INTRODUCTION

The Hon'ble High Court of Delhi in a recent judgment of Golden Tobacco Limited v. Golden Tobie Private Limited, delved into the issue of interpretation of the contracts that are determinable in nature. As per Section 14 (1) (c) of the Specific Relief Act the contracts which are determinable in nature cannot be specifically enforced. For a contract to become determinable, it needs to be shown that its clauses and terms are such that it would be possible for either of the parties to determine and terminate it without having to give any reasons. In the case of T.O Abraham v. Jose Thomas1 the court held that:

"If an agreement is shown to be determinable at the happening of an event or on the occurrence of a certain exigency, then it is ineluctable that on such event or exigency happening or occurring alone that the contract would stand determined."

The Hon'ble High Court while distinguishing whether the right of the Party to unilaterally terminate the agreement as per the contractual terms would imply that the contracts are determinable in nature or not, specifically dealt with this aspect of determinable nature of contracts in respect to the Trademark License Agreement entered between the parties.

BRIEF FACTS

Petition was filed under Section 9 of the Arbitration and Conciliation Act for restraining the Respondent, Golden Tobie Private Limited ("GTPL") from manufacturing, selling, and supplying to the market, cigarettes under the exclusive brands owned by Golden Tobacco Limited ("GTL").

GTL entered into a Master Long Term Agreement with GTPL on 16.08.2019 wherein GTL had to supply the cigarettes under its exclusive brand to GTPL who would purchase and distribute the same in the domestic and international market.Thereafter, on 12.02.2020 a Trademark License Agreement ("TLA") was also entered into between the two parties granting exclusive non-transferable and non-assignable license to GTPL in respect of the exclusive brands owned by GTL. The TLA was terminated by GTL on 14.08.2020 on account of non-payment of royalty by GTPL. However, the said notice was withdrawn by GTL in lieu of amicable settlement between the two parties leading to signing of another agreement i.e. Amendment Agreement on 29.08.2020 as per which GTPL was to pay a monthly royalty for an initial period starting from August 2020 through November 2020. The Parties agreed that they would meet in December 2020 for discussion and agreement on the minimum turnover and the royalty payment.

Thereafter, the Amendment Agreement and Trademark License Agreement was terminated via notice dated 13.02.2021 by GTL, stating the violation of the agreed terms of the Amendment Agreement by GTPL, as it did not enter further discussions regarding payment of royalty after December 2020, as agreed between the parties during signing of the amendment agreement.

Because of termination by GTL, GTPL instituted on 14.04.2021 a suit for specific performance of the Trademark License Agreement, as amended by the Amendment Agreement along with claiming of the damages, which was adjourned by the High Court. GTL filed an application under Section 8 of the Arbitration Act praying for the reference of the matter to arbitration as per the Agreement Terms. The I court allowed the application vide order dated 4.06.2021 which led to GTPL filing an appeal against the said order, which was dismissed. GTPL then filed a writ petition opposing the order dated 4.06.2021, which is pending before the court.

The Section 9 Petition of GTL was listed before this court on 11.06.2021 and the court passed an ex parte order granting ad interim injunction to GTL by restraining the Respondents (GTPL) from manufacturing, supplying, and selling cigarettes under the exclusive brand of GTL.

In addition to filing of Section 9 Petition, GTL also sent a notice dated 15.07.2021 for appointment of the arbitrator as per Clause 12 of the Agreement. On refusal of GTPL to appoint arbitrator, GTL filed a petition under section 11 of the Arbitration and Conciliation Act.

Footnote

1 (2018 1 KLJ 128

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