforced. On a conjoint reading of both the Sections, it is clear that the Court will not grant an injunction to prevent the breach of a contract performance of which cannot be specifically enforced under Section 14(i)(c) of the Act.
12. I may now see some of the clauses of the said Agreement that have been relied upon by the learned counsel for the plaintiff.
13. Clause 4.[1] of the said Agreement dated 01.11.2016 states as follows:-
4. Contract Term and expiration 4.[1] This AGREEMENT shall come into effect on the 1st day of November, 2016 ("Effective Date") and shall continue in full force and effect for a period of at least Four (04) years ("hereinafter referred to as "Initial Term"), whichever is later. The Agreement will get renewed automatically after the Initial Term for a period of 04 years each ("the Subsequent Term") unless terminated in accordance with Termination Clause 8. The "Contract Term" for the purpose of this Agreement refers to and includes total period of Initial Term and Subsequent Term(s) If any.”
14. Hence, the term of the contract is four years. Thereafter it automatically gets renewed for a period of four years unless terminated as stated. The contract has been entered into for the purpose of permitting the defendants to use Amaedus GDS which is used for the purpose of carrying out reservation for Airlines. In return for the reservations that are done from the system the defendants are entitled to certain commissions.
15. Section 14 of the Specific Relief Act enumerates the contracts which cannot be specifically enforced. Section 14 (1)(a) deals with the contract for the non-performance of which compensation in money is an adequate relief. Sub-clause (c) deals with contracts which in nature are determinable. Merely because, the present contract has a fixed term of four years, it would not ipso facto mean that the contract cannot be terminated. Absence of a termination clause in the agreement does not mean that the agreement is not determinable. It is quite clear from the nature of the agreement itself that it cannot be said to be an agreement that can be specifically enforced in terms of section 14 of the Specific Relief Act. In case there is a breach of contract by the defendants on account of wrongful termination the remedy of the plaintiff would be to seek damages. Injunction cannot be passed against the defendants compelling the defendants to continue to perform his business by using only the platform of the plaintiff. Merely because three months notice was not given by the defendants prior to his intention to start using another platform would be of no consequences thereof other than a claim of damages.
16. The matter may be looked at from another aspect. The clauses of the agreement do provide a situation in which if there is a breach of contract or the termination is done by the defendant he becomes liable to pay certain named amount in the contract. In fact, the plaintiff himself has filed the present suit where one of the reliefs sought is a decree of Rs.6.45 crores. Inherent in the terms and conditions of the agreement between the parties and the averments and contentions in the plaint is that monetary relief is claimed and is an adequate compensation for non-performance of the contract. The plaintiff cannot insist in grant of an injunction restraining the defendants from using the GDS of a third party except that of the plaintiff. This plea is without merit.
17. The next contention of the learned counsel for the plaintiff was reliance upon the clauses of the said Agreement which stipulate certain damages to be paid in the eventuality of illegal termination of the contract. I may look at those clauses, namely, clauses 8.[3] and 9 of the said Agreement, which read as follows:- “8.[3] - In the event that this Agreement is terminated for any reason during the Contract Term, other than by Subscriber pursuant to sub-clauses (i) or (ii) above, Subscriber agrees to refund to Resbird as on the date of such termination, without the requirement of notice or demand, the entire gross amount of loyalty incentive, upfront payment, any other incentive paid by Resbird (including the amount of any statutory deduction made there from) to Subscriber under this Agreement during the Contract term, without prejudice to Resbird's rights.” Similarly, clause 9 reads as follows:-
9. Liquidated Damages Where Subscriber during the Contract Term
(i) does not book any segment on Amadeus GDS or
(ii) books less than 72000 Segments in any Review Period or
(iii) commits a breach of any of the clauses of this Agreement,
Resbird shall be entitled to recover from Subscriber and Subscriber hereby agrees to be bound to pay to Resbird as liquidated damages an amount of Rs. 3,25,00000/- (Rupees Three Crore Twenty Five Lakh Only). The Parties hereby confirm, record and declare that the amount of compensation or liquidated damages fixed as above represent the genuine, fair and reasonable pre estimate thereof considering all the facts and circumstances as the loss and damages that would be likely suffered by Resbird on account thereof. The Parties agree that the sum named above is only, for the purposes of securing performance of this Agreement and not for the purpose of giving to the Party in default an option of paying the money either (i) in lieu of specific performance or (ii) in lieu of any other liability, pecuniary or otherwise, under this Agreement.”
18. In terms of the clause 8.[3] even if the agreement is terminated as per the said clause, the incentive paid by the plaintiff to the defendants has to be refunded. Similarly, clause 9 provides for liquidated damages in case of breach of any clause of the said agreement. Hence, the plaintiff shall be entitled to liquidated damages of Rs.3.25 crores. In the course of argument, the learned counsel for the plaintiff insisted that the defendants are bound to refund to the plaintiff the said amount of Rs.3.20 crores as advance that he has received in view of the above clauses at this stage.
19. The position regarding liquidated damages and penal damages is quite clear. Reference in this context may be had to the judgment of the Supreme Court in Kailash Nath Associates vs. DDA, (2015) 4 SCC 156. The Supreme Court in the said judgment held as follows:- “43. On a conspectus of the above authorities, the law on compensation for breach of contract Under Section 74 can be stated to be as follows:
1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.
2. Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.
3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section.
4. The Section applies whether a person is a Plaintiff or a Defendant in a suit.
5. The sum spoken of may already be paid or be payable in future.
6. The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded.
7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application.”
20. What has been contended before the court by the plaintiff is that in view of the illegal breach of contract by the defendants by seeking to terminate the said agreement even assuming that the said agreement can be terminated, the defendants are liable to pay a sum of Rs.3.20/3.25 crores as liquidated damages.
21. In view of the above legal position stated by the Supreme Court in Kailash Nath Associates vs. DDA(supra), it would be for this court to adjudicate as to whether the sum named in the contract as liquidated damages is a genuine pre-estimate of the damages or whether any other compensation is to be paid to the plaintiff which is reasonable not exceeding the amount as stated. It is not possible at this stage while adjudicating the present injunction application to conclude on the liability of the defendants.
22. It is no doubt true that the plaintiff has an apprehension that in case ultimately a decree is passed in favour of the plaintiff, it may have no means to recover its dues. Hence, the issue arose as to how the interest of the plaintiff is to be protected.
23. This question was put to learned counsel for the defendants. He submits that they are not in a position to provide any security on account of the operations of the defendant being of a very frugal nature. Liberty is granted to the plaintiff to file an appropriate application to secure its interest. If such an application is filed it would be adjudicated as per law. However, I direct the defendants to file an affidavit under Form 16A Appendix E of the CPC giving the full assets of the defendant’s company.
24. In the present application, the relief that has been sought by the plaintiff is to seek injunction to restrain the defendant from using any other GDS of a third party except the GDS of the plaintiff. In the facts and circumstances of the present case as elaborated above, in my opinion, no such injunction can be granted. I accordingly dismiss the present application. All interim orders passed by this court stand vacated. List before Joint Registrar on 16.4.2018.