Delhi High Court: Whether Mandatory Injunction In The Form Of Specific Performance Of Contract Can Be Granted As An Interim Measure By The Court?

Delhi-High-Court

A contract which is determinable in nature cannot be specifically enforced in view of Section 14(1)(c) of the Specific Relief Act, 1963 (‘SRA’). Further, clause (e) of Section 41 of SRA provides that injunction cannot be granted to prevent the breach of contract, the performance of which would not be specifically enforced.[1] On a co-joint reading of these provisions, the settled position of law is that if a contract cannot be specifically enforced because it is covered under Section 14(1)(c) of SRA, no injunction can be granted to prevent breach of such a contract.[2]

Thus, in case of termination of a determinable contract, if ultimately the termination was found to be illegal, the remedy of the aggrieved party would be to seek damages for wrongful termination and a claim for specific performance of the Agreement cannot be entertained.[3] The question then arises as to whether interim relief of mandatory injunction which is actually in the form of Specific Performance of the contract can be granted to an aggrieved party from the Court under Section 9 of the Arbitration & Conciliation Act, 1996 (‘Arbitration Act’). The Delhi High Court in Overnite Express Limited vs Delhi Metro Rail Corporation[4] recently reiterated the settled position of law in this regard and answered the moot question in negative.

A Court cannot grant interim relief of enforcing a Contract which is determinable as per Section 14(1)(c) read with Section 41(e) of SRA. [5] In the case of Cox and Kings India Limited v. Indian Railways Catering Tourism Corporation Limited[6], Supreme Court was dealing with a case of restoration of a Lease Agreement, which stood terminated. The aggrieved party had invoked Section 9 of the Arbitration Act and one of the pleas raised was that it had invested huge sums of money in the Project. Mandatory injunction was sought by the party. The Supreme Court upheld the decision of the Division Bench of the Delhi High Court[7] which inter alia held that it is difficult to pass an injunction under Section 9 of the Arbitration Act which is in the nature of mandatory injunction amounting to specific performance or directing continuation of the arrangement even when the determinable agreement had been terminated since as per the mandate of law, a contract which by its very nature is determinable, not only cannot be enforced but in respect of such a contract no injunction could also be granted.[8]

Similarly, in Chandu Lal vs. MCD[9], the Full Bench of the Delhi High Court has laid down that a licensee after his licence is terminated is not entitled to any interim injunction under Section 9 of the Arbitration Act. The Division Bench of the Delhi High Court in DTTDC Vs. D.R.Mehra & sons[10], declined an injunction which was prayed for by a licensee by stating that a licencee after termination of the licence is not entitled to injunction and even if he is in possession such a relief cannot be granted to him.

Thus, the position of law can be summarised that a Contract which in its nature is determinable, cannot be specifically enforced in view of the clear legal bar under Section 14(1)(c) of SRA. Once a Contract is not enforceable, Section 41(e) SRA, occupies the field and provides that an injunction cannot be granted to prevent the breach of a Contract, the performance of which would not be specifically enforced.[11] The next question that arises is whether under Section 9 of the Arbitration Act, the principles of SRA have to be applied or not. This is recently answered by the Delhi High Court in M/s Inter Ads Exhibition Pvt. Ltd. v. Busworld International Cooperatieve Vennootschap Met Beperkte Anasprakelijkheid[12], wherein the Court while dealing with a determinable contract had declined to grant a relief under Section 9 of the Arbitration Act as the same would have amounted to granting Specific Performance of the Contract.[13] Thus, in view of Section 14(1)(c) read with Section 41(e) of the SRA and the judgments on the subject, the grant of injunction in the form of specific relief is statutorily prohibited in respect of determinable contracts even as an interim measure under Section 9 of the Arbitration Act.

Disclaimer: The views expressed in this post are mine and do not reflect the views of the organisation(s) I am engaged with

[1] Rajasthan Breweries Ltd. v. The Stroh Brewery Company, AIR 2000 Delhi 450 at [14]

[2] Airport Authority of India v. Dilbagh Singh 1997 IAD DELHI 722

[3] Rajasthan Breweries Ltd. v. The Stroh Brewery Company, AIR 2000 Delhi 450 at [20]

[4] O.M.P. (I) (COMM) 254/2019, Delhi High Court decided on 12 June 2020

[5] V.F. Services (UK) Ltd. vs. Union of India & Ors. 2011 XAD (Delhi) 268 at [7]

[6] (2012) 7 SCC 587

[7] Indian Railways Catering & Tourism Corp. Ltd. v. Cox & Kings India Ltd. and Another, 2012 SCC OnLine Del 113 at [25]

[8] Placing reliance on Rajasthan Breweries Ltd. v. The Stroh Brewery Company, AIR 2000 Delhi 450 at [14]

[9] AIR 1978 Del 174.

[10] 62(1996) DLT 234

[11] at [43]

[12] O.M.P. (I) (COMM.) 273/2019, decided on 13.01.2020

[13] at [29]

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