CPCTemporary injunctionSupreme Court of India

Gujarat Bottling Co. Ltd. v Coca-Cola Co.

(1995) 5 Supreme Court Cases 54519952 min read
The case in brief30-second read
Facts
Under the 1993 agreement, GBC was authorised to bottle and sell beverages under trade marks such as "Thums Up", "Limca" and "Gold Spot". Paragraph 14 contained a negative covenant against dealing in other brands during the agreement, including the one-year notice period.
Issue
Was the negative covenant void as a restraint of trade under S.27 of the Contract Act?
Held
A negative covenant that operates during the period of the contract is not, in general, a restraint of trade, and S.42 of the Specific Relief Act 1963 allows an injunction to enforce a negative agreement.
Principle
Grant of an interlocutory injunction is discretionary and depends on (i) a prima facie case, (ii) balance of convenience and (iii) irreparable injury. The court weighs the plaintiff's need for protection against the defendant's corresponding need, and may protect the defendant by requiring an undertaking from the plaintiff. A negative covenant operative during the term of a contract may be enforced by injunction (S.42 Specific Relief Act).
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Facts

  • Under the 1993 agreement, GBC was authorised to bottle and sell beverages under trade marks such as "Thums Up", "Limca" and "Gold Spot". Paragraph 14 contained a negative covenant against dealing in other brands during the agreement, including the one-year notice period.
  • The shares of GBC were transferred to the Pepsi group, which sought to use the plants for Pepsi products.
  • Coca-Cola obtained an interim injunction from the Bombay High Court restraining GBC from making or selling other beverages at the two plants until 25 January 1996.

Issues

  1. Was the negative covenant void as a restraint of trade under S.27 of the Contract Act?
  2. Were the conditions for an interlocutory injunction met?

Held

  • A negative covenant that operates during the period of the contract is not, in general, a restraint of trade, and S.42 of the Specific Relief Act 1963 allows an injunction to enforce a negative agreement.
  • Grant of an interlocutory injunction is discretionary. The court applies three tests: (i) a prima facie case, (ii) balance of convenience in the plaintiff's favour, and (iii) irreparable injury if the injunction is refused.
  • The court must weigh the plaintiff's need for protection against injury not compensable in damages against the defendant's corresponding need, and decide where the balance of convenience lies (following Wander Ltd. v. Antox India). It can protect the defendant by requiring the plaintiff to give an undertaking.
  • On the facts Coca-Cola had a prima facie case; its loss of goodwill and market share could not be compensated in damages, while GBC's loss could be assessed and recovered under Coca-Cola's undertaking under Rule 148 of the Bombay High Court (Original Side) Rules.
  • Result: appeals dismissed; the injunction stood.

Ratio decidendi

An interlocutory injunction depends on a prima facie case, balance of convenience and irreparable injury; the balance of convenience is found by weighing each party's need for protection, and an undertaking from the plaintiff can protect the defendant.

Exam use

How to use it in an answer

  • Cite for the three-part test and the weighing of the parties' needs in the balance of convenience.
  • Cite for enforcement of a negative covenant by injunction during the term of a contract.
  • Key line: "In Gujarat Bottling v. Coca-Cola (1995), the Supreme Court applied the tests of prima facie case, balance of convenience and irreparable injury, and weighed each party's need for protection in deciding where the balance lay."

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Citation

Gujarat Bottling Co. Ltd. v. Coca-Cola Co. (1995) 5 Supreme Court Cases 545

Reported: Indian Kanoon doc 104935066 (judgment of 4 August 1995); (1995) 5 SCC 545; AIR 1995 SC 2372. This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.