Universal Petro Chemicals Ltd vs B. P. PLC

Universal Petro Chemicals Ltd vs B. P. PLC 

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)
W I T H
Civil Appeal No.3128 of 2009
J U D G M E N T
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
7 | P a g e
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
8 | P a g e
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
9 | P a g e
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 Singh
1
, Urmila Devi & Ors. v.
Deity, Mandir Shree Chamunda Devi
2 and Sukhbir v.
Ajit Singh
3
 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
10 | P a g e
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
11 | P a g e
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
12 | P a g e
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
13 | P a g e
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
14 | P a g e
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 SubSection (5), Mr. Dwivedi has relied upon certain judgments in
15 | P a g e
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
16 | P a g e
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.
17 | P a g e
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
18 | P a g e
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.
19 | P a g e
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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