M/s Gujarat Bottling Co. Ltd. v. Coca-Cola Co. & Ors., 1995 SCC (5) 545

Core holding: The 1993 licence and the 1994 registered-user agreement were different. There was no clear intent to replace (no novation under Section 62). The negative covenant in the 1993 agreement—not to bottle rival brands during the term—was valid and not a restraint of trade under Section 27. Under Section 42 Specific Relief Act, courts can injunct the negative promise even if the positive part is not specifically enforced.

• Result: Breach by GBC established; interim injunction to hold the negative covenant was proper.

1. Did the 1994 agreement supersede the 1993 agreement?
2. Was the 1993 clause restraining dealings with rival brands void under Section 27?

• Section 62, Contract Act (Novation): A prior contract is replaced only with clear intention and consent.
• Section 27, Contract Act: In-term restraints that support a business collaboration are generally valid; post-term restraints are suspect.
• Section 42, Specific Relief Act: Court may restrain breach of a negative promise (injunction), even if it cannot compel the positive promise.

• No novation: 1993 licence and 1994 registered-user arrangement are distinct; no intention to replace the former.
• Negative covenant valid: In-term restraint to promote the brand is not void under §27.
• Injunction proper: §42 SRA allows enforcement of the negative promise through an interim injunction.
• Breach: GBC’s conduct violated the operative negative covenant.

In-term negative covenants in collaboration/licensing deals are enforceable by injunction under §42 SRA and are not per se void under §27. A later registered-user arrangement does not, without clear intent, novate an earlier commercial licence.

• Guides drafting of negative covenants in franchise/licence deals.
• Clarifies how trademark “registered user” agreements interact with main licences.
• Shows courts will protect brand networks from mid-term defection.

• 1 Different documents, different purposes ≠ automatic novation.
• 2 In-term non-competes in collaboration are usually valid.
• 3 §42 SRA enables injunction of the negative promise.
• 4 Post-termination restraints are scrutinised; draft carefully.

Mnemonic: “D-N-I: Distinct • Not-void • Injunction.”

• Distinct contracts (1993 vs 1994) → no novation.
• Not-void in-term restraint under §27.
• Injunction under §42 to hold the negative covenant.

3-Step Hook:

1. Compare purposes: licence vs TM registered-user.
2. Check covenant timing: during term or post-term?
3. If breach of a negative promise → seek §42 SRA injunction.

Negative Covenant

A promise not to do something (e.g., not to deal with rivals during the contract term).

Novation

Replacing a contract with a new one (needs clear intent and consent).

Registered-User Agreement

Trademark-law mechanism allowing another to use the mark under registration rules.

Section 42 SRA

Lets courts enforce a negative promise by injunction even without compelling positive acts.