Mandatory Negative Injunctions With Regards To Specific Performance

I. INTRODUCTION

An injunction is an equitable remedy by which a court issues a specific order requiring a party to perform a particular act or to refrain from certain conduct. Injunctions, be it prohibitory or mandatory, are governed by the Specific Relief Act, 1963 ("SRA"). A negative mandatory injunction is an unusual but recognised judicial remedy where the court restrains a party from breaching a negative covenant and the effect of such restraint is so strong that it compels the party to specifically perform the contract by default. In simpler terms, it is an order that technically "prohibits" conduct, but the prohibition forces a positive act or prevents deviation from contractual obligations.

The statutory foundation for this approach lies primarily in Sections 38, 39, and 42 of SRA. Section 38 states that the Courts can grant injunctions to prevent breach of a contract where the compensation is inadequate or the contract involves a unique subject matter. Further, Section 39 provides that a mandatory injunction may compel performance of certain acts to prevent breach of an obligation. Lastly, Section 42 of SRA particularly allows courts to enforce negative agreements even when the positive part of the contract is incapable of specific performance, which gives rise to idea of a "negative mandatory injunction". In the current judicial landscape, the Courts have been cautious in their approach towards granting negative injunctions.

II. JUDICIAL APPROACH

The remedy of negative injunctions is generally considered when the Contract contains a clear and reasonable negative covenant, especially during the subsistence of an agreement. The case of Niranjan Shankar Golikar v. Century Spinning & Manufacturing, 1967 SCC OnLine SC 72 is a classic example for the same where the Hon'ble Supreme Court granted an injunction to prevent an employee from accepting employment with a competitor for the duration of his contract of exclusive employment. Section 14 of SRA prohibits specific performance of a contract of personal service, but the Court ruled that enforcement of the negative covenant was not specific performance of the personal service contract but only ensured that the employee abide by the restraint he had voluntarily undertaken. Further, the Court agreed that considerations against restrictive covenants are different in cases where the restriction is to apply during the period after the termination of the contract, than those in cases where it is to operate during the period of the contract.¹

Similarly, in Gujarat Bottling Co. Ltd. v. Coca Cola,(1995) 5 SCC 545 the Court enforced a negative covenant preventing a bottler from dealing with competitors, observing that such injunctions do not amount to enforcing specific performance but merely restrain breach of contract.

In other instances, however, the courts have also refused to provide relief in cases where the enforcement of the negative covenant will result in performance of positive obligations or in cases where such restraint is unreasonable. In the case of Superintendence Co. v. Krishan Murgai (1981) 2 SCC 246, the Hon'ble Supreme Court refused to enforce a post-employment restraint as it was a restraint of trade and considered contrary to public policy.

Thus, the law adopts a balanced approach i.e., mandatory negative injunctions are granted sparingly, only when they enforce a clear, reasonable negative covenant without indirectly compelling full contractual performance. In the case of Dalmia Cement (Bharat) Limited v. Jaiprakash Associates Ltd, 2020: DHC: 508, the Delhi High Court reiterated that a negative injunction can be granted to enforce a contractual restraint, provided it is reasonable and does not amount to indirectly compelling performance of the entire contract.

The Court emphasised that negative or prohibitory injunctions cannot be used to indirectly achieve what is clearly barred by the. Any relief where the grant of an injunction recreates a non-existent status quo, revive contractual relations, or effectively mandate performance, it crosses the line from enforcement of a negative covenant into impermissible compulsion of performance. The Court rightfully observed that such relief must be incidental to enforcing a valid negative obligation, must not require continuous judicial supervision, and must not infringe issues that are yet to be adjudicated by an arbitral tribunal or trial court.²

This position must also be read alongside the settled law governing injunctions that restrain termination of contracts. The Supreme Court has recently reaffirmed this framework in State (UT of J&K) v. IFFCO TOKIO General Insurance Co. Ltd., 2024 SCC OnLine J&K 696 while considering the scope of interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 in the context of a terminated insurance contract.

The Court clarified that applications under Section 9 cannot be decided in isolation from the SRA. Where a contract is, by its nature, determinable, Section 14 of SRA bars its specific enforcement, and Section 41 of SRA correspondingly prohibits the grant of injunctions to prevent its breach. As a result, courts cannot grant interim relief which will result in continuation or restorations of such contracts under the guise of protective measures. The Court further acknowledged that the courts have limited power to examine the termination notice at the interim stage. This scope of scrutiny is only to assess on a prima facie basis whether the contract is determinable and whether any statutory bar under the Specific relief act is applicable ³. The Courts cannot delve into the question of validity of the termination on merits.

The decision thus reinforces that even interim injunctive relief cannot be used to bypass legislative prohibitions on specific performance, and that courts must look beyond the form of the relief sought to its substantive legal effect.

However, Section 42 of SRA provides for an important statutory exception to the general bar on granting of negative covenants against determinable contracts. This provision permits enforcement of a negative covenant even where the affirmative part of the contract is incapable of specific performance. In the case of Provogue (India) Ltd. v. Naveen Kohli, 2008 (104) DRJ 627, the dispute arose from termination of a commercial contract, containing both affirmative obligations and restrictive covenants. The Delhi High Court further clarified Section 42 provides a narrow exception, allowing injunctions to enforce a standalone negative obligation.⁴

The scope and limits of this exception have been consistently emphasised by the Supreme Court, most notably in Gujarat Bottling Co. Ltd. v. Coca Cola Co. Ltd., a principle reiterated in Rajendra Prasad Agrawal v. Samarpan Varishtha Jan Parisar, MANU/UP/1905/2021, where the Court held that the mere presence of a negative covenant does not automatically entitle a party to Injunction being granted. While Section 42 of SRA enables enforcement of such covenants despite the non-enforceability of the affirmative agreement, the grant of injunction remains discretionary. Further, it was observed that the courts must refuse relief where enforcement of the negative covenant would compel performance of the contract or otherwise achieve indirectly what the law prohibits directly⁵. The exception under Section 42 thus preserves the enforceability of legitimate negative restraints, while maintaining the broader statutory bar against indirect specific performance.

Pertinently, in the case of Dirk India Pvt Ltd v. Mahagenco, 2007 SCC OnLine Bom 211, the Bombay High Court, granted the injunction restraining performance in view of an implied negative covenant in the agreement.6 Therefore, the imposition of the negative covenants is purely restricted to the terms of the contract and is circumstantial to the facts of the case.

III. CONCLUSION

The law on mandatory negative injunctions has seen a consistent judicial effort to balance contractual enforcement with the statutory limitations on specific performance. Courts have repeatedly held that negative injunctions are granted only to prevent breach of a clear and reasonable negative covenant and cannot be extended to situations that result in indirect performance of the Contract. The Courts recognised that the relief of an injunction is not an automatic relief and is granted for the purpose of protecting the contractual obligations during the subsistence of the contract. However, there cannot be an absolute restraint for imposition of negative covenants subject to the contractual terms, regardless of the termination of the contract. In the absence of any doctrinal clarity regarding the scope of Section 42 of SRA, the Courts are required to ensure that the negative injunction sought is a legitimate and reasonable negative covenant which does not deviate or encroach upon the statutory bar on specific performance. In our opinion, Courts may benefit from laying down more structured principles to assess when a negative covenant becomes unreasonably coercive, particularly in commercial and employment contracts, while preserving the contractual sanctity. Further, legislative clarification on post termination restraints is also critical to reduce inconsistent judicial outcomes.