GEA Energy System India Ltd. vs Germanischer Lloyd Aktiengesellschaft

M. Jeyapaul, J.—The application is filed seeking an order of interim 1 injunction restraining the respondents and their affiliates, subsidiaries, associates, agents, men or any person claiming under them in any way establishing any firm or company in India to carry on any business set out in the joint venture agreement dated April 23, 1997 and representing before the clients, customers, banks, employees, general public, Government authorities acting upon the alleged termination notice dated December 20, 2006, pending disposal of the arbitration.

The averments, in brief, found in the application are as follows:

The power of attorney Mr. R. Ramesh Kumar representing applicants Nos. 1 and 2 is the president-corporate secretary of the first applicant. The applicants and Germanischer Lloyd Aktiengesellschaft, a company organised under the laws of Federal Republic of Germany have entered into a joint venture agreement dated April 23, 1997, at Chennai for the purpose of incorporation of a joint venture company, viz., Germanischer Lloyd Industrial Services India P. Ltd., with equal shareholding (50 : 50) between the applicants and the first respondent and its affiliates and group companies. The joint venture company was incorporated on June 30, 1997 and ever since its incorporation, it carried on its business in accordance with the joint venture agreement and articles of association. In the year 2003, the 50 per cent, shareholding held by the first respondent was transferred to its affiliate company, viz., Germanischer Lloyd Offshore and Industrial Services GmbH and the said transfer took place in accordance with the joint venture agreement. A notice of termination of the joint venture agreement dated April 23, 1997, was sent by another affiliate of the first respondent, viz., Germanischer Lloyd Industrial Services GmbH. Admittedly, the affiliate is a subsidiary of the first respondent who is not a party to the joint venture agreement and has no right to deal with any rights and obligations of the joint venture agreement. The respondents indicated their interest to enter into a negotiation for purchase of 50 per cent, shareholding of the second applicant. The applicants emphasised their interest to continue with the joint venture agreement. The respondents have created an atmosphere of distrust and illwill and vitiated the atmosphere under a mistaken belief as if the 50 per cent, shareholding of the second applicant have already been transferred. They started influencing the managing director of the joint venture company to further their interest in India. The differences and disputes arose in respect of the management of the affairs of the joint venture company. The first respondent has now issued a notice on December 20, 2006 terminating the joint venture agreement dated April 23, 1997, through the said affiliate of the first respondent who is not a party to the joint venture agreement and has no right to terminate the joint venture agreement. The affiliate of the first respondent is acting with a motive to cripple the operations of the joint venture company, as they have not succeeded in their diabolical attempt to snatch the joint venture company under the garb of "independence" and "objectivity". The respondents have also taken steps to register a company in India to carry on an identical business as that of the joint venture company. Any attempt by the respondent to set up a company to carry on a business in the same field will result in serious conflict of interest and cause irreparable damage to the joint venture company. The Foreign Investment Promotion Board (FIPB) has also released a Press Note 1 (2005 series) dated January 12, 20051, stipulating prior approval of the Government of India in case the foreign investor has an existing joint venture or technology transfer or other agreements in the same field. It is also stressed by the Government of India that the future joint venture agreements should embody a "conflict of interest" clause to safeguard the interest of the joint venture partner in the event of one partner desiring to set up another joint venture in the same field of activity. In order to clandestinely set up a company in India, the respondents have attempted to terminate the joint venture agreement dated April 23, 1997. This is wholly impermissible in law and violative of the joint venture agreement. The applicants apprehend that the respondents will carry out a publicity campaign to the clients, customers, employees and other business associates of the joint venture company in India that the respondents have terminated the joint venture agreement and thereby causing irreparable damage to the immediate and long-term business of the joint venture company. The applicants have referred the matter to arbitration as per the provisions of the joint venture agreement. Hence, the order of interim injunction pending disposal of the arbitration is called for.

The respondents have countered the above averments as follows:

The agreement dated April 23, 1997, between the applicants and the respondents has been terminated by letters dated December 20, 2006 and December 28, 2006, issued by Germanischer Lloyd Industrial Services GmbH as the legal successor of Germanischer Lloyd Offshore & Industrial Services GmbH, the second respondent herein. The second respondent was merged with Germanischer Lloyd Industrial Services GmbH with effect from September 28, 2006. The agreement is terminable and is not perpetual in nature inasmuch as the joint venture agreement by nature and in effect is a partnership agreement to the business on equal partnership basis. The agreement is of commercial and mercantile nature and therefore, it cannot intend to constitute a permanent relationship and in the event of the terms between the parties becoming bad, it would be impossible to give business efficacy to such an agreement and therefore, it is terminable. The negative clause in the agreement which gives the joint venture company exclusive right of operation within the territory of India is a restraint of trade within the meaning of Section 27 of the Indian Contract Act and will have effect only during the operation of the agreement and not after termination of the agreement. Since the agreement is terminable and is also in restraint of trade, seeking an injunction against the respondents in the manner in which it has been sought for will be effectively asking for specific performance of the contract which is not permissible under the provisions of Section 14 of the Specific Relief Act, 1963. Further, injunction sought for could not be granted in view of the provisions of Sections 41 and 42 of the Specific Relief Act. In any event, the respondents have already entered into an agreement with a third party to carry on business in India and the order as prayed for, if granted, would affect the third party rights who are not a party to these proceedings. The second respondent wrote a letter to the first applicant expressing the desire to transform the Indian activities of the respondents through the Indian company as a 100 per cent. Germanischer Lloyd Industrial Services GmbH affiliate. The applicants were also informed that the second respondent would like to discuss with the applicants the terms and conditions related to the acquisition of shares of the joint venture company. The applicants were also willing to negotiate disinvestment of the equity shareholding in the joint venture company. However, abruptly, on July 12, 2006, the applicants issued a letter removing Mr. Srinivasulu as the managing director of the joint venture company without consulting the second respondent. The second respondent, by its letter dated July 14, 2006, expressed empathy of the removal of Mr. Srinivasulu as the managing director and requested to nominate a competent person who could be appointed as a managing director. On July 19, 2006, a resolution was circulated to all directors of the joint venture company by which resolution, important decisions were sought to be taken including the operation of bank account and authorising officers to operate the bank account. The applicants also issued a circular to all the employees with certain guidelines for the management and operation of the joint venture company without consulting the respondents. The first applicant, through its chairman Mr. B. G. Ragupathy, abruptly, issued notice dated August 23, 2006, for convening a board meeting of the joint venture company on August 25, 2006, with full knowledge that the directors representing the respondents would not be able to attend the board meeting with such short notice. The respondents, through Mr. Matthias Wesseler, who is also a chairman of the board of directors of the joint venture company, wrote a letter to Mr. B. G. Raghupathy on August 23, 2006, to cancel the scheduled meeting of August 25, 2006. However, the applicants went ahead and held the meeting on August 25, 2006 and took various decisions of far reaching consequences without involving the respondents. The various events at the instance of the applicants have disturbed the confidence and faith of the second respondent. The applicants were trying to take complete control of the affairs of the joint venture company throwing the spirit of partnership into wind. The applicants want to run their own show ignoring all the rights of the respondents and keeping them at arms length in all matters relating to the joint venture company. The respondents were not allowed to take over the operation of the joint venture company as per the procedure laid down in the joint venture agreement for more than a year despite several requests made by the respondents. Left with no other alternative, the respondents had to take a drastic step of terminating the joint venture agreement by letters dated December 20, 2006 and December 28, 2006. The only question that has to be decided in the event the dispute between the parties is arbitrated is the value of the shares of the joint venture company and sale or purchase of the said shares by either party. The respondents have also entered into a technical service agreement with another Indian company M/s. GVC Energy Services P. Ltd. and thereby third party''s rights have been created. No equitable relief can be granted as prayed for in the absence of the third party whose rights will be seriously affected.

Learned Counsel for the applicants would submit that the termination notice is ex-facie illegal inasmuch as there is no valid ground for termination as adumbrated in the joint venture agreement. Further, 90 days notice to remedy the breach, if any, committed by the applicants was also not given in the termination notice. The joint venture agreement would restrain the respondents from floating any similar business of its own or with the partnership of any third party prejudicial to the interest of the joint venture company. But, quite unfortunately, it is admitted that the respondents have entered into a similar joint venture agreement with GVC Energy Services P. Ltd. None of the grounds for termination alleged in the termination notice was contemplated in the joint venture agreement as sufficient ground for termination of the joint venture agreement. The joint venture floated by the respondents in partnership with a third party is against the spirit of the Press Note issued by the FIPB. The applicants are entitled to an order of interim injunction in the face of the negative covenant found in the joint venture agreement as per Section 42 of the Specific Relief Act. If the respondents are permitted to carry on similar business with the partnership of a third party, the joint venture business with certain terms and conditions commenced by the applicants and the respondents would be completely mined. The applicants have established prima facie that there is no legal termination of the joint venture agreement. Therefore, the applicants are entitled to interim injunction till the disposal of arbitral proceedings pending between the parties.

Learned Counsel for the respondents would contend that the joint venture company is not before the court. M/s. GVC Energy Services P. Ltd., with whom the respondents have entered into a technical service agreement and created third party rights in their favour, are also not before the court. Therefore, no remedy as sought for by the applicants in the absence of the aforesaid proper and necessary parties could be granted by the court. Inasmuch as the joint venture agreement was lawfully terminated in terms of the agreement between the parties, this court cannot grant injunction as sought for. The first respondent-company was taken over by the second respondent-company and the second respondent-company now got merged with another big company, viz., Germanischer Lloyd Industries Ltd., GmbH which lawfully terminated the joint venture agreement with the applicants. The applicants, who were not amenable to the offer either to purchase the equity share of the respondents or to let the respondents to purchase the entire equity shares of the applicants, have come to this court seeking such a relief. So, termination was the only solution which was available to the respondent-company. Even if there is any loss in the joint venture business, the respondent-company also will have to share 50 per cent. loss. To invoke the provisions u/s 41 of the Specific Relief Act, the joint venture agreement should be in vogue. But, here, in this case, the joint venture agreement had come to an end. The applicants cannot seek before this court what the arbitrator cannot grant. Therefore, the applicants are not entitled to the relief of interim injunction as prayed for.

There is no dispute to the fact that the applicants and the respondents entered into a joint venture agreement dated April 23, 1997 and that a joint venture company, as a result thereof, was incorporated on July 30, 1997. The joint venture agreement and the memorandum of association of the joint venture company have been produced for perusal before this court.

It is relevant to refer to Clause 16 of the joint venture agreement which reads as follows:

Termination:

16.1. This agreement shall become binding upon the parties as of the date of execution hereof by the parties hereto which date shall be the date inserted as the date first above written.

16.2a. If a party--

(i) shall commit any material breach of its obligations under this agreement and shall fail to take all necessary action to remedy such breach within ninety (90) days from the service of any written notice by any other party hereto complaining of such breach;

(ii) shall go into voluntary liquidation otherwise than for the purpose of reconstruction or amalgamation or an order of court is made for its compulsory liquidation;

(iii) shall enter into any composition or arrangement within its creditors;

(iv) shall have a receiver appointed over the whole or any part of its undertaking or assets ;

(v) shall have cease to carry on the whole or any substantial part of its business other than in the course of reconstruction or amalgamation.

16.2b. If either party shall purport to sell, transfer or otherwise dispose of their interests in their shares on the company other than as permitted by the provisions of Clause 10 then and in that event this agreement shall be terminated as from the date such transfer has been presented to the company for entry in the share register of the company, as against the party purporting to sell transfer or otherwise dispose of their interests.

A close scrutiny of the joint venture agreement would show that the said agreement can be terminated by either of the parties only in accordance with the spirit of Clause 16.2a. If any breach was committed by one of the parties to the joint venture agreement, such material breach will have to be brought to the notice of the other party affording an opportunity to rectify and remedy the breach within 90 days from the service of the written notice. In the termination letter dated December 20, 2006, admittedly given by one Germanischer Lloyd Industrial Services GmbH, the said time frame had not been given to rectify the breach, if any, committed by the applicants.

It is found that the Germanizcher Lloyd Industrial Services GmbH is not at all a party to the joint venture agreement between the applicants and the first respondent. Of course, the take over of the first respondent by the second respondent has been recognised by both the parties as per the supplemental agreement dated July 23, 2003, executed by and between them. Though it is submitted that the second respondent-company, who took over the first respondent-company, was merged with one Germanischer Lloyd Industrial Services GmbH, no merger document was produced before the court. The applicants might have corresponded with Germanischer Lloyd Industrial Services GmbH, but, that ipso facto would not tantamount to recognition of the merger of the second respondent with Germanischer Lloyd Industrial Services GmbH in the absence of any proof to establish the merger status of the second respondent with one Germanischer Lloyd Industrial Services GmbH. Prima facie, it has been established by the applicants that Germanischer Lloyd Industrial Services GmbH, who were not a party to the joint venture agreement or to the supplemental agreement between the parties, has issued the termination notice to the applicants.

Coming to the various grounds set out in the letter of termination dated December 20, 2006 and reiterated by the subsequent termination letter dated December 28, 2006, I find that removal of the managing director, passing of resolution by circular, appointment of a new managing director, calling upon a board meeting within a short span of time and lack of courtesy allegedly exhibited by the applicants have been shown as the provocations for terminating the joint venture agreement.

Let us find whether the respondents have any say in the matter of removal of the managing director and appoint a new managing director in his place. Clause 8.1 of the joint venture agreement reads as follows:

The parties agree that GL India shall have a managing director, who will be its chief executive officer. The managing director shall always be a nominee of BGR group. The managing director shall hold proper qualifications and relevant experience and shall be suitable for the nature of business of GL India and shall be a professional. BGR group shall have a right to terminate the nomination of such managing director and nominate any other suitable person in the vacancy so caused. The terms and conditions of appointment, and powers, authorities and discretions of the managing director shall be determined by the board in accordance with the prior concurrence reached by the parties in this respect.

The managing director is only a nominee of the applicants. The applicants have been given supreme power of terminating the nomination of the managing director and come out with a new nomination of a suitable person to fill up the vacancy caused thereby. Therefore, the termination of service of Mr. Srinivasulu as managing director of the joint venture company nominated by the applicants without entering into any consultation with the respondent-company appears to be in tune with the spirit of the joint venture agreement. The respondents have not reserved any right to question the wisdom of the removal of the managing director and induction of a new managing director by the applicant-company. The applicants have shown prima facie that such a ground alleged in the letter of termination is not in agreement with the clauses found in the joint venture agreement. Under Regulation 73(2) of Table A of the Companies Act, 1956, a director is empowered to call for a board meeting. Further, there is no prohibition contemplated under the joint venture agreement against the applicants calling for a board meeting or passing of a resolution by circulation. Of course, the respondents have expressed their difficulty in attending the urgent board meeting convened with short notice by the applicants. But, the applicants would submit that urgent board meeting will have to be convened and a resolution by circulation will have to be passed to transact the business in the absence of the managing director Mr. Srinivasulu who was shown the doors by the applicants. At any rate, I find that convening of board meeting and passing of resolution by circulation which had not been prohibited under the joint venture agreement do not appear to be a valid ground for termination of the agreement. Curiously, lack of courtesy reportedly shown by the applicants was also projected as one of the causes for issuing the termination notice. The applicants have shown prima facie that the termination of the joint venture agreement was a ruse to commence the new venture quite akin to the business under the joint venture between the applicants and the respondents.

Reference is made to Clause 9.1 of the joint venture agreement which reads as follows

The parties affirm and agree that the business territory of GL

India shall be India. The business operations in the territory shall be carried on exclusively by GL India. The parties agree and undertake that they shall not in anyway associate themselves with any firm/company which will result in conflict of interest as against GL India.

The applicants and the respondents have clinched an agreement not to try any venture, by themselves or in partnership with others, a trade or business which would be prejudicial to the joint venture object.

It has been, unambiguously, admitted in the last paragraph of the counter filed before the court that they had already entered into a technical service agreement with another Indian company M/s. GVC Energy Services P. Ltd. The memorandum of the new company floated by the affiliate of the respondents is found to be quite identical to the memorandum of the joint venture company. The professionals and officers of the respondents have figured as signatories to the memorandum of association of the new company. Documents have been produced by the applicants to show that the respondents have sent letters to the clients of the joint venture company. The unhappy development in the joint venture project is that about 50 employees of the joint venture company have submitted their resignation and left the joint venture business. The applicants have also shown before the court that the new company floated by the affiliate of the second respondent-company have also started collecting letters meant for the joint venture company. Part 2(i) of the Press Note 1 (2005 series) See [205] Comp. Cas 122, 123. issued by the Government of India, Ministry of Commerce & Industry relating to the guidelines pertaining to the approval of foreign/technical collaborations under the automatic route with previous ventures/tie-up in India would read as follows:

New proposals for foreign investment/technical collaboration would henceforth be allowed under the automatic route, subject to sectoral policies, as per the following guidelines:

(i) Prior approval of the Government would be required only in cases

where the foreign investor has an existing joint venture or technology transfer/trademark agreement in the ''same'' field. The onus to provide requisite justification as also proof to the satisfaction of the Government that the new proposal would or would not in any way jeopardise the interests of the existing joint venture or technology/trademark partner or

other stakeholders would lie equally on the foreign investor/technology supplier and the Indian partner.

Unless prior approval of the Government of India is obtained by the foreign investor who has established a joint venture business, it cannot float a new business in the same field. The applicants have shown before the court prima facie that there was no valid ground for the termination of the joint venture agreement. Of course, the arbitrator will have to go into conclusively as to whether the joint venture agreement was legally terminated.

The joint venture company has been constituted by the applicants and the respondents. Both of them are parties to the joint venture company. One of the parties has got grievance now as against the other party to the joint venture company. Therefore, even in the absence of joint venture company, the said company is properly represented by both the applicants and the respondents put together have given shape to the joint venture company. As both the parties to the joint venture company are before this court, the omission to array the joint venture company as one of the respondents does not affect the case of the applicants. The respondents have entered into a technical service agreement with another Indian company M/s. GVC Energy Services P. Ltd. and started transacting business. The applicants cannot seek any remedy as against M/s. GVC Energy Services P. Ltd., as there is no privity of contract between the applicants with the said third party. The applicants can seek remedy only against their partners to the business, establishing their clandestine activity throwing to wind up the joint venture agreement in vogue between them. As the applicants cannot lawfully seek any remedy as against the third party, there is no necessity to implead the third party to the present proceedings. The interest of the third party may be affected by injuncting the respondent-company from associating themselves with a third party. But, the third party has entered into an agreement with the respondents taking such foreseeable risk. The respondents cannot separate themselves from the joint venture agreement without lawfully terminating their joint venture agreement and tie-up with a third party. Just because a third party''s rights would be affected, the court cannot grace the technical service agreement the respondents have entered with a third party against the spirit of the binding agreement.

As far as the merger of the second respondent with Germanischer Lloyd Industrial Services GmbH, I find that no document was forthcoming to establish such a merger. Therefore, the applicants are not supposed to take cognisance of such a merger that had taken place behind their back.

Section 27 of the Indian Contract Act, 1872, reads as follows:

Agreement in restraint of trade void.--Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.

If we read Clause 9.1 of the joint venture agreement in juxtaposition with Section 27 of the Indian Contract Act, it would come to light that the said clause in the joint venture agreement is not in conflict with the aforesaid prohibition found in Section 27 of the Indian Contract Act. The parties have been given liberty to undertake any business they like, but, such a business shall not be prejudicial to the interest of the joint venture business commenced by the applicants and the respondents in the aftermath of the joint venture agreement. It is not an absolute restriction placed on the parties not to transact any business. The new business, if any, commenced by one of the parties is in conflict with the interest of the joint venture business, then such a business falls under the restriction clause. The joint venture agreement has been entered into between the parties on equal terms. The contract is not found to be excessively hard or one sided. Therefore, the submission made by learned Counsel for the respondents that the restriction clause found in the joint venture agreement is hit by the prohibition imposed in Section 27 of the Indian Contract Act does not appeal to me.

Section 14 of the Specific Relief Act would apply to a case where specific performance of a contract which is determinable has been sought for. In the instant case, interim injunction to restrain the other party to float a similar business either by itself or with the association of the others has been sought for during the pendency of arbitral proceedings. Therefore, Section 14 of the Specific Relief Act, 1963, does not apply to the case on hand. Similarly, Section 41(e) of the said Act would apply in a case where a party seeks for an injunction to prevent the breach of contract, the performance of which could not be specifically enforced. But, in a case where there is negative covenant between the parties, the performance of which can be sought for u/s 42 of the said Act. The applicants have also shown before the court that the joint venture agreement was not lawfully terminated. Therefore, Section 42 of the Specific Relief Act, 1963, squarely applies to the case on hand where the negative covenant has been sought to be enforced by the applicants. In case where the negative covenant sought to be enforced by way of interim injunction was resisted on the plea that damages would be an adequate remedy, this court in Prasad Mathew v. S. C. V. Unit of Sun T. V. P. Ltd. [2003] 4 LW 555, observed as follows:

To deny interim injunction would not be in accordance with equity and justice since it would allow the defendant to flout the agreement with the blessings of the court on the ground that damages would be an adequate remedy. There is a negative covenant, viz., Clause 4(3) in the agreement and according to the M/s. Gujarat Bottling Co. Ltd. and others Vs. Coca Cola Company and others, breach of a negative stipulation is normally restrained by an order of injunction and the question of balance of convenience or damages being an adequate remedy does not arise.

This court has gone to the extent of protecting the negative covenant by issuing an order of interim injunction even without giving much consideration for the question of balance of convenience and the availability of remedy for damages. But, in the instant case, I find that incalculable loss would occasion to the joint venture business if the respondents are permitted to have a tie up with the third party to float a similar business against the spirit of the negative covenant. The new venture has been commenced only recently by the respondents having tie up with a third party. But, the joint venture business of both the parties have been in vogue right from the incorporation of the joint venture company on June 30, 1997. Therefore, the balance of convenience is also found in favour of the applicants in this case.

The observation of Lord Porter and Lord Uthwatt has been quoted in Martin-Baker Aircraft Co. Ltd. v. Canadian Flight Equipment Ltd. [1955] 2 QBD 556; [1955] 2 All ER 722, as under:

It would be strange if the agreement were not intended by the parties to be terminable; were it perpetual it is difficult to see how effect be given to its provisions. For instance, if the parties become on bad terms with each other, which could occur without breach of the agreement, it would be impossible to give it business efficacy.

The joint venture agreement contemplates termination of the agreement on certain contingencies as adumbrated under Clause 16 thereof. This court, while dealing with the application for injunction, cannot conclusively decide whether the conduct of the applicants had broken down the joint venture business irretrievably. But, the facts and circumstances placed before this court would indicate that there had been an attempt on the part of the respondents to purchase the 50 per cent, equity shares of the applicants in the joint venture business so as to make it a wholly owned subsidiary company of the first respondent. The other activities of the applicants appear to have fallen within the parameters of the joint venture agreement. Therefore, the above observation in the Queen''s Bench Martin-Baker Aircraft Co. Ltd. v. Canadian Flight Equipment Ltd. case does not, in any way, come to the rescue of the respondents who might establish before the Arbitral Tribunal the irretrievable break down of the agreement on account of the conduct of the applicants herein.

In M/s. Gujarat Bottling Co. Ltd. and others Vs. Coca Cola Company and others, , the hon''ble Supreme Court observed as follows:

In this context, it would be relevant to mention that in the instant case GBC had approached the High Court for the injunction order, granted earlier, to be vacated. Under Order 39 of the Code of Civil Procedure, jurisdiction of the court to interfere with an order of interlocutory or temporary injunction is purely equitable and, therefore, the court, on being approached, will, apart from other considerations, also look to the conduct of the party invoking the jurisdiction of the court, and may refuse to interfere unless his conduct was free from blame. Since the relief is wholly equitable in nature, the party invoking the jurisdiction of the court has to show that he himself was not at fault and that he himself was not responsible for bringing about the state of things complained of and that he was not unfair or inequitable in his dealings with the party against whom he was seeking relief. His conduct should be fair and honest. These considerations will arise not only in respect of the person who seeks an order of injunction under Order 39, Rule 1 or Rule 2 of the Code of Civil Procedure, but also in respect of the party approaching the court for vacating the ad interim or temporary injunction order already granted in the pending suit or proceedings.

In the instant case, we find that the managing director was sacked by the applicants, a new managing director was inducted, a board meeting was convened and the resolution was passed by circulation only within the ambit of the stipulations found in the joint venture agreement. Except the fact that the applicants have chosen to convene the board meeting with a short notice, no other fault can be fastened on the applicants. The emergency board meeting had to be convened as per the version of the applicants in order to protect the interest of the joint venture business. The resolution by circulation was also obtained to give power to the newly inducted managing director to operate the bank accounts in order to facilitate the business activity of the joint venture company. Therefore, the aforesaid activities of the applicants cannot be termed as unfair and inequitable so as to deprive them of the equitable remedy of injunction as against the respondents.

The applicants have established prima facie that the joint venture agreement was not lawfully terminated. They have acted well within the powers conferred under the joint venture agreement in the matter of termination of service of the managing director and inducting a new managing director in his place. It has also been shown that the respondents, against the spirit of the specific clause found in the joint venture agreement, have started a similar business with a third party against the interest of the joint venture company established by both the applicants and the respondents. It has also been established prima facie that much damage has been caused to the business of the joint venture company on account of the conduct of the respondents in show causing that they have severed the relationship with the joint venture company and set up a similar venture with the association of a third party. The entire business of the joint venture will be completely ruined if the respondents are permitted to go out of the arhbit of the agreement and start a similar business with the third party. The balance of convenience is only in favour of the applicants. It is not as if the issue as to whether the termination of the joint venture agreement is lawful or not is beyond the purview of the arbitral proceedings. If such an issue is raised before the arbitrator, then, the prayer before this court does not fall beyond the scope of the dispute referred to before the arbitrator.

In view of the above, interim injunction restraining the respondents and their affiliates, subsidiaries, associates, agents, men or any person claiming under them in any way establishing any firm or company in India to carry on any business set out in the joint venture agreement dated April 23, 1997 and representing before clients, customers, banks, employees, general public, Government authorities acting upon the alleged termination notice dated December 20, 2006, pending disposal of the arbitration proceedings is granted. The application stands allowed.