# Coca-Cola vs. Pepsi: The Battle for Gujarat's Bottling Plants — A Study in Franchise Law, Negative Covenants, and Interlocutory Injunctions
---
## Introduction
The case of *Gujarat Bottling Co. Ltd. and Others v. Coca Cola Co. and Others*, decided by the Supreme Court of India on August 4, 1995, is one of the most remarkable corporate legal battles ever fought on Indian soil. It involves two of the world's most powerful multinational beverage corporations — Coca-Cola Company and PepsiCo Inc. — locked in a fierce commercial dispute over franchise rights, negative contractual covenants, and the grant of an interim injunction by the Bombay High Court. The case touches upon some of the most important areas of civil and commercial law, including the law of interlocutory injunctions, the doctrine of restraint of trade under Section 27 of the Indian Contract Act, 1872, the licensing of trade marks under the Trade and Merchandise Marks Act, 1958, and the principles of equity that govern a party's conduct before a court of law. What makes this case extraordinary is not just its legal complexity but also its dramatic factual backdrop — a deliberate corporate manoeuvre by Pepsi to seize control of a Coca-Cola franchisee and use its bottling infrastructure against Coca-Cola's very interests. The Supreme Court, while deciding the appeals against the Division Bench order of the Bombay High Court dated March 31, 1995, upheld the injunction granted in favour of Coca-Cola and dismissed the appeals filed by Gujarat Bottling Co. Ltd. and the share transferees, who were ultimately controlled by Pepsi. The judgment was delivered by Justice S.C. Agrawal.
---
## Factual and Procedural Background
To appreciate the depth of this case, one must understand the remarkable history of the Indian soft drink market. Coca-Cola had been operating in India until 1977, when, owing to a change in government policy, it was compelled to shut down its Indian operations. The vacuum left by Coca-Cola's departure was largely filled by the Parle group of companies, owned and controlled by Mr. Ramesh Chauhan and Mr. Prakash Chauhan, who were Respondents 3 and 4 in this case. The Parle group manufactured beverages under trade marks such as "Gold Spot," "Thums Up," "Limca," "Maaza," "Rim Zim," and "Citra," and also sold "Bisleri" club soda. The Parle group had arrangements with bottlers across the country who would prepare beverages from essence or syrup supplied by Parle and bottle the same for sale. In the late 1980s, Pepsi commenced operations in India, and Coca-Cola followed soon after. Under a Deed of Assignment dated November 12, 1993, the Parle group assigned its trade marks in beverages bearing the names "Gold Spot," "Thums Up," "Limca," "Maaza," "Rim Zim," and "Citra" to Coca-Cola.
Gujarat Bottling Company Ltd., referred to as GBC throughout the case, was the first appellant and is a company incorporated under the Companies Act, 1956. Of its shares, 21% were held by Ahmedabad Advertising and Marketing Consultants Ltd., which was Respondent 7. The remaining 79% were held by Mr. Pinakin K. Shah, Respondent 2, and his family members and business associates, along with Respondents 3 and 4 (the Chauhan brothers) and their family members and associates in the ratio of 78% and 22% respectively. GBC operated bottling plants at Ahmedabad and Rajkot in Gujarat. GBC had an existing arrangement with Respondents 3 and 4 under which it had been licenced to prepare, bottle, sell, and distribute beverages under the Parle trade marks.
In anticipation of the assignment of trade mark rights by the Parle group to Coca-Cola, Coca-Cola entered into an agreement with GBC on September 20, 1993, referred to throughout the judgment as the "1993 Agreement." Under this agreement, Coca-Cola permitted and authorised GBC to bottle, sell, and distribute beverages known and sold under the trade marks "Gold Spot," "Thums Up," "Limca," "Maaza," and "Rim Zim." The trade mark "Citra" was excluded because of pending litigation in the Delhi High Court. The 1993 Agreement was to remain operative until November 17, 1998, unless earlier terminated as provided therein. Under paragraph 21 of the agreement, either party could terminate it by giving one year's written notice. Importantly, paragraph 14 of the 1993 Agreement contained a negative covenant by which GBC agreed not to manufacture, bottle, sell, deal, or otherwise be concerned with the products, beverages of any other brands or trade marks or trade names during the subsistence of the agreement, including the period of one year's notice contemplated in paragraph 21. Paragraph 19 of the agreement gave Coca-Cola the right to discontinue supplying GBC with essence, syrup, or other materials upon the happening of certain specified events, one of which under clause (b) related to any transfer of stock, share, or interest or other indicia of ownership of GBC resulting in an effective transfer of control without the prior express written consent of Coca-Cola.
Subsequently, on April 30, 1994, Coca-Cola entered into another agreement with GBC, referred to as the "1994 Agreement," whereby Coca-Cola granted GBC a non-exclusive licence to use the trade marks mentioned in the schedule — "Gold Spot," "Limca," "Thums Up," "Maaza," "Citra," etc. — in relation to goods prepared from concentrates or syrup supplied by Coca-Cola. This 1994 Agreement was executed specifically to comply with the requirements of Rule 83 read with Section 49 of the Trade and Merchandise Marks Act, 1958, for registration of GBC as a registered user of these trade marks. Unlike the 1993 Agreement, which had a fixed expiry date of November 17, 1998, the 1994 Agreement was not limited to any particular period and could be terminated at any time by either party upon giving 90 days' written notice. On July 12, 1994, Coca-Cola applied to the Registrar of Trade Marks under Sections 48 and 49 of the Act for registration of the 1994 Agreement as a Registered User Agreement.
Events then took a dramatic turn. Coca-Cola required GBC to make additional investments in marketing arrangements, purchase of crates, equipment, and trucks. GBC was reluctant. Respondent 2, Mr. Pinakin K. Shah, requested Coca-Cola's consent in advance for the transfer of his interest in GBC. Coca-Cola declined to give consent without knowing who the prospective purchaser was, informing GBC that transfer could be permitted provided GBC does not lose controlling power or management in favour of an outsider. On January 20, 1995, the shareholding of Respondent 2 and his associates, as well as that of Respondents 3 and 4 and their family members, in GBC and in Respondent 7 were all transferred to Appellants 2 to 5, which were entities closely associated with and affiliated to subsidiaries of Pepsi and Pepsi Foods Limited, a subsidiary of Pepsi. As a result, Pepsi effectively acquired control over GBC.
On January 25, 1995, GBC gave a notice to Coca-Cola under clause 7 of the 1994 Agreement terminating that agreement. In the same notice, GBC also stated, without prejudice to its contentions, that the 1993 Agreement either stood replaced by the 1994 Agreement, or that the termination period under the 1993 Agreement stood reduced to 90 days, and that the notice should be treated as termination notice under clause 21 of the 1993 Agreement as well. On the same date, GBC informed Coca-Cola that shares representing 70.6% of the paid-up equity capital of GBC had been transferred to Appellants 2 to 5. On January 31, 1995, GBC wrote to the Director (F&VP) of the Ministry of Food Processing Industries, Government of India, for approval of crown cap designs pertaining to beverages whose trade marks were held by Pepsi.
On January 30, 1995, Coca-Cola filed a suit — Suit No. 400 of 1995 — in the Bombay High Court seeking various reliefs and also moved Notice of Motion No. 316 of 1995 for interim relief. During the hearing before the learned Single Judge (Dhanuka, J.), Coca-Cola sought interim relief in terms of prayers (a)(i), (a)(ii), (a)(iii), and (a)(viii) of the Notice of Motion. By his order dated February 22, 1995, the Single Judge declined the application in terms of prayers (a)(i), (a)(iii), and (a)(viii) but issued an interim injunction restraining GBC from manufacturing, bottling, or selling or dealing with the products or beverages of any brand or trade mark owned by Respondents 5 and 6 or anyone else other than Coca-Cola. Two appeals — Appeals Nos. 183 and 191 of 1995 — were filed before the Division Bench of the Bombay High Court. During the hearing of those appeals, the parties agreed that the Notice of Motion itself should be heard and decided finally by the Division Bench to avoid one more round of appeal. The Division Bench, by its impugned judgment dated March 31, 1995, made Notice of Motion No. 316 of 1995 absolute in terms of modified prayers (a)(ii) and (a)(iii). In terms of prayer (a)(iii) as modified, an injunction was granted restraining the transferees of GBC's shares and those to whom the shares had been sold, and also subsequent transferees, their servants, agents, nominees, employees, subsidiary companies, controlled companies, affiliates or associate companies, or any person acting for and on their behalf, from using the plants of GBC at Ahmedabad and Rajkot for manufacturing, bottling, selling, or dealing with or concerning themselves in any manner whatsoever with the beverages of any person till January 25, 1996. Feeling aggrieved, GBC and the four share transferees filed the appeals before the Supreme Court.
---
## The Dispute
The central dispute before the Supreme Court revolved around several interrelated questions. First, whether the 1993 Agreement was still subsisting or had been legally terminated. GBC argued that the 1993 Agreement had been superseded by the 1994 Agreement, and alternatively, that the termination period under the 1993 Agreement had been reduced from one year to 90 days by mutual consent through the 1994 Agreement, so that the notice dated January 25, 1995 effectively terminated the 1993 Agreement within 90 days. Second, whether the negative covenant in paragraph 14 of the 1993 Agreement was void under Section 27 of the Indian Contract Act, 1872, being in restraint of trade. Third, whether the Bombay High Court was justified in enforcing the negative covenant by granting an interlocutory injunction, considering the alleged irreparable loss and unemployment that the injunction would cause to GBC and its workers. Fourth, whether the injunction was too widely worded in that it restrained not only GBC but also the share transferees, who were Pepsi-controlled entities, from using GBC's plants.
---
## Reasoning and Analysis of the Judge
**On the question of whether the 1993 Agreement was superseded by the 1994 Agreement**, Justice Agrawal noted an important distinction between the two agreements. The 1993 Agreement was a franchise agreement entered into under the common law governing the licensing of trade marks, through which Coca-Cola permitted GBC to bottle, sell, and distribute beverages under its trade marks. The 1993 Agreement was far wider in its scope than the 1994 Agreement, containing numerous provisions regulating the exercise of the franchise — including quality control obligations, promotional obligations, pricing commitments, and supply terms — none of which were found in the 1994 Agreement. The 1994 Agreement, on the other hand, was executed specifically to comply with the statutory requirements of the Trade and Merchandise Marks Act, 1958, and the Trade and Merchandise Marks Rules, 1959, particularly Rule 83 read with Sections 48 and 49 of the Act, so as to enable registration of GBC as a registered user of Coca-Cola's trade marks. The Court noted that paragraph 25 of the 1993 Agreement expressly stated that it superseded all prior contracts and commitments, but no such supersession clause was contained in the 1994 Agreement. In the absence of such a clause, and given that the 1994 Agreement was much narrower in scope, it could not be construed as superseding the 1993 Agreement. The High Court had rightly rejected GBC's contention on this point.
**On the question of whether the termination period was reduced to 90 days**, Justice Agrawal held that paragraph 21 of the 1993 Agreement required the termination period to be reduced only by mutual consent in writing — a *consensus ad idem* between the parties. No such mutual agreement existed. The notice dated January 25, 1995 sent by GBC to Coca-Cola itself showed that it was GBC's unilateral contention that the termination period had been so reduced — it was not a statement of a mutually agreed fact. The 1993 Agreement could therefore only be terminated by giving one year's notice as required under paragraph 21. The Court left open the question of whether the notice dated January 25, 1995 could be treated as a valid one-year notice, leaving it to the High Court to determine if raised, and proceeded to deal with the case on the basis that the 1993 Agreement was subsisting and had not been terminated upon the expiry of 90 days.
**On the law of trade marks and the nature of the two agreements**, Justice Agrawal delivered a comprehensive analysis of the provisions of the Trade and Merchandise Marks Act, 1958, particularly Sections 2(m), 48 to 54, and the Trade and Merchandise Marks Rules, 1959, particularly Rules 82 to 93. He explained that under the Act, the use of a registered trade mark can be permitted to a registered user, and for that purpose the registered proprietor must enter into an agreement with the proposed registered user and submit it to the Registrar along with the application for registration. The Court also noted that the use of a trade mark can be permitted independently of the Act through a common law licence by the registered proprietor to the proposed user. Such a common law licence is permissible provided the licensing does not result in causing confusion or deception among the public, does not destroy the distinctiveness of the trade mark, and a connection in the course of trade consistent with the definition of trade mark continues to exist between the goods and the proprietor of the mark. The 1993 Agreement was an agreement for grant of franchise under common law, while the 1994 Agreement was a statutory agreement required under Rule 83 read with Section 49(1)(ii)(a) to (d) of the Act for registration of GBC as registered user. Since the two agreements operated in different spheres and the 1994 Agreement was not intended to supersede the 1993 Agreement, both were held to be co-existent with their respective provisions confined to their own fields of application.
**On the question of restraint of trade**, the appellants' principal argument was that the negative covenant contained in paragraph 14 of the 1993 Agreement was void under Section 27 of the Indian Contract Act, 1872. Justice Agrawal undertook a thorough comparative study of English and Indian law on this point. Under English common law, the doctrine of restraint of trade has evolved significantly over centuries. At the earliest times, all contracts in restraint of trade were void. Later, the law moved to the position that a partial restraint might be good if reasonable. Eventually, the distinction between general and partial restraint was abandoned, and the rule today in England is that any restraint — general or partial — may be valid if it is reasonable and reasonably necessary for the purpose of freedom of trade. A covenant in restraint of trade must be reasonable with reference to public policy and also reasonably necessary for the protection of the interest of the covenantee. The Court referred to *Halsbury's Laws of England*, 4th Edition, Volumes 47 (paragraphs 9 to 26), and to the decisions of the House of Lords in *Niranjan Shankar Golikari v. Century Spg. and Mfg. Co. Ltd.*, (1967) 2 SCR 378 : AIR 1967 SC 1098, and *Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd.*, 1968 AC 269 : (1967) 1 All ER 699, among others.
In India, Section 27 of the Indian Contract Act, 1872 provides that every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind is to that extent void. The exception carved out is that one who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business within specified local limits so long as the buyer carries on a like business therein, provided the limits appear to the Court to be reasonable. Justice Agrawal noted that this provision was lifted from Hon. David D. Field's Draft Code for New York, which was based on the old English doctrine of restraint of trade as prevailing in ancient times, and had been severely criticised by Sir Frederick Pollock for tying down Indian courts to a hard and fast rule with strictly limited exceptions. The Court further noted that while the High Courts in India have consistently held that the test of reasonableness does not apply under Section 27, the Law Commission in its Thirteenth Report had recommended suitable amendment to permit all reasonable restraints, but no action had been taken by Parliament. For purposes of this case, the Court proceeded on the basis that the question of reasonableness of the restraint is not within the purview of Section 27, and what courts in India must consider is only whether the contract is or is not in restraint of trade.
The crucial question then was whether the negative stipulation in paragraph 14 of the 1993 Agreement constituted a contract in restraint of trade. Justice Agrawal relied on a line of important cases. Referring to the observations of Lord Morris in *Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd.*, 1968 AC 269, he noted that a stipulation in a contract which is intended for the advancement of trade shall not be regarded as being in restraint of trade. He also referred to *Petrofina (Great Britain) Ltd. v. Martin*, 1966 Ch 146 : (1966) 1 All ER 126, where Diplock L.J. defined a contract in restraint of trade as one in which a party agrees with another to restrict his liberty in the future to carry on trade with other persons not parties to the contract in such manner as he chooses. And in *McEllistrim v. Ballymacelligott Coop. Agricultural and Dairy Society Ltd.*, 1919 AC 548, Lord Finlay had referred to *Herbert Morris Ltd. v. Saxelby*, (1916) 1 AC 688, for the principle that every man shall be at liberty to work for himself and shall not be at liberty to deprive himself or the State of his labour, skill, or talent by every contract he enters into. Lord Reid in *Esso Petroleum Co. Ltd.* doubted whether this extended to the right to sell goods. The Court also referred to *Attorney General of Commonwealth of Australia v. Adelaide Steamship Co. Ltd.*, 1913 AC 781, where Lord Parker observed that monopolies and contracts in restraint of trade have in common that both, if enforced, involve a derogation from the common law right in virtue of which any member of the community may exercise any trade or business in his own interests.
The Court then referred to its own earlier decision in *Niranjan Shankar Golikari v. Century Spg. and Mfg. Co. Ltd.*, (1967) 2 SCR 378 : AIR 1967 SC 1098, where it was held that the doctrine of restraint of trade applies only when the contract comes to an end, not during the continuance of a contract of employment. The same principle was affirmed by A.P. Sen, J. in *Superintendence Co. of India (P) Ltd. v. Krishan Murgai*, (1981) 2 SCC 246 : (1980) 3 SCR 1278, in a concurring judgment. Justice Agrawal held that this principle is not confined to contracts of employment but applies to all contracts — including franchise agreements — and that the doctrine of restraint of trade does not apply where the restriction is to operate during the period the contract is subsisting.
Applying these principles to the facts, Justice Agrawal found that the 1993 Agreement was a franchise agreement — a commercial agreement whereunder both parties had undertaken obligations for promoting the trade in beverages for their mutual benefit. The purpose underlying paragraph 14 and its negative stipulation was to ensure that GBC worked vigorously and diligently to promote and solicit the sale of the products and beverages produced under Coca-Cola's trade marks, which would not be possible if GBC were simultaneously to manufacture, bottle, sell, deal, or otherwise be concerned with the products of any other brands or trade mark names. Importantly, the negative stipulation was expressly confined in its application to the period of subsistence of the agreement, including the period of one year's notice under paragraph 21. Since the restriction operated only during the subsisting period of the contract, it could not be treated as being in restraint of trade within the meaning of Section 27 of the Contract Act. The Court also referred to the growing trend of franchise agreements globally, noting that such agreements routinely incorporate a condition that the franchisee shall not deal with competing goods, and that such a condition is for facilitating the distribution of the franchiser's goods and cannot be regarded as in restraint of trade.
**On the question of clause (b) of paragraph 19 and the transfer of shares**, the appellants' counsel Shri Shanti Bhushan argued that clause (b) of paragraph 19, which imposed a restraint in the matter of transfer of shares of GBC, was void inasmuch as the transfer of shares of a company registered under the Companies Act is governed by Section 82 of that Act, and no restraint can be placed by contract on the said right. The Court agreed, to an extent, that since the shareholders of GBC were not parties to the 1993 Agreement (only Coca-Cola and GBC were parties), clause (b) of paragraph 19 could not have any binding force on the shareholders. However, the clause could be construed to mean that in the event of shareholders transferring their shares resulting in an effective transfer of control, Coca-Cola was entitled to terminate the agreement and also had the additional right to discontinue supplying GBC with essence, syrup, and other materials. This clause, in other words, governed the relationship between Coca-Cola and GBC inter se and could not be construed as placing a restraint on the shareholders' right to transfer shares. The Court distinguished *V.B. Rangaraj v. V.B. Gopalakrishnan*, (1992) 1 SCC 160, on which the appellants had relied, holding that it had no application in the present context.
**On the grant of interlocutory injunction**, Justice Agrawal set out the well-established principles that govern the grant of such injunctions. The court applies three tests — whether the plaintiff has a prima facie case, whether the balance of convenience is in favour of the plaintiff, and whether the plaintiff would suffer an irreparable injury if the injunction is not granted. These principles are drawn from the decision of this Court in *Wander Ltd. v. Antox India (P) Ltd.*, 1990 Supp SCC 727, and from *Chitty on Contracts*, 27th Edition, Volume I, General Principles, paragraphs 27-40, page 1310, and *Halsbury's Laws of England*, 4th Edition, Volume 24, paragraph 992.
The Court also relied on *Ehrman v. Bartholomew*, (1898) 1 Ch 671 : (1895-99) All ER Rep Ext 1680, and *Niranjan Shankar Golikari v. Century Spg. and Mfg. Co. Ltd.* to reinforce the position that in England, where a contract is negative in nature or contains an express negative stipulation, breach of it may be restrained by injunction as a matter of course. In India, Section 42 of the Specific Relief Act, 1963, provides that where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement not to do a certain act, the circumstance that the court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement, subject to the proviso that the plaintiff has not failed to perform the contract so far as it is binding on him. The Court however noted that the court is not bound to grant an injunction in every case and that an injunction to enforce a negative covenant would be refused if it would indirectly compel the employee either to idleness or to serve the employer.
Having regard to the negative covenant in paragraph 14 of the 1993 Agreement, the Court found that Coca-Cola had made out a prima facie case for grant of injunction. The Court found that the balance of convenience also favoured Coca-Cola. Pepsi, with full knowledge of the terms of the 1993 Agreement, had deliberately taken over control of GBC with the express design of paralyzing Coca-Cola's operations in that region and promoting its own products. In the absence of the interim injunction, Pepsi would have been free to use GBC's plants at Ahmedabad and Rajkot to manufacture Pepsi products, which would have reduced Coca-Cola's market share and its resultant loss in goodwill and profits could not have been adequately compensated by damages. Insofar as the loss that GBC might suffer as a result of the injunction was concerned, the Court found that it could be assessed and compensated by an award of damages which could be recovered from Coca-Cola in view of the undertaking that Coca-Cola was required to give under Rule 148 of the Bombay High Court (Original Side) Rules, 1980. It was not suggested that Coca-Cola lacked the financial capacity to pay whatever might be found payable.
**On the conduct of GBC and the equitable considerations**, Justice Agrawal invoked the well-settled principle that the jurisdiction of the court to interfere with an interlocutory injunction under Order 39 of the Code of Civil Procedure, 1908 is purely equitable. The court, on being approached, will look not only to other considerations but also to the conduct of the party invoking its jurisdiction, and may refuse to interfere unless his conduct was free from blame. The party seeking the relief must show that he himself was not at fault and 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. The Court cited *Lalbhai Dalpatbhai & Co. v. Chittaranjan Chandulal Pandya*, AIR 1966 Guj 189 : (1965) 2 LLJ 284, *Modern Food Industries India Ltd. v. Shri Krishna Bottlers (P) Ltd.*, AIR 1984 Del 119, and *American Cyanamid Co. v. Ethicon Ltd.*, 1975 AC 396 : (1975) 1 All ER 504, in this context.
The Court found that GBC had acted in a grossly unfair and inequitable manner in its dealings with Coca-Cola. It transferred shares in favour of Pepsi-controlled entities without obtaining Coca-Cola's prior consent, in clear violation of the terms of the 1993 Agreement. Neither was Coca-Cola consulted nor was it informed of the names of the persons to whom the shares were proposed to be transferred. Furthermore, it was GBC itself, and not Coca-Cola, that issued the termination notice — and it did so by giving only three months' notice, whereas the 1993 Agreement required one year's notice. GBC, having itself acted in violation of the agreement and being prima facie responsible for the breach of the contract, could not legally claim that the order of injunction be vacated, particularly when it was primarily responsible for having brought about the state of things it was complaining of. Pepsi could not ask Coca-Cola to part with its trade secrets and essence/syrup to its business rival. The appellants' complaints about closure of factories and unemployment of workers, the Court found, were being raised by Pepsi through the mouth of the appellants, and it would be unreasonable to allow Pepsi to take advantage of the plight of workers to assail the interim injunction when it was Pepsi itself that had engineered the entire situation.
**On the scope of the injunction**, the appellants contended that the interim injunction was worded too widely as it extended to the share transferees and subsequent persons. The Court found that while the injunction was indeed widely worded in its terms, in actual operation it restrained those persons only from using the plants of GBC at Ahmedabad and Rajkot for manufacturing, bottling, or selling or dealing with beverages in any manner till January 25, 1996 — the expiry of one year from the date of the termination notice dated January 25, 1995. The interim injunction was thus found to be consonant with and confined to the negative stipulation contained in paragraph 14 of the 1993 Agreement.
---
## Final Decision of the Court
The Supreme Court, for all the reasons stated above, found no infirmity in the impugned order of the Bombay High Court dated March 31, 1995 granting an interim injunction in terms of prayers (a)(ii) and (a)(iii) of the Notice of Motion as amended. The appeals were accordingly dismissed, and no order as to costs was made.
---
## Points of Law Settled in the Case
This judgment settled several important points of law that have continued to be applied by Indian courts in subsequent decades. The Court definitively held that the 1994 statutory agreement executed under the Trade and Merchandise Marks Act, 1958, for the purpose of registering a licensee as a registered user, does not supersede a broader common law franchise agreement entered into between the same parties, even if both agreements contain similar provisions, unless the later agreement expressly provides for such supersession. The Court further settled that negative covenants operating only during the subsistence of a contract — and not extending beyond its termination — are not in restraint of trade within the meaning of Section 27 of the Indian Contract Act, 1872, and this principle is applicable not just to employment contracts but to franchise and other commercial agreements as well. It was also settled that a franchisee's covenant not to deal with competing goods during the life of the franchise is a condition facilitating the franchiser's distribution of its own goods and is therefore not a restraint of trade. The case authoritatively held that a party who has itself breached a contract and acted inequitably cannot invoke the equitable jurisdiction of the court to vacate an injunction — equity demands clean hands from the party seeking relief. The Court also confirmed that the grant of interlocutory injunction requires satisfaction of the three-pronged test of prima facie case, balance of convenience, and irreparable injury, and that where the loss to the defendant from the injunction can be assessed and compensated in money, it does not tip the balance of convenience in the defendant's favour.
---
*Disclaimer: Readers are advised not to treat this as a substitute for legal advice as it may contain errors in perception, interpretation, and presentation.*
*Written By: Advocate Ajay Amitabh Suman, IP Adjutor [Patent and Trademark Attorney], High Court of Delhi*
---
## Case Details
**Title:** Gujarat Bottling Co. Ltd. and Others v. Coca Cola Co. and Others
**Date of Order:** August 4, 1995
**Case Number:** Civil Appeals Nos. 6839-40 of 1995
**Neutral Citation:** (1995) 5 Supreme Court Cases 545
**Name of Court:** Supreme Court of India
**Name of Hon'ble Judge:** Justice S.C. Agrawal (with Justice S. Saghir Ahmad)
---
## Suggested SEO Titles for Legal Journal
1. Gujarat Bottling Co. Ltd. v. Coca-Cola Co. 1995: Supreme Court on Negative Covenants, Franchise Law and Interlocutory Injunctions in India
2. Coca-Cola vs Pepsi India 1995: How the Supreme Court Stopped Pepsi from Using Rival's Bottling Plants — A Complete Case Analysis
3. Negative Covenant in Franchise Agreement Not Restraint of Trade: Gujarat Bottling v. Coca-Cola Explained
4. Section 27 Indian Contract Act and Franchise Agreements: Supreme Court's Landmark Ruling in Gujarat Bottling v. Coca-Cola 1995
5. Interlocutory Injunction to Enforce Negative Stipulation: Legal Principles from Gujarat Bottling Co. Ltd. v. Coca Cola Co. 1995 SCC
6. Trade Mark Licence vs Franchise Agreement: Distinguishing the 1993 and 1994 Agreements in Gujarat Bottling v. Coca-Cola — Supreme Court Analysis
7. Equitable Conduct and Interlocutory Injunctions: Lessons from Gujarat Bottling Co. Ltd. v. Coca Cola Co. (1995) 5 SCC 545
---
## SEO Tags
Gujarat Bottling Co Ltd v Coca Cola Co, 1995 5 SCC 545, Supreme Court of India, interlocutory injunction India, negative covenant franchise agreement, Section 27 Indian Contract Act, restraint of trade India, Trade and Merchandise Marks Act 1958, registered user trade mark India, Pepsi Coca-Cola India legal battle, franchise law India, negative stipulation contract India, Order 39 CPC injunction, Section 42 Specific Relief Act 1963, balance of convenience injunction India, Coca-Cola franchise dispute India, bottling plant injunction Gujarat, corporate law India 1995, trade mark licence India, equitable relief clean hands doctrine India, Justice SC Agrawal Supreme Court, Wander Ltd v Antox India, Esso Petroleum Harper's Garage, Niranjan Shankar Golikari Century Spg, interlocutory injunction franchise dispute, multinational corporation legal battle India, Bombay High Court Division Bench, Gujarat Bottling Company, PepsiCo India legal case, trade mark registered user agreement, AdvocateAjayAmitabhSuman, IPAdjutor
---
## Headnote
Gujarat Bottling Co. Ltd. and Others Vs. Coca Cola Co. and Others** — (1995) 5 SCC 545 — Supreme Court of India — Civil Appeals Nos. 6839-40 of 1995 — Decided August 4, 1995 — Before Justice S.C. Agrawal and Justice S. Saghir Ahmad.
The case arose out of a franchise arrangement between Coca-Cola Company and Gujarat Bottling Co. Ltd. (GBC), under which GBC was authorised to bottle and distribute beverages under Coca-Cola's trade marks pursuant to the 1993 Agreement. The 1993 Agreement contained a negative covenant in paragraph 14 restraining GBC from dealing with beverages of any other brand during the subsistence of the agreement. Pepsi subsequently acquired effective control of GBC by purchasing shares without Coca-Cola's consent, in violation of the agreement, and GBC served a termination notice. Coca-Cola filed a suit and obtained an interim injunction from the Bombay High Court restraining the use of GBC's plants for manufacturing Pepsi products. The Supreme Court dismissed the appeals against the High Court's order, holding: (i) the 1994 Agreement executed under the Trade and Merchandise Marks Act, 1958 for statutory registration of GBC as registered user did not supersede the wider 1993 franchise agreement in the absence of an express supersession clause; (ii) the termination period of one year under the 1993 Agreement was not reduced to 90 days as no mutual consent in writing existed; (iii) the negative covenant in paragraph 14 of the 1993 Agreement was not in restraint of trade under Section 27 of the Indian Contract Act, 1872, because the restriction operated only during the subsistence of the contract; (iv) the principle that the doctrine of restraint of trade does not apply during the continuance of a contract is not confined to employment contracts but applies equally to franchise and other commercial agreements; (v) a franchisee's covenant not to deal with competing goods during the franchise period is a condition facilitating distribution of the franchiser's goods and cannot be regarded as in restraint of trade; (vi) Coca-Cola had made out a prima facie case for grant of injunction, the balance of convenience favoured Coca-Cola as any loss to GBC could be compensated in money, whereas Coca-Cola's loss of goodwill and market share could not be adequately compensated by damages; and (vii) GBC, having itself breached the agreement and acted inequitably by facilitating Pepsi's takeover without Coca-Cola's consent, could not invoke the equitable jurisdiction of the court to vacate the injunction. Appeals dismissed. No costs.
