India: Dispute Resolution & Arbitration Monthly Update | April 2022

Universal Petro Chemicals Ltd v. B.P. PLC and Ors

Civil Appeal Nos. 3127 and 3128 of 2009

Background facts

• A Collaboration Agreement was executed between Universal Petro Chemicals Ltd (Appellant) and Aral Lubricants, a German company (Respondent No. 3), under which the Appellant was required to manufacture lubricants using the formulation of Aral and was given exclusive license for distribution, blending, rebranding, and marketing of Aral lubricants in India (Collaboration Agreement). Subsequently, necessary approvals were obtained from RBI under the Foreign Exchange Management Act, 1973, which were incorporated in the Collaboration Agreement by way of a supplementary agreement.
• Later, Veba Oil, the holding company of Respondent No. 3 was acquired by B.P. PLC (Respondent No. 1), a UK entity, which was also the holding company of Castrol India Ltd (Respondent No. 2).
• Since the RBI approval was lapsing, the Appellant applied to the Ministry of Commerce and Industry for approval with respect to the royalty and extension of the term under the Collaboration Agreement. The Government accepted Appellant's request and extended RBI's approval; however, it was specified that the royalty was payable from January 01, 2003 to December 31, 2009 and the duration of the extended Collaboration Agreement would be from January 01, 2003, to December 31, 2009 by way of another supplementary agreement.
• Subsequently, Respondent No. 3 issued a termination notice claiming that the Collaboration Agreement would expire on October 31, 2004, as per Clause 5 of the Collaboration Agreement and that there would be no extension thereafter.
• Aggrieved by the termination notice, the Appellant filed a Civil Suit No.214 of 2004 before the High Court of Calcutta (HC) for specific performance of the Collaboration Agreement, as modified by the two supplementary agreements. The HC vide an interim order dated August 19, 2004, prohibited the Respondents from giving effect to the termination notice and interfering with the Appellant's usage of 'Aral' (Interim Order).

• The Interim Order was extended on three occasions and then it was vacated by the Single Judge Bench of HC vide Order dated January 10, 2005. Subsequently, the Single Judge Bench refused to grant a decree of specific performance of the Collaboration Agreement, but a decree of injunction was granted.
• Aggrieved by the Order of the Single Judge Bench of HC, the Appellant preferred an Appeal before the Division Bench of the HC, which dismissed the Appeal vide Order dated February 18, 2008.
• Aggrieved by the order passed by the Division Bench of the HC, the Appellant filed a Special Leave Petition, which was disposed of by the Supreme Court (SC) on August 24, 2005, with the direction for an expedited hearing in the suit. Thereafter, an Appeal was filed by the Appellant before SC for compensation in lieu of specific performance.
• Another Appeal was filed by Respondent No. 3 before the SC which questioned the Order of the Division Bench related to the perpetual injunction granted in favor of the Appellant.
• The counsel for the Appellant argued that the relief of specific performance of the Collaboration Agreement cannot be granted as the Collaboration Agreement expired on December 31, 2009, and by placing reliance on various cases, appellant was entitled for damages, even though such a relief was not specifically sought for either in the suit or in the Appeal before the HC.
• Against these assertions, the counsel for the Respondents contended that the judgments referred by the Appellant pertain to the award of compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, wherein the manner of calculation of compensation was either ascertainable or expressly agreed upon between the parties and are not applicable to the facts of the instant case.

Issue at hand?

• Whether compensation in lieu of specific performance can be granted under the Specific Relief Act, 1963, if not specifically claimed for in the plaint?

Decision of the Court

• At the outset, SC observed that the Appellant admitted to the fact that no relief for damages or compensation was claimed in the suit by the Appellant and such a relief was not sought for either before the Division Bench of HC or before the SC. The Court further noted that the Appellant also did not take any steps to amend the Appeal even after the date of expiry of the Collaboration Agreement i.e., December 31, 2009.
• Thereafter, SC examined the scope of Sections 21(4) and (5) of the Specific Relief Act, 1963 in Shamsu Suhara Beevi v. G. Alex and Anr1, relied upon by the Respondents to contend that the Plaintiff, who has been remiss in expressly seeking the relief of damages under Section 21(5) of the Specific Relief Act, 1963, is not entitled for any such relief.
• SC observed that in the Shamsu case (supra), the recommendations of the Law Commission of India were discussed, wherein it was recommended that in no case the compensation should be decreed unless it is claimed by a proper pleading. SC further noted that the Law Commission was of the opinion that it should be open to the plaintiff to seek an amendment to the plaint at any stage of the proceedings in order to introduce a prayer for compensation, whether in lieu or in addition to specific performance.
• Upon considering the facts in the instant case, SC held that no claim for compensation for breach of Collaboration Agreement was claimed either in addition to or in substitution of the performance of the agreement. With respect to the judicial pronouncements relied upon by the Appellant, SC held that they were not applicable to the instant case.
• Further, SC opined that the Appellant might have been interested in the relief of specific performance of the Collaboration Agreement when it filed the Special Leave Petition in 2008 as the Collaboration Agreement subsisted till December 31, 2009. Even thereafter, the Appellant did not take any steps to specifically plead the relief of damages or compensation.
• In view of the above, SC held that the Appellant is not entitled to claim damages for the period between August 24, 2005, to December 31, 2009, and thus, refused the request of the Appellant for grant of damages.

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