SARDAR MUHAMMAD RAZA KHAN, J.---PepsiCo Inc., a North Carolina. Corporation, Executive Offices, 700 Anderson HillRoad, Purchase, New York 10577, U.S.A. (hereinafter to be referred to as Pepsi Cola Company) on 26th day of June, 1993, entered into an agreement captioned as Exclusive Bottling Appointment with Bolan Beverages (Pvt.) Limited, B-98/100, Quetta Industrial Estate, Quetta, Pakistan (hereinafter to be referred to as Bolan Bottlers). Through such agreement Pepsi Cola Company appointed Bolan Bottlers to bottle, sell and distribute their product known as and sold under the trademarks PEPSI COLA and PEPSI, solely within the limits of the Province of Balochistan described as "Territory."
2. The term of such appointment initially was for a period of five years commencing from the date of appointment. After the expiry of initial terms this appointment was to be automatically extended for additional terms of 5 years each unless either the Bolan Bottlers or the Pepsi Cola Company should give notice in writing to the other party of its intention not to renew the agreement or of the terms under which such appointment shall be renewed. Such notice was to be given at least one year in advance of the expiration of the original term of five years or of any additional term. Bolan Bottlers accepted the appointment upon the terms contained in the agreement (pages 162 to 172) to bottle, sell and distribute the beverage only for ultimate resale to consumers within the "territory" and not without either directly or indirectly. Clause 2 of the agreement was incorporated to provide that Pepsi Cola Company will sell either directly or through its subsidiaries to Bolan Bottlers and the latter will purchase all units of Pepsi-Cola concentrate required for the manufacture of the beverage known as Pepsi Cola the world over. A Unit of Pepsi Cola concentrate was of fixed quantity while the price thereof was US $ 1150.
3. Such bottling appointment issued on 26-6-1993 was intact when Pepsi Cola Company, vide letter dated 7-12-1998, cancelled the exclusive bottling appointment. On 16-12-1998, Bolan Bottlers filed a civil suit against Pepsi Cola Company and its various divisions for a declaration to the effect that the cancellation was void and unlawful and further that an interest of Bolan Bottlers had been created in the franchise and hence it could not be revoked unilaterally by Pepsi Cola Company. An injunction was also sought against Pepsi Cola Company to the effect, inter alia, that Bolan Bottlers be allowed to continue the business and Pepsi Cola Company be restrained from taking any action against the bottlers and under the Trade Marks Act, till the final decision of the suit. As the agreement stood already cancelled, we would better comprehend it to be a temporary- mandatory injunction. In the alternative, Bolan Bottlers claimed a sum of Rs,985 million as damages with the assertion that the exclusive bottling appointment stood automatically renewed for another period of five years with effect from 26-6-1998.
4. The suit was strongly opposed by Pepsi Cola Company calling it to be counterblast to their suit before the High Court of Sindh and seriously alleging that Bolan Bottlers had been guilty of grave violation of terms of appointment and that under the terms thereof the cancellation was but unavoidable. The application filed by the plaintiff under Order XXXIX, Rules 1 and 2 read with section 151, C.P.C. Was strongly resisted. The learned trial Court, vide its order dated 20-4-1999, allowed the application and granted all the interim reliefs contained in the application. Being aggrieved of the aforesaid order, Pepsi Cola Company filed F.A.O. No,122 of 1999, whereupon an Hon'ble Single Judge of Lahore High Court recalled the interim injunction through order dated 41-10-1999 and hence Bolan Bottlers filed a petition for leave to appeal, which was granted by this Court on 20-10-1999 to consider various aspects of the case specially that the High Court while recalling the interim injunction, whether or not had complied with the law laid down by this Court in Muhammad Aref Effendi v. Egypt Air 1980 SCM R 588, and whether an injunction in such-like cases can be granted, even, when the plaintiff has laid down substantial money claim in shape of damages.
5. We had the opportunity of listening to the learned discourse of Mr. Tariq Mehmood for Bolan Bottlers and Mr. Khalid Anwar for Pepsi Cola Company.
6. Mr. Tariq Mehmood, learned counsel for the appellant while describing the agreement between the parties as "franchise" based his case on three-fold grounds. Firstly, that an interest of Bolan Bottlers had been created in the franchise and therefore, the contract could not be revoked unilaterally under section 202 of the Contract Act. Secondly, that the grounds of cancellation were frivolous and no notice of revocation had been issued. Thirdly, that the duration of agreement had stood automatically extended to ten years before which the cancellation could not be made. A judgment of this Court in Civil Appeal No,518 of 1994 (Bee'cham's case) decided on 7-8-2000 was placed reliance upon. A perusal of the judgment would indicate that the point of law settled therein was, as to, whether clause 12 of the agreement was governed by clause 13 of the agreement or vice versa. This specifically pertains to the agreement between the parties of that appeal and the same are reproduced at page 4 of the judgment wherefrom it clearly transpires that clause 13 of the agreement controlled the provisions of clause 12, laying down that "subject to the provisions of paragraph 13 thereof this appointment shall commence on 1st September, 1987 and shall continue until terminated by Three months notice from either party or the other." The same point was determined by this Court in the aforesaid judgment but so far as the creation of interest of the appellant thereof was concerned, it was not commented upon and was deferred to be determined by the trial Court, being a question of fact. The judgment is not of any consequence so far as the present case is concerned.
7. As franchise is not defined in our own Contract Act, we may have a reference to Black's Law Dictionary 6th Edition page 658, where franchise is defined as "a privilege granted or sold, such as to use a name or to sell products or service. The right given by a manufacturer or supplier to a retailer to use his product and name on terms and conditions mutually agreed upon." In its simplest terms, a franchise is a licence from owner of trademark or trade name permitting another to sell a product or to serve under that name or mark. Precisely this definition is more akin to a licence rather than an agency. What exists between the present parties is more suitable to be determined in the light of the agreement itself and then the relevant laws on the subject.
8. From the perusal of the agreement in question dated 26-6-1993 (pages 162 to 172) it would be clear that the very heading given to the agreement was neither licence nor agency but it was captioned as "Exclusive. Bottling Appointment". Though the headings or the captions B cannot exclusively determine the nature of a contract yet the various clauses thereof would be material in determining the real nature of the agreement. It would not be convenient to reproduce the entire agreement yet the material clauses thereof would be referred to at the appropriate places. Clause 2 (Part I) is reproduced below: "The Company will sell or cause to be sold by one of its subsidiaries (Company and/or such subsidiary hereinafter both called the "Seller") to the Bottler, and the Bottler will buy only from the Seller, all units of Pepsi-Cola concentrate (hereinafter called "Units") required for manufacture of the Beverage by the Bottler, at a price established by the Seller One Thousand One Hundred Fifty United States Dollars (US $ 1,150.00)".
The clause reproduced above defines the role of the parties where Bolan Bottlers is a purchaser of Pepsi Cola concentrate while Pepsi Cola Company is the seller thereof. Prima facie there appears to be a relationship of seller and buyer between the parties.
9. Clause 3 of the agreement further lays down that the trademark shall be the exclusive property of Pepsi Cola Company not subject to question by the Bottler. The seller shall protect the trademark and shall not be liable to the Bottler for any loss or damage suffered by Bottler's use of the trademark. Peculiar words in clause 3 are to the effect that the Bottler will co-operate fully with Pepsi Cola Company in the defence and protection of trademark. Another important clause is sub- clause (3) of clause 3 which is again reproduced below: "Nothing herein contained shall be construed as conferring upon the Bottler any right or interest in the Trademarks, or in their registrations or in any designs, copyrights, patents, trade names, signs, emblems, insignia, symbols and slogans, or other marks, used in connection with the Beverage."
' This indicates beyond doubt that in this agreement the Bolan Bottlers would have no right or interest in the trademark or in the registration thereof or any designs, copy rights patents etc. Mentioned above.
10. From the perusal of relevant clauses of the agreement, we are now left to .See. As to, whether the appointment in hand is a licence or an ageric) . Before determining this in the light of the agreement between the parties, we would first turn to the question of agency because the terms "agency" and "franchise" are, at times, wittingly or unwittingly, confused with each other. In the instant circumstances, however, the learned counsel for the respondents has denied the existence of both.
11. Section 182 of the Contract Act defines an agent and a principal as follows:
182. "Agent" and "principal" defined. An "agent" is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the "principal".
According to the above definition it appears that an agent is appointed by a principal to do any act for the principal or to represent the principal in dealings with the third persons. From the agreement in hand it has become abundantly clear that Bolan Bottlers while dealing with third persons do not represent Pepsi Cola. After purchasing the concentrate from the Pepsi Cola Company they are engaged in a business which is purely their own and the returns thereof are completely enjoyed by them.
12. There are a few other sections which also enhance the phenomenon of an agency. Section 211 of the Contract Act describes the E agent's duty in conducting the principal's business. This section presupposes the belonging of the business to the principal while tile conduct thereof to the agent.
Whether the business agreed upon between the parties before us is the one of the principal or of the agent remains to be determined in the light of the agreement. According to the agreement, the entire business belongs to the Bolan Bottlers and not the Pepsi Cola Company. In the wake of the existence of an agency, a loss sustained by the principal is bound to be made good by the agent.
In the agreement before us all the losses as well as the profits are of the Bolan Bottlers and not capable of being shared by the Pepsi Cola Company except for the sale of the concentrate for which a price is fixed and duly paid. In terms of the provisions of section 182 and 211 of the Contract Act, we believe that, prima facie, the agreement between the parties does not constitute an agency either.
13. Under section 213 of the Contract Act an agent is bound to render proper accounts to his principal on demand. In the instant case Bolan Bottlers, as per agreement, is not bound to render any account to Pepsi Cola Company on demand. Section 216 of the Contract Act explains theprincipal's right to benefit gained by agent dealing on his own account in business of agency. It elaborates that if an agent without the notice of a principal, deals in the business of agency on his own account instead of on account of his principal, the principal is entitled to claim from the agent any benefit which may have accrued to him from the transaction. In the instant case, as said earlier the whole business is that of Bolan Bottlers Which is run on its own account and not at all for the Pepsi Cola Company. This also prima facie is indicative of the absence of agency. Sections 217 and 218 of the Contract Act also lay down certain conditions that the agent is bound to pay to his principal all sums received on his account. In case before us, the Bolan Bottlers never received from the third persons any amount or account on behalf of or for the Pepsi Cola Company. The agreement viewed in the light of the text law, prima facie, indicates the existence of no agency.
14. This Court in Hazratullah v. District Council Haripur 1997 SCM R 1570 had observed that when once a lease agreement has been reduced into writing, oral evidence was to be excluded while proving the terms thereof as against the terms specifically reduced into writing. At this juncture we would reproduce clause 20 of the agreement which specifically lays down as to what in essence was the nature of agreement between the parties. This clause altogether negates the creation of either agency or partnership or joint venture.
"20. Nothing in this Appointment shall create or be deemed to create any relationship of agency, partnership or joint venture between Bottler and the Seller. The Bottler will assume full responsibility and liability for, and will hold the seller harmless from any loss, injury and or damages resulting from or claimed to result from any act or omission on the part of the bottler in the performance of its obligations under this Appointment. Further, and without limiting the generality of the foregoing, the Bottler agrees to indemnify and hold harmless the Seller from any and all product liability, and damage claims, howsoever caused, including the legal costs of defending such claims, which are alleged to have arisen as a result of the negligence, breach of contract, implied or express, of the bottler and/or any act or omission on thepart of the Bottler. The Seller will assume full responsibility and liability for, and will hold the Bottler harmless from any provable loss, damage or claim resulting from defective concentrate; such indemnity to arise provided the Bottler has strictly complied with the Company's instructions for the bottling of the beverage. In furtherance of the obligations imposed upon the Bottler within this paragraph, the Bottler must at all times carry product liability and personal and property damage insurance in an amount sufficient to satisfy in full any claim advanced against the Seller and, if requested by the Seller, furnisha Certificate of Insurance or such other reasonable proof of adequate insurance coverage.
15. We hold in the light of the above discussion as well as the law, that an agent is a hyphen that joins and a buckle that binds the relation between the principal and the third party. Where an agent is not a link between the principal and a third party, the institution of agency is not created.
Where a person is not liable to the principal for the submission of accounts such person cannot be dubbed as agent. In the instant case, the product known as Pepsi Cola is sold to the third party as the property of Bolan Bottlers without any control of Pepsi Cola Company and hence it prima facie lacks the necessary ingredients of an agency. The Bolan Bottlers also do not receive any commission for the sale, rather, they receive the entire amount of sale consideration as well as the profits. They are also likely to sustain losses as well.
16. Before we advert to the question of creation of interest of Bolan Bottlers with reference to section 202 of the Contract Act, we may remark that if the relationship between the parties is determined to be that of principal and agent, the provisions of section 202 of the Contract Act would be attracted, otherwise not. Coming to section 202 of the Contract Act, it is reproduced for facility of reference: "202. Termination of agency where agent has an interest insubject-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."
The close examination of section 202 of the Contract Act would show that it can be split up into two parts. The first part contemplates that the interest of the agent himself should exist in the property that forms the subject-matter of agency. The second part of the section is that when such an interest is created, it cannot be terminated to the prejudice of agent unless it is expressly provided in the contract.
17. 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. Any interest, either not pre-existing or not forming subject-matter of the agreement but created subsequent to the agreement in any related matter, would not be called as the creation of interest of the agent. In the instant case, the subject-matter of the agreement is the sale of concentrate by Pepsi Cola Company to the Bolan Bottlers. The interest of the parties is only to the extent of sale by one and purchase by the other. Everything comes to an end the moment the sale is completed. The case of the appellant is that after such agreement the Bolan Bottlers constructed offices, built a vast infrastructure, employed numerous persons and hence a clear interest was created. This, we are afraid, would not be a proper definition of interest because such interest is created independent of the agreement which is only for sale of concentrate. All the infrastructure which has been constructed and prepared by the appellant is for the expansion and promotion of his own business which he commenced in order only to earn his own profits which are never to be shared by the respondent i,e, the Pepsi Cola Company.
18. Hon'ble Mr. Justice Shabir Ahmad and Mr. Justice Akhlaque Hussain, as they then were, had held far back in the year 1957. In Messrs Caltax Oil (Pakistan) Ltd., Karachi v. Sheikh Rehan-ud-Din PLD 1957 Lahore 998 that in case of the sale by one person of a product belonging to the other and having purchased from that other, the agency is not created. The indispensable ingredient of agency in such cases is missing because when the so-called agent deals with the third person, such dealings do not bind the so-called principal. In the above referred case, the matter pertained to a petrol dealer who was held not to be an agent of the company supplying the petrol and that such a seller is deemed to be selling his own goods having been purchased from the other.
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 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 factum 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.
20. At this juncture, we may also refer to the case of Muhammad Aref Effendi v. Egypt Air 1980 SCM R 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.
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. Vet 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(f) 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 Hameed ullah v.
Headmistress (1997 SCM R 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(g) 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.
23. Our attention has been invited to another important aspect of the case not adequately rebutted by the opposite side. Learned counsel for the respondent has referred to various tests conducted qua the product sold in the market. It was put to four different tests whereafter it transpired that the Bottlers have been using the concentrate of 'RC Cola' and were selling it under the name, Astyle and trademark of 'Pepsi Cola'. This is alleged to be a serious violation of the trademark in selling a product available for half the price of Pepsi Cola. In order to reinforce the argument the learned counsel referred us to numerous pages of Papers Book-V showing the graph of sale of Pepsi Cola concentrate having been purchased by Bolan Bottlers during previous years.
This background of sale of concentrate has remained reasonable and constant during early years but for six months next before the institution of suit no concentrate has at all been purchased, whereas, the product is constantly being sold in the market. It is not known as to how could the product be marketed, if genuine, when no concentrate at all is purchased. The obvious conclusion, prima facie, would be that some spurious product is marketed and the same is accepted as well in few of dispatches on record.
24. In these circumstances, if a temporary injunction is granted, what assurance would there be that no spurious or unhygienic material shall be sold during the existence of the injunction. In that case the Court shall have no sources to check all such failings and shortcomings and would rather be thrusting an agreement over a party which has already revoked the contract. In case the temporary injunction is granted, it would virtually amount to the grant of relief prayed for but without a decree in favour of the plaintiff/appellant. In Messrs Pakistan Associated Construction Ltd. v. Asif H. Kazi and another 1986 SCM R 820 this Court had discouraged the grant of interim relief where it amounted to resurrection of contract in its full form and effect which stood cancelled by the party concerned. It also held that when Court was not in a position to grant relief against oppressive consequences of the injunction, it should be refused.
25. It is a case where, by sale of spurious goods, a serious infringement of trademark is alleged along with the substandard quality thereof. All these matters are most likely to adversely affect the goodwill of the Pepsi Cola Company which is always considered to be irreparable. Taking all the ingredients for the issuance of a temporary injunction we believe at this stage that the provisions of section 202 of the Contract Act are not attracted and hence the appellant has no prima facie case. The irreparable loss in case of grant of injunction, in the circumstances, would be that of the Company and not the Bottlers'. While parting with this aspect of the case, we may remark that, so far as the trademark is concerned, the Bottler has neither claimed any interest therein nor could it be so claimed in view of the express provisions of the contract.
26. Learned counsel for the appellant seriously objected to the manner in which various samples of the product were procured and sent to the laboratory. He was of the view that a spurious product in the market could have been manufactured by any other violator of the trade mark in the market and hence the availability of a spurious Pepsi Cola cannot be an exclusive prove of the fact that it was produced by Bolan Bottlers. He referred to the case of one Farooq who was so apprehended and against whom action was also taken. Learned counsel for the respondents controverted the argument by alleging that all the samples in question were taken from the factory of the appellant.
27.The next allegation of the learned counsel for the appellant was that the cancellation of agreement was mala fide because the Pepsi Cola Company wanted to eliminate all business in all other 'territories' and intended to centralize the same in Karachi. That this suggestion was strongly opposed by Bolan Bottlers, the appellant. Learned counsel for the respondents vehemently opposed this suggestion saying that it was based on no evidence and that all other purchasers of the concentrate in Pakistan were peacefully working under the agreement except Bolan Bottlers whose agreement was cancelled under unavoidable and compelling circumstances.
28.Lastly. The learned counsel for the appellant claimed that the ad interim injunction, in the instant case is continuing for a long time since,1999 and that it would not be in the interest of justice if the same is withdrawn now at this stage. This, in our view is a novel argument. When once the High Court had refused injunction, the case should either have been heard by this Court at the most earliest or ad interim injunction should have been made conditional to early hearing. The injunction was originally granted with direction that the case be heard at the earliest possible. In view of the important nature of the case, the magnitude of the stakes and the quantum of finances involved the continuation of ad interim injunction for such a long time, in the circumstances, was rather sad.
The appellant should better be not allowed to benefit from a situation so created. Learned counsel for the appellant rightly argued in rebuttal that this contract was created in the year 1993 and was terminated in the year 1998 but still, under the force of an ad interim injunction, the appellant is in complete enjoyment of the business not sanctioned and desired by the Pepsi Cola Company.
29.Consequent upon what has been discussed above, there. Being no merit in the appeal. It is hereby dismissed, the order of the High Court is maintained and the temporary injunction prayed for by the appellant/plaintiff is hereby refused.
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