The Supreme Court has set aside the order of the Andhra Pradesh High Court in a case where Hindus-tan Petroleum Corporation Ltd (HPCL) cancelled the contract of a dealer for changing the character of his business from proprietorship to partnership.
There was a term in the contract for dealership that the character of the business should not be changed without the permission of the corporation.
When the dealer changed the character of his business and turned it into a partnership, the corporation initiated action to revoke his dealership agreement.
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The dealer sought an injunction against the corporation. Though the district court dismissed it, the Andhra Pradesh Court passed an injunction against the corporation restraining it from dispossessing the dealer. Therefore, the corporation moved the Supreme Court.
The apex court stated that the high court had not taken into consideration the wellknown principles in passing interim injunctions.
While exercising the discretion of the court in such matters, it should consider whether the plaintiff had a good case to start with, whether the balance of convenience was in his favour and whether he would suffer irreparable injury if his request was rejected.
In this case, the dealer had changed the structure of the firm. The consequence of this violation of the contract was provided in the agreement itself, namely revocation of the dealership by the corporation.
Therefore, the corporation was entitled to take action for revoking the agreement. In such a situation, the high court was wrong in passing an injunction order, said the Supreme Court.