2001 PLP 69 (CLC)

On the other hand Mr. Munawar Ghani, learned counsel for the defendant, has vehemently opposed the stay application. He has referred to para. 3 of the counter‑affidavit filed on behalf of the defendant to the said application and submitted that the first agreement dated 28‑12‑1999 was mutually cancelled and it was agreed that after the execution of the second agreement dated 29‑12‑1999 both the originals of the first agreement in possession of the parties would be destroyed. The plaintiff has not done so whereas the defendant did so. Next learned counsel has referred to Annexure R/2 of the counter‑affidavit which is a draft of the first agreement wherein clause 4 has been deleted entirely. Learned counsel submits that consequently the intention of the parties was always that as regards the right of the defendant to engage in competing business this remained intact. Next learned counsel has referred to Annexures D/5 to D/7 to the plaint, which are the undertakings given by the sons and wife of the defendant and submitted that these only refer to the name Jimmy's Studio and do not talk at all about photography business which could be undertaken by the defendant under any other name. In this regard learned counsel has also submitted that Annexure D/8 purportedly executed by the defendant and which prohibits the defendant from undertaking photography business in the Province of Sindh has not been signed by the defendant and consequently prima facie, this establishes that the parties did agree that the defendant could engage in competing photography business in Karachi although not under the name and style of Jimmy's Studio. Next learned counsel has referred to Annexure R/1‑B filed alongwith the counter‑affidavit which is a letter addressed to the plaintiff by the defendant and the same concerns the later agreement dated 29‑12‑1998. Both the parties have signed the said Agreement which would display the novation of the earlier agreement dated 28‑12‑1998. Learned Counsel has particularly referred to the insertion in long hand by the Plaintiff in the above said letter whereby time has been extended for the performance of the agreement as it was going to expire on 15‑2‑1999 originally. Next learned Counsel has referred to para. 10 of the plaint which talks about balance payment but no receipt has been produced deliberately by the plaintiff since such receipt refers to the agreement, dated 29‑12‑1998 which are in the possession of the plaintiff. Learned counsel has also produced a copy of the receipt dated March 1, 1999 for the balance payment regarding the transaction between the parties in full and final settlement thereof which refers to the later agreement dated December 29, 1998. In support of his contentions learned counsel has relied upon: Nordenfelt v. Maxim Nordenfelt Co. (1894) AC 535, Jenkins v. Reid (1894) IAER 4'71, Routh v. James (1947) IAER 758, Unichmichem Corporation v. Abdullah Ismail 1992 MLD 2374, Submrimanian v. Kizhakaru Poduval AIR 1922 Mad. 519, District Board v. Hari Chand AIR 1934 Lah. 474, Amba Parsad v. Jugal Kishore AIR 1936 Allah. 112 and Ramamurthy v. Nandi Ramwalmma AIR 1940 Mad.

558. In rebuttal Mr. Khawaja Shamsul Islam for the plaintiff has submitted that as concerns the receipt Annexure C/1 to the plaint this refers to the agreement, dated 28‑12‑1998. He has also referred to para.8 of the plaint which shows the break up of the entire sale consideration viz. Rs.22,490,

750. He has denied that the receipt produced in Court by Mr. Munawar Ghani bears the genuine signatures of the defendant and also objected to its production on the basis that in civil proceedings documents cannot be introduced unless by means of a proper application. Next learned counsel says that as regards Annexure R/1‑B filed alongwith the counter‑affidavit which is a receipt in the sum of Rs.2.5 million and refers to the second agreement dated 29‑12‑1998 his copy, of the said receipt is blank whereas the copy filed in Court is initialled which shows the mala fides of the defendant viz, that he has been tampering with Court documents. In support of his earlier contentions as regards the exception to section 27 of the Contract Act learned counsel has relied upon Connors Brothers Ltd. v. Bernard Connors AIR 1941 PC 75 and Mulluk Chand v. Surendra Nath AIR 1957 Cal.

217. I have heard both learned counsel and my conclusions are as follows:‑‑ It would be seen that the entire controversy between the parties is whether the defendant had agreed not to practise his profession viz. photography studio and laboratory business in the Province of Sindh in general and at Karachi in particular vide clause (4) of the agreement dated 28‑12‑1998 Annexure D. It is the plaintiff's contention that the defendant did so in terms of restrictive covenants to this effect contained in said clause as the execution of the agreement is not denied and further the defendant, his sons and wife had given under takings in terms of said clause 4, viz. Annexure D/5, D/6 and D/7. To the contrary, it is the defendant's case that the first agreement, dated 28‑12‑1998 was cancelled and a fresh agreement dated 29‑12‑1998 was executed between the parties whereby the restrictive contents were omitted thus leaving the defendant free to practice his profession in Karachi or elsewhere in support of which contention a copy of such new agreement has been filed as ‑Annexure R/ 1, to the counter‑affidavit to C.M.A. 507 of 2000 as well as a signed draft of such agreement in which the entire Clause 4 has been omitted. The plaintiff's response to such version given by the defendant is that during negotiations and finalization of the various agreements between the parties, the defendant had obtained the plaintiff's signatures on blank stamp papers and has thereafter typed out the alleged fresh agreement dated 29‑12‑1998 and consequently the same is denied as being fraudulent and not binding on the plaintiff. So also plaintiff places reliance upon the rejoinder filed by the witness to the earlier agreement Syed Raza Panjtan Rizvi who has fully supported the plaintiff. Upon a deeper examination of the matter it is instructive to note that in Annexure R/2 to the counter‑affidavit, which is a letter written to the defendant by the plaintiff, reference is made to the second agreement dated 29‑12‑1998. Such reference is also made in the receipt issued by the defendant dated 1‑3‑1999 in the sum of Rs.14,549,750 being full and final sale consideration for the transaction a copy of which was produced by Mr. Munawar Ghani during the course of arguments and which has been taken on the record in the interest of justice. As opposed to this observation it would be seen that in the Draft Agreement which has been signed by both parties a copy of which has been filed as Annexure R/3 to the counter‑affidavit the entire Clause4 has been scored out, however, the parties have not initialled the sentence which appears in hand in clause 10 thereof viz. all previous agreements made for the sale of Jimmy's Studios treated as cancelled. In the fact this sentence does not also appear in the second agreement dated 29‑12‑1998. In my view therefore, considering the material on the record and in the overall circumstances of the case, at this stage without examining the parties, it cannot be said with any degree of certainty as to which agreement is the authentic one. However, having observed as much, considering the entire relationship between the parties, whereby not only has the undertaking viz, Jimmy's Studio been sold by the defendant to the plaintiff including two shops, fixtures, fittings, photographic equipment alongwith good‑will etc. but also two apartments, a reasonable restraint can be implied and the defendant put to terms as to the setting up of rival photography business in the vicinity of his old premises which are presently occupied by the plaintiff. To hold otherwise would be to place a premium on a unfair business practice which would allow a person to sell his undertaking alongwith the goodwill and then open up a rival concern next door to his old establishment which in effect would deprive the purchaser from the fruits of his investment. Support for such a view can be found in Treqo v. Hunt (1896) AC 7 and it necessarily follows from the nature of good‑will which has been described as a proprietary interest and includes every positive advantage that has been acquired in carrying on the business whether connected with the premises of the business or its name and style, and everything connected with or carrying with it the benefit of the business. It is also referable in part to it locality, in part to the way in which it was conducted and the personality of those who conduct it. (per Ajmal Mian, J. (as he then was) in Khatoon Begum v. Hyesons Commercial Corporation Ltd. 1980 CLC 1666. . In my view therefore in the present case, when the business of the defendant is to a large extent personalized (he being a portrait photographer amongst other things) unless some reasonable restraint is imposed upon him as to the location and duration where he may be allowed to practice his profession, it is more than likely that his old customers would flock back to his thus, depriving the plaintiff from the fruits of his investment in a rather substantial amount. It would now remain to be seen as to what should be a reasonable restraint in the circumstances of the case. In this connection, recourse can be taken to the decided cases under the exception to section 27 of the Contract Act whereby the Court has been empowered to consider such restraints based upon the touchstone of reasonableness. There are hardly any cases under this exception in our jurisdiction, however in the English and Indian Jurisdictions the decided cases on reasonable restraint where good‑will is sold enunciate the following broad principles:‑‑

(1) The restraint sought to be imposed must be in the interest of the parties. (2) Such restraint should be justified in the public interest. The above principles were laid down by the House of Lords in Nordenfelt v. Maxim. Nordenfelt Guns and Ammunition Co. Ltd. (supra). As far as reasonableness in the interest of the parties is concerned, the general rule is that it must not be longer in point of time or otherwise be more extensive than is necessary to protect the interest of the Buyer. This would again depend upon the interest to be protected, the nature of the contract and the relative position of the contracting parties. Thus, in Nordenfelt (supra) it was held that a covenant by a patentee and manufacturer of guns and ammunition with the purchasers of the good will of his business not to engage in the said business for twenty five years in the United Kingdom was not too wide to be an invalid restraint. This conclusion was of course drawn in the particular circumstances of the case where the only customers of the Company were the British and Foreign Governments. However, in McEllistrim v. Ballymaclligot (1919) AC 548 restrictive covenant contained in the Rules of a Society, whereby a former member agreed that for an unlimited period he would sell all milk produced at his farm to a creamery run by the Society, was struck down as too wide, since it amounted to a virtual monopoly situation. As regards the issue of public interest, it has been said that in most cases, reasonableness in the interest of the parties would coincide with that of the public interest and rightly so because once the Court comes to the conclusion that a restrictive covenant can be upheld being reasonable in the parties interest, it would be very difficult to render it unenforceable because it involved some injury to the public. However, with respect to cartels and other forms of restrictive trading agreements there has been a distinct shift of emphasis in favour of recognizing the interests of the public. Such agreements are, as a general rule, freely entered into between traders who are perfectly capable of deciding for themselves what is reasonable in their own interests. Thus, the real point at issue in these cases is whether the maintenance of the restraint is detrimental to the interests of the public. (see Esso Petroleum Co. Ltd v. Harpers Garage (Stourport) Limited (1968) AC 781). However, in the present context involving the sale of good‑will, in my view, a wide restraint as contemplated by the earlier agreement dated 28‑12‑1998, whereby the Defendant has been denied the right to carry on his trade in the entire province, cannot be justified as the defendant is a skilled photographer and it would be unfair to deny his expertise to the residents of this city at all which would certainly not be in the public interest. The Indian cases cited at the Bar by Mr. Munawar Ghani, learned counsel for the defendant in my opinion are not relevant to the basic issue raised in this matter. In District Board v. Hari Chand (supra) it was held that a contract giving a person a monopoly of lorry traffication on a public road was opposed to public policy. This case concerned the issue of public policy seen in the context of monopolies which in Pakistan is regulated by law viz the Monopolies and Restrictive Trade Practices Ordinance which is not at all concerned with placing of legitimate restraints on the seller of good‑will in the case of private transactions between two parties. . Similarly in Ramamamurthy v. Nandi Rumulamma .(supra), the custom in Madras whereby one scavenger claimed absolute right to collect garbage from residential areas was struck down as opposed to public policy. Finally in Amba Prashad Maheshawasi v. Jungal Kishore (supra) it was held that the general public had the right to use a highway which could not be curtailed by the U.P. District Board by creating any monopolies viz that a particular high way could only be used by trucks. More to the point are the English Cases cited by Mr. Munawar Ghani In Jenkims v. Reid (which was followed in Routh v. Jones) (supra) the English Court of Appeals struck down covenants whereby the defendants were restrained from practising medicine within certain limits of the Plaintiff's clinic for a number of years as being too wide in their scope so as to afford adequate protection to the plaintiff's practice. It was held that such covenants were a restraint on trade and therefore, void unless there are special circumstances to justify the same, the onus to prove which is upon the plaintiff. While these cases pertain to an employer and employee situation the principle on which they were decided is common to the case of sale of good will viz that the restraint should be reasonable balancing on the one hand the purchaser's interest which would include some period wherein he‑ would be established in the business and on the other hand the sellers right to make a living which would include the general public rights to profit from his expertise. In view of the above discussion, it would be just, reasonable and fair to place some restraint on the defendant both in terms of space and time. In this regard banishing the defendant altogether from the city ,of Karachi , would not be justified as this is not in the interest of the parties as well as the general public. Consequently I would allow the plaintiff to conduct his business of photography exclusively under the name of Jimmy's Studio (or any other name) on the Eastern Side of Shahrah‑e‑Faisal starting from Karachi Airport to Metropole Hotel and thereafter down Moulvi Tamizuddin Khan Road (Queen's Road) upto the Quaid‑e‑Azam Bridge (Native Jetty). This area would include Shah Faisal Colony, Defence Area, Clifton etc. The defendant shall do so on the Western side including Karsaz, K.D.A., Saddar, I.I. Chundrigar Road etc., under any other named except Jimmy's Studio. These arrangements shall continue for a period of five years from 28‑12‑2000 or till such time as the final disposal of the suit whichever is earlier. The, above are the reasons for the short order passed on 19‑6‑2000 disposing of his application. Q.M.H./M.A.K./S‑59/K Orders accordingly.