1994 (2) TMI 328 - HC - Indian Laws

Summary

Issues Involved:
1. Termination of the bottling agreement.
2. Validity of the Supplemental Agreement.
3. Plaintiff's claims regarding duress, coercion, and unequal bargaining power.
4. Justiciability of the termination clause.
5. Adequacy of damages as relief.
6. Validity of termination notices.
7. Applicability of Section 23, 28, and 39 of the Indian Contract Act.
8. Plaintiff's entitlement to interim relief.

Detailed Analysis:

1. Termination of the Bottling Agreement:
The plaintiff challenged the termination of the bottling agreement dated 5th November 1990, arguing that the termination clause (Clause 23) was illegal and void. The plaintiff claimed that the agreement was envisaged as a long-term arrangement to recoup heavy investments made in anticipation of a ten-year relationship. The termination clause allowed PFL to terminate the agreement under various conditions, including without assigning any reason upon 12 months' notice (Clause 23(e)).

2. Validity of the Supplemental Agreement:
The Supplemental Agreement dated 31st March 1992 was executed to amicably resolve issues between the parties, stating that the original agreement would terminate on 30th September 1992. The plaintiff contended that this agreement was void for lack of consideration and was a product of duress and unequal bargaining power. However, the court held that the Supplemental Agreement was valid as it was a mutual decision to terminate the contract, and both parties had agreed to discharge their respective obligations under the original agreement.

3. Plaintiff's Claims Regarding Duress, Coercion, and Unequal Bargaining Power:
The plaintiff argued that the franchise agreement was a standard form contract, leaving no option but to accept it, and that PFL exercised duress and coercion. The court found that the plaintiff did not provide material particulars to support these claims and noted that the plaintiff had experienced businessmen and a solicitor on its board. The plaintiff had the opportunity to negotiate and suggest changes to the Supplemental Agreement, indicating free consent.

4. Justiciability of the Termination Clause:
The court examined whether the termination clause was justiciable and whether the breaches pointed out by PFL were substantial enough to justify termination. The court held that the power to terminate a contract is justiciable and subject to conditions such as whether the breach goes to the root of the contract and whether it results in unjust enrichment.

5. Adequacy of Damages as Relief:
The plaintiff argued that damages would not be an adequate relief. However, the court did not find this argument sufficient to invalidate the Supplemental Agreement or to grant interim relief.

6. Validity of Termination Notices:
PFL issued two termination notices under Clause 23(c) and Clause 23(e) on 6th December 1991. The plaintiff claimed to have replied to the defect notice, but PFL denied receipt of any such reply. The court found that the plaintiff's letter dated 18th March 1992, which stated that the plaintiff had withheld reply to the notices, prima facie belied the plaintiff's claim.

7. Applicability of Section 23, 28, and 39 of the Indian Contract Act:
The plaintiff argued that Clause 23 was void under Sections 23 and 28 of the Indian Contract Act as it was unreasonable, oppressive, and against public policy. The court held that even if Clause 23 was declared invalid, the parties' right to mutually terminate the contract remained unaffected under Section 62 of the Contract Act.

8. Plaintiff's Entitlement to Interim Relief:
The plaintiff sought interim relief to restrain PFL from appointing any other bottler and to continue supplying soft drink concentrates. The court held that none of the interim reliefs could be granted as the Supplemental Agreement, which terminated the original agreement, was valid. Granting such relief would mean re-writing the contract contrary to the parties' expressed will.

Conclusion:
The court dismissed the plaintiff's applications for interim relief, upholding the validity of the Supplemental Agreement and terminating the original agreement dated 5th November 1990. The court's decision was based on the principle that parties have the right to mutually terminate a contract and that the Supplemental Agreement was executed with free consent, without duress or coercion. The court emphasized that the expression of prima facie opinion would be subject to the final decision of the suit.