In order to grant compensation in lieu of specific performance, it is necessary that same is specifically claimed by plaintiff in plaint: SC

Read Judgment: Universal Petro Chemicals Ltd. V. B. P. Plc & Others

Pankaj Bajpai

New Delhi, February 21, 2022: While hearing an appeal relating to consequences of termination of a collaboration agreement with foreign company for manufacture and marketing of lubricants in India, the Supreme Court has refused to grant compensation in lieu of specific performance to the Universal Petro Chemicals, as it was not specifically claimed in the plaint. 

A Division Bench of Justice L. Nageswara rao and Justice B.R Gavai therefore observed that Universal Petro Chemicals (Appellant) is not entitled to claim damages for the period between August 24, 2005 and December 31, 2009. 

Going by the background of the case, the Appellant entered into a collaboration agreement with third Respondent, which is a German company, by which the Appellant had to manufacture lubricants using the formulation of Aral and market the same in India. In the year 2002, Veba Oil, the holding company of third Respondent was acquired by BP Plc., (first respondent) a UK entity, who was also the holding company for Castrol India (second respondent). As the approval granted by RBI 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. The Government approved the request of the Appellant and extended the approval of RBI. 

Later, termination notice was issued by third Respondent on the ground that the Collaboration Agreement would come to an end in 2004 and that there would be no extension thereafter. Against this termination notice, the Appellant filed Civil Suit, wherein the High Court by an interim order restrained the Respondents from giving effect to the termination notice and from interfering with the Appellant’s usage of ‘Aral’. The interim order was extended on three occasions and was vacated thereafter. After a careful examination of the Collaboration Agreement and the Supplementary Agreement, the High Court opined that third Respondent was not entitled to terminate the agreement before 2009 and that the letter of termination was issued in violation of the terms. 

The High Court further held that no case of either criminal conspiracy or procuring breach of contract was made out as the Respondents 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. The High Court also 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, as the contract 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. However, a decree of injunction was passed against third Respondent and its subsidiaries and affiliates restraining them from marketing or distributing in India, ‘Aral’ products till December 31, 2009.  

After considering the submissions, the Top Court found that the High Court has expressly mentioned in his judgment that the Appellant did not claim any relief for damages, and even in the appeal filed by the Appellant, no relief for damages was claimed. 

In fact, it was a specific submission on behalf of the Appellant before the Division Bench of the High Court that no relief in the nature of damages and/or compensation could be granted, since 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, added the Top Court. 

Therefore, observing that even though the Appellant was interested in the relief of specific performance of the Collaboration Agreement, but, no steps were taken to specifically plead the relief of damages or compensation, the Apex Court refuses to accept the request of Appellant for grant of damages.