2015 (6) TMI 1210 - HC - Indian Laws

Restraint on respondent from terminating the SAP Software End-User License - Whether in view of the order dated April 30, 2015 the petition under Section 9 of the Act, seeking relief of injunction against notice dated December 30, 2014 has become infructuous? - Whether in the facts of this case, the agreement in its very nature determinable and no injunction of termination notice dated April 30, 2015 can be granted? - Whether in the facts of this case, in view of the Explanation (ii)(a) to Section 10 of the Specific Relief Act, 1963, the relief for specific performance can be granted? - Whether, in view of the agreement having been terminated, an injunction can be granted to the termination notice dated April 30, 2015? - HELD THAT - Clause 2.1 of the MOU stipulated that the MOU shall come into force on the date of execution of the MOU and shall be valid for a term of 240 days from the date of execution of the MOU unless mutually extended or till the execution of definitive agreements, whichever is earlier. It is clarified that the MOU shall be superseded by the definitive agreements - Clause 5.1 of the MOU stipulated that the NTCL shall have the right to terminate the MOU forthwith upon serving written notice on the strategic partner in the event the definitive agreements are not executed to the full satisfaction of NTCL within 240 days of the date of execution of the MOU. Clause 5.2 of the MOU stipulated that either party shall have the right to terminate the MOU upon the happening of the following events by giving the other party 30 days‟ prior notice in writing; (i) should the other party become insolvent or a Receiver is appointed in respect of its properties (ii) should the other party commit a breach of any of the provisions of the MOU which is not remedied with 30 days of the receipt of written notice in this respect from the non-defaulting party. The reasons for terminating the MOU were, that in terms of clauses 2.1 and 5.1 of the MOU as the definitive agreements were not executed by KSL (Petitioner) NTCL had the right to terminate the MOU. Similarly, the MOUs entered into by the other two petitioners were also terminated by NTCL. Since we are concerned with (ii) of clause 5.1 (akin to clause 27) which contemplates 30 days notice by the respondent to the licensee i.e. the petitioner herein, of material breach of any provision of the agreement including more than 30 days delinquency in licensee‟s payment of any money due under the agreement unless the licensee, the petitioner herein, has cured such breach during such 30 days‟ period. The learned Single Judge dismissed the appellant‟s application on the ground that injunction prayed for was statutorily prohibited on conjoint reading of Section 41 and Section 14(1)(c) of the Specific Relief Act, 1963 since the contract in question was determinable in nature. The appellant‟s case was that the contract was not determinable in nature as contemplated by Section 14(1)(c) of the Specific Relief Act, 1963 since there is no clause in the agreement, which permits the respondent to terminate the agreement by giving a notice of a few days. This Court has held, although the clause does not add the word by the parties or by the defendant yet that is the sense in which, it ought to be understood - The Court went on to hold that all revocable deeds and voidable contracts may fall within determinable contracts and the principles on which specific performance of such an agreement would not be granted is that, the Court will not go through the idle ceremony of ordering the execution of a deed or instrument which is revocable at will of the executants. No relief can be granted to the petitioner and the petition is dismissed.

Issues Involved:
1. Whether the petition under Section 9 of the Arbitration and Conciliation Act seeking relief of injunction against the notice dated December 30, 2014, has become infructuous due to the termination order dated April 30, 2015.
2. Whether the agreement is determinable by its nature and if an injunction against the termination notice dated April 30, 2015, can be granted.
3. Whether the relief for specific performance can be granted under the Specific Relief Act, 1963.
4. Whether an injunction can be granted to the termination notice dated April 30, 2015, in view of the agreement having been terminated.

Detailed Analysis:

Issue 1: Infructuous Petition
The court noted that the respondent had terminated the License Agreement during the pendency of the petition. Although the petitioner did not amend the petition to challenge the termination order dated April 30, 2015, the court proceeded on the premise that the petition challenged the termination notice. Therefore, the petition had not become infructuous.

Issue 2: Determinability of the Agreement
The court examined Clause 5.1 of the License Agreement, which allowed termination by the respondent upon 30 days' notice for a material breach. The court noted that the agreement was determinable by its nature, similar to the provisions in the Indian Oil Corporation Ltd. v. Amritsar Gas Service case. The court held that the agreement was terminable, and thus, the relief sought by the petitioner could not be granted under Section 14(1)(c) read with Section 41 of the Specific Relief Act, 1963.

Issue 3: Specific Performance
The petitioner argued for specific performance under Explanation (ii)(a) to Section 10 of the Specific Relief Act, 1963, claiming that the software licenses were not ordinary articles of commerce. However, the court found that the software licenses were available from other vendors, making them ordinary articles of commerce. The court concluded that the relief of specific performance could not be granted.

Issue 4: Injunction Against Termination Notice
The court referred to the Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd. case, noting that the Supreme Court did not injunct the termination of the agreement but only restrained the respondent from entering into a contract with a third party. The court held that the termination having been effected, damages were an adequate remedy, and the agreement could not be revived. The court also noted that the merits of the termination needed to be urged before the Arbitral Tribunal.

Conclusion:
The court dismissed the petition, concluding that no relief could be granted to the petitioner. The petition was dismissed, and the miscellaneous application was also dismissed in view of the order passed in the petition.

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