2001 (11) TMI 1040 - HC - Companies Law

Summary

Issues Involved:
1. Breach of Agreement
2. Supply and Payment Discrepancies
3. Termination of Agreements
4. Suppression of Material Facts
5. Entitlement to Injunctive Relief

Detailed Analysis:

1. Breach of Agreement:
The plaintiff alleged that the defendants failed to adhere to the terms and conditions of the agreement dated 2nd October 1999. Specifically, the defendants did not supply the initial consignment of 5000 capsules within 21 days and delayed the subsequent consignment of one lakh capsules by five months. Additionally, the defendants did not provide the necessary sales promotion materials timely, impacting the plaintiff's marketing strategies.

2. Supply and Payment Discrepancies:
The defendants were accused of billing the capsules at varying prices instead of the agreed price of Rs. 5.85 per capsule. The plaintiff also claimed that the defendants dispatched consignments under the guise of storage space shortage and pressured the plaintiff to pay for them. Furthermore, the defendants allegedly diverted the infrastructure funds provided by the plaintiff for other purposes, delaying the supplies.

3. Termination of Agreements:
The defendants contended that due to the plaintiff's failure to make timely payments and lift the minimum required capsules, they terminated the agreements. The termination of the exclusive marketing rights for 'dbNorm' was effective from 16th August 2000, and for 'Glunorm' from 1st February 2001. The plaintiff did not disclose these terminations in their suit, misleading the court into believing the agreements were still in force.

4. Suppression of Material Facts:
The court found that the plaintiff suppressed material facts, including crucial communications regarding the termination of agreements. This suppression was deemed significant as it misled the court during the initial hearing, resulting in the grant of an ex parte injunction. The court emphasized that a party seeking discretionary relief must approach with clean hands, disclosing all relevant facts.

5. Entitlement to Injunctive Relief:
The court held that due to the suppression of material facts by the plaintiff, they were not entitled to the discretionary relief of an injunction. The court cited precedents emphasizing that suppression of material facts is grounds for denying such relief. The balance of convenience also favored the defendants, as they would suffer irreparable loss if restrained from selling their products, whereas the plaintiff could be compensated for any loss of business.

Conclusion:
The court vacated the ex parte injunction granted on 3rd May 2001, allowing the defendants to continue selling their products. The plaintiff's application for injunction was rejected, and they were ordered to pay Rs. 10,000 as costs. The judgment underscored the importance of full disclosure and clean hands in seeking equitable relief.