Case Note & Summary
The Plaintiff, Stoughton Street Tech Labs Pvt. Ltd., operates LOCO, an online live streaming and e-sports gaming platform. It entered into a Collaboration Agreement dated 15.12.2021 with Defendant No.1 (Godlike Esports Pvt. Ltd.) and Defendant No.2 (Cornerstone Sport LLP), and a Tripartite Agreement dated 15.12.2021 with Defendant No.1 and Defendant No.3 (Jonathan Amaral, a popular e-sports gamer). The agreements contained negative covenants restricting Defendants from associating with competing platforms and disclosing confidential information. Defendant No.1 terminated the agreements by letter dated 13.05.2022, alleging no concluded agreement. The Plaintiff filed a suit seeking enforcement of the negative covenants and an interim application for injunction. The Court considered the submissions of both sides, including arguments on the validity of termination and the existence of negative covenants. The Court found that a prima facie case exists for enforcement of the negative covenants, the balance of convenience is in favor of the Plaintiff, and irreparable loss would be caused if the injunction is not granted. The Court granted an interim injunction restraining the Defendants from acting contrary to the negative covenants until the disposal of the suit.
Headnote
A) Contract Law - Negative Covenants - Interim Injunction - Specific Relief Act, 1963, Section 38 - Enforcement of negative covenants in a Collaboration Agreement - Plaintiff sought to restrain Defendants from associating with competing platforms and disclosing confidential information - Court held that a prima facie case exists for enforcement of negative covenants, balance of convenience favors Plaintiff, and irreparable loss would be caused if injunction not granted (Paras 1-56).
Issue of Consideration
Whether the Plaintiff is entitled to an interim injunction enforcing negative covenants in the Collaboration Agreement, restraining the Defendants from associating with competing platforms and disclosing confidential information.
Final Decision
The Court allowed the Interim Application and granted an interim injunction restraining the Defendants from acting contrary to the negative covenants in the Collaboration Agreement, including associating with competing platforms and disclosing confidential information, until the disposal of the suit.
Law Points
- Negative covenants
- interim injunction
- breach of contract
- confidentiality
- non-compete
- specific performance
- prima facie case
- balance of convenience
- irreparable loss
Case Details
2022 LawText (BOM) (12) 91
Interim Application (L) No. 16493 of 2022 in Commercial Suit (L) No. 16491 of 2022
Mr. Mustafa Doctor, Senior Advocate a/w Ashish Kamat, Nishant Sing and Nikhil Bhat for the Plaintiff; Mr. Atul Rajadhyaksha, Senior Advocate a/w Akhilelsh Dubey, Vagish Mishra, Amit Dubey, Uttam Dubey, Rajuram Kuleriya, Varad Dubey, Ritika Gupta and Ritesh Yadav i/b Law Counsellors for Defendant No.1; Ms. Mahalakshmi G., a/w Savani Vaze for Defendant No.2; Mr. Kevic Setalwad, Senior Advocate a/w Awais Ahmedji, Parag Joshi and Dharmesh Joshi i/b T.D. Joshi and Associates for Defendant No.3
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Nature of Litigation
Commercial suit seeking enforcement of negative covenants in a Collaboration Agreement and Tripartite Agreement.
Remedy Sought
Plaintiff seeks interim injunction restraining Defendants from associating with competing platforms and disclosing confidential information.
Filing Reason
Defendant No.1 terminated the agreements, and Plaintiff alleges breach of negative covenants.
Issues
Whether the Plaintiff has a prima facie case for enforcement of negative covenants.
Whether the balance of convenience lies in favor of granting interim injunction.
Whether irreparable loss would be caused to the Plaintiff if injunction is not granted.
Submissions/Arguments
Plaintiff argued that the Collaboration Agreement and Tripartite Agreement contain negative covenants that are enforceable, and Defendants have breached them by associating with competing platforms and disclosing confidential information.
Defendants contended that the agreements were not concluded or were validly terminated, and no negative covenants exist.
Ratio Decidendi
Negative covenants in a contract can be enforced by interim injunction if a prima facie case is made out, balance of convenience favors the plaintiff, and irreparable loss would result from refusal.
Judgment Excerpts
By the present Interim Application the Plaintiff has inter alia sought relief in terms of the negative covenants contained in the Collaboration Agreement dated 15.12.2021...
The Plaintiff’s contention in the Suit is that Defendant No.1 has wrongly terminated the Collaboration Agreement as well as Tripartite Agreement by its termination letter dated 13.05.2022.
Procedural History
Plaintiff filed Commercial Suit (L) No. 16491 of 2022 and Interim Application (L) No. 16493 of 2022 seeking interim injunction. The application was reserved on 19th October 2022 and pronounced on 6th December 2022.
Acts & Sections
- Specific Relief Act, 1963: Section 38
