24 September 2021 | Golden Tobacco Limited v. Golden Tobie Pvt. Ltd. | OMP (I) (COMM.) 182/2021 | Vibhu Bakhru J | Delhi High Court | 2021 SCC OnLine SC 4506

The court had before it a petition relating to some cigarette brands of mass appeal most of us consumed at least in student life: Panama, Gold Flake, Golden Classic, Taj Chhap and Chancellor. These brands were licensed to the respondent in perpetuity subject to payment periodically of royalty (Trademark License Agreement). The agreement could be terminated for breaches which were not cured even after a notice had been given.

Some disputes arose and the petitioner applied for an injunction against the respondent from manufacturing, selling and supplying the cigarettes under those brand names.

The respondent opposed the petition on several grounds. In rejoinder, the petitioner’s case was that under Section 14(d) of the Specific Relief Act, 1963 a contract which is in its nature determinable cannot be enforced and denying an injunction in the case would amount to specifically enforcing the Trademark License Agreement, which was a determinable contract.

What is an agreement determinable by nature and whether the Trademark License Agreement was such an agreement? The court considered this the “main question.” In answer, relying on some cases from other High Courts, the court ruled as follows and also gave some illustrative examples:

1. The question whether an agreement is in its nature determinable is required to be understood in the context of the nature of that agreement. There are certain agreements that can be terminated by either party at will or without any cause. Those are determinable.
2. Some other agreements that require service of a personal nature which by its very nature cannot be compelled are also clearly determinable.
3. There may be agreements where the right to terminate the contract is reserved for a specified party or parties. In such cases, the contracts are determinable but only at the instance of the said party and that party cannot be compelled to specifically perform the contract.
4. However, an agreement, which pertains to transfer of rights in property, cannot be considered as a determinable contract if it does not provide for termination by a party without cause.

It ruled that the agreement in question was not determinable.

The court also examined another of the petitioner’s contention, namely, because the agreement had been terminated, it could not be specifically enforced (and denial of injunction would be specifically enforcing it). Rejecting, the court ruled:

1. The sweep of Section 9 ACA is not narrow. The court has wide powers (including) to grant such interim measures of protection as may appear just and convenient. The court has the same power for making orders as it has for the purpose of and in relation to any proceeding before it.
2. The subject matter of disputes in the present case are not only the rights of the petitioner but also that of the respondent. The right to use the brands in perpetuity is a valuable right and it could not be contended that the court lacks the jurisdiction to pass interim orders of protection for preserving such right.

Noting further that GTL could not insist on interim orders of protection without establishing the ingredients of injunction, the court examined the facts and found that GTL did not have a prima facie case, and the termination appeared improper. The petition was rejected reserving all rights and contentions of the parties for the arbitration.

Read the decision here.