' MUNIB AKHTAR, J.---The present appeal arises out of an order announced on 6-9-2010 by the learned Single Judge on an application for interim injunctive relief that had been filed in Suit 98 of 2009, which is pending adjudication on the original side of this Court. The suit has been filed by the present appellant, and the learned Single Judge was pleased to dismiss the application, and recall the ad interim injunction that had been granted earlier. The suit was tiled, and the application arose therein, in the following circumstances.
2. The appellant's case is that it is a company engaged, and specializing, in the business of the development, manufacture and sale of various constructional products such as concrete admixtures, surface treatments, protective coating, waterproofing, etc. The respondent is a British company, which is engaged in the same business, and which sells its products under the "FOSROC" trademarks ("the Trademarks") The appellant's case is that in 1987, the respondent entered into an agency agreement ("the 1987 Agreement") with a local business entity, Messrs Technical Marketing Company (which is regarded as the predecessor of the appellant), for the sale and supply of the respondent's products under the Trademarks in Pakistan. The appellant claims that prior to this, the respondent's products were not known in Pakistan. The appellant states that its predecessor applied itself assiduously to the agency business, and developed a market for the respondent's products in this country, and the relationship between the parties blossomed to the extent that in 1997, a new agreement was entered into. It may be noted that the appellant was incorporated on or about 25-10-1997, and the second agreement was entered into on 1-11-1997 ("the 1997 Agreement") between the appellant and the respondent. This agreement is described as a licensing agreement, and in terms thereof, the respondent gave the appellant an exclusive, nontransferable licence to manufacture and sell its products in Pakistan, and a non-exclusive, non-transferable licence to use the Trademarks in relation to, and in connection with, the products and their sale in this country. The 1997 Agreement described in detail the manner in which the appellant was to use and avail the licences thereby granted, and the royalties that were payable to the respondent in connection therewith. We will refer to some of the relevant provisions of the 1987 and 1997 Agreements later in the judgment.
3. The appellant claims that for purposes of the 1997 Agreement, it made heavy investments in its business, and set up two factories, one at Lahore and the other at Karachi, to manufacture the products that were to be sold in terms thereunder, the total investment under this head alone amounting to around Rs, 149.8 million. The appellant's case is that it applied itself diligently to its end of the bargain and succeeded in further developing, creating and sustaining a healthy market for the respondent's products throughout the country. According to the appellant, although the respondent was earlier interested in making an equity investment in the appellant, that view ultimately changed on account of the events of September, 2001 (commonly referred to as "9/11"), and by 2003, the respondent was reluctant to make any direct investment in this country. However in that year, a fresh licensing agreement ("the 2003 Agreement") was entered into between the parties, on or about 8-12-2003. This Agreement was, in many ways, a more elaborate version of the 1997 Agreement, and again, we will later consider those of its terms as are relevant for present purposes. It had an initial term of 10 years (from the effective date as therein defined), unless terminated earlier on account of the occurrence of any of the events specified in Article 14, "or unless terminated by either party giving to the other at least six (6) months' notice in writing at any time" (clause 14.1).
4. The appellant's case is that it continued to work tirelessly for the promotion of the business under the licensing arrangement between the parties, and the market for the respondent's products continued to develop in the country. The appellant also claims that throughout the period, it continued to pay the royalties due and payable by it to the respondent. However, on or about 16-9- 2008, the respondent served a termination notice ("the Notice") on the appellant, stated to be pursuant to the aforesaid clause 14.1, which allowed either party to terminate the agreement on six months' notice. Thus, according to the respondent, the 2003 Agreement would terminate on or about 16-3-2009. The appellant stated that it thereafter entered into correspondence with the respondent, seeking to have the notice of termination withdrawn, but to no avail. The appellant contends that the Notice was unlawful and in violation of the rights of the appellant, and could not have been issued in the facts and circumstances of the case. When these efforts proved useless, the appellant was ultimately constrained to file Suit 98 of 2009 on the original side of this Court, seeking suitable declaratory and injunctive relief therein in respect of the Notice, and the rights that the appellant claimed under the 2003 Agreement for the remaining portion of the term thereof.
5. Along with the suit, the appellant also filed an application for interim injunctive relief (C.M.A. 588 of 2009). It appears that an ad interim injunction was granted to the appellant. However, after hearing the parties on the application, the learned Single Judge, as noted above, dismissed the application for interim relief by means of the impugned order, and recalled the ad interim injunction earlier granted. Being aggrieved by the aforesaid order, the appellant has preferred the present appeal.
6. Learned counsel for the appellant based his case squarely on the ground that the relationship between the parties was one of agency which, according to him, was coupled with an interest pursuant to, and within the meaning of, section 202 of the Contract Act, 1872. Thus, according to learned counsel, the agency could not be terminated without the appellant's consent. Hence, the Notice was unlawful and the appellant was entitled to the grant of interim injunctive relief. This claim lies at the heart of the appellant's case. It is to be noted that the learned Single Judge, while accepting that, prima facie, the relationship between the parties was that of agency (on the ground that "the plaintiff has himself admitted that he was appointed as an agent of the defendant vide agreement of 1987") nonetheless concluded that it was not an agency coupled with an interest, and hence was revocable by notice of termination by the principal (i,e,, the defendant, the present respondent). Developing his arguments, learned counsel submitted that a perusal of the three agreements entered into between the parties showed that there was always a deeper relationship envisaged between them. Thus, the 1987 Agreement provided, in its clause 6, that the parties would "keep under review the commercial relationship between them" and, if both agreed, they would enter into discussions to "further develop such relationship", including by way of subsequently entering into a "Technical Licence Royalty agreement and Joint Venture manufacturing and sales agreement". Learned counsel submitted that the ten years of dedicated hard work, and the success of the appellant's predecessor in creating a market for the respondent's products, led to the 1997 Agreement, which was a licensing agreement in respect of the respondent's products. Clause 2 of this agreement provided for an initial term of 10 years for the licence, and stated that the thereafter the agreement would continue unless terminated by either party by giving 12 months' notice in writing to the other. Learned counsel submitted that the respondent was to invest 51% in the project (by way of equity investment in the appellant) and the appellant was only to invest 49%, but due to the prevailing conditions in the country, the respondent did not make any investment. Reference in this regard was made to clause 19 of the 1997 Agreement which gave the respondent the option to acquire up to 51% of the equity of the appellant. The result was that the entire investment was made by the appellant, which set up the two factories mentioned herein above, and also undertook considerable other investment, all for the purposes of the further promotion and development of the market for the respondent's products in the country.
7. Learned counsel further submitted that the events of 9/11 made the respondent all the more reluctant to invest in Pakistan, and ultimately, the 2003 Agreement was entered into between the parties. Learned counsel submitted that this agreement, which also had a term of 10 years, was in continuation of the other two agreements. It in fact recognized that the appellant had suffered certain losses during the previous years, and gave concessions to it with regard to the payment of royalties so that the appellant could, in effect, recoup the said losses. Thus, the royalty amount was reduced from 15% of net sale value in the 1997 Agreement (reference was made to clause 5.1) to 3.5% of net sale value (per clause 8.1(b) of the 2003 Agreement). Further other such concessions were also given. Learned counsel submitted that these concessions were given in recognition of the heavy investments that the appellant was forced to make on account of the failure of the respondent to make any investments as envisaged by the parties. Learned counsel submitted that thus, the appellant had clearly acquired an interest in the property which constituted the subject matter of the agency within the meaning of section 202 of the Contract Act, and the 2003 Agreement could not therefore be terminated without the appellant's consent. Learned counsel submitted that the learned Single Judge erred materially in failing to correctly appreciate this crucial point. Reliance was placed, in particular, on the decision of the Supreme Court reported as Muhammad Arif Effendi v. Egypt Air 1980 SCMR 588. Learned counsel submitted further that the learned Single Judge had erred materially in concluding that since the appellant had quantified its loss (by claiming Rs,300 million by way of damages in the suit) it was not entitled to interim injunctive relief. Learned counsel submitted that the learned single Judge had failed to appreciate that this claim was only by way of a "token amount" and it was expressly stated even in connection with this relief that the termination of the 2003 Agreement had caused irreparable loss and injury to the appellant. Learned counsel submitted that the appellant had been able to make out a case for interim relief since all three of the ingredients for such relief existed in its favour. He prayed that the appeal be allowed, and interim injunctive relief be granted to the appellant. It may be noted that learned counsel also filed certain written submissions in support of his case (the last of which was filed on or about 2-12-2010).
8. Learned counsel for the respondent supported the impugned order, and submitted that the application for interim relief had been rightly dismissed. Learned counsel based his case on the terms and provisions of the 2003 Agreement. In essence, his case rested on two provisions. Firstly, he relied on clause 25.1, which is an "entire agreement" clause and provides as follows:-- "This Agreement, together with the schedules hereto constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions of the parties whether oral or written; and neither party has relied upon any warranties, representations or other agreements between the parties in connection with the subject matter other than those specifically set forth herein. FIL [i,e,, the respondent] shall have no liability, whether in contract or in tort for any pre-contractual representations made to the Licensee [i,e,, the appellant] in connection with the subject matter of this Agreement except where the Licensee can show that they were made fraudulently by FIL."
' Learned counsel submitted that such clauses are well known to the law and are typically to be found in licensing agreements of the same nature as the 2003 Agreement. His case was that this clause precluded reference to, or reliance on, the earlier two agreements between the parties.
Secondly, he relied on clause 14.1 in terms of which the 2003 Agreement was terminated. This provides as follows:-- "This Agreement shall commence or be deemed to have commenced on the Effective Date and shall continue thereafter for a period of ten [10] years unless terminated earlier pursuant to this clause 14 or unless terminated by either party giving to the other at least six (6) months' notice in writing at any time."
' Learned counsel submitted that all that the respondent had done was to exercise the right expressly granted to it in terms of this clause, i,e,, to terminate the agreement by giving six months' notice in writing. He emphasized that this right was not peculiar to the respondent. It was a right conferred on both parties, and the appellant was as much entitled to exercise it as the respondent.
Thus, there was complete parity between the parties in this regard, and the appellant could not take exception to a provision that it had itself expressly agreed to. Learned counsel submitted that the 2003 Agreement was not an agency agreement, but was a licensing agreement, which could be terminated in terms as therein provided. Learned counsel also submitted that while it was the respondent's case that there were other underlying causes (including non or delayed payment of royalty amounts) which entitled the latter to terminate the agreement under the other clauses of Article 14, the respondent had chosen to simply terminate the agreement pursuant to clause 14.1. In this regard, learned counsel referred to various provisions of the 2003 Agreement which, according to him, had been violated by the appellant. These were clauses 2 (soliciting orders for the respondent's products outside Pakistan, in Afghanistan), 4 (regarding the Trademarks), 6 (the rights licensed to the appellant) and 8 (payment of royalties). Learned counsel further submitted that in fact, the 2003 Agreement expressly provided (in clause 20) for arbitration of disputes under the auspices of the London Court of International Arbitration, and the appellant had acted in violation of even this clause by tiling Suit 98/2009 (and it appears that an application in this regard is also pending in the suit). Finally, learned counsel also drew attention to the fact that, as per clause 21, the parties had agreed that the 2003 Agreement was to be governed by English law, and his case was that English law did not recognize any concept equivalent to section 202 of the Contract Act.
9. Learned counsel for the respondent also submitted, without prejudice to the foregoing submissions, that the appellant had in any case misconstrued the relevant provisions of the 1987 and 1997 Agreements. He submitted that neither clause 6 of the 1987 Agreement nor clause 19 of the 1997 Agreement imposed any obligation on the respondent to make any investment in the appellant or to otherwise enter into any agreement, whether by way of a joint venture or otherwise.
Thus, clause 19 expressly stated that the option thereby conferred on the respondent to make a 51% investment in the appellant was at the respondent's "sole and absolute discretion", without the respondent being under any "obligation whatsoever to exercise it". Thus, according to learned counsel, the entire case built up by the appellant, that it had been forced to make heavy investments on account of the respondent's alleged failure to do so, and thus had acquired an interest pursuant to section 202, was entirely misconceived and based on a complete misreading of the relevant agreement. Learned counsel submitted that the appellant was in any case bound to make such investments to keep its end of the bargain, and fulfil its obligations, and enjoy of the benefit of the licences conferred upon it, in terms of both the 1997 and the 2003 Agreements.
Learned counsel further submitted that even it section 202 were to be regarded as applicable, it itself provided that an agency coupled with interest could be terminated if there were an express provision to this effect. He submitted that clause 14.1 was a provision of precisely this nature. Thus, on any view of the matter, the Notice terminating the 2003 Agreement was entirely lawful and unexceptionable. In support of his submissions, learned counsel relied in particular on Bolan Beverages (Pvt.) Ltd. v. PepsiCo Inc. And others PLD 2004 SC 860 and Roomi Enterprises (Pvt.) Ltd. v.
Stafford Miller Ltd. 2005 CLD 1805, (SHC; DB). Learned counsel submitted that the Supreme Court had, in Bolan Beverages, considered its earlier decision in Egypt Air, which had been relied on by learned counsel for the appellant. He accordingly prayed that the appeal be dismissed. It may be noted that, like learned counsel for the appellant, learned counsel for the respondent also filed certain written submissions in support of his case.
10. We have heard learned counsel for the parties, examined the record with their assistance, and considered the case-law and other material relied upon by them. As noted above, learned counsel for the appellant and the respondent have both relied on judgments of the Supreme Court, being respectively Muhammad Arif Effendi v. Egypt Air 1980 SCMR 588 and Bolan Beverages (Pvt.) Ltd. v.
PepsiCo Inc. And others PLD 2004 SC 860. In addition, learned counsel for the respondent has relied on a Division Bench decision of this Court reported as Roomi Enterprises (Pvt.) Ltd. v. Stafford Miller Ltd. 2005 CLD 1805. Learned counsel for appellant also placed reliance on a single Bench decision of this Court reported as Universal Trading Corporation (Pvt.) Ltd. v. Beecham Group PLC and another 1994 CLC 726. Subsequently, he also placed on record a decision of a Division Bench of this Court in appeal against the latter decision, being the judgment dated 23-12-1993 in H.C.A. 145 of 1993 (unreported). In the first instance therefore, it will be appropriate to examine the aforesaid decisions of the Supreme Court, and the Division Bench decisions of this Court relied on by learned counsel. We start with the Bolan Beverages case, since that appears to represent the latest view of the Supreme Court on the legal issues raised in the present appeal.
11. In Bolan Beverages, the Supreme Court was concerned with a exclusive bottling appointment under which the appellant therein ("the bottler") had been conferred a bottling franchise by PepsiCo, owners of well-known soft drink trademarks. PepsiCo terminated the appointment and the bottler filed suit in the civil courts at Lahore. One of the principal grounds taken by the bottler was that the appointment could not be terminated in terms of section 202 of the Contract Act. It was averred that the bottler had made heavy investments for purposes of the franchise. It is also to be noted that the question in the litigation was whether the bottler was entitled to interim injunctive relief. After considering the matter in detail, and referring to the various provisions of the Contract Act, including section 202, the Supreme Court held as follows with regard to the latter section:-- "19 After having gone through the law on the subject, we are of the view that only that agency is irrevocable which is created with adequate consideration and is designed to serve as security for some interest of the agent. Any expenditure in setting up office and necessary infrastructure for carrying on business of agency does not tantamount to the creation of the interest of agent in the subject-matter. To elaborate, we may mention that creation of tenancy or the grant of lease is tantamount to the creation of agency because a tenant or lessee by virtue of the very agreement of lease or tenancy becomes directly interested in the subject-matter of lease etc. The creation of no such right is contemplated through the agreement in hand. The scenario can further be elaborated by furnishing the example of a debtor who authorizes his creditor to sell the property and to recover his debt. In such an agreement the creditor-agent has a direct interest in the subject-matter of sale to the extent of his right to recover the debt. The interest of a person is created only where the authority is given for the purpose of being a security or is a part of the security and not to cases where .Such authority is independent and the interest of donee is created afterwards and incidental to the fact of sale etc. An act of sale of consumer goods does not create an authority coupled with interest. We hold in view of the law coupled with the terms of agreement before us that it does not create an interest of the purchaser by itself and hence prima facie the provisions of section 202 of the Contract Act are not attracted." (pg 872)
' The Supreme Court was also referred to its earlier decision in the Egypt Air case, and observed as follows:-- "20 At this juncture, we may also refer to the case of Muhammad Arif Effendi v. Egypt Air 1980 SCMR 588 on the basis of which leave to appeal was granted in the instant case. A close perusal of the case aforesaid would indicate that in there the factum of existence of agency was admitted and hence to draw a conclusion was not even required. Whereas, in the instant case the very existence of agency or franchise is denied by the opposite party. Thus, in case of denial we have to refer only to the text law on the subject appreciated in the light of agreement between the parties, which we have already done." (at pp. 872-3)
' Learned counsel for the respondent also relied on the following observations, and submitted that the present case was on all fours with what was held by the Supreme Court, especially with regard to the provisions of the Specific Relief Act referred to:-- "21. The case was argued from another angle as well. Learned counsel for the respondent- Company laid sufficient stress on the fact that the Company has already revoked the agreement and stopped the sale of concentrate to Bolan Bottlers. That if any temporary injunction is granted now in their favour, it would amount to a mandate whereby such revoked contract would be trusted upon the respondent. Mr. Khalid Anwar, learned Advocate Supreme Court placed reliance on section 21(a) of the Specific Relief Act, which provides that the contract for the nonperformance of which compensation in money is an adequate relief cannot be specifically enforced. He added that in the instant case the Bolan Bottlers have claimed a money decree of an exorbitant amount which shows that if decreed, the non-performance of contract shall stand compensated in terms of money and this being an adequate relief it was, never a fit case for the grant of temporary injunction. There is no cavil with the proposition that money reliefs like claim of compensation and damages are brought about by the plaintiffs mostly to avoid the mischief of Order II, rule 2 of the C.P.C. Yet the calculation of such amount and the claim thereof would automatically give an impression that such loss or, damage is reparable in terms of money. We agree with the learned counsel and believe that, in the circumstances of the present case, the loss cannot be irreparable in case the decree. For, compensation and damages etc. As claimed by the plaintiff is ultimately granted.
22. We also believe and hold that in the circumstances of the present case and in the light of section 21(a) read with section 56(t) of the Specific Relief Act, the instant one is not a fit case for the grant of temporary injunction. A similar view was taken by this Court in Hameedullah' v.
Headmistress (1997 SCMR 855) with particular reference to a contract involving continuous duty extending over a period longer than three years. As, a contract in the circumstances, extending over a period longer than three years cannot be specifically enforced under section 21 of the Contract Act, the issuance of temporary injunction would not be in the interest of justice simply because the non-issuance thereof would cause inconvenience." (pg 873)
12. The Egypt Air case involved a general sales agency (commonly known as a "GSA") relating to the sale by the appellant therein of the tickets of Egypt Air in Pakistan. The airline terminated the GSA, and the agent filed suit on the original side of this Court. Again, the matter came before the Supreme Court by way of whether the appellant was entitled to interim injunctive relief. This Court had refused to grant such relief, and on appeal by the agent, the Supreme Court held as under: "(4) The plaintiff/petitioner has come up in a petition for special leave to appeal against the same to this Court. We have heard the learned counsel for the parties and from their arguments as also after going through the judgment under appeal, we notice that the case involves substantial questions of law and fact namely: -
(i) under what circumstances a contract of agency of the kind involved in this case could be cancelled or revoked by a principal;
(ii) whether section 202 of the Contract Act was applicable to the fact of this case and what is true construction and scope of that section.
(iii) whether the plaintiff/petitioner is entitled to continue the agency and/or claim damages from the principal on the pleadings as made by him in his plaint and if so to what ultimate relief he will be entitled on the facts and in the overall circumstances of the case.
(iv) whether the plaintiff/petitioner had not submitted his account to the principal in terms of the contract and whether he was justified in withholding the same on any legal ground; and
(v) whether the termination of contract in this case was lawful or not.
(5) These are all substantial questions of law and fact and since they involve a careful study and scrutiny after leading of appropriate evidence therefore the High Court was not justified to refuse grant of a temporary injunction as prayed for at this stage. In the circumstances we are inclined to grant leave to appeal to the petitioner and converting this petition into an appeal accept the same and hold that this was a fit case in which a temporary injunction ought to have been granted on terms."
13. The next case that requires consideration is Roomi Enterprises, the Division Bench decision of this Court relied on by the respondent. Again, the matter involved the question of interim injunctive relief. It appears that the parties had entered into two agreements, one being a licensing agreement, whereby the appellant therein was granted a licence to manufacture and sell the respondent's products in Pakistan, and the other being a trademark user agreement. The product in question was toothpaste sold under the "Sensodyne" trademark. The respondent terminated both the agreements, and the appellant filed suit on the original side of this Court. The learned single Judge refused to grant interim injunctive relief, and the appellant preferred a High Court appeal. (It appears that there were in fact two suits, and thus two High Court appeals, but for present purposes, this detail is not relevant.) The two agreements which were the subject matter of the dispute were in fact preceded by earlier agreements between the parties, the first dating back to 1969, and the second to 1985. It appears that the first of these agreements was in the nature of an agency agreement for the import and sale of Sensodyne toothpaste in Pakistan, while the second was for technical assistance for the manufacture and sale of the toothpaste in this country.
These agreements were eventually replaced with agreements entered into in 1997, which were finally terminated by the respondent therein. The Division Bench, after considering the matter, and the case-law cited before it (which included the Supreme Court's decision in Bolan Beverages), held as follows (at pp. 1515-16):-- "From perusal of paragraphs 28 to 33 of Memo. Of plaint of Suit No. 1457 of 2001 filed by appellant it appears that the appellant is not claiming any interest in the Trade Mark "Sensodyne" itself and/or right to manufacture it, but claiming interest on account of his alleged investment made in establishing business, which contention by itself is contrary to the terms and conditions of the agreement. The Agreement executed. Between the parties specifically provides that the said agreements were for a fixed period of time, to come to an end on expiry of such period. The agreement further gives rights of termination of it by giving notice of three months by either party to agreement. Reliance has been placed upon section 202 of Contract Act, which, in our opinion, has no application to the facts of the present case for more than one reason. The Agreement dated 1-11-1997 provided stipulation for the cancellation and termination of it. The phrase "in the absence of any express contract" used in section 202 of the Contract Act has a great significance and even if an agency due to any reason creates an interest in the property which forms the subject-matter of agency; if agreement itself provided for termination and cancellation of such Agreement of Agency then section 202 of the Contract Act cannot be invoked. Section 205 of the Contract Act further stipulated that even where there is an agency for any period of time and if it is terminated before the expiry of the period so stipulated in the Agreement, compensation is to be paid for the loss suffered, if any, by him due to such termination by the principal or agent, as the case may be if such termination was without sufficient cause.
' In the case of Messrs Burnis Computing International (Pvt.) Ltd. v. IBM World Trade Corporation 1997 CLC 1908 one of us (namely Sabihuddin Ahmed, J.) while dealing with the question of agency coupled with interest, held that making of substantial investments in business of agency does not make the agency irrevocable and reproduce the passage from the case of World Wide Trading Company v. Sanio Trading Company PLD 1986 Karachi 234 that interest of the agent, forming subject-matter of the agency, is to be some sort of an adverse nature qua the principal.
' In the recent case of Bolan Beverages (Private) Limited v. Pepsicola 2004 CLD 1530 = PLD 2004 SC 860 Honourable Supreme Court held that section 202 of the Contract Act split up into two parts.
The first portion of the section is clearly indicative of the fact that either the agent must have an interest pre-existing in the property or creation of such interest should be the direct result of the agreement itself and any interest either not pre-existing or not forming subject-matter of the agreement but created subsequent to the agreement in any matter, would not be called as the creation of interest of the agent. It was further held by the Honourable Supreme Court that only that agency is irrevocable which is created with adequate consideration and is designed to serve as security for some interest of the agent. Any expenditure in setting up office and necessary infrastructure for carrying on business of agency does not tantamount to the creation of interest of agent in the subject-matter."
14. Finally, we turn to the unreported High Court appeal in the Beecham litigation. This was also a case involving the question of interim injunctive relief. The dispute involved an agency for the distribution of the well-known Horlicks drink owned by the Beecham group (now known as GlaxoSmithKline). The plaintiff in the suit therein was appointed the exclusive agent/distributor in Pakistan for Horlicks in 1987, which relationship was terminated by Beecham in 1992. The agent filed suit on the original side of this Court and also sought interim injunctive relief. A learned single Judge was pleased to grant such relief (by means of an order which is reported, as noted above, at 1994 CLC 726). The principal, Beecham, filed a High Court appeal, and by means of the unreported judgment relied on by learned counsel for the appellant, a learned Division Bench was pleased to dismiss the appeal, upholding the order of the learned single Judge. In order to properly appreciate the conclusions of the Division Bench, it is necessary to first consider what was held by the learned single Judge. The latter referred to paragraphs (i,e,, clauses) 12 and 13 of the agency agreement (at pp. 731-32). Paragraph .12 provided that the agreement could be terminated by either party on it giving three months' notice to the other, but this was expressly "subject to the provisions of paragraph 13". The latter paragraph provided for various specific events on the occurrence of which the agreement could be terminated. The learned 'single Judge observed as follows: "The works "subject to the provisions of paragraph 13" appearing in para. 12 show that action under para. 12 can be taken only subject to fulfillment of the conditions of paragraph 13. In other words para.13 controls para.
12. If the intention was otherwise then there was no purpose for using the words "subject to the provisions of paragraph 13"." (pg 731)
' The learned single Judge noted that there was no allegation by Beecham that there had been any violation of paragraph 13. He also referred to the Egypt Air case, and granted the interim injunction.
When considering the matter in appeal, the Division Bench focused its attention on whether the learned single Judge had correctly concluded that the agent had been able to make out a prima facie case, and observed as follows: "23. Prima facie means that it needs serious consideration investigation or determination. It does not mean proof at this stage. It means bona fide dispute requiring determination without prejudging the cause. The proper stage for judging the case is at the conclusion of the trial when the full facts are placed before the Court. The case of the plaintiffs as observed above requires whether the agency coupled with interest and whether clause 12 of the agreement is independent or subject to conditions in clause 13 of the agreement.
(24) Here the facts were properly appreciated and the law rightly applied so there is no misdirection of law or wrong appreciation of facts. In that view of, the matter, the submissions made on behalf of the appellant cannot be sustained. It seems that the application of temporary injunction is rightly allowed. This appeal does not lie.
(25) It is well settled that an order passed under the provisions of Order XXXIX, Rule 1 of the Code of Civil Procedure is a discretionary one and the appellate Court ought not to interfere with the exercise of a Judge's discretion allowing such application unless it is satisfied that it was not exercised judicially, that is to say, that the Judge acted on wrong principles. The mere fact that the Judges of the Appellate Court might have taken a different view is not sufficient ground for interference. If the Judge rightly appreciate the facts and applies the true principles that is a sound exercise of judicial discretion. Appeals are to be admitted in such a case only when there is a misdirection of law or fact."
15. It will be seen from the foregoing that the Egypt Air case and the Beecham litigation, which were relied on by learned counsel for the appellant, involved agreements in which there was little, if any, difficulty in concluding that they were agency agreements. The situation in Bolan Beverages and Roomi Enterprises was however different. In our view, learned counsel for the respondent was correct in asserting that the facts of the Present case are most akin to those in Roomi Enterprises.
As noted above, the learned single Judge has observed in the present case that, prima facie, the relationship between the parties was that of agency, on the ground that "the Plaintiff has himself admitted that he was appointed as an agent of the defendant vide Agreement of 1987". We are, with respect, unable to agree. Firstly, what a plaintiff says in his plaint is hardly determinative, in and of itself, of the legal relationship between the parties to a contract. The stand taken by the defendant is obviously at least as important. Furthermore, it is for the court itself to examine the agreement, and determine its true legal nature. Secondly, while it is clear that the 1987 Agreement was an agency, that agreement was not between the appellant and the respondent, but between the respondent and an altogether different entity. The appellant did not even exist at the time that the 1987 Agreement was entered into. Thirdly, it is clear that the nature of the 1997 and the 2003 Agreements was different from that of the 1987 Agreement. The 1997 and 2003 Agreements were (like the situation in Roomi Enterprises) licensing agreements, whereby the appellant was given a licence to manufacture products in Pakistan using the respondent's proprietary know-how and intellectual property rights, and then to sell the said products in the country under the respondent's Trademarks. However, we would not like to dilate at length on the nature of these two agreements (and especially, the 2003 Agreement) since that is ultimately something for the learned single Judge to consider at the trial. Prima facie, it appears that the 2003 Agreement was not an agency contract.
16. Notwithstanding the foregoing, we must consider the case sought to be made out by the appellant. Even when placed at its highest, it is no more than that of an agency coupled with an interest. However, for the following reasons, we are not satisfied that, prima facie; the appellant has been able to make out such a case. Firstly, as noted in Roomi Enterprises, section 202 itself provides that if there is an express provision which allows for the termination of a contract to which it applies, the contract can be terminated. That is precisely the situation at hand. Clause 14.1 of the 2003 Agreement expressly confers a right on either party to terminate the contract. Furthermore, this is not a right limited to one party. It applies equally to both. Therefore, even if section 202 were to apply to the 2003 Agreement, clause 14.1 would still permit its termination. Indeed, if the submission made by learned counsel for the appellant were accepted, that would lead to the result that even on the occurrence of an event to which clauses 14.2 and/or 14.3 applied, the respondent would still be unable to terminate the contract. Clause 14.2 (.Which is a standard form provision, to be found in virtually every contract of a similar nature) enables the respondent (the licensor) to terminate the contract on breach of its provisions by the appellant (the licensee), subject to fulfilment of the conditions provided in the said clause. On the appellant's submission, such a termination would not be possible by reason of section 202, which would, in effect, give the appellant (and every other licensee in a similar position under a similar contract) a virtual carte blanche to violate the contract with impunity. That could hardly be a proper interpretation and application of both section 202 and the contract itself.
17. Secondly, it was held in both Bolan Beverages and Roomi Enterprises that the fact that the putative agent made investments for purposes of the agreement between the parties does not bring the matter within the ambit of section 202. Indeed, in Roomi Enterprises, the learned Division Bench expressly approved earlier single Bench decisions of this Court to this effect. It is also to be noted that this issue was not one of the questions that the Supreme Court formulated in Egypt Air while concluding that the agent therein was entitled to the grant of interim relief. The claim therefore that such investments were made by the appellant (even if accepted correct for present purposes) does not advance the latter's case in relation to section 202. In this context, it is also to be noted that learned counsel for the respondent was correct, in our view, in asserting that the respondent was not under any obligation, under any of the agreements, to make any investment, whether by way of equity or otherwise. The submission by learned counsel for the appellant that the respondent's failure or inability to do so put the entire burden on the appellant does not therefore have any foundational basis in either the 1997 or the 2003 Agreements. The appellant itself entered into those licensing agreements, whereby it obtained the benefit of the right to manufacture the respondent's products in Pakistan and sell them under the Trademarks, and it was incumbent on the appellant to have the necessary facilities available for such purposes.
18. Thirdly, when section 202 is itself examined, it is clear that it is not, prima facie, applicable in the facts and circumstances of the present case. Section 202, and its illustrations, provide as follows:-
202. Termination of agency where agent has an interest in subject-matter.--Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest.
Illustrations
(a) A gives authority to B to sell A's land, and to pay himself, out of the proceeds, the debts due to him from A. A cannot revoke this authority nor can it be terminated by his insanity or death.
(b) A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton, and desires B to sell the cotton, and to repay himself, out of the price, the amount of his own advances.
A cannot revoke this authority, nor is it terminated by his insanity or death.
For section 202 to apply, the following three conditions must be fulfilled; (a) there must be an agency; (b) the subject matter of the agency must be some property; and (c) the agent must himself have an interest in such property. Thus, for section 202 to apply, the court must ask itself the following sequential questions: (a) is the contract in the nature of an agency? If so, (b) what is the subject matter of the agency, i,e,, does it involve some property? If so, (c) does the agent himself have an interest in such property? A negative answer to any one of these questions would negative the application of section 202, In our view, for a proper understanding of section 202, it is crucial to keep in mind the word "himself", as used therein. The section requires that the agent must "himself" have "an interest in the property" which forms the subject matter of the agency. In other words, the "interest" of the agent with which the section is concerned must be an interest that he has in his own right or capacity, i,e,, a capacity other than that of simply being the agent. The point is reinforced by the concluding words of the section: if the agent "himself" has such an interest, then the agency cannot (in absence of an express provision) be terminated to the prejudice of "such" interest. The word "such" obviously relates back to the nature of the interest that the agent must have, which is an interest in his own right, and not simply an interest on account of his position as agent.
19. It is to be noted that the scope and nature of the "interest" in the property that the section seeks to protect is wider than an interest in property in the conventional sense. This is clear from the illustrations to the section. Thus, it is obvious in illustration (a) that the agent (B) has no interest in the immoveable property in the conventional sense. However, he is owed some money by the principal (A). The latter appoints B as his agent to sell the property and gives B authority to pay himself out of the sale proceeds in respect of the money owed to him. Now the debt owed by A to B is in B's own right or capacity; it is not on account of B's position qua agent. This is D the "interest" that B has in the property that is the subject matter of the agency, and this is an interest that he "himself" has. The agency (or more, precisely, the "interest") is therefore protected under section
202. The importance of the agent "himself" having an interest in the property can be seen if the facts of illustration (a) are slightly altered. Suppose, the agent was not owed any money by the principal, but the latter simply agreed that the agent could reimburse himself out of the sale proceeds of the property for his commission as agent. Here, the agent does have an interest in the property, but it is not an interest in his own right it is simply an interest qua his position as agent.
Such a situation is not protected by section 202. This is the import of, e.g., Dalchand v. Seth Hazarimal and others AIR 1932 Nagpur 34, and the earlier Bombay case of Vishnucharya v.
Ramchandra (1881) 5 Bom 253. Similarly, if a person agrees to sell his immoveable property to another, and pending finalization of the transaction, executes a power of attorney in favour of the buyer in respect of the property, the power of attorney would not be revocable, and would be protected by section 202: see, e.g., Abdul Rahim v. Mukhtar Ahmad and others 2001 SCMR 1488 and Mst. Hajran Bibi and others v. Suleman and others 2003 SCMR 1555. In our view, one test for determining whether the agent himself" has an interest in the property or his interest is only on account of his capacity as agent is to ask whether the basis of the interest existed and/or can exist independently of the agency contract. In other words, the question is whether the basis on which the "interest" is being claimed exists, or could or would exist, or would have existed, even if there were no agency contract. If the answer to this question is in the affirmative, then the "interest" is such as may be protected by section 202; if not, then the interest is only in the agent's capacity as such, and is not protected by the section. In the two illustrations to section 202, the basis of the agent's interest in the property is the debt owed to him by the principal. This basis existed independently of the agency contract, and would exist even if there were no agency. It is thus protected under section 202. In the two Supreme Court eases noted above in this para, the basis of the agent's interest was the agreement to sell whereby the principal had sold him the property. Again, this basis existed independently of the agency contract, and would exist even if there were no agency contract (i,e,, power of attorney).
20. Furthermore, and this point is equally important, the agent must "himself' have an interest in the property concerned and the property must be the subject matter of the agency. Both these conditions must be fulfilled for section 202 to apply. If the agent does have an interest in his own right in the property, but the property is not the subject matter of the agency, then the section can have no application. This is one reason for the rule noted above, namely that even if the agent has made heavy investments (by way of setting up an office or factory, etc.), that in and of itself does not bring the matter within the ambit of section 202. The agent does have an interest in his own right in the property (it is, after all, the result of investments made by him) but the property is not the subject matter of the agency.
21. When the foregoing principles are applied to the case at hand, it is, in our view, at once clear that section 202 does not, prima facie, have any application. The appellant does not itself have any interest in the property that is the subject matter of the 2003 Agreement (even assuming for the moment that the agreement can somehow be regarded in the nature of an agency contract, as to which we are not at all satisfied). The only interest the appellant has arises solely by reason of the agreement itself, does not exist independently of it, and does not, and cannot, survive its termination. Thus, clause 6.3 of the 2003 Agreement provides as follows:-- "The Licensee [i,e,, the appellant] shall not make any representation or do any act which may be taken to indicate that it has any right, title or interest in or to the ownership or use of any of the Licensed Rights except under the terms of this Agreement, and acknowledges that nothing contained in this Agreement shall give the Licensee any right, title or interest in or to the Licensed Rights save as granted hereby."
' The Licensed Rights are (to put the matter shortly) the intellectual property rights, including know- how and confidential information, which belong to the respondent, and for which the licences were granted to the appellant pursuant to the 2003 Agreement. This is the property that is the subject matter of the agreement. A clause such as the one noted above is typical of licensing agreements of this nature since, quite understandably, the owner of the intellectual property rights (the licensor) jealously protects such rights. It would, in our view, be a complete misreading of an agreement in the nature of the 2003 Agreement (or even the 1997 Agreement before it) to conclude (unless there is something expressly stated in the agreement to this effect) that the licensee has "itself' acquired some interest in the intellectual property rights which are subject matter of the agreement, and in particular, the interest is such that outlasts and exists independently of the agreement. It follows that section 202 cannot, prima facie, have any application to the facts and circumstances of the present case. Since, for present purposes, the appellant's case rests squarely on section 202, the appellant has in our view, failed to make out a prima facie case. It is therefore not necessary to consider whether the other two ingredients for interim injunctive relief were made out or not.
22. Before parting with this judgment, we may note that it is clear that the dispute raised in the Suit is of a commercial nature, and the issues involved on the merits are commercial questions which are obviously of importance to the parties. We would therefore request the learned single Judge that, if possible, the Suit may be determined on the merits within a period of six months.
23. The upshot of the foregoing discussion is that in our view, the appellant has been unable to make out a case for the grant of interim injunctive relief. This appeal must therefore fail, and is hereby dismissed. Needless to say, the observations made herein are, insofar as the pending Suit is concerned, of a tentative nature, and the Suit shall be tried and decided on its own merits, and on the basis of the evidence led by the parties. There shall be no order as to costs.