* IN THE HIGH COURT OF DELHI AT NEW DELHI % Judgment pronounced on: 29 th October, 2015 + I.A. No.19996/2015 & I.A. No.21152/2015 in CS(OS) 2892/2015 ANIL GUPTA & ANR Through... Plaintiffs Mr.Rajiv Nayar, Sr. Adv. with Mr.Aman Vachher, Mr.Saket Sikri, Mr.Ashutosh Dubey, Mr.Abhishek Chauhan and Mr.Sagar Mehra, Advs. versus KEWAL SEHGAL & ORS Through... Defendants Mr.Parag P. Tripathi, Sr.Adv. with Mr.Rajiv Singh, Mr.Tarjit Singh and Mr.Ashim Shridhar, Advs. CORAM: HON'BLE MR.JUSTICE MANMOHAN SINGH MANMOHAN SINGH, J. 1. The plaintiff has filed the suit for declaration and permanent injunction. The suit and interim application were listed before Court on 22 nd September, 2015 while issuing the summons and notice, the interim order was passed restraining the defendants and their servants from using the business of Technical Agrochemicals like 2:4 D series, clodino etc., in terms of the MOU dated 1 st April, 2012. 2. The defendants upon service of summons also filed an application under Order 39 Rule 4 read with Section 151 CPC for vacation of ex-parte interim injunction. The grounds taken in the application are same as stated in the written statement. The plaintiffs CS(OS) No.2892/2015 Page 1 of 18
have filed the reply to the said application and taken the same stand as taken in the plaint and reiterated the averments made in the replication. 3. Both the parties have made their submissions in the pending interim applications. It would be appropriate to refer to the pleadings of the parties in order to decide the interim applications. 4. Brief facts of the case as per plaint are : i) Anil Gupta, plaintiff No.1 and Kewal Sehgal, defendant No.1 were partners in Ambey Laboratories (partnership firm) from the year 1977. The above-named Ambey Laboratories was engaged in manufacturing of fast moving consumer goods like phenyl, naphthalene balls etc. under the brand name of Trishul. ii) iii) The plaintiff No.1 and defendant No.1 in order to do new business formed a company namely Ambey Laboratories Pvt. Ltd., plaintiff No.2 Company in pursuance of the Memorandum of Association dated 26 th February, 1985 and accordingly they agreed to take ten numbers of equity shares each in their names. After the aforesaid memorandum and decision taken by the above said parties, plaintiff No.2 Company on 20 th March, 1985 got registered and incorporated under the Companies Act, 1956 which became a limited company in the name and style of Ambey Laboratories Private Ltd. iv) On 31 st December, 2005, the licensing officer, Joint Director Agriculture, Plant Protection, Rajasthan, Jaipur granted licence to the Ambey Laboratories Pvt. Ltd. for various agrochemical CS(OS) No.2892/2015 Page 2 of 18
products, the detailed list of the products has been attached with the plaint. On 15 th February, 2010 the Annual Sales Turnover of M/s Ambey Laboratories was Rs.963.47 lakhs. v) On 1 st April, 2012 the Memorandum of Understanding between the plaintiff No.1 and the defendant No.1 was signed. The important condition of separation of business between the said parties is that plaintiff No.1 and his sons Archit Gupta and Arpit Gupta will not indulge themselves in the business of Phenyl and other products which were currently being manufactured by Ambey Laboratories (partnership firm) and that the defendant No.1 and his son Rakshit Sehgal, defendant No.2 would not indulge themselves in the business of technical Agrochemicals like 2:4 D Series, Clodino etc. which was currently being manufactured by plaintiff No.2 Company. The aforesaid Memorandum of Understanding was valid upto the next 10 years w.e.f. 1 st April, 2012 to 1 st April, 2022. The main aim of the Memorandum of Understanding is that no one would violate the terms and conditions as agreed between the parties. vi) The defendant Nos.1 and 2 after disassociation formed a new company in the name and style of Agro Allied Ventures Pvt. Ltd., defendant No.3 and defendant No.1 is the Director of the Company. It came to the notice of the plaintiffs that the defendants have violated the terms and conditions of the Memorandum of Understanding dated 1 st April, 2012 and were manufacturing the products which the defendants were not to manufacture in view of the terms and conditions of the Memorandum of Understanding. The Retail Invoice/Cash CS(OS) No.2892/2015 Page 3 of 18
Memo/Bill dated 9 th May, 2015 of the defendant No.3 Company has been produced by the plaintiffs which would show that the defendants have manufactured pesticides, insecticides, weedicides which is contrary to the condition of MoU dated 1 st April, 2012. The consignment receipt of Associated Road Carriers Ltd. dated 7 th May, 2015 would also reveal that defendants have supplied those products to their customers. Besides this, the Excise Invoice of Shanti Chemtrade Pvt. Ltd., Faridabad shows that defendant No.3 Company purchased Caustic Soda (C), raw material for manufacturing Agrochemicals and violated the terms and conditions of the Memorandum of Understanding. The invoice is of 16 th May, 2015. The Tax Invoice dated 28 th May, 2015 of Shanti Chemtrades Pvt. Ltd., Faridabad shows that the defendants have also purchased Liquid Chloride for manufacturing Agrochemicals. vii) The plaintiffs and defendants entered into a dissolution deed dated 30 th September, 2012. According to the aforesaid dissolution deed the plaintiffs and defendants were to follow certain terms and conditions but the defendants have violated the terms and conditions as incorporated in the aforesaid dissolution deed dated 30 th September, 2012 as the ledger account of the Ambey Laboratories since 1 st April, 2012 to 31 st March, 2013 shows that the debit of the company is Rs.16,33,992.33/- and the credit of the company is also the same. The ledger account of the Ambey Laboratories since 1 st April, 2012 to 31 st March, 2013 reveals that the opening balance, shares of plaintiff No.2 Company and Indian Overseas Bank is Rs. 28,85,30.00/- (debit) and credit of the company is also the same. CS(OS) No.2892/2015 Page 4 of 18
viii) Defendant No.2 transferred his 46,500 equity shares of plaintiff No.2 Company to Ambey Capital Pvt. Ltd. as per the share transfer deed and share certificates. Similarly, defendant No.1 also transferred 40,500 equity shares of plaintiff No.2 Company to Ambey Capital Pvt. Ltd. as per the share transfer deed and share certificates. Now, the defendants have no dues of any kind left over with the plaintiffs. ix) As the defendants are selling goods in the market, the plaintiffs have suffered a loss in its business. Therefore, the plaintiffs are seeking relief of injunction against the defendants, inter alia, restraining the defendants from manufacturing and supplying the agricultural products i.e. pesticides, insecticides, weedicides and other agricultural products which the defendants have not to manufacture and supplied that to his customers. 5. Defence in the written statement on behalf of the defendants: i) The plaintiffs have come to this Court with unclean hands and have filed the suit on the basis of a forged and fabricated MOU dated 1 st April, 2012, which was never entered into or executed between the parties, nor does it bear the genuine signature of defendant No.1. There was otherwise no occasion for entering into any alleged MOU on 1 st April, 2012, as the parties at that time were still continuing with the partnership business and were associated in plaintiff No.2 Company. ii) On 1 st September, 2012, a fresh partnership deed was executed between the parties whereby defendant No.2 was inducted as a CS(OS) No.2892/2015 Page 5 of 18
partner and plaintiff No.1 continued as a partner in the said firm. Thereafter it was only when defendant Nos. 1 and 2 bought plot No. SP3-7(B), Keshwana Industrial Area, Kotputli, Rajasthan, that plaintiff No.1 enquired from defendant Nos. 1 and 2 as to why and for what purpose the said plot was purchased by defendant No.3, which was a company incorporated by defendant Nos. 1 and 2. On that day, it was intimated to the plaintiffs by the defendants that they were interested in setting up an independent plant for the purpose of manufacture of Agro Chemicals including Technical Agrochemicals like 2.4D series clodino etc as well as various formulation of agro chemical. iii) On coming to know about the aforesaid fact the plaintiff expressed his view that in case the defendants are setting up a new business, then the defendants would not be able to devote sufficient time for the purpose of business which was being carried on in partnership as well as in plaintiff No.2 company and it was only after 20 th September, 2012 that negotiations started between the parties and it was decided that Ambey Laboratories would be taken over by the defendants and while the plaintiff No.2 Company will be taken over by the plaintiff No.1 and his group members and defendant Nos. 1 and 2 will do business in the name and style of defendant No.3. These negotiations ultimately culminated into a settlement on 30 th September, 2012 and a dissolution deed was executed between the plaintiff No.1 and defendant Nos. 1 and 2 whereby plaintiff No.1 retired from Ambey Laboratories and was paid back his money as was agreed to be paid under the dissolution deed. Similarly, from November, 2012 onwards defendant Nos. 1 and 2 started transferring their CS(OS) No.2892/2015 Page 6 of 18
shareholding in favour of plaintiff No. 1 and his group members on the book value and thus, resigned from the board of the said company after the transfer of the entire shareholding. All negotiations regarding separation took place only after 20 th September, 2012 and prior to that there was never any inkling about retirement or separation and therefore, there was no reason whatsoever for entering into any MOU dated 1 st April, 2012 which MOU has in fact been fabricated and forged by the plaintiffs for the purpose of filing the present suit. iv) It is submitted that plaintiff No. 1 has utilized one old letterhead, which must be lying with the plaintiff No.1, for fabricating MOU dated 1 st April, 2012 as from 2008 onwards new letterhead of Ambey Laboratories were got printed as the telephone number as well as email address of the said firm had changed. It is submitted that new letterheads were in use as far back as 2008, which fact can be appreciated from various letters on the said letterhead signed by the plaintiff No.1 and filed with various government departments. v) The plaintiffs have also forged the stamp of the firm. The stamp used by the plaintiffs on the alleged MOU, was never used by the firm. The font of the letters used in the stamp on the alleged MOU is different from the original stamp of the firm which contains capital letters in the name of Ambey Laboratories. The said MOU also does not bear the genuine signature of defendant No.1. The same is done by the plaintiffs only in order to create a false evidence for the purpose of the present suit, whereas, as a matter of fact, there was no occasion for entering into any such CS(OS) No.2892/2015 Page 7 of 18
arrangement between the parties as it was known to the plaintiffs since September 2012 that the defendants were going to set up a separate unit for manufacture of Agro Chemicals including Technical Agrochemicals like 2.4D series clodino etc as well as various formulation of agro chemical as mentioned above. vi) The defendants invested Rs. 17 crores on the establishment of the said project. When the defendants transferred their shareholding in favour of plaintiffs, it was always in the knowledge of the plaintiffs that the defendants have applied for various licences required for manufacture of such type of items and the defendants were spending huge amount for establishment of their new unit for manufacture of Agro Chemicals including Technical Agrochemicals like 2.4D series clodino etc as well as various formulation of agro chemical. The plaintiffs never raised any objection to the same at any time, except by means of the present suit only when the plaintiffs found that the goods being manufactured by the defendants are of much superior quality than the quality of goods manufactured by the plaintiffs. vii) There was no embargo for the plaintiff to carry on business of Phenyl which was being manufactured by Ambey Laboratories, except that the trademark Trishul, under which Ambey Laboratories were manufacturing Phenyl and allied items, cannot be used by the plaintiffs. The said MOU dated 1 st April, 2012 is forged and fabricated and even otherwise the same is hit by Section 27 of the Contract Act. The restrictions on trade are otherwise unreasonable and unfair and cannot be imposed upon the defendants and are not enforceable in law. Even otherwise CS(OS) No.2892/2015 Page 8 of 18
there are many other manufacturers who are manufacturing Agro Chemicals including Technical Agrochemicals like 2.4D series clodino etc as well as various formulation of agro chemical and as such the plaintiffs cannot claim any monopoly in the same, nor can seek any relief in this regard. viii) It is submitted that defendant Nos.1 and 2 have transferred shareholding in the company which is a private limited Company and have not received any money, except the price of those shares at book value. 6. Replication filed on behalf of the plaintiffs i) It is denied by the plaintiffs that the signature of the defendant No.1 is not a genuine signature. It is submitted that the signature of the defendant No.1 on MoU dated 1 st April, 2012 is his genuine Signature which can be proved by other signatures on the other documents. The report of the handwriting expert which has been filed along with the written statement is denied. ii) iii) The plaintiffs have enclosed few documents with the replication in order to show that the defendant No.1 has signed and his signatures do not match with each other as there are variation in signature of the defendant No.1 which can be verified. It is submitted that there has never been instance or occasions wherein the parties to the suit have discarded old letter heads for new ones. The plaintiffs used those letter heads which have always used whatever was available with them. There are many stamps in the firm. The stamp of the company which is used in the MOU is correct. CS(OS) No.2892/2015 Page 9 of 18
iv) It is denied that discussion for separation started only after 1 st September, 2012. Before finalizing the MOU, number of meetings were held in Maurya Shereton Hotel and thereafter, MOU was signed on 1 st April, 2012 and in order to execute the MOU the salary of defendant No.1 and defendant No.2 were not released from plaintiff No.2 Company from April 2012 and no TDS was deducted which was being done from the day of salary distribution to Directors started. The plaintiff No.1 did not withdraw any salary and profit from Ambey Laboratories since 1 st April, 2012. The shares of plaintiff No.2 Company held by Ambey Laboratories were transferred from plaintiff No.1's capital amount in Ambey Laboratories to plaintiff No.1 as payment of the capital deployed in Ambey Laboratories. The aforesaid transaction was executed on 2 nd April, 2012. The certified copies of the C.A. as well as the letter signed by defendant No.1 has been placed on record. The book value on which the shares were transferred is calculated upto 31 st March, 2012. As a part of execution the parties had to reconstitute the partnership deed in Ambey Laboratories for which the stamp paper No.IN DL10761879013238k was purchased on 5 th August, 2012 at 2:59 P.M. post adding a new partner a resolution deed was to be executed for which the stamp papers were purchased at the same time vide stamp paper No. INDL1076168662065K on 5 th August, 2012 at 2:57 P.M. The description of documents mentioned in the aforesaid stamp paper is Article 64(b) dissolution deed. The balance sheet of 2009-10 and 2010-11 were signed by the defendants and plaintiffs jointly post signing of MOU the balance sheet of 2012 was duly signed by the plaintiffs' family only. CS(OS) No.2892/2015 Page 10 of 18
v) The suppliers are common and they have provided the bills to the plaintiffs vide email dated 13 th June, 2015 at 4:11 P.M. to Ms. Sangeeta Sharma, G.M. Purchase Ambey Laboratories Pvt. Ltd. providing the information of bills, the transportation bills of Associated Road Carrier were received on whatsapp from one Mr. Sanjay, employee of the aforesaid transport company to Mr. Nitin Gupta. Ambey Allied Ventures Pvt. Ltd., the defendant No.3 was incorporated on 24 th May, 2011 and their MOA does not state any mention of manufacturing of pesticides. It was only after the MOU dated 1 st April, 2012 they purchased the land and changed the name from Ambey to Agro Allied Venture Pvt. Ltd. on 5 th June, 2012. Therefore, it is mentioned that the discussions were started earlier after execution of MoU. 7. Mr. Parag Tripathi, learned Senior Counsel has made his submissions which are outlined as under :- i. Firstly he says that the MoU is forged and fabricated document. In support, he referred para 2 and 3 of the preliminary objections. Mr. Tripathi submits that from the year 2008 onwards new letter-head of M/s. Ambay Laboratories were printed as the telephone number as well as email address of the said firm had changed. The MoU is fabricated by the plaintiff on the old letter-head which were not in existence in the year 2012. ii. Secondly, Mr. Tripathi says that it is the case of the plaintiffs that MoU is the most vital document which divides the business of the parties with regard to the nature of the description of the goods however by mutual consent when the CS(OS) No.2892/2015 Page 11 of 18
dissolution deed was executed parties, the plaintiff No.1 himself had agreed in clause 3 of the agreement to the effect that the continuing partners defendant No.1 and defendant No.2 may use the name and style of AMBEY LABORATORIES to carry on business of the firm or any other business as they may desire. If the said document was a vital document as claimed by the plaintiffs which was in their possession at the time of execution of deed, then why the defendants were allowed to carry on business of the firm or any other business as they may desire. The plaintiff would not have allowed any other business if the MOU was a genuine document and the same was executed by the defendants rather the plaintiff No.1 would have insisted for including the terms of MoU. iii. iv. Thirdly, Mr. Tripathi, learned Senior Counsel submits that as a matter of fact, the plaintiffs on the date of filing of suit had full knowledge about the said clause 3 of the dissolution deed where the consent was given, therefore the plaintiffs intentionally and deliberately did not file the copy of dissolution deed dated 30 th September, 2012 in order to obtain ex-parte ad-interim order. Lastly and fourthly, it is submitted by Mr. Tripathi that the clause 3 of the deed itself allowed to carry out business of any nature of business, even otherwise MoU referred the conditions and the said restrictions imposed is hit by Section 27 of the Contract Act. The defendants are entitled to deal with such goods which were restrained by this Court irrespective of MoU or no MoU. He says that his clients have CS(OS) No.2892/2015 Page 12 of 18
no objection even if the plaintiffs may also deal with all description of goods including 2:4 D series clodino. Pertaining to the issue raised by the plaintiffs to goodwill is concerned, it is stated that defendants also transferred shareholding in favour of the plaintiffs company without receiving any money except the price of these shares at book value. 8. Mr.Rajiv Nayar, learned Senior counsel appearing on behalf of the plaintiffs in the submission submitted that the MoU is a genuine document which is duly signed by defendant No. 1 who has been signing papers in the course of business in different manner from time to time. He also referred the hand written expert report in support of the case of plaintiffs. He argues that MoU defines the clauses of division of the description of goods and even otherwise after execution of said MoU, both parties were taking various steps for the purpose of division of business as well as description of goods and as consent of parties the requisite papers of dissolution deed were signed. He denied the report of hand writing expert filed on behalf of the defendants. He says that since goodwill of the trademark Trishul is assigned to the defendants, the said MoU cannot be offended under Section 27 of Contract Act. Lastly, it is submitted by him that the original MoU is being produced in the Court and the same be kept on record. His clients have no objection if the same is sent to FSL at Hyderabad and until the report is received, the interim report should continue against the defendants. He has referred the following decisions in support of his submission on the objection raised by Mr. Tripathi under Section 27 of the Contract Act. CS(OS) No.2892/2015 Page 13 of 18
i) Wipro Ltd. vs. Beckman Coulter International S.A., 131 (2006) DLT 681 ii) Ozone Spa Private Limited vs. Pure Fitness & Ors., 2015 (63) PTC 505 (Del.) 9. It is the admitted position that when the interim order was passed, copy of the dissolution deed was not filed although reference about the same was mentioned in the plaint. Clause 3 of the said agreement allows the defendants to carry on business of the firm or any other business as the defendant may desire. Factum of the same has not been denied by the plaintiffs, who have also not denied that there is no reference about MOU in the deed of dissolution executed between the parties after the date of MoU. 10. The defendants have denied having executed the said document. Both parties have relied upon their hand writing experts reports. It is difficult for the Court to give its opinion about the documents by comparing the signatures. The findings of the two reports are contrary to each other. At this stage only prime-facie view is to be taken on the basis of material placed on record and the conduct of the parties during the relevant period of time. However, one thing is clear that one of the parties is making incorrect statement in its pleadings and arguments. 11. At the time of passing the interim order, photocopy of the MoU was placed. The original MoU was produced before Court on 16 th October, 2015. The scanned copy of the original MoU is reproduced herein below:- CS(OS) No.2892/2015 Page 14 of 18
From the original document it is evident that the said document is also signed by two witnesses, but in the photocopy of the same the entire details of witnesses are missing which was filed along with the plaint. 12. Secondly, it is the case of the defendants that the letter-head of Ambey Laboratories as appeared and filed in Court was changed from 2008 onwards and new letterhead of Ambey Laboratories were got printed as the telephone number as well as e-mail address of the said firm had changed. It was submitted on behalf of the plaintiffs that even old letter head was being used by the parties in 2012. But the said statement is not supported by any back-up evidence. Out of many documents one of them is of July, 2008, it would reveal the new telephone numbers and e-mail address. Admittedly, during the course CS(OS) No.2892/2015 Page 15 of 18
of business when parties were jointly carrying on business, M/s.Ambey Laboratories issued the letter dated 8 th July, 2008 to the Deputy Director (Mark) Bureau of Indian Standards for issuance of renewal of License No. 1106324 for the year 2009-10, the said letter-head issued by the said firm contained the details of new telephone numbers and e-mail address. Scanned copy of the said letter is reproduced herein below : From the above it is clear that new telephone numbers and e- mail address were mentioned. MoU typed in the letterhead relied CS(OS) No.2892/2015 Page 16 of 18
upon by the plaintiffs of the year 2012 contained old details. It is also pertinent to mention that the letter issued in July, 2008 was received by the Government Office against its stamp. 13. Thirdly, when the dissolution deed was executed, the factum of MoU was not mentioned which was allegedly in the possession of the plaintiffs. In case, the defendant No.1 had already surrendered his rights by not indulging in the business of Technical Agrochemicals like 2:4 D series, clodino etc. one would be surprised why the same was incorporated in the dissolution deed which was executed at the later stage rather as per Clause 3 of the dissolution deed, the defendants were allowed to carry on other business as the defendants desired. Further, why the plaintiffs did not file the dissolution deed along with the plaint. The decisions referred by the plaintiffs counsel do not help the case of the plaintiffs under these circumstances and the situation and facts in the present matter are materially different. Even otherwise, it is not necessary to go into the aspect of Section 27 of the Contract Act raised by Mr. Tripathi once the plaintiffs have not made their case on the main issues at this prima facie stage. 14. Under these circumstances, without expressing any opinion about the MoU and subsequent conduct of the plaintiffs, at this stage, this Court is not inclined to continue with the interim order rather to put the terms to the defendants as the balance of convenience lies in favour of the defendants who have allegedly invested Rs.17 crores on the establishment of the said project and they have employed more than 150 employees in their factory. In case the interim order will continue, the defendants would suffer irreparable loss and injury. Under these circumstances, both applications are disposed of with CS(OS) No.2892/2015 Page 17 of 18
directions that the defendants shall maintain true and correct statement of sale of the impugned goods and shall file the statement every quarterly. The first statement of sale shall be filed by 15 th November, 2015 from the date of filing the suit till 31 st October, 2015 and thereafter, the defendants shall file the same every quarterly till the final decision of the suit. The interim order passed on 22 nd September, 2015, in view of the above said terms and conditions, is vacated. 15. Both applications are disposed of accordingly. OCTOBER 29, 2015 (MANMOHAN SINGH) JUDGE CS(OS) No.2892/2015 Page 18 of 18