1. SARMAD JALAL OSMANY, J.- This is an application under Order 39, Rules 1 and 2, C.P.C., wherein it is prayed that till the decision of the suit the defendant, his wife, sons, servants, employees, agents etc., be restrained from acting in violation of the agreement between the parties dated 28.12.1998 and in furtherance thereof the defendant be restrained from operating Zzee's Photo Studio till final disposal-of the suit.
2. The brief facts of the matter as per the averment made in the plaint are that the- parties had entered into an Agreement for the sale of the Defendant's establishment/shop known as Jimmy's Studio including its fixtures, fittings, laboratory, good-will etc., for the total sale consideration of Rs.22,049;750. As per clause No.' A of .The said Agreement, copy of which has been filed as Annexure the Plaint, in lieu of the sale of the good-will of Jimmy's Studio the defendant agreed that neither he or any of his family members viz., his wife and sons would associates themselves with the Photo Studio/Lab. Business in .Any part of the Province of Sindh in general and, in Karachi in particular and further not to Use the name and style of Jimmy's Studio anywhere for all times to come. It is the plaintiff's case that the entire sale consideration of the shop/fixtures and fittings and the good-will has been paid by the plaintiff to the defendant, but in spite of this concluded transaction the plaintiff has opened up a Photo Studio near the plaintiff's premises in the Beauty Salon. Owned by his wife and now the establishment is known as Zzee's Studio and Salon which is against the express terms of the agreement between the parties and hence the suit seeking declaration and injunctions regarding the operation of the said Zzee's Studio by the defendant.
3. In the counter-affidavit filed to this application, the contents of the Plaint as well as the Affidavit- accompanying the stay application are controverted. To the contrary it is submitted that the agreement dated 28.12.1998 was cancelled and destroyed by mutual consent amongst the parties and a new agreement dated 29.l2.1998 was executed in which the crucial portion of Clause 4 whereby the defendant and/or his wife and sons were denied the right to establish a Photo Studio/Lab. Business in Sindh -was deleted and the defendant only restricted from using the words "logo" Jimmy's Studio. In support of this contention the defendant has relied upon a copy of the agreement dated 29.12.1998 executed between the parties, receipt of the same date in the sum of Rs.2.5 Minion, letter dated 13.2.1999 regarding extension of time for the finalization of the transaction between the parties written by "the plaintiff to the defendant, a draft of-the proposed agreement between the parties wherein the crucial provision as-to the prohibition imposed upon the defendant from carrying on photography business in the Province of Sindh has been deleted. In sum, the defendant's case is that, this prohibition does not appear in the later-agreement executed between the parties on 29.12.1998, therefore, he was free to engage in the. Photography business >although- not under the name or Style of Jimmy's Studio and elsewhere in the Country.
4. In support of this application Mr. Khuwaja Shamsul Islam tor the plaintiff has submitted that the execution of the agreement between the parties dated 28.12.1998 has not been denied by the defendant, however, in the counter-affidavit it is stated that this was destroyed and a-fresh agreement entered into on 29.12.1998 in which the wording in Clause 4 was changed from the earlier agreement to reflect that the defendant would not longer be prohibited from engaging in photography business in the Province of Sindh. Learned counsel says that prima facie the stand of the defendant is belied from the documents on the record viz. Annexure C/l to the plaint, which is a receipt of the part payment in respect of the sale transaction 'contemplated by the previous agreement and is dated 28.12.1998 and has been executed by the defendant/ Annexure C/2 which is a schedule of movable property the subject-matter of the agreement between the parties and has been executed by both the parties, undertaking of the family members of the defendant, Annexures D/5 to D/7 confirming the sale of the defendant's photography business in the name and style of Jimmy's Studio to. The plaintiff and undertaking that they shall never use such name in any part of-the Province of Sindh and at Lahore and finally undertaking given by the defendant himself Annexure D/8 to the plaint whereby the defendant has agreed not to engage in photography business in any part of Sindh and also not to use the name and style of Jimmy's Studio for all times to come. Learned counsel has further referred to Annexure E to the plaint, which is an application filed by the plaintiff for the registration of the trade mark Jimmy's Studio. Leamed counsel has also referred to Annexures F and G to the plaint whereby the defendant has published a public notice to the effect that pursuant to the sale transaction between the parties, although the name and logo of Jimmy's Studio has been sold to the plaintiff, certain memberships of professional organizations are being used by the plaintiff which belong to the defendant personally and also that the defendant has opened up Zzee's Studio and Saloon along with his wife which is in direct violation of the agreement between the parties.
5. As regards the second agreement dated 29.12.1999 filed along with the counter-affidavit by the defendant, learned counsel says that prima facie it appears to be fraudulent as there is overwriting on page 6 thereof and the receipt is unsigned whereas in the copy filed in the Court it is initiated by the defendant, similarly learned counsel says that Annexure R/2 to the counter-affidavit filed to this application which purports to be a draft of the agreement is undated and-hence cannot be relied upon to support the defendant's case and finally it is-the contention of the learned counsel that although the alleged agreement dated 29.12.1998 has been signed by the plaintiff, it was done so when, the papers were blank and thereafter the same have been filled up mala fidley by the defendant in order to achieve his intentions of not abiding by his earlier commitment as per the first agreement dated 28.12.1998.
6. As far as the law is concerned, learned Counsel says that although Section 27 of the Contract Act provides that any contract in restraint of trade is void; however, under the exception to such section where the goodwill is sold then a period can be restrained from engaging in the same business. He has. Further submitted that it was the manifest intention of the Parties that the defendant be restrained fr6m carrying on photography business as per their agreement which should be upheld. He has relied upon H.B.F.C. v. Shahinshah Humayun House Building Co-operative Housing Society Ltd. (1992 SCM R 19) and Khatoon Begum v. Hyesons Corporation (1980 CLC 1666) as well as commentaries on the Contract Act by S. Sanjiya Rao arid Dr. Autar Singh.
7. On the other hand Mr. Munawar Ghani, learned counsel for the defendant, has vehemently opposed the stay application. He has referred to para 3 of the counter-affidavit filed on behalf of- the defendant to the said application and submitted that the first agreement dated 28.12.1999, was mutually cancelled and it was agreed that after the execution of the second agreement dated 29.12.1999 both the originals, of the first agreement in possession of the parties, would be destroyed.
8. The plaintiff has not done so whereas the defendant did so. Next learned counsel has referred to Annexure R'/2 of the counter-affidavit which is a draft of the first agreement wherein clause 4 has been deleted, entirely. Learned Counsel submits that consequently the intention of the parties was always that as regards the right of the defendant to engage in competing business this remained intact. Next learned counsel has referred to Annexures D/5 to D/7 to the plaint, which are the undertakings given by the sons and wife of the defendant and submitted that. These only refer to the name Jimmy's Studio and do not talk at all about photography business which could be undertaken by the defendant under any other name. In this regard learned counsel has also submitted that Annexure D/8 purportedly executed by the defendant and which prohibits the defendant from undertaking photography business in the Province of Sindh has not been signed by the defendant and consequently prima facie, this establishes that the parties did agree that the defendant could engage in competing photography business in Karachi although not under the name and style of Jimmy's Studio.
9. Next learned counsel has referred to Annexure R/l-B filed along with the counter-affidavit which is a letter addressed to the plaintiff by the defendant and the same concerns the later agreement dated 29.12.1998. Both the parties have signed the said Agreement which would display the novation of the earlier agreement dated 28. l2.1998.' Leamed counsel has particularly referred to the insertion in long hand by the plaintiff in the abovesaid letter whereby time has been extended for the performance of the agreement as was going to expire on 15.2.1999 originally.
10. Next learned Counsel has referred to para. 10 of the plaint which talks, about balance payment but no receipt has been produced deliberately by the plaintiff since such receipt refers to the agreement, dated 29. 12.1998 which are in the possession of the plaintiff. Learned counsel has also produced a copy of the receipt dated March 1, 1999 for the balance payment regarding the transaction between the parties in full and final settlement thereof which refers to the latter agreement dated December 29, 1998. In support of his contentions learned 'Counsel has relied 'upon: Nordenfelt v. Maxim Nordenfelt Co. (1894) AC 535, Jenkins v. Reid, (1894) IAER 471, Routh v.
11. James, (1947) IAER 758, Umchmichem Corporation v.- Abdullah Ismail (1992 M LD 2374), Submrimanian v. Kizhakaru Poduval (AIR 1922 Mad. 519), District Board v. Hari Chand (AIR 1934 Lah.
12. 474), Amba Parsad v. Jugal Kishor (AIR 1936 Allah. 112). And Ramumurthy v. Nandi Ramwalmma (AIR 1940 Mad. 558).
13. In rebuttal Mr. Khuwaja Shamsul Islam tor the plaintiff has submitted that as concerns the receipt Annexure C/l to the plaint this refers plaint this refers to the agreement, dated 28.12; 1998. He has also referred to para. 8 of the plaint which shows the break up of the entire sale consideration viz. Rs.22,490,750. He has denied that the receipt produced in Court by Mr. Munawar Ghani bears the genuine signatures of the defendant and also objected to its production on the basis that in civil proceedings documents cannot be introduced unless by means of a proper application.
14. Next learned counsel says that as regards Annexure R/l-B. Filed along with the counter-affidavit which is a receipt in the sum of Rs.2.5 million and refers to the second agreement dated 29.12.1998, his copy, of the said receipt is blank whereas the copy tiled in Court is initialled which shows the mala fides of the defendant viz., that he has been tampering with Court documents. In support of his earlier contentions as regards the exception to Section 27 of the Contract Act learned counsel has relied upon Connors Brothers Dd. v. Bernard Connors (AIR 1941 PC 75) and Mulluk Chand v.
15. Surerilira Nath (AIR 1957 Cal. 217).
16. I have heard both learned counsel and my conclusions are as follows:- It would be seen that the entire controversy between the parties is whether the defendant had agreed not to practise his profession viz. Photography studio and laboratory business in the Province of Sindh in general and at Karachi in particular vide clause (4) of the agreement dated 28.12.1998 Annexure D It is the plaintiff's contention that the defendant did so in terms of restrictive covenants to this effect contained in said clause as the execution of the agreement is not denied and further the defendant, his sons and wife had given undertakings in terms-of said clause 4, viz. Annexures D/5, D/6 and D/7, To the contrary, it is the defendant's case that the first agreement, dated 28.12.1998 was cancelled and a fresh agreement dated 29.1.1998 was executed between the parties whereby the restrictive contents were omitted this leaving the defendant free to practice his profession in Karachi or elsewhere in support of which contention a copy of such new agreement has been filed as Annexure R/I, To the counter-affidavit to C.M.-A. 507 of 2000 as well as a signed draft of such agreement in which the entire Clause 4 has. Been omitted. The plaintiff's response to such version given by the defendant is that during negotiations and finalization of the various agreements between the parties, the defendant had obtained the plaintiff's signatures on blank stamp papers and has thereafter typed out the alleged fresh agreement dated 29.l2.1998 and consequently the same is denied as being fraudulent and not binding on the plaintiff. So also plaintiff places reliance upon the rejoinder filed by the witness to the earlier agreement Syed Raza Panjtan Rizvi who has fully supported the plaintiff.
17. Upon a deeper examination of the matter it is instructive to note that in Annexure R/2 to the counter-affidavit, which is a letter written to the defendant by the plaintiff, reference is made to the second agreement dated 29.12.1998. Such reference is also, made in the receipt issued by the defendant dated 1,3.1999 in the sum of Rs.14,549,750 being full and final sale consideration for the transaction a copy of which was produced by Mr. Munawar Ghani during the course of arguments and which has been taken on the record in the interest of justice.
18. As opposed to this observation it would be seen that in the Draft Agreement which has been signed by both parties a copy of which has been field; as Annexure R/3 to the counter-affidavit: the entire Clause 4 has been scored out, however, the parties have not initialled the sentence which appears in hand in clause TO thereof viz. All previous agreements made for the sale of Jimmy's Studios treated as cancelled! In the fact this sentence does not also appear in the second agreement dated 29. 12.1998.
19. In my view therefore, considering the material on the record and in the overall circumstances of the case, at this stage without examining the parties, it cannot be said with any degree of certainty as to which- agreement is the authentic one. However, having observed as much, considering the entire relationship between the parties, whereby not only has the undertaking viz. Jimmy's Studio been sold by the defendant to the plaintiff including two shops, fixtures, fittings, photographic equipment along with good-will etc. But also. Two apartments, a reasonable restraint can, be implied and the defendant put to terms as to the setting up of rival photography business in the vicinity of his old "premises which are presently occupied by the-plaintiff. To hold otherwise would be to place a premium on an unfair business practice which would allow a person to sell his undertaking along with the goodwill and then open up a rivaj concern next door to his old establishment which in effect would deprive the purchaser from the fruits of his investment.
20. Support for such a view can be found in ' Treqo v. Hunt {1896) AC 7 and it necessarily follows from the nature of good-will which has been described as a proprietary interest and includes every positive advantage that has been acquired in carrying on the business 1 whether connected with the premises of the business or its name and style, and" everything connected with or carrying with it the benefit of the business. It is also referable, in part to it locality, in part To the way in which it was Conducted and the personality of those who conduct it. (per Amal Mian, J. (as he then was) in Khatoon Begum v. Hyesons Commercial Corporation Ltd. {1980 CLC 1666).
21. In my view therefore in the present case, when the business of the defendant is to a large extent personalized (he being a portrait photographer amongst other things) unless some reasonable restraint is imposed, upon him as to the location and duration where he may be allowed to practice his profession, it is more than likely th t his old customers would flock back to his thus, depriving the plaintiff for the fruits of his investment in a rather substantial amount.
22. It would, now remain to be seen as to what should be a reasonable restraint in the circumstances of the case. In this connection, recourse can be taken to the decided cases under the exception to Section 27 of the Contract Act whereby the Court has been empowered to consider such restraints based upon the touchstone of-reasonableness. There are hardly any cases under this exception in our jurisdiction, however in the English and Indian jurisdictions the decided cases on reasonable restraint where good-will is sold enunciate the following broad principles:-
(1) The restraint sought to be imposed must be in the interest of the parties.
(2) Such restraint should be justified in the public interest.
23. The above principles were laid down by the House of Lords in Narden felt v. Maxim. Nordenfelt Guns and Ammunition Co. Ltd. (supra). As far as reasonableness in the interest of the parties is.
24. Concerned, the general rule is that it must not be longer in point of time or otherwise be more extensive than is necessary to protect the' interest of the Buyer. This would again depend upon the interest to be protected, the nature of the contract and the relative position of the contracting parties.
25. Thus, in Nordenfelt (supra) it was held that a covenant by a patentee and manufacturer of guns and ammunition with the purchasers of the goodwill of his business not to engage in the said business for twenty-five years in the United Kingdom was not too wide to be an invalid restraint.
26. This conclusion was of course drawn in the particular circumstances of the case where the only customers of the Company were the British and Foreign Governments. However, in McEUistrim v.
27. Ballymaclligot (1919) AC 548 restrictive covenant contained in the Rules of a Society, whereby a former member agreed that for an unlimited period he would sell all milk produced at his farm to a creamery run by the Society, was struck Sown as too wide, since it amounted to a virtual, monopoly situation.
28. As regards the issue of public interest, it has been said that in most- cases, reasonableness in the- interest of the parties would coincide with that of the public interest and rightly so because once the Court comes to the conclusion that a restrictive covenant can be upheld being reasonable in the parties interest, it would be very difficult to render it unenforceable because it involved some injury to the public. However, with respect to cartels and other forms of restrictive trading agreements there has been a distinct shift of emphasis in favour of recognizing the interest of the public. Such agreements are, as a general rule, freely entered into between traders wha are perfectly capable of deciding for themselves what is reasonable in their own interests. Thus, the real point at issue in these cases is whether the maintenance of the restraint is detrimental to the interests of the public (see Esso Petroleum Co. Ltd. v. Harpers Garage (Stour port) Limited (1968) AC 781). However, in the present context involving the sale of good-will, in my view, a wide restraint as contemplated by the earlier agreement dated 28.12.1998, whereby the defendant has been denied the right to carry on his trade in the entire province, cannot be justified as the defendant is a skilled photographer and it would be unfair, to deny his expertise to the- residents of this city- at all which would certainly not be in the public interest.
29. The Indian cases cited at the Bar by Mr. Munawar 'Ghani' learned counsel for the defendant in my opinion are not relevant to the basic issue raised in this matter. In District Board v. Hari Chand (supra) it was held that a contract giving a person a monopoly of lorry tariffication on a public road was opposed to public policy. This case concerned the issue of public policy seen in the context of monopolies which in Pakistan is regulated by law viz. The Monopolies and Restrictive Trade Practices Ordinance which is not at all concerned with placing of legitimate restraints on the seller of good-will in the case of private transactions between two parties. Similarly in Ramamamurthy v. Nandi Rumulamma (supra), the custom in Madras whereby one scavenger claimed absolute right to collect garbage from residential areas was struck down as opposed to public policy,. Finally in Amba Prashad MaheshawasL v. Juhgal Kishore (supra) it was held that the general public had the right to use a highway which could not be curtailed by the U.P. District Bward by creating any monopolies^ v/z. That a particular high way could only be used by trucks.
30. More to the point are the English Cases cited by Mr. Munawar Ghani In Jenkins v. Reid (which was followed in Routh v. Jones) (supra) the English Court of Appeals struck down covenants whereby the defendants were restrained from practising medicine within certain limits of the plaintiff's clinic for a number of years as being too wide in their scope so a$ to afford adequate protection to the plaintiffs practice. It was held that such covenants were a restraint on trade and therefore, void unless there are special circumstances to justify the same, the onus to prove which is upon the plaintiff. While these cases pertain to an employer and employee situation the principle on which they .Were decided is common to the case of sale of good-will viz. That the restraint should be reasonable balancing on the one hand the purchaser's interest which would include some period wherein he would be established in the business and on the other hand the sellers right to make a living which would include the general public rights to profit from his expertise.
31. In view of the above discussion, it would be just, reasonable and fair to place some restraint on the defendant both in terms of space and time. In this regard banishing the defendant altogether from the city of Karachi would not be justified as this is not in the interest of the parties as well as the general public. Consequently, I would allow the plaintiff to conduct his business of photography exclusively under the name of Jimmy's Studio (or any other name) on the Easter Side of Shahrah- e-Faisal starting frbm Karachi Airport to Metropole Hotel and thereafter down Moulvi Tamizuddin Khan Road (Queen's Road) upto the Quaid-e-Azam Bridge (Native Jetty). This are would include Shah Faisal Colony, Defence Area, Clifton etc. The defendant shall do so on the Western side including Karsaz, K.D.A., Saddar, I.I. Chundrigar Road etc., under any other name except Jimmy's Studio;-These arrangements shall continue for a period of five years from 28.12.2000 or till such time as the final disposal of the suit whichever is earlier.
32. The above are the reasons for the short order passed on 19.6.2000 disposing of this application.