Universal Petro Chemicals Ltd. vs B.P.Plc And Others on 18 February, 2022


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Supreme Court of India

Universal Petro Chemicals Ltd. vs B.P.Plc And Others on 18 February, 2022

Author: L. Nageswara Rao

Bench: [ B ], [ L ]

                                            Non-Reportable


          IN THE SUPREME COURT OF INDIA
           CIVIL APPELLATE JURISDICTION

              Civil Appeal No. 3127 of 2009


Universal Petro Chemicals Ltd.            .... Appellant(s)



                          Versus


B. P. PLC and Others                     …. Respondent(s)

                          WITH

              Civil Appeal No.3128 of 2009


                     JUDGMENT

L. NAGESWARA RAO, J.

1. The Appellant – Universal Petro-Chemicals Ltd. in Civil

Appeal No.3127 of 2009 (for the sake of convenience,

hereinafter referred to as ‘the Appellant’) filed a suit for

specific performance of a collaboration agreement dated

01.11.1994 as modified by the supplementary agreements

dated 01.03.1995 and 27.12.2002. The Plaintiff further

prayed for a declaration of perpetual injunction. The learned

Single Judge of the High Court of Calcutta refused to grant a

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decree of specific performance of the agreement. However,

a decree of injunction as prayed for was granted. Aggrieved

thereby, the Appellant had filed an appeal questioning the

judgment of the learned Single Judge to the extent that no

relief was granted. The Appeal was dismissed by a Division

Bench of the High Court of Calcutta by a judgment dated

18.02.2008 which is impugned in the Civil Appeal No.3127 of

2009. Respondent No.3 – Aral Aktiengesellschaft in Civil

Appeal No.3127 of 2009 has also filed an appeal against the

judgment of the Division Bench questioning the judgment

relating to the perpetual injunction granted in favour of the

Appellant.

2. The Appellant entered into a collaboration agreement

with Respondent No.3, which is a German company, on

01.11.1994 by which the Appellant had to manufacture

lubricants using the formulation of Aral and market the same

in India (hereinafter referred to as the “Collaboration

Agreement”). By the Collaboration Agreement the Appellant

was given exclusive licence regarding the distribution,

blending, rebranding and marketing of Aral lubricants in

India. Subsequent to the Collaboration Agreement,

necessary approvals were obtained from the Reserve Bank of

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India under the Foreign Exchange Management Act, 1973 on

25.11.1994 which was incorporated in the Collaboration

Agreement vide a supplementary agreement dated

03.01.1995.

3. In the year 2002, Veba Oil, the holding company of

Respondent No. 3 was acquired by the Respondent No. 1 – BP

Plc., a UK entity, who was also the holding company for

Respondent No. 2 – Castrol India Ltd. As the approval granted

by the Reserve Bank of India was lapsing, the Appellant

applied to the Ministry of Commerce & Industry, Government

of India for approval with respect to the royalty, extension of

duration of the contract etc. On 13.11.2002, the Government

approved the request of the Appellant and extended the

approval of the Reserve Bank of India dated 25.11.1994.

However, in the letter dated 13.11.2002, it was specified that

the royalty was payable from 01.01.2003 to 31.12.2009 and

that the duration of the extended Collaboration Agreement

would be from 01.01.2003 to 31.12.2009. This approval dated

13.11.2002 was also made an integral part of the

Collaboration Agreement by execution of yet another

supplementary agreement dated 27.12.2002 (hereinafter

referred to as the “Supplementary Agreement”).

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4. A termination notice was issued by Respondent No.3 on

14.04.2004 on the ground that the Collaboration Agreement

would come to an end on 31.10.2004 as per Clause 5 of the

Collaboration Agreement and that there would be no

extension thereafter. Against this termination notice, the

Appellant filed Civil Suit No.214 of 2004 praying for the

following reliefs: –

“The plaintiff prays for leave under Clause 12 of the Letters
Patent and claim :

a) Perpetual injunction restraining the defendants No. 1 and
2 from marketing in India any lubricant and in particular
finished automotive and industrial lubricant under the brand
name of ‘Aral’ or by using the design of ‘Aral’ ;

b) Perpetual Injunction restraining the defendant No. 3
and/or its servants and/or its agents from allowing or
permitting anybody other than the plaintiff to market
finished automotive and industrial lubricant in India under
the trade mark ‘Aral’ or design of ‘Aral’ ;

c) Declaration that the collaboration agreement dated
November 1, 1994, read with supplementary agreements
dated January 3, 1995 and December 27, 2002 incorporated
therein and agreement upon trade mark and design, copies
whereof are annexed hereto are operative, subsisting and
binding upon the defendant No. 3 and its associates
including the defendants No. l and 2 herein till December 31,
2009 ;

d) Declaration that letter of termination dated April 14,
2004, a copy whereof being annexures “G” hereto, be

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directed to be delivered up so that the same may be
adjudged void and cancelled ;

e) Perpetual injunction restraining the defendant No. 3 and
their associate, affiliate or agents from taking any step or
from giving any effect to the letter of termination dated April
14, 2004 in any manner whatsoever;

f) Perpetual injunction restraining the defendant No. 3. from
acting in any manner contrary to or in breach of the
collaboration agreement dated November 1, 1994 as
modified by supplementary agreements dated January 3,
1995 and dated December 27, 2002 and the agreement
upon trade mark and design being annexures “A”, “B”, “D”
and “F” hereof and the defendants No. 1 and 2 from
procuring breach thereof or acting contrary thereto in any
manner whatsoever ;

g) Decree for specific performance of the said collaboration
agreement and agreement upon Trade Marks dated
November 1, 1994 as modified by the supplementary
agreement dated January 3, 1995 and December 27, 2002
executed by and between the plaintiff and the defendant No.
3;

h) Perpetual injunction restraining the defendant No. 3
and/or its servants and/or its agents from interfering with
the right of the plaintiff to market its products of finished
automotive and industrial lubricants under the trade mark
‘Aral’ and by use of ‘Aral’ design ;

i) Receiver;

j) Injunction;

k) Costs;

I) Further and other reliefs.”

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5. In this Suit, the High Court by an interim order dated

19.08.2004, restrained the Respondents from giving effect to

the termination notice dated 14.04.2004 and from interfering

with the Appellant’s usage of ‘Aral’. The interim order was

extended on three occasions and was vacated thereafter by

the Single Judge in its order 10.01.2005. However, a stay in

the operation of the judgment was granted for 10 days, i.e.,

till 20.01.2005. In an appeal filed against the said order of

the Single Judge, the Division Bench passed an interim order

directing the continuation of the interim order of the Single

Judge. However, the appeal filed by the Appellant was

dismissed by the Division Bench on 30.03.2005. Questioning

the correctness of the orders passed by the Division Bench,

the Appellant filed Special Leave Petition which was disposed

of by this Court on 24.08.2005 with the direction for an

expedited hearing in the suit. There was an interim order

which subsisted during the pendency of the Special Leave

Petition as well.

6. In the civil suit, the learned Single Judge framed the

following issues for consideration: –

“1. Is the suit maintainable?

2. Does this Court have jurisdiction to try and determine this
suit?

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3. Whether the applicable law for construing the
collaboration agreement dated lst November 1994 would be
the law of Germany or it would be the Indian law?

4. Having regard to the approval given by Reserve Bank of
India in respect of the Collaboration Agreement what would
be the duration of the contract?

5. Whether the Agreement dated lst November 2004 is
terminable by six months’ notice and whether the letter of
termination as alleged in paragraph 44 of the plaint is legal
and valid or is the contract valid till 31st December, 2009?

6. Did the defendant Nos. 1 and 2 conspire together, as
alleged in the plaint for the purpose of procuring breach and,
consequential termination of the contract between the
defendant No. 3 and the plaintiff?

7. Whether having regard to the status of the contract the
plaintiff is entitled to exclusive right of use of the brand
‘Aral’ in India?

8. Whether the plaintiff has any right to sell lubricants under
the brand name ‘Aral’ with ‘Aral’ design in India?

9. To what reliefs, if any is the plaintiff is entitled to?”

7. Issues No.4 and 5 pertaining to the termination of the

agreement were considered together. The contention of the

Plaintiff (Appellant herein) in the suit was that the

agreements stood extended till 31.12.2009 in view of the

Supplementary Agreement dated 27.12.2002. The

Supplementary Agreement was entered into between the

parties pursuant to the letter dated 13.11.2002 of the

Government of India by which the Reserve Bank of India’s

approval was extended till the duration of the Collaboration

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Agreement from 01.01.2003 to 31.12.2009. As against this,

the Respondents contended that the Collaboration

Agreement subsisted only till December, 2004 and the

approval granted by the RBI in which the date of 31.12.2009

was mentioned was only for the purpose of remitting royalty

in the foreign exchange. According to the Respondents,

Clause 5 of the original agreement is relevant for the purpose

of determining the date of expiry of the Collaboration

Agreement, which provided that after the expiry of 3 years,

the Agreement could be terminated by either party by giving

a termination notice six months prior. After a careful

examination of the Collaboration Agreement and the

Supplementary Agreement, the learned Single Judge was of

the opinion that Respondent No.3 was not entitled to

terminate the agreement before 31.12.2009 and that the

letter of termination dated 14.04.2004 was issued in violation

of the terms agreed between the parties.

8. Coming to the issue of whether or not the defendants

were guilty of committing tort of conspiracy or procuring

breach of the contract between the Appellant and

Respondent No. 3 herein, the Single Judge rejected the

contention of the Plaintiff. The Single Judge concluded that no

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case of either criminal conspiracy or procuring breach of

contract was made out as the Respondents herein had

adduced sufficient evidence to show that the object behind

the termination was predominantly economic and loss to the

Appellant was in the nature of a collateral damage. No

intention could be ascertained to injure the Appellants

specifically.

9. Insofar as the issues with respect to the relief are

concerned, the High Court held that the relief of specific

performance could not be granted in view of the bar in

Section 14 (1) (b) of the Specific Relief Act, 1963. The High

Court observed that the contract involves performance of

future unspecified obligations and duties and it would not be

possible for the Court to enforce specific performance of the

material terms of the contract. The High Court further held

that it was an open-ended agreement involving continuous

flow of technology for innovating and overhauling the

products which are upgraded from time to time to meet world

class standards. Therefore, though the termination

agreement was found to be not in accordance with law but

the specific performance of the contract was not granted.

However, a decree of injunction was passed against

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Respondent No.3 and its subsidiaries and affiliates restraining

them from marketing or distributing in India, ‘Aral’ products

till 31.12.2009.

10. The findings recorded by the Division Bench need not be

dealt with in detail as the Division Bench upheld the

judgment of the learned Single Judge on all counts. Notice

was issued in the Special Leave Petition filed by the Appellant

on 21.07.2008. Thereafter, leave was granted on

25.03.2009.

11. Mr. Rakesh Dwivedi, learned Senior Counsel appearing

for the Appellant submitted at the outset that the relief of

specific performance of the Collaboration Agreement cannot

be granted by this Court as the Collaboration Agreement

expired on 31.12.2009. He submitted that the Appellant is

entitled for damages for the period from 24.08.2005 till

31.12.2009. He relied upon the judgments of this Court in

Jagdish Singh v. Natthu Singh1, Urmila Devi & Ors. v.

Deity, Mandir Shree Chamunda Devi2 and Sukhbir v.

Ajit Singh3 and argued that the Appellant is entitled for

damages even though such a relief was not specifically

sought for either in the suit or in the appeal. He referred to

1 (1992) 1 SCC 647
2 (2018) 2 SCC 284
3 (2021) 6 SCC 54
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the proviso to Section 21 (5) of the Specific Relief Act to

contend that the Appellant should be allowed to seek

compensation at any stage of the proceeding. He further

submitted that the Appellant is entitled for compensation due

to the breach of contract under Section 73 of the Indian

Contract Act, 1872. Mr. Dwivedi relied upon a letter dated

03.07.2003 written by the Finance Director, Castrol India

Limited to state that the amount of compensation to be

awarded to the Appellant can be gathered from this letter

wherein the profit margins of Respondent No. 3 were

discussed.

12. It was submitted that specific performance of the

agreement was a relief that could have been granted at the

time when the Appellant approached this Court in 2008 but

cannot be done at this point of time. Therefore, the Appellant

is entitled for damages, especially after the Appellant

succeeded before the High Court which declared the

termination notice as illegal.

13. Ms. Debolina Roy, learned counsel appearing for the

Respondent countered the submission of Mr. Dwivedi by

contending that the judgments cited by the Appellant

pertained to award of compensation under Land Acquisition

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Act 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 this case. She

submitted that the Appellants failed to plead relief for

damages either in the Civil Court, before the High Court or

even before this Court. She submitted that even assuming

that the Collaboration Agreement expired on 31.12.2009, the

Appellant did not raise this ground or seek to amend the

relief during the pendency of this appeal for the past 13

years. Ms. Roy referred to the Email dated 03.07.2003 relied

upon by the Appellant and submitted that the amount

mentioned in the Email is only an estimate of profits. She

further referred to another Email dated 07.04.2004 and

submitted that the amounts mentioned are different.

Therefore, no reliance can be placed on the Emails dated

03.07.2003 and 07.04.2004 for coming to a conclusion about

the compensation/damages to which the Appellants are

entitled to. She referred to a judgment of this Court in

Shamsu Suhara Beevi v. G. Alex and Another 4 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, is not entitled for any such relief. The
4 (2004) 8 SCC 569
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further contention of the Respondents is that damages can

only be granted for the loss suffered and not for the loss of

profits as per Section 73 of the Indian Contract Act.

14. Respondent No.3 has contended in its appeal that the

approval granted by the Reserve Bank of India and the

Government of India related only to payment of royalty which

did not impinge on the power of the parties to terminate the

Agreement as provided under Clause 5 of the Collaboration

Agreement. According to Clause 5 of the Collaboration

Agreement, either party could terminate the agreement by

giving a notice six months prior, after the expiry of initial

three years of the term. It was contended that since a

termination notice which was issued on 15.04.2004 was in

accordance with Clause 5, it was valid and therefore, the

Collaboration Agreement expired on 28.10.2004. The

Judgment of the trial Court relating to the injunction was

found fault with on the ground that no reasons have been

given.

15. The judgment of the learned Single Judge is after

considering the Collaboration Agreement, and the

Supplementary Agreements which were entered into by the

parties. As the parties have agreed to extend the agreement

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till 31.12.2009 and have voluntarily incorporated such terms

in the Collaboration Agreement, it cannot be said that there is

any error committed by the High Court in setting aside the

termination notice. The High Court has given cogent reasons

for grant of injunction. Therefore, the appeal filed by the

third Respondent deserves to be dismissed.

16. The only point that arises for our consideration is

whether the Appellant is entitled for damages for the period

between 24.08.2005 and 31.12.2009. The relevance of

24.08.2005 is that the Supreme Court disposed of the SLP on

that date vacating the interim order granted in favour of the

Appellant. Since there was an interim order operating in

favor of the Appellant, damages are sought only from

24.08.2005 till 31.12.2009. The Appellant admits that no

relief for damages or compensation was claimed in the suit.

Admittedly, such a relief was not sought for either before the

Division Bench or before this Court. No steps were taken by

the Appellant to amend the appeal even after the date of

expiry of the Collaboration Agreement, i.e., 31.12.2009.

17. The Appellant is relying on Section 21 (5) of the Specific

Relief Act to buttress his contention for awarding of damages

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in lieu of specific performance of the Collaboration

Agreement. Section 21(5) reads as follows: –

“21. Power to award compensation in certain
cases. – (1) In a suit for specific performance of a
contract, the plaintiff may also claim compensation for its
breach in addition to such performance.
(2) If, in any such suit, the court decided that specific
performance ought not to be granted, but that there is a
contract between the parties which has been broken by
the defendant, and that the plaintiff is entitled to
compensation for that breach, it shall award him such
compensation accordingly.

(3) If, in any such suit, the court decides that specific
performance ought to be granted, but that it is not
sufficient to satisfy the justice of the case, and that some
compensation for breach of the contract should also be
made to the plaintiff, it shall award him such
compensation accordingly.

(4) In determining the amount of any compensation
awarded under this section, the court shall be guided by
the principles specified in section 73 of the Indian
Contract Act, 1872 (9 of 1872).

(5) No compensation shall be awarded under this section
unless the plaintiff has claimed such compensation in his
plaint:

Provided that where the plaintiff has not claimed any
such compensation in the plaint, the court shall, at any
stage of the proceeding, allow him to amend the plaint
on such terms as may be just, for including a claim for
such compensation.”

18. In order to overcome the limitation posed by Sub-

Section (5), Mr. Dwivedi has relied upon certain judgments in
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support of his submission that even if a relief for damages

has not been specifically sought for, this Court can still award

damages to the Appellant. In Jagdish Singh v. Natthu

Singh (supra), the Respondents’ suit for specific performance

of an agreement for conveyance of certain properties was

dismissed by the Civil Court and the judgment of the Civil

Court was upheld in appeal. As the High Court reversed the

findings of the First Appellate Court, the defendant filed an

appeal before this Court. The contention of the Appellant in

that case was that the contract itself became incapable of

specific performance as a proceeding for compulsory

acquisition of suit properties was initiated during the

pendency of the second appeal. It was not clear as to

whether compensation in lieu of specific performance was

sought by the plaintiff in the suit. However, on a finding that

there is no difficulty in assessing the quantum of

compensation for the subject property which was

ascertainable by determination of market value, this Court

permitted amendment of relief to do complete justice.

19. In Urmila Devi & Ors. v. Deity, Mandir Shree

Chamunda Devi (supra), this Court was concerned with the

modification of the decree of specific performance of an

agreement to sell granted by the Courts below by the High
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Court into a decree directing the Respondents therein to pay

a sum of Rs. 90,000/- with interest from the date of filing of

the suit as the suit property was acquired. Referring to the

judgment of this Court in Jagdish Singh v. Natthu Singh

(supra), this Court held that compensation can be awarded in

lieu of specific performance under Section 21 of the Specific

Relief Act when a contract has become impossible to be

performed. In the facts of the said case the amount of

compensation which already stood determined was

distributed amongst the parties.

20. The contention of the Appellant in Sukhbir v. Ajit

Singh (supra) that no compensation shall be awarded under

Section 21, unless the plaintiff has claimed such

compensation in his plaint was rejected by this Court by

relying upon the judgment of this Court in Jagdish Singh v.

Natthu Singh (supra) and Urmila Devi & Ors. v. Deity,

Mandir Shree Chamunda Devi (supra) as the case was in

relation to an agreement to sell and the amount of

compensation was already determined by the parties therein.

This Court held that a decree of compensation was passed as

an alternate decree in lieu of the decree of specific

performance.

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21. The scope of Section 21 (4) and (5) was examined by

this Court in Shamsu Suhara Beevi v. G. Alex and

Another (supra). This Court referred to the Law Commission

of India’s recommendation that in no case the compensation

should be decreed, unless it is claimed by a proper pleading.

However, 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. In the said case no claim for

compensation for breach of agreement of sale was claimed

either in addition to or in substitution of the performance of

the agreement. Admittedly, there was no amendment to the

plaint asking for compensation either in addition or in

substitution of the performance of an agreement of sale. In

such background, this Court held as follows.

“In our view, the High Court has clearly erred in granting
the compensation under Section 21 in addition to the
relief of specific performance in the absence of prayer
made to that effect either in the plaint or by amending
the same at any later stage of the proceedings to
include the relief of compensation in addition to the
relief of specific performance. Grant of such a relief is in
the teeth of express provisions of the statute to the
contrary is not permissible. On equitable consideration
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court cannot ignore or overlook the provisions of the
statute. Equity must yield to law.”
On a careful consideration of the judgments of this Court

relied upon by learned Senior Counsel for the Appellant and

the learned counsel for the Respondents, we are of the view

that the Appellant is not entitled to claim damages for the

period between 24.08.2005 and 31.12.2009.

22. The learned Single Judge expressly mentioned in his

judgment that the Appellant did not claim any relief for

damages. Even in the appeal filed by the Appellant, no relief

for damages was claimed by the Appellants. In fact, it was a

specific submission on behalf of the Appellant before the

Division Bench that no relief in the nature of damages and/or

compensation could be granted. It was submitted that it was

difficult to quantify such damages/compensation as neither

the anticipated loss of business nor estimated value of the

goodwill could be prospectively assessed. It might be true

that the Appellant was interested in the relief of specific

performance of the Collaboration Agreement when he filed

the Special Leave Petition in 2008 as the collaboration

agreement subsisted till 31.12.2009. However, even

thereafter no steps were taken by the Appellant to

specifically plead the relief of damages or compensation.

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The judgments relied upon by the Appellant are not

applicable to the facts of this case. Though, the claim in

Shamsu Suhara Beevi v. G. Alex and Another ’s case

pertained to grant of compensation in addition to the relief of

specific performance, this Court considered the point relating

to the relief of compensation in substitution of the

performance of the agreement as well.

23. We are afraid that the request of the Appellant for grant

of damages cannot be accepted.

24. For the aforementioned reasons no relief can be granted

to the Appellant. Civil Appeal No. 3127 of 2009 is disposed

of. Civil Appeal No. 3128 of 2009 is hereby dismissed.

……………………………………J.

[ L. NAGESWARA RAO ]

……………………………….J.

[ B.R. GAVAI ]

New Delhi,
February 18, 2022.

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