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Relief at the interlocutory stage would require a petitioner to establish a prima-facie case and show that the balance of convenience is in its favour : The High Court of Calcutta

A prima facie case required for a petitioner to be established and prove that the balance of convenience is in its favour and that irretrievable injury would be caused to the petitioner if the injunction is not granted.

The High Court of Calcutta in the case of The All India Tea and Trading Company Limited v. The Loobah Company Limited is led by the single bench through Hon’ble Justice Moushumi Bhattacharya.
The facts of the case are the petitioner agreed to provide financial assistance to the respondent for liquidating the dues towards the Provident Fund authority in relation to the tea garden owned by the respondent in exchange for the respondent letting out the tea factory in the respondent’s tea garden at Cachar, Assam, for a period of 4 years.

The terms of the agreement were crystallized by way of a Term Sheet executed on 2nd December 2017 and a formal agreement between the parties dated 14th December 2017. The said Agreement provided for leasing of the factory premises by the respondent to the petitioner and for sale of the entirety of the green tea leaves produced in the said Tea Estate exclusively to the petitioner at the rates contained in the Agreement.

Clause (4) of the Supplementary Agreement provides for the respondent supplying all the green leaves procured at the Tea Estate only to the petitioner in terms of the Agreement dated 14th December 2017 and not to divert the same to any third party. The petitioner thereafter raised a dispute with regard to the respondent being in breach of the Agreement and for the consequential loss suffered by the petitioner by reason of the inferior quality of green leaves and short supply by the respondent.

The petitioners relied on the negative covenants in the Agreement to urge that the respondent was and is obliged to supply the entire green tea leaves produced in its garden to the petitioner and that the respondent has not been able to make out any breach on the part of the petitioner for not carrying out its part of the bargain.

The respondents pointed to the breaches committed by the petitioner including failure to make payment in terms of the Agreement as well as the payment against the supply of green tea leaves. The respondents drew a “fine” distinction (in teas as well) between fine count and coarse leaves which entail a different method of calculation as certified by the Tea Research Authority. It is submitted that a negative covenant does not entail an automatic injunction and that the petitioner is not entitled to specific performance having regard to the nature of the contract since the petitioner is in breach. Counsel cites several provisions of the Specific Relief Act, 1963 in this connection.

The court concluded “Since the contract also relates to segregating and differentiating between fine and coarse leaves and supply of tea from the respondent to the petitioner, the performance thereof would involve a continuous duty as contemplated under Section 14(b) of the Specific Relief Act. The difficulty in enforcing a contract of this nature may also attract the consequent inability of a court to enforce specific performance of the material terms of the contract under Section 14(c) as it would be dependent on various factors which would be beyond the monitoring mechanism of the Court. The Court of Appeal in Stocznia Gdynia SA vs. Gearbulk Holdings Ltd; (2009) 3 WLR 677 placed emphasis on the language of the clause in question in the context of the contract as a whole and in light of the parties’ obligations and what they intended to achieve. The Court discussed the 12 implication of the right to terminate as embodied in the agreement to treat the contract as repudiated under the common law.

The High Court of Calcutta directed “In view of the reasons as stated above and having found that the petitioner has breached the material and fundamental terms of the agreement, this court is not inclined to hold in favour of the petitioner in the matter of specific performance of the contract or restrain the respondent in terms of the negative covenant contained in the Agreement.”

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