Court case(1995) 5 SCC 545

Gujarat Bottling Co. (GBC) bottled and sold Coca Cola's brands under a franchise agreement of 1993, paragraph 14 of which bound GBC not to manufacture, bottle, sell or deal with the products of any other brand during the subsistence of the agreement. Control of GBC then passed to a group connected with Pepsi, a rival, and GBC purported to terminate the agreement on one year's notice while preparing to bottle Pepsi's products. Coca Cola sued and obtained an interim injunction from the Bombay High Court restraining GBC from dealing in competing brands during the notice period. GBC appealed.

The Supreme Court dismissed GBC's appeal. A negative stipulation which operates only during the currency of the contract and is intended to further the trade of both parties, by promoting the franchisor's brands through the franchisee, is not a restraint of trade within s. 27; the doctrine applies to restraints operating after the contract ends. Such a covenant may be enforced by injunction under s. 42 of the Specific Relief Act. On interim relief the Court restated the tests of prima facie case, balance of convenience and irreparable injury, and added that the court, exercising an equitable jurisdiction, considers the conduct of the party seeking relief and of the party against whom it is sought: GBC, which had itself broken the agreement, could not resist the injunction.