PERCEPT D'MARK (INDIA) PVT. LTD. versus ZAHEER KHAN

Citation: [2006] 3 S.C.R. 146 · Decided: 22-03-2006 · Supreme Court of India · Bench: H.K. SEMA · Disposal: Dismissed

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Judgment (excerpt)

A 
B 
PERCEPT D'MARK (INDIA) PVT. LTD. 
v. 
ZAHEER KHAN 
MARCH 22, 2006 
[H.K. SEMA AND DR. AR. LAKSHMANAN, JJ.} 
Specific Relief Act, 1963-Sections 14(l)(a), (b} and (d}-Contract, 
1872--Section 27-Promotion agreement for member of Indian Cricket team 
C appointing sole and exclusive agent for marketing and generally managing 
his diverse media affairs-Agreement having fued term with a clause that 
after its expiry if he desired to appoint any other person as hi.f agent for 
rendering similar services, he was required to give the agent option to match 
offer of other party, and only if the agent refused it, appoint the other party-
After expiry of the term, cricketer entering into agreement with another person---
D Single judge of High Court granting ad-interim injunction restraining the 
cricketer from acting upon agreement with the other party without first 
performing his obligation under the clause of first agreement-Division Bench 
allowing the appeal-Correctness of-Held: Contract between the cricketer 
and the agent was for services which were of personal, confidential and 
E fiduciary in nature and its specific performance was barred by Section 14( l}(a), 
(b) and (d) of Act of 1953-Grant of interim injunction by Single Judge of 
High Court was wrong as it not only compelled such specific performance, but 
also granted entire relief before conclusion of trial-Enforcement of negative 
covenant of clause in first agreement beyond its term against contract entered 
into subsequently was restriction on cricketer's freedom to enter into fiduciary 
F relationships of his choice; it compelled him to enter into afresh contract with 
the agent after fully performing his pervious contract, and was a restraint of 
trade which was void under Section 27 of Act of 1872--Section 9 of Arbitration 
and Conciliation Act, 1996. 
Contract, 1872-Section 27-Jnterpretation of-Neither test of 
G reasonableness nor principle of restraint of trade being partial is app/icab/e-
Agreement has to fall within express exception engrafted in it to be declared 
void 
Appellant company, carrying on business, inter alia, of celebrity 
H 
146 
PERCEPT D'MARK (INDIA) PVT.LTD. 1'.ZAHEER KHAN 
147 
endorsement and management, entered into promotion agreement with A 
respondent no. I, who was then a member of Indian Cricket team. Under 
the agreement, appellant was to act as the sole and exclusive agent to 
market and generally manage diverse media affairs, endorsements etc. of 
latter. The term of the agreement was for a period of three years 
commencing from October 30, 2000 and ending on October, 29, 2003 
unless extended by mutual consent of both the parties. As per clause 31 B 
(b) of the agreement, if respondent no. I, after expiry of term of the 
agreement was desirous of appointing any other person as his agent for 
rendering services similar to those rendered by appellant, he was required 
to offer appellant the right to match the third party offer, and only in the 
event of appellant opting not to exercise its right to accept it, appoint the C 
third party. The appellant on 1.12.2003 became aware that respondent no. 
I had entered into an agreement with respondent no. 2 for services similar 
to those rendered by them and filed an Arbitration Petition in the High 
Court under Section 9 of the Arbitration and Conciliation Act, 1996. They 
prayed inter alia, for an interim order that pending the commencement 
and duration of arbitration proceeding, respondent no. I be restrained by D 
injunction from entering into or continue to act upon agreement with third 
party without first performing his obligation under Clause 31 (b) of the 
agreement. Single judge of High Court granted the ad-interim reliefs as 
prayed for. However, Division Bench of High Court held that Clause 31(b) 
of the agreement was in restraint of trade and void under Section 27 of E 
Contract Act. It allowed the appeals, dismissed the arbitration petition and 
passed orders for further proceedings in the case. Henre the present 
appeals. 
Appellant contended that (i) Clause 31(b) of the agreement giving 
them right of refusal was reasonable, in furtherance of trade and hence F 
not void under Section 27 of Contract Act (ii) Under Section 42 of Specific 
Relief Act, 1963 Court can grant injunction to perform negative covenant 
even where specific performance of affirmative covenant may not enforced. 
Respondent contended that the agree!Dent cannot be specifically 
enforced unde

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