MIS. GUJARAT BOTTLING COMPANY LTD. AND ORS. v. THE COCA COLA CO. AND ORS.

The Judgment of the Court was delivered by

S.C. AGRAWAL, J. Special leave granted.

In the past nations often went to war for the protection and advan- F cement of their economic interests. Things have changed now. Under the international order envisaged by the Charter of the United Nations war is no longer an instrument of State policy. Now-a-days there are wars between corporations; more particularly corporations having multi-national opera- tions, for the protection and advancement of their economic interests. G These wars are fought on the economic plane but some of the battles spill over to courts of law. The present case is one such legal battle. The combatants are two American multi-national corporations dominating the soft drink market having operations in a number of countries. On the one side is Coca Cola Company (respondent No.1), hereinafter referred to as "Coca Cola", and on the other side is PEPSICO INC. (for short "Pepsi"), H

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A and its subsidiaries and subsidiaries of the subsidiaries which are under, direct or indirect, control of Pepsi. There is a long history of trade rivalry between these two multi-national corporations. ....... Coca Cola had been operating in this country till 1977 when on account of change of policy of the new Government Coca Cola had to close its operations in India. After the departure of Coca Cola the products of the domestic manufactures filled the vacuum. A substantial share of the market came to be controlled by the Parle group of companies oWlled and controlled by Mr. Ramesh Chauhan and Mr. Prakash Chauhan, respon- dents Nos. 3 and 4. The said group was manufacturing under trade marks bearing the names "Gold Spot", "Thums Up", "Limca", "Maaza", "Rim Zim" and "Citra" as well as "Bisleri" club soda. They had arrangements with bottlers in different parts of the country where under the bottlers prepared beverages from the essence/syrup supplied by the Parle group and after bottling the same the beverages were sold under the names for which trade marks were held by the Parle group. In late 1980s Pepsi started operations in India and introduced beverages under their trade marks. Coca Cola followed suit thereafter. Under the Deed of Assignment dated November 12, 1993, the Parle group assigned their trade marks in the beverages bearing the names "Gold Spot", "Thums Up" , "Limca", "Maaza", "Rim Zim" and "Citra" to Coca Cola. On January 6, 1994, Coca Cola applied to the E Registrar of Trade Marks for being recorded as subsequent proprietor of the trade marks which had been assigned to it by the various Parle entities.

Gujarat Bottling Company Ltd., appellant No. 1 {hereinafter referred to as 'GBC) is a company incorporated under the Companies Act, 1956. F 21% of its shares are held by Ahmedabad Advertising· and Marketing Consultants Ltd., respondent No. 7. The remaining 79% of shares were held by Mr. Pinakin K. Shah, respondent No. 2 and his family members and business associates and respondents Nos. 3 and 4 and their family members and associates in the ratio of 78% and 22% respectively. The shares of respondent No. 7 were also held by respondent No. 2 and his family members and associates and respondent No. 3 and 4 and their family members and associates in the same ratio of 78% and 22% respectively. GBC has bottling plants at Ahmedabad and Rajkot in Gujarat. GBC was having an arrangement with respondents Nos. 3 nd 4 whereunder licence had been given to GBC to prepare, bottle, sell and distribute beverages under the trade marks "Thums Up", "Limca", "Gold Spot", "Maaza", "Citra",

UUJ.BOTfLINGCO.LTD. v. COCA COLA CO. [S.C.AGRAWAL,J.) 523

"Rim Zim" and "Bisleri Club Soda". In anticipation of the assignment of the rights in trade marks by parle group in its favour, Coca Cola, on September 20, 1993, entered into an agreement (hereinafter referred to as the "1993 Agreement") with GBC whereby Coca Cola permitted and authorised - GBC, upon the terms contained in the said agreement, to bottle, sell and distribute the beverages known and sold under the trade marks "Gold B Spot", "Thums Up", "Limca", "Maaza" and "Rim Zim". The trade mark "Citra" was excluded from this agreement for the reason that a suit for 'passing off' was pending against the Parle entity concerned in the Delhi High Court and there was uncertainty of the outcome of this litigation. The 1993 Agreement was to come into effect on the date Coca Cola indicated in writing to GBC that all trade marks related to the said agreement have been assigned and transferred to Coca Cola. The 1993 Agreement is to -

... operate till November 17, 1998 unless earlier terminated as provided in the said agreement. Under Paragraphs 4(a), 6, 18, 19, 20 and 23 Coca Cola is empowered to terminate the said agreement without notice and in para- graph 21 provisions is made for termination of the said agreement by either side on giving one year's written notice. The said period of notice could be reduced by mutual consent in writing between Coca Cola and GBC. Paragraph 14 of the 1993 Agreement contains a negative covenant by GBC not to manufacture, bottle, sell, deal or otherwise be concerned with the products, beverages of any other brands or trade marks/trade names during the subsistence of the agreement including the period of one years' notice as contemplated in paragraph 21. Under paragraph 19 Coca Cola has the right to dis-continue supply to GBC with essence/syrup and/or othe! materials on the happening of any of the events mentioned in clauses (a) to (e) of the said paragraph. Clause (b) of paragraph 19 relates to transfer of stock, share or interest or other indicia of ownership of GBC resulting in effective transfer of control without the prior express written consent of Coca Cola. The 1993 agreement came into force on November 12, 1993 when the trade niarks related to the said agreement were assigned and transferred to Coca Cola. Two such agreements were executed - one pertaining to Ahmedabad town and other pertaining to Rajkot town. In G petition, Coca Cola also entered into two separate agreements under letters dated September 20, 1993 in respect of permission to use the trade mark "Citra" by GBC for Ahmedabad and Rajkot towns. Two other separate agreements were entered by Coca Cola under letters dated Sep- tember 20, 1993 for Ahmedabad and Rajkot towns for the use of the trade H

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A mark "Bisleri" club soda by GBC. All these four letters agreements are - ~

operative for two years and can be renewed by mutual consent. These agreements can be ten.ninated by giving three months notice by either side. These agreements were also to come into effect from the date indicated by Coca Cola in writing to GBC that all trade marks related to the said agreements have been assigned and transferred to Coca Cola. B On April 30, 1994 Coca Cola entered into another agreement (hereinafter referred to as the "1994 Agreement") with GBC whereby Coca Cola granted to GBC a non-exclusive licence to use the trade marks mentioned in the schedule to the agreement, namely, "Gold Spot", "Lim ca", c ''Thums Up", "Maaza", "Citra", etc, in relation to goods prepared by or for the licensee (GBC) from concentrates and/or syrup supplied by the licen- sor (Coca Cola) and packaged or dispensed in accordance with standards, specifications, formulae processes and instruction furnished or approved ... by the licensor from time to time and only so long as such goods are manufactured within such territory of India and sold within such territory of India and in such bottles or other containers as shall be approved by the licensor from time to time. In the said agreement it is provided that both the parties shall make application to the Registrar of Trade Marks ~

under the Trade & Merchandise Marks Act, 1958 (hereinafter referred to as "the Act') or any statutory modification or enactment thereto or thereof for the time being in force to procure the registration of the Licensee (GBC) as a registered user of the said trade marks as aforesaid as soon as the said trade marks are registered and shall sign and execute all such documents as are reasonably proper and necessary to secure such registra- tion and for any change thereof in the future. The said agreement is not limited to any particular period and is to continue in force without limita- F tion of period but can be terminated at any time by either party upon giving ninety days' notice in writing to the other or by mutual consent. But in the event of either party committing a breach of any of the provisions of the .... said agreement it shall be lawful for the other party, by giving thirty days' notice in writing, to terminate the agreement. In accordance with the 1994 G Agreement an application was submitted by Coca Cola on July 12, 1994 under Section 48 and 49 of the Act to register the said agreement as a Registered User Agreement.

After the execution of these agreements steps for upgradation of the H plants of GBC at Ahmedabad and Rajkot were taken and when the

GUJ.BOTTLINGCO.LID. v. COCACOLACO.(S.C.AGRAWAL,J.] 525

upgradation of the said two plants was near completion Coca Cola advised A GBC that it was necessary for GBC to provide for additional investments in marketing arrangements, purchase of crates and other equipments and trucks etc. GBC was, however, reluctant to make further investment and respondent No. 2 requested Coca Cola to give its consent in advance for transfer of interest of respondent No. 2 in GBC. Coca Cola declined to B give its consent to such transfer in advance without being aware as to who the prospective purchaser was and informed GBC and respondent No. 2 that the transfer can be permitted provided GBC does not lose controlling power or management in favour of an outsider. On January 20, 1995, the share holding of respondent No. 2 and his family members and associates as well as respondent Nos. 3 and 4 and their family members and associates c in GBC and respondent No. 7 were transferred to appellants Nos. 2 to 5 which are concerns closely associated and connected or affiliated to sub- sidiaries of Pepsi, respondent No. 6, and Pepsi Foods Limited, respondent No. 5, a subsidiary of Pepsi. As a result Pepsi acquired control over GBC. On January 25, 1995 GBC Gave a notice to Coca Cola under clause 7 of the 1994 Agreement whereby the said agreement was terminated. In the said notice it is also stated tha~ without prejudice to the contentions of GBC that the 1993 Agreement stands replaced by the 1994 Agreement and/or that the termination period under the 1993 Agreement in any event stands reduced to 90 days and that the said letter dated January 25, 1995 be treated, as a matter of abundant caution, as termination notice also under clause 21of the 1993 Agreement. On January 25, 1995 GBC also addressed a letter to Coca Cola informing them that shares representing 70.6% approximately of the paid up equity capital of GBC had been acquired by and transferred in favour of appellants Nos. 2 to 5. On January 31, 1995 GBC addressed a letter to the Director (F&VP), Ministry of Food F Processing Industries, Government of India, for approval of crown cap designs pertaining to beverages of which the trade marks are held by Pepsi.

On January 30, 1995 Coca Cola filed in suit- (Suit No. 400 of 1995) in the Bombay High Court seeking various reliefs. In the said suit Coca G Cola took out Notice of Motion No. 316 of 1995 seeking interim relief. During the course of hearing on the said Notice of Motion before the learned single Judge of the High Court (Dhanuka J .) the learned counsel for Coca Cola sought interim relief in terms of prayers (a)(i), (a)(ii) (a) (iii) and (a) (viii) of the Notice of Motion. By his order dated February 22, 1995 the learned single Judge declined the application for grant of interim H

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A relief in terms of prayers (a)(i), (a)(iii) and (a)(viii) but issued an interim injunction restraining GBC from manufacturing, bottling or selling or dealing with the products, beverages of any brand or trade marks owned by respondents Nos., 5 and 6 or any one else other than Coca Cola. GBC was permitted to pursue its application dated January 31, 1995 pending before the Director (F&VP), Ministry of Food Processing Industries, in B accordance with law but GBC was directed not to act upon the permission of the said authority or any other authority, if granted, without obtaining prior leave of the court. Two appeals (Appeals Nos. 183 and 191 of 1995) were filed against the· said order of the learned single Judge before the Division Bench of the High Court - one was by GBC and the other was by c Coca Cola. During the course of hearing of the said appeals the parties, through their counsel, submitted that as decision in the appeals would have . impact on the Motion pending before the learned single Judge, it was desirable that Notice of Motion No. 316 of 1995 should be taken up on board and disposed of finally by the Division Bench so as to avoid one more appeal. In view of the said submission and by consent of the parties the Motion was heard and disposed of finally by the Division Bench by the impugned judgment dated March 31, 1995. By the said judgment Notice of Motion No. 316 of 1995 was made absolute in terms of prayer Nos. (a)(ii) and (a) (iii) as modified. Prayer (a)(ii) was for an injunction restraining respondent No. 1 (GBC) either directly or indirectly by itself or through its shareholders from concerning itself with the products, beverages of any other brand or trade mark of the plaintiffs (Coca Cola). Under prayer (a)(iii) as modified an injunction has been granted in the following terms:

"That in the event of the sale of shares having taken place before the institution of the suit, the deponent No. 1 and those to whom the shares have been sold and also subsequent transferees, their servants, agents, nominees, employees, subsidiary companies, con- trolled companies, affiliates or associate companies or any person acting for and on their behalf are restrained by an interim injunc- tion from using the plants of respondent No. 1 at Ahmedabad and G Rajkot for manufacturing, bottling or selling or dealing with or concerning themselves in any manner whatsoever with the beverages of any person till January 25, 1996."

Feeling aggrieved by the said judgment of the Division Bench of the H High Court dated March 31, 1995, GBC (defendant No.l) and the four

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transferees of the shares of GBC (defendants Nos. 7 to 10) have filed these A appeals.

By the said interim order the High Court has given effect to the hegative stipulation contained in paragraph 14 of the 1993 Agreement which is in the following terms : B "As such the Bottler covenants that the Bottler will not manufac- ture, bottle, sell, deal or otherwise be concerned with the products, beverages of any other brands or trade marks/trade names during the subsistenane of this Agreement including the period of one year's notice as contemplated in paragraph 21." C On behalf of the appellants submissions have been made assailing the validity of the said negative covenant. For that purpose it is necessary to determine whether the 1993 Agreement subsists or has been legally terminated. The case of GBC, in this regard, is that the 1993 Agreement is no longer in operation since it has been superseded by the 1994 Agree- D ment and the 1994 Agreement has been terminated by notice dated January 25, 1995 and that, in the alternative, the requirement regarding giving of one year's written notice for terminating the 1993 Agreement as contained in paragraph 21 of the said agreement was reduced by mutual consent by the parties by the 1994 Agreement wherein under clause 7 the period of E such notice for terminating the agreement is 90 days and that by notice dated January 25, 1995 the 1993 Agreement stands terminated on the expiry of 90 days from the date of the said notice. These submissions require an examination of the nature and contents of the 1993 and 1994 Agreements but before we proceed to do so we may briefly refer to the relevant law governing the use of trade marks in India. F The first enactment whereby the machinery for registration and statutory protection of trade marks was introduced in this country was the Trade Marks Act, 1940. Prior to the said enactment the law relating to trade marks in India was based on common law which was substantially the G same as was applied in England before the passing of the Trade Marks Registration Act, 1875. At common law the right to property in a trade mark was in the nature of monopoly enabling the holder of the said right to restrain other person from using the mark. For being capable of being the subject matter of property a trade marks had to be distinctive. This right was an adjunct. of the goodwill of a business and was incapable of H

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A separate existence dissociated from that goodwill. [See : General Election Co. v. General Electric Co. Ltd., (1972) 2 All ER 507). The Trade Marks Act, 1940, which was based on the Trade Marks Act, 1938 of U.K., has now been replaced by the Act. The Act has modified the law relating to Trade and Merchandise Marks and is a comprehensive piece of legislation B dealing with the registration and protection of trade marks and criminal offences relating to trade marks and other markings in merchandise. Under the Act registration of trade marks is not compulsory and as regards unregistered trade marks, some aspects are governed by the Act while others are still based on common law. In respect of a trade mark registered under the provisions of the Act certain statutory rights have been conferred c on the registered proprietor which enable him to sue for the infringement of the trade mark irrespective of whether or not mark is used. The Act also makes provisions whereunder registered proprietor of a trade mark can permit any person to use the mark as a registered user and for that purpose provisions are made in Sections 48 to 54 of the Act. In clause (m) of Section D 2 the expression "permitted use" in relation to a registered trade mark has been defined to mean "(i) the use of a trade mark by a registered user of the trade mark in relation to goods - (a) with which he is connected in the course of trade; and (b) in respect of which the trade mark remains registered for the time being; and (c) for which he is registered as E registered user; and (ii) which complies with any conditions or restrictions to which the registration of the trade mark is subject". In sub- section (1) of Section 48 it is provided that a person other than a registered proprietor of a trade mark may be registered as the registered user thereof in respect / of any or all of the goods in respect of which the trade mark is registered otherwise than as a defensive trade mark and in the said Section the F Central Government has been empowered to make rules providing that no application for registration as such shall be entertained unless the agree- ment between the parties complies with the conditions laid down in the rules for preventing trafficking in trade marks. Under sub-section (2) the permitted use of a trade mark shall be deemed to be used by the proprietor G thereof and shall be deemed not to be used by a person other than the proprietor, for the purpose of Section 46 or for any other purpose for which such use is material under the Act or any other law. Section 49 makes provision for submission of application for registration of trade mark as a registered user and one of the requirements is that the said H aJ?plication shall be accompanied by the agreement in writing or a duly

GUJ.BOTfLINGCO.LTD. v. COCACOLACO.[S.C.AGRAWAL,J.) 529

authenticated copy thereof entered into between the registered proprietor A and the proposed registered user with respect to permitted use of the trade mark and it is further required that the registered proprietor or some person authorised to the satisfaction of the Registrar to act on his behalf give an affidavit in respect of the matters set out in sub-clauses (a) to (d) of clause (ii) of sub-section (1) of Section 49. Section 51 empowers a B registered user of a trade mark to call upon the proprietor to take proceed- ing to prevent infringement of the trade mark and if the proprietor refuses or neglects to do so within three months after being so called upon, the registered user may institute proceedings for infringement in his own name as if he were the proprietor, making the proprietor a defendant. Section 52 deals with power of Registrar to very or cancel registration as registered user. Under Section 53 a registered user does not have the right of assignment or transmission of the right to use the trade mark. Further provisions relating to registered user are contained in chapter V (Rules 82 to 93) of the Trade and Merchandise Marks Rules, 1959 (hereinafter referred to as "the Rules"). Rules 83 provides the particulars which are required to be stated in the agreement between the registered proprietor and the proposed registered user with respect to the permitted use of the trade mark. The said particulars include "the particulars specified in sub-clauses (a) to (d) of clause (ii) of sub-section (1) of Section 49" and a provision about "means for bringing the permitted use to an end when the relationship between the parties or the control by the registered proprietor over the permitted user ceases."

The above mentioned provisions contained in the Act and the Rules indicate that the use of registered trade mark by a registered user is subject to fulfilment of certain conditions and for the purpose of registration of a F registered user it is necessary for the registered proprietor of the trade mark and the proposed registered user to execute an agreement which must contain the prescribed particulars and must be submitted alongwith the application for registration as a registered user. The registration as registered user enables the use of the trade mark by the registered user as being treated as use by the proprietor of the trade mark and enables a G registered user to take proce_edings in his own name to prevent infringe- ment of the trade mark.

Apart from the said provisions relating to 'registered users, it is permissible for the registered proprietor of a trade mark to permit a person H

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A to use his registered trade mark. Such licensing of trade mark is governed by common law and is permissible provided (i) the licensing does not result in causing confusion or deception among the public; (ii) it does not destroy the distinctiveness of the trade mark that is to say, the trade mark, before the public eye, continues to distinguish the goods connected with the proprietor of the mark from those connected with others; and (iii) a B connection in the course of trade consistent with the definition of trade mark continues to exist between the goods and the proprietor of the mark. (See : P. Narayanan - Law of Trade Marks and Passing off, 4th Ed., para 20.16, p.335]. It would thus appear that use of a registered trade mark can be permitted to a registered user in accordance with provisions of the Act C and for that purpose the registered proprietor has to enter into the agreement with the proposed registered user. The use of the trade mark can also be permitted dehors the provisions of the Act by grant of licence by the registered proprietor to the proposed user. Such a licence is governed by common law. D We may now examine the two agreements, viz., the 1993 Agreement and 1994 Agreement. In the 1993 Agreement, in paragraph 2, Coca Cola has agreed to permit and authorise GBC, upon the terms contained in the said agreement, to bottle, sell and distribute the beverages known as and sold under the trade marks set forth, in Annexure II to the agreement. E Under paragraph 3 it is required that beverages shall be manufactured in a plant approved by Coca Cola in accordance with the formula and procedure provided by Coca Cola. In clause (a) of paragraph 4 GBC expressly covenants to consistently maintain the quality .of the said beverages in all respects and to strictly adhere and conform to the technical F ·specifications and standards as provided, using only such ingredients and of such quality as approved by Coca Cola. GBC also undertakes to exercise great care and caution to see that sub-standard, inferior or unwholesome beverages will not be manufactured/marketed by GBC or its agents directly or indirectly and if Coca Cola observes that the quality of the beverages is G not maintained consistently, and/or there are persistent complaints from the market, dealers, outlets, consumers, etc., concerning the low standard or inferior quality of the beverages manufactured/marketed by GBC, Coca Cola retains the right to forthwith terminate the agreement. In clause (b) of paragraph 4, in order to assure compliance by GBC with the above requirements, it is permissible for the representatives and/or agents of H Coca Cola to inspect at any time the premises of GBC, the finished

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beverages, the methods of preparation thereof, the the bottling process, and full co-operation in this regard is to be extended by GBC. GBC has also agreed to submit sample of the finished beverages to Coca Cola every month for analysis and approval by Coca Cola who is the sole judge to determine and certify the quality of the said beverages as fit for marketing. Paragraph 5 relates to keeping by GBC or complete records of all chemical tests carried out as specified by Coca Cola and of production, sale and distribution of the beverages and furnishing of monthly reports about the same to Coca Cola. Under clause (a) of paragraph 6 GBC undertakes to buy only from Coca Cola or a manufacturer approved by Coca Cola essences and beverages bases (ingredients for making the said beverages). C Under clause (b) of paragraph 6 GBC undertakes to buy bottles, crowns, labels and other ingredients of the quality, standard and specifications laid down by Coca Cola preferably from the suppliers approved by Coca Cola and in case GBC chooses to buy the above items from a supplier/suppliers other than the one approved by Coca Cola, GBC is required to submit the items so procured to Coca Cola to determine the quality, standard and specifications before they are put to use to manufacture, bottle or sale of the said beverages. Under clause ( c) of paragraph 6 GBC has agreed to use only bottles, labels and crowns for the said beverages of a type, style, size and design approved by Coca Cola. The breach of clauses (a), (b) and ( c) of paragraph 6 would constitute an infringement of the agreement for which Coca Cola reserves its right to terminate the agreement. Under paragraph 7 GBC has agreed to vigorously and deligently promote and solicit the sale of the said beverages and assure full and complete distribu- tion of the said beverages to meet the market demand for the said bverages. Under clause (a) of paragraph 8 GBC covenants and agrees not to manufacture, bottle, sell, deal in or otherwise be concerned with any product under any getup or container used by Coca Cola or which is likely to be confused or used in unfair competition therewith or passed-off therefor. Under clause (b} of paragraph 8 GBC covenants and agrees not to manufacture, bottle, sell, deal in or otherwise be. concerned with any product under any trade mark or other designation which is an imitation or infringement of these trade marks or is likely to cause passing-off of any product which is calculated to lead the public to believe that it originates from Coca Cola because of GBC's association with the business of bottling, distributing and selling the beverages. In the said clause, it is provided that the use of the .said trade marks in any form or fashion or any wordS H

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GUJ. BOTILING CO. LTD. v. COCA COLA CO. [S.C. AGRAWAL, J.) 533

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A supplying GBC with essence/syrup and/or other materials for such length of time as Coca Cola may in its sole judgment deem necessary without thereby cancelling or prejudicing Coca Cola's right to cancel or terminate the agreement for the said cause or for any one or more other cause or causes. In paragraph 20 it is prescribed that the said agreement shall B expire, without notice, on November 17, 1998 unless it has been earlier terminated as provided in the agreement. Paragraph 21 markes provision for termination of the agreement by either side on giving one year's written notice which period may be reduced by mutual consent in writing between Coca Cola and GBC. Paragraph 23 deals with partial invalidity resulting from any of the provisions of the agreement being held invalid for whatever c reason by any of court, governmental agency, body or tribunal. In para- graph 25 provision is made for supersession of all prior contracts, agree- ments or commitments, either written or oral, which are rendered null and void and of no effect. Paragraph 29 provides that the agreement shall come into effect at the date on which Coca Cola indicates in writing to GBC that D all trade marks related to the said agreement have been assigned and transferred to Coca Cola, provided that if such notice is not issued by the first anniversary of the agreement, then the agreement shall be void· ab initio and of no effect. In paragraph 30 GBC represents and warrants to Coca Cola that GBC acknowledges that the trade marks listed on An- E nexure II will be, as of the effective date of this agreement, the property of Coca Cola, that GBC has no right, title or interest to such trade marks, except pursuant to the licence granted by the agreement and that GBC has no existing claims or basis for clainis against Parle (Exports) Limited or any of its affiliates which would affect the rights of Coca Cola under the agreement. F A perusal of the various provisions contained in the 1993 Agreement shows that by this agreement Coca Cola has agreed to grant a licence to GBC for the use of the trade marks in respect of beverages mentioned in Annexure II to the agreement which were to be acquired shortly by Coca G Cola. A number of provisions in the agreement relate to the use. of the said trade marks by GBC so as to ensure that such user of the trade marks by GBC is strictly in accordance with the common law governing user of trade marks. The 1993 Agreement was, therefore, an agreement for grant of licence under common law for user by GBC of the trade marks which were H to be acquired by Coca Cola. The 1993 Agreement also contains various

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provisions governing preparation, bottling and sale of the beverages cover- A ing by the said trade marks, In that sense the 1993 Agreement can be regarded as an agreement for grant of a franchise by Coca Cola, as franchiser, to GBC; as franchisee, whereunder GBC has been permitted to manufacture, bottle and sell the beverages covered by the trade marks referred to and mentioned in the agreement in the area covered by the agreement subject to the conditions laid down in the agreement.

We would now come to the 1994 Agreement. lo. this agreement Coca Cola has been described as the Licensor and GBC as the Licensee. In clause (a) of the Preamble to the agreement it is stated that the licensor has acquired the trade marks specified in the schedule to the agreement by virtue of Deeds of Assignment dated November 12, 1993 in respect of the goods specified in the said schedule. In clause (b) of the Preamble reference is made to the 1993 Agreement and it is stated that the parties have arranged for the preparation, packaging and sale of the goods by the Licensee and for the use of the said trade marks in relation thereto, and may enter into further arrangements in the future, within the scope of the 1994 Agreement. In clause (c) of the Preamble it is stated that the Licensor holds no equity interest in the Licensee and wishes to enter into an agreement for the use of the said trade marks on a purely contractual basis. Thereafter, the agreement provides in paragraph 1 for grant of a non-ex- clusive licence by the Licensor to the Licensee to use the said trade marks in relation to goods prepared by or for the Licensee from concentrate and/or syrup supplied by the Licensor or its nominee and prepared and packaged or dispensed in accordance with standards, specifications, for- mulae, processes and instruction, furnished or approved by the Licensor from time to .time and so long as such goods are manufactured within such territory of India and in such bottles or other containers as shall be approved by the Licensor from time to time. In paragraph 2 of the agreement it is provided that the Licensor and the Licensee shall make application to the Registrar of Trade Marks under the Act or any statutory modification on enactment thereto or thereof for the time being in force to procure the registration of the Licensee as a registered user of the said trade marks as aforesaid as soon as the said trade marks are registered and shall sign and execute all such documents as are reasonably proper and necessary to secure such registration and for any change thereof in the future. In paragraph 3 the Licensee has undertaken to prepare and pack- age of dispense the said goods strictly in accordance with standards, H

536 SUPREME COURT REPORTS (1995] SUPP. 2 S.C.R. ..- A specifications, formulae, processes and instructions furnished or approved by the Licensor from time to time to use the said trade marks in relation only to such goods so prepared and p?.ckaged or dispensed and also agreed to permit the Licensor or its authorised representative at all reasonable times to inspect at the Licensee's premises and elsewhere as the Licensor may consider appropriate to implement these covenants to ensure quality B control of the said goods and the methods of preparing, packaging or dispensing the said goods and the Licensee will, if called upon by· the Licensor to do so, submit samples of the said goods, including packages and the markings thereon, for the inspection, analysis and approval of the Lieensor. Paragraph 4 records the understanding that the Licensee shall c not be the sole licensee/permitted user of the said trade marks. In para- graph 5 the Licensee has agreed that whenever the said trade marks are used by the licensee in relation to the said goods, the marks shall be so described as to clearly indicate that the trade marks are being used only by way of permitted use. In paragraph 6 the Licensee recognises the .- Licensor's title to the said trade marks and the Licensee agrees that it shall D not at any time do or suffer to be done any act or thing which will in any way impair the rights of the Licensor in and to the said trade marks and the Licensee shall not acquire and shall not claim any right, title or interest in and to the said trade marks adverse to the Licensor by virtue of the License granted under the agreement to the Licensee or through the E Licensee's use of the trade marks. In paragraph 7 it is provided that the agreement shall continue in force without limit of period but may be terminated at any time by either party upon giving 90 day's notice in writing to the other or by mutual consent and further that in the event of either party committing a breach of any of the provisions of the agreement it shall be lawful for the other party by giving 30 days' notice in writing to terminate the agreement. In paragraph 8 the Licensee covenants that upon any amendments that the Licensor may request Licensee to execute for the purpose of applying for variation or cancellation of the entry of the •, Licensee as a registered user of the said trade marks and that in the event of cancellation, the Licensee will not make any further use of the said trade marks.

A perusal of the provisions contained in the 1994 Agreement, more J.. particularly paragraphs 2 and 8, indicates that the said agreement has been executed with a view to comply with the requirements of the Act and the H Rules for registration of GBC as the registered user of the trade marks

GUJ. B01TLINGCO. LTD. v. COCA COLA CO. (S.C.AGRAWAL,J.] 537

specified in the Schedule to the agreement which had been acquired by A Coca Cola. This agreement has been executed as per the requirements of Rule 83 of the Rules read with sub-clauses (a) to (d) of clause (ii) of sub-section (1) of Section 49. This is evident from paragraphs 1, 3, 4, 5 and -r 6 which contain particulars referable to sub-clauses (a), (b) and (c) and paragraph 7 which contains particular referable to sub- clause (d) of clause B (ii) of sub-section (1) of Section 49. The 1994 Agreement must, therefore, be treated as an agreement for registration of GBC as a registered user as contemplated by Section 49 of the Act. In other words, 1994 Agreement is a statutory agreement which is required to be executed under Section 49 of the Act read with Rule 83 of the Rules for registration of GBC as a registered user of the trade marks held by Coca Cola. It is true that C · provisions similar to these contained in 1994 Agreement are also contained in the 1993 Agreement. But that is so because a licence to use a trade marks in common law can only be granted subject to certain limitations which are akin to the requirements for an agreement for registered user under the Act. But, at the same time, the 1993 Agreement is much wider in its amplitude than the. 1994 Agreement in the sense that the 1993 D Agreement includes various terms regulating the exercise of the right of

- .. franchise that has been granted by Coca Cola to GBC in the matter of manufacturing, bottling and selling of the beverages which provisions are not found in the 1994 Agreement. The 1994 Agreement cannot be con- strued as wiping out the said terms and conditions regarding exercise of franchise granted by Coca Cola to GBC as contained in the 1993 Agree- E ment. In this context, reference may also be made to paragraph 25 of the 1993 Agreement which contains an express provision for superseding all prior contracts/agreements or commitments either written or oral. No similar provision regarding the supersession of the 1993 Agreement is contained in the 1994 Agreement. We are, therefore, of the opinion that the 1994 Agreement cannot be construed as superseding the 1993 Agree- ment and the learned single Judge and the Division Bench of the High Court have rightly rejected the contention urged on behalf of GBC that 1993 Agreement was superseded by the 1994 Agreement.

Shri Shanti Bhushan, the learned senior counsel appearing for the appellants, however, laid emphasis on the alternative submission that the period of notice for terminating the agreement as contained in paragraph 21 of the 1993 Agreement was reduced by mutual consent from one year to 90 days' by paragraph 7 of the 1994 Agreement. We find it difficult to accept this contention. It is no doubt true that paragraph 21 of the 1993 H

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A Agreement enables the termination period to be reduced by mutual con- sent in writing between Coca Cola and GBC. There is, however, no such agreement which expressly reduces the said termination period under paragraph 21 of the 1993 Agreement. What is suggested is that paragraph 7 of the 1994 Agreement is such an agreement which, by implication, reduces the termination period prescribed in paragraph 21 of the 1993 B Agreement. Since we are of the view that the nature and scope of the two agreements, i.e., 1993 Agreement and 1994 Agreement, are not the same and that while the 1993 Agreement is an agreement for grant of licence in common law and the 1994 Agreement is executed as per the requirements of the Act and the Rules for the purpose of registration of user, GBC as c registered user of the trade marks under the Act, clause 7 of the 1994 Agreement has to be confined in its application to that agreement only and it cannot be construed as having modified the termination period contained in paragraph 21 of the 1993 Agreement. Moreover, paragraph 21 of the .,,__ 1993 Agreement requires that reduction of the termination period has to be by mutual consent of both the parties, viz., Coca Cola and GBC. Mutual consent postulates consensus ad idem between the parties. There is no material on record to show that there was such a consensus ad idem between Coca Cola and GBC regarding reducing the termination period for the notice under paragraph 21 of the 1993 Agreement. The notice dated January 25, 1995 that was given by GBC to Coca Cola does not lend support to the case of the appellants. In the said notice it is stated :

"Without prejudice to our contentions that the so called Licence Agreement dated September 20, 1993 (herein 'the License Agreement') stands replaced by the Trade Mark License Agree- ment and/or that the termination period under the License Agree- F ment in any event stands reduced to 90 days' please treat this letter, as a matter of abundant cautidb, as termination notice also under clause 21 of the License Agreement."

In the said notice, it is not stated that the parties had mutually agreed to reduce the termination period from one year to 90 days by the 1994 Agreement. What is stated in the notice is the contention of GBC that the 1993 Agreement is replaced by the 1994 Agreement and that in any event the limitation period had been reduced to 90 days. If it was mutually agreed by Coca Cola and GBC. that the termination period for notice under paragraph 21 of the 1993 Agreement is being reduced from one year to

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90 days by the 1994 Agreement, there was no reason why GBC would not have mentioned about the said mutual understanding in the notice dated January 25, 1995. The fact that there is no mention about such mutual understanding in the notice dated Ja...'luary 25, 1995 and what is stated in the said notice about reduction of the termination period of the notice is by way of contention of GBC negatives the case put forward by the appellants that the termination period for the notice under paragraph 21 of the 1993 Agreement had been reduced from one year to 90 days. It must, therefore, be held that the 1993 Agreement can be terminated oniy by giving a notice of one year as required by paragraph 21 of the said agreement. The question whether the notice dated January 25, 1995 can be treated as a notice terminating the 1993 Agreement on the expiry of period c of one year from the date of the said notice has not been examined by the High Court. We do not propose to go into the same and leave it to the High Court to deal with it, if raised. For the present, we will proceed on the basis that the 1993 Agreement subsists and it does not stand terminated on the expiry of 90 days from the date of notice dated January 25, 1995. D We may now examine the submission of Shri Shanti Bhushan that the negative stipulation contained in paragraph 14 of the 1993 Agreement, being in restraint of trade, is void in view of the provisions of Section 27 of the Indian Contract Act, 1872. For that purpose, it is necessary to consider whether and, if so, to what extent the law in India differs from· E the common law in England.

Under the common law in England a man is entitled to exercise any lawful trade or calling as and where he wills. The law has always regarded jealously any interference with trade, even at the risk of interference with freedom of contract, as it is public policy to oppose all restraints upon liberty of individual action which are injurious to the interests of the State. A person may be restrained from carrying on his trade by reason of an agreement voluntarily entered into by him with that object and in such a case the general principle of freedom of trade must be applied with due regard to the principles that public policy requires for persons of full age and understanding the utmost freedom to contract. Traditionally the doctrine of restraint of trade applied to covenants whereby an employee undertakes not to compete with his employer after leaving the employer's service and covenants by which a trader who has sold his business agrees not thereafter to complete with the purchaser of the business. The doctrine H

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