P L D 1966 (W (PLP)

FARUQUI, J.‑

This is a letters patent appeal against the order dated 15th April 1965 passed by Awan, J. sitting on the Original side in Suit No. 76 of 1965 confirming the amended order of ad interim injunction passed by V Civil Judge (Mr. Bugti) in this suit before it was transferred to this Court on the Original Side. The main parties in the dispute leading to this litigation are three:‑

(1) Lt.‑Col. Muhammad Alam Shaikh, carrying on business in the name of Alam & Alam, hereinafter to be referred as Alam. (2) Messrs Atlas Autos Ltd., a public limited company having its registered office at 7, West Wharf Road, Karachi, hereinafter to be referred as Atlas. (3) Yusuf Husain Shirazi, a director and chairman of No. 2, hereinafter to be referred as Shirazi. The Plaintiff in this suit from which this appeal arises was Alam. The first two defendants were Shirazi and Atlas and the remaining defendants 3 to 11 are said to be the dealers appointed by Atlas for their products. Neither they nor Shirazi are parties to this appeal which has been filed by Atlas who are the appellants against Alam who is the respondent.

2. The material facts may be briefly stated. Alam was appointed by Messrs Honda Motor Company of Tokyo, Japan on 21‑11‑51 as their importer and distributor for Honda Motor cycles in Pakistan and had been acting as such since then. Atlas had obtained on 6‑10‑62 a permission from the Government of Pakistan for the assembly of the motor Scooter Laverda of the Italian origin. In November 1963 Shirazi went to Tokyo and contacted Hondas and discussed with them the possibility of putting up an assembly plant of Honda motor‑cycles in Pakistan. As to the details of the discussions we find reference in a letter of Hondas to Alam dated 8th November 1963, Annexure A, produced by Alam along with his counter‑affidavit. This letter makes mention that Shirazi the Chairman of Atlas had discussed this matter with them and according to his reports some firms in Pakistan were making preparations for assembly plant of motor cycles and had applied or were applying to the Government of Pakistan for sanction. The names of these are mentioned with the number of units which they were going to assemble. It is then pointed out that Atlas were preparing for the construction of the assembly plant of the motor‑cycle of Italian make and that they had sometime ago sent an offer to Hondas through another Japanese firm for setting up a plant for their make. It is then pointed out that if these 8 Pakistan firms set up these assembly plants there would be no room for the export of Honda products. They added that "Mr. Shirazi of the said Atlas was prepared to co‑operate with you (Alam) in giving you the right to distribute the products assembled in their factory to be established in future and that Mr. Shirazi will visit your office and discuss the matter with you." As no reply of this letter was received the Hondas sent a reminder to Alam by their letter dated 6th December 1963, Annexure A‑

1. Alam replied on the 14th of December acknowledging these two letters. He pointed out that as regards the question of future import of motor‑cycles in Pakistan there was no fear of import being banned in the near future and that this question would arise only when the factories start production which would take at least two years and the ban of import will be imposed only when the Government is satisfied that the quality of the locally assembled motor‑cycles was sufficient to meet the requirements of the country. As regards Altas he pointed out that they will have to obtain the sanction of the Government for the production of Honda instead of Laverda. He added that he proposed that he should be responsible for the distribution as hitherto of the Honda motor cycles which may be assembled by Atlas and that he should also be allotted certain shares and a directorship in the new company. He then said that‑he was taking all possible precautions to ensure that the sale of "our products continues in this country irrespective of the fact whether Mr. Shirazi agrees or not. As already stated there is still scope of a few more projects in this country and if necessary we may ourselves submit such a proposal to the Government to be sanctioned against the Yen credit. We are, however, keen to associate with Mr. Shirazi provided our interest as well as your interest is properly safeguarded." He ended this letter by saying that no sooner some decision is arrived at he will Write to them.

3. As a result of the negotiations between Alam, Shirazi and Atlas, an agreement was executed on 14th January, 1964. This is Annexure A filed with the memorandum of appeal. The parties to this agreement are Shirazi, Alam and Atlas. After the recitals follow the terms of which those material for the present purposes may be briefly noted: (1) That Alam shall be the sole distributor for the territories of the whole of Pakistan of the Honda motor‑cycles, etc. assembled in Pakistan by first party, namely, Shirazi or the limited liability company which was proposed to be incorporated for that purpose. (2) That this sole distributorship shall be for a period of 10 years (subject to renewal) from the date of the assembly and/or manufacture in Pakistan of the first Honda motor‑cycle/Scooter or auto‑rickshaw, subject to payment, efficient working, sales and servicing thereof by Alam. (i) This clause contains the material and basic terms and conditions upon which the distribution was to take place. This may be reproduced:‑ "(a) The Second party (Alam) shall take immediate delivery against cash or cheque payments of all the products manufactured and/or assembled by the said proposed company. (b) The second party shall carry out efficient servicing of the said products in the hands of the customers after sale, at reasonable charges. (c) The second party shall maintain for the efficient working of the said distributorship, efficient show‑rooms, service stations and workshops and adequate Staff for the same, by himself in Karachi and by himself or through his Sub agents in areas other than Karachi. (d) The second party shall be at liberty to appoint Sub agents, and sub‑distributors but without prejudice to the main distributorship agreement. (e) The first party (Shirazi) or the said proposed limited company shall fix reasonable and commercial prices for all the said products at all stages as per Government orders and/or the commercial profits determined from time to time."

4. It is next provided that this sole distributorship was subject to the conditions of the execution of an agreement between Shirazi or the proposed limited company on the one hand and the Japanese company on the other, and if this did not happen this agreement shall stand cancelled and become of no effect.

5. By clauses 6, 7 and 8 of this agreement it was provided that Shirazi or the proposed limited company of which he was to be the promotor shall allot fully paid‑up shares of the face value of Rs. 60,000 free of cost of the said company in consideration of Alam associating with him; in addition to this Alam shall be entitled to be allotted such shares of the proposed company as shall represent 5% of the paid‑up capital for the time being of the said company; that Alam will be entitled to be appointed as a director on the board of directors of the said company.

6. By clause 9 it was provided that the proposed limited company upon its incorporation shall adopt, ratify and execute or re‑execute this agreement. Then comes clause 10 which relates to Atlas who were not so far mentioned in this agreement. This clause provides that in the event of Government of Pakistan refusing to give permission to Shirazi or the proposed limited company for the manufacture or assembly of Honda motor‑cycles Atlas agrees to adopt and be bound by this agreement and carry out its terms and conditions and re‑execute a fresh agreement as per terms hereof with Alam and have their (Atlas's) permit dated 6th October 1962 for Laverda modified and amended so as to be valid for the manufacture or assembly of Honda motor cycles, etc.

7. On 16th January 1964 Alam informed Hondas that a final arrangement had been executed on the 14th and Atlas likewise informed the Hondas on 17th January 1964. What happened thereafter is not yet clear and will perhaps be a matter of evidence but there is on record a letter dated 12th May 1964, Annexure B of the counter affidavit of Alam in which Shirazi has written to Alam asking hire to get the matter expedited. It is, however, the case of the defendant Atlas which has been reproduced in the Judgment of the learned Single Judge and which is contained in para. 9 of the plaint of Atlas in their Suit (No. 49/65) and a copy of which plaint was filed along with the affidavit of Shirazi in this suit in support of the application for the vacating of the ex parte injunction which had been passed by the V Civil Judge. These allegations are of a serious character and may be reproduced: "

9. Even after the execution of the aforestated agreement dated 14‑1‑64 the defendants (Alam) instead of promoting and advancing the interests and welfare of the said proposed, limited company in regard to the said scheme and project for the assembly and manufacture by the said proposed limited liability company of the said world famous Honda two‑wheelers in Pakistan, acted in a mala fide, dishonest and wrongful manner from time to time to frustrate and sabotage the obtaining of the said franchise from Honda with the latter's capital participa tion, worked against the said agreement, put up another party, namely, Messrs Jam & Jam Industries, and/or got themselves to obtain Government of Pakistan's sanction for Honda two wheelers to be manufactured in Pakistan for dishonest and wrongful gain for the defendants, avoiding the said promoter, maligning the said promoter and the plaintiff before Honda, making false representations to Honda about the said promoter and plaintiff being not sound financially, having no political influence nor working knowledge of manufacture of vehicles and doing various wrongful acts, deeds and things, as are hereinafter more particularly pleaded." The particulars of these allegations are set out in sub‑paras (a), (b), (c), (d), (e), (f), (g), (h), (i), (j) and (k) of para 19 of the said plaint. It may be noted that the record of the Civil Suit from which this appeal arises and in which the affidavit and the plaint of the other suit was filed was sent for at the hearing and has been kept with the record of this appeal for the sake of convenience.

8. To resume the narrative of facts, the next document that is on record is the agreement dated 12‑9‑64 which is only between the Hondas and Atlas and is described as the "Technical Collaboration contract". By this agreement a deed was conclud ed between Hondas and Atlas whereby the latter became entitled to assemble the Honda motor‑cycles, etc. By a separate letter of the same date, that is 12‑9‑64 by Hondas addressed to Atlas the former made it clear that the latter had the full liberty either to choose whatever exclusive distributor they like, or not to choose any distributor at all. It may be noted from the terms of this agreement and the letter dated 12‑9‑64 that the Honda by‑passed Alam and made their agreement directly with Atlas. Atlas then obtained on 29‑2‑64 a modification from the Government of their permit dated 6‑10‑62 and by this modification they became entitled to assemble Honda motor‑cycles, auto‑rickshaws, etc.

9. It appears that Atlas went into production and started publishing their notices and advertisements which led to counter advertisements by Alam and so the stage was set for litigation. It was Atlas who first came to Court and instituted Suit No. 49/65 in this Court on 17‑2‑65 seeking a declaration and injunction against Alam and also damages in the sum of Rs. 2,00,000 because the latter was still holding out himself to be the sole distributor of Hondas manufactured either in Japan or in Pakistan. The defendant was served in this suit and obtained time for filing a written statement but before he did so he filed the present suit in the Court of the V Civil Judge, Karachi on 23‑2‑65 in which the following reliefs are claimed: "(a) Perpetual injunction restraining the defendants 1 and 2 their agents. servants and all other persons claiming through or under them from interfering with plaintiff's exclusive rights of distribution in respect of Honda motor‑cycles, Scooters and auto‑rickshaws and spare parts thereof assembled in Pakistan by defendant No. 2 as well as certain models of Honda motor cycles, manufactured by Honda Motor Company of Japan, for which plaintiff admittedly holds exclusive rights of distribu tion in Pakistan. (b) Perpetual injunction restraining defendants 1 and 2 from assembling/manufacturing and distributing of agreement (sic) dated 14‑1‑64 (Annexure A) in violation of the said agreement. (c) Perpetual injunction restraining the defendants 1 and 2 from directly or indirectly granting rights of distribution, dealership, agency, etc. in respect of Honda motor‑cycles, Scooters, auto‑rickshaws and parts thereof, assembled and manufactured by them in Pakistan, in favour of any other person whatsoever and further restraining the defendants 1 to 11 from selling Honda motor‑cycles and other items mentioned above, to anyone else 'and/or booking or receiving orders for the same as dealers in violation of the agreement aforesaid. (d) Perpetual injunction restraining the said defendants and each of them, as such from exhibiting, presenting, passing off, posing or in any manner advertising and otherwise acting at all as dealers, sub‑dealers, agents, sub‑agents, distributors for sale and/or distribution of Honda motor‑cycles, Scooters and auto‑rickshaws and spare parts thereof assembled by defendant No. 2 in violation of the said agreement." Along with this plaint an application was, under Order XXXIX, rules 1 and 2, also filed by which a temporary interim injunction was prayed for in the same term . as the prayers in the plaint as reproduced above. Upon this application the learned Civil Judge promptly passed an ex parte order granting ad interim injunction which may be reproduced:‑ "The counsel for the plaintiff is present and he is heard at length. I accede to his arguments. Issue ad interim injunction as prayed for on costs. Notice to the opposite party on costs for 6‑3‑65. (Sd.) 23‑2‑1965." Having been served with this injunction whereby Atlas were also restrained from assembling/manufacturing Honda motor‑cycles and other items, Atlas rushed up to the Court with a counter affidavit alleging that this suit was a counterblast to their suit and there has been suppression of material facts and then prayed for the vacating of the ad interim injunction. Upon this the follow ing order, the relevant part of which is as follows was passed: "Anyhow I accede to the argument of the learned counsel that I should vary my interim injunction granted on 2 a‑2‑65 to this extent that the said defendants should not be restrained from assembling/manufacturing Honda motor‑cycles directly or indirectly." Atlas came up in revision to the High Court against the injunc tion order passed by the Civil Judge and this revision application carne before one of us upon which a direction was given that this may also be placed before Awan, J. before whom the suit of Atlas was already pending. Awan, J. very properly ordered the transfer of the suit from the Court of the V Civil Judge to the High Court and after hearing the parties passed an order confirm ing the ad interim injunction passed by the Civil Judge on 24‑2‑65 as amended by his subsequent order dated 25‑2‑6.5. The present letters patent appeal is directed against this order.

10. We would like at the outset to observe that the interim ex parte order was passed by the learned Civil Judge with undue haste. By this not only he restrained the defendants from interfer ing with the rights of distributorship of the plaintiff Alam but also restrained the assembly and manufacture in the factory of Atlas of the products of Honda make. We have observed in more than one instance that such sweeping ex parte interim orders are passed in the subordinate Courts without fully realising the damage that it may cause and often as in this case in disregard of the provision of rule 3 of Order 39, C. P. C. which makes it obligatory upon the Court in all cases, except where it appears that the object of granting the injunction would be defeated by the delay, to give notice of the application to the opposite‑party. There is nothing in the order of the learned Civil Judge to indicate that if he had given notice to the opposite‑party in the present case the object of the A injunction would have been defeated. We hope in future the subordinate Courts will pay due regard to the requirement oft rule 3 of Order 39 when the question of grant of an ex parte injunction arises. It must be remembered that an ex parte injunction passed in haste might put the opposite party at a considerable disadvantage and cause unnecessary hardship and this would continue until in due course, and this generally takes a long time, the other party is heard and the application is disposed of after hearing.

11. In this appeal we have heard Mr. Fakhruddin for the appellant Atlas and Mr. Sharifuddin Pirzada for the respondent Alam and both of them have addressed us at a considerable length. We would, however, try to limit our observations as much as possible to the question with which we are concerned in this appeal, namely, whether the temporary injunction should have been granted in this suit.

12. The grant of perpetual injunction is governed by sec. 54 of the Specific Relief Act which provides that a perpetual injunction may be granted to prevent a breach of an obligation exis ting in favour of the applicant whether expressly or by implication It is further laid down that when such an obligation arises from contract the Court shall be guided by the rules and provisions contained in Chapter II of this Act. Chapter II, it may be stated, relates to specific performance of contract. Clauses (a) to (e) of section 54 enumerate the cases where the Court may grant a perpetual injunction. Of these clauses (b) and (c) may be quoted: "(b) where there exists no standard for ascertaining the actual damage caused, or likely to be caused, by the invasion; (c) where the invasion is such that pecuniary compensation would not afford adequate relief." We may then revert to Chapter II and refer to section 21 which deals with contracts which cannot be specifically performed. Of these clauses (a), (b) and (g) may be reproduced:‑ "(a) a Contract for the non‑performance of which compensa tion in money is an adequate relief; (b) a contract which runs into such minute or numerous details, or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the Court cannot enforce specific performance of its material terms; (g) a contract the performance of which involves the performance of a continuous duty extending over a longer period than three years from its date." We then return to the Chapter 10 which relates to perpetual injunction. We have already referred to section

54. Section 56 in its clauses (a) to (k) enumerates cases in which an injunction cannot be granted. Clause (f) of these reads as follows:‑- (f) to prevent the breach of contract, the performance of which would not specifically be enforced." Then comes section 57 which provides that notwithstanding section 56 (f) where a contract comprises an affirmative agreement to do a certain act coupled with the negative agreement, express or implied, not to do a certain act, the circumstance that the Court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an‑injunction to perform the negative agreement: provided that the applicant has not failed to perform the contract so far as it is binding on him. The contention of Mr. Fakhruddin was drat the agreement dated 14‑1‑64 was such of which. the Court would not grant a specific performance. That being so it was contended that an injunction to prevent the breach of such a contract was expressly barred by section 56 (f). With regard to section 57 it was contended that there was no such negative agreement, express or implied, in this document in respect of which the Court would grant an injunc tion relying upon the aforesaid provision. He also contended that this agreement was at best an agency agreement which was revocable and in which case the plaintiff could only be entitled to compensation. Mr. Sharifuddin on the other hand urged that specific performance of this agreement may be ordered and in any case there was an implied negative term in that agreement and this could be enforced by an injunction. With regard to the question of revocation of the agency he urged that this was a case of an agency coupled with interest and could not, therefore, be revoked. We do not propose to go into the question of the revocability of the agency and we shall briefly deal with the other two questions, because we are of the view that even if it was found at the trial that this was a fit case for the grant of a perpetual injunction it is not a fit case for the grant of a temporary injunction pendente lite.

13. To begin with it must be observed that the nature of the agreement in question, assuming that all the subsequent necessary steps which are contemplated therein. were taken, is such that for its fulfillment it requires a complete confidence and fidelity between the parties and is dependent upon the personal qualification and loyal adherence to the innumerable requirements of the trade in question and a willing co‑operation in all matters between the parties throughout the duration of its period. It involves the performance of a continuous duty on the part of the plaintiff with full vigour and willing co‑operation with the defendant producer. This duty is required to be under the agree ment for 10 years. It may be noticed that clause (3) of the agreement lays down that the second party (Alam) shall take immediate delivery against cash or cheque payment of all the products manufactured or assembled; that he shall carry out efficient servicing of the said products in the hand of the customers after sale at reasonable charges; that he shall maintain for the efficient working of the said distributorship, efficient show rooms, service stations and workshops and adequate staff for the same. Can there be a reasonable expectation of the fulfilment of all these duties when the parties ‑are completely at loggerheads and at each other's throats? Can it reasonably be expected in the circumstances of this case that the necessary confidence would be restored between the parties which is essential for the carrying out of an agreement between a producer and a distributor, particularly in the business of this kind. The least that we can, say is that such an expectation would not be reasonable. The next feature of the agreement is that it cannot tie said that for the non‑performance of it compensation in money would not be an adequate relief. In fact, the plaintiff may himself after sometime consider the advisability of suing the defendant or defendants for damages instead of persisting in this claim for injunction. The third aspect is whether the producers in this case, if they so desire, can enforce the agreement against the plaintiff Alam in case he declines to act as the distributor of the products. The answer, in our opinion, must be in the negative. That being so, there is no mutuality and considering that the grant of injunction is an equitable relief the Court would not grant an; injunction at the option of one party to prevent the breach of an agreement by him if a similar injunction could not be validly granted in the opposite case.

14. It may be noted that the right of assembly or manufacture by joint collaboration has now been granted by Hondas to Atlas alone. The choice of dealers is to be made at the recommenda tion of Atlas and approval of Hondas. Atlas are not bound how to appoint a sole distributor. That being so, apart from several other considerations which arise, would it be just and equitable to prevent the production or sale or distribution of the products in a suit to which Hondas are not parties and who have left it to Atlas whether to appoint an exclusive distributor or not? For these amongst other reasons we are inclined to the view that the agreement in question is not such of which the Court would order specific performance.

15. The next question which falls for consideration is whether a negative covenant can be spelled out of the agreement in question which should be enforced by an injunction even though the affirmative of it could not be enforced by a decree for specific performance. A considerable amount of case law was cited in this connection by the learned counsel for both the parties but we do not think we should, for the purposes of this appeal from an interlocutary order, deal with all of them. Mr. Sharifuddin placed considerable reliance upon the decision in the case of Lumley v. Wagner (21 L J Ch, 898) in which a singer who had failed to perform his agreement to sing at the plaintiff's theatre and who could not be compelled by a decree for specific performance to sing at the plaintiff's theatre but who because of an express negative covenant was prevented by an injunction restraining him from singing at another theatre. This case was decided a long time ago. It has been approved in some subsequent cases but has been the subject of criticism in later decisions. In Whitewood Chemical Co. v. Hardman ((1891) 2 Ch. 416) in which the defendant had entered into an agreement to serve as a plaintiff's manager for a fixed term of years and to devote the whole of his time to plaintiff's business but he was trying to set up within the district a rival company to work the same patent which the plaintiffs were working and was devoting part of his time to the business of the rival company, the Court refused to grant an injunction restraining the defendant. Lindley, L. J. observed: "Every agreement to do a particular thing, in one sense involves a negative. It involves the negative of doing that which is inconsistent with the thing you are to do . . . but it does not at all follow that because a person has agreed to do a particular thing he is therefore to be restrained from doing everything else which is inconsistent with it. The Court has never gone that length, and I do not suppose that it ever will . . . . . I confess I look upon Lumley v. Wagner, rather as an anomaly to be followed in cases like it, but an anomaly which it would be very dangerous to extend." It may be observed that so far we are concerned the law is contained in the statute and while it is true that the illustrations C & D to section 57 do go along way in suggesting that negative can be spelled out of an affirmative term of an agreement yet it must be remembered that both these clauses relate to contract of service. We do not think that in the present case a negative covenant can be spelled out of the term of the agreement in question so as to be enforced by an injunction under section

57. It may be noted that there is no express negative covenant in it. The express part of it relates to the promise of appointing the plaintiff as the sole distributor. Can it then be effectively urged that if the affirmative term cannot be enforced in this case by a, decree of specific performance the implied negative should be spelt out, namely that the defendant shall neither distribute or sell his products himself nor appoint anyone to do so. We asked Mr. Fakhruddin whether his clients intended to appoint a sole distributor and his categorical assurance was that they were not going to do so.

16. We are inclined to the view that in order that a negative term may be held to be implied And which may be enforced by injunction it must be such which should be severable from the opposite obligation. If we were to hold otherwise it would lead to obvious anomaly, viz., where a positive term of an agreement could not be enforced by an injunction because of the reasons stated in section 54 the same object could be indirectly achieved by imputing an implied negative agreement merely out of a positive term and enforce it under the provisions of section

57. We do not. think that it was intended by section 57 to destroy the effect of the provisions contained in section 54 and clause (f ) of section 56.

17. The next, question which remains is and which is what is the principal one for decision in this appeal, namely, whether this is a fit case in which a temporary injunction should have been granted. Merely because it might be thought fit to grant a perpetual injunction after the hearing in a case it does not follow that a temporary injunction before the hearing must necessarily be granted. To justify a temporary injunction, not only must the case be such that an injunction is an appropriate relief but there must be the further ingredient that unless the defendant is restrained forthwith by a temporary injunction irrepairable injury or inconvenience may result to the plaintiff before the suit is decided upon its merits. The learned Single Judge has not taken this aspect of the case fully into consideration. In the present case there are serious allegations by the defendant that the plaintiff himself has been guilty of attempt to thwart this agree ment of which considerable details have been given. They may be disproved but they have to be investigated. Then we have not been able to see what would be the irrepairable injury to the plaintiff if the temporary injunction is not granted. His interest can be safeguarded by putting the defendant on terms. We do not think that this is a fit case in which the defendants should be restrained from disposing of the machines which they have produced and which they are producing until the decision of this hotly contested suit. Some correspondence was produced to show that after the confirmation of the injunction the defendant wrote to the plaintiff about the disposal of the machines which had been assembled and which were of the value of about Rs. 6,00,

000. They could not agree upon any method of doing so. In fact, the defendant suggested that this offer was for a mala fide and ulterior purpose. Could the Court in these circum stances, when the entire confidence has been destroyed, force the defendant to sell the produce only through the sole distributor ship of the plaintiff alone otherwise keep the machines to rot.

18. For the reasons given we allow this appeal and set aside the order of the temporary injunction which was confirmed by the learned Single Judge. We, however, direct the defendant to submit fortnightly statement of account of sale of every motor cycle or auto‑rickshaws which may be produced. The plaintiff shall be entitled to obtain copies of such accounts. This will ensure the amount of commission to which the plaintiff would have been entitled in case the agreement was fulfilled. The costs in this appeal shall be the costs in the suit. S.Q. Appeal allowed.