2MBA-027 (GBL V Coke)

NALSAR UNIVERSITY OF LAW
HYDERABAD
Centre for Management Studies
Project on “Business and Commercial Contracts”
(Gujarat Bottling Co Ltd. V Coca Cola Co. (1955) 5 SCC 545)
by:
(Akhil Marina)
(27)
Submitted to:
Dr. Shaik Nazim Ahmed Shafi

Instructor: Business and Commercial Contracts
Business and Contracts Law
CONTENTS
1. Introduction
2. Facts of the case
3. Legal Issues
4. Judgement
5. Conclusion
https://indiancaselaws.wordpress.com/2013/01/30/ms-gujarat-pottling-co-ltd-ors-v-the-coca-cola-co-
ors/
https://indiankanoon.org/doc/104935066/
http://www.manupatrafast.com/articles/PopOpenArticle.aspx?ID=264fdfb0-bb02-416b-9eed-
4ca76ca1ee46&txtsearch=Subject:%20Contract
1.INTRODUCTION
In this case, which helds under Restraint of Trade or not. Gujarat Bottling Co Ltd. V Coca Cola Co.
(1955) 5 SCC 545. GBC entered into an agreement with Coca Cola in 1993, that for the grant of
franchisee to prepare, bottle and sell the brand (beverages), and not to be concerned about any other
brand for the whole agreement period and 1 year period of its termination.
The total agreement is void, when it’s total restraint or partial restraint of trade. The law never
encourages it because of the monopolistic advantage. England law says that, restraint of trade whether
its general or partial is good, when its needed and necessary only for the freedom of purpose of trade.
ors/
2. FACTS OF THE CASE
GBC entered into an agreement in 1993 with Coke for grant of franchisee to prepare, bottle, sell
brands of latter, but not to be concerned with the beverages of any other brand during the subsistence
of the agreement and of 1 year period notice for its termination.
Under the agreement, GBC also had right to discontinue supplying syrup on effective transfer of
control of GBC by transfer of shares or any other indicia without the prior express consent of Coke.
In all, 1993 agreement was for grant of license to GBC under common law by Coke. GBC, however
entered into another agreement with Coke in 1994 where under it was required to make an application
to register the agreement under the statute as Registered User Agreement. Though the period of
termination notice was reduced to 90 days but no similar provision as that of Para 14 of 1993
agreement was stipulated and neither was 1993 agreement expressly substituted.
The shareholding of GBC was transferred subsequently to Pepsi and it served Coke with a notice of
90 days to terminate 1994 agreement, and as a matter of abundant precaution, as 1 year notice
terminating 1993 agreement, notwithstanding the contention that 1993 stands replaced by 1994
agreement. Coke sought GBC to be refrained from dealing with the beverages of Pepsi for the period
of 1 yr. of termination notice.
ors/
3. LEGAL ISSUES
Whether 1994 agreement substituted 1993 agreement?
Whether Para 14 of 1993 agreement was in restraint of trade u/s 27 of Indian Contract Act (ICA),
hence void?
Is it total restraint or partial restraint ?
ors/
4.JUDGEMENT
The agreement was:
“The agreement in question here was for the grant of franchise by Coca Cola to GBC to manufacture,
bottle, sell and distribute various beverages for which the trade marks were acquired by Coca Cola. It
was thus a commercial agreement where under both the parties had undertaken obligations for
promoting the trade in beverages for their mutual benefit.”
According to the agreement, GBC should have exclusively sold Coca Cola brand and marketed it. The
purpose of the condition contained in the agreement was that GBC will work hard to promote and
solicit the sale of the products/beverages produced under the trade marks of Coca Cola. This would
not be possible if GBC were to manufacture, bottle, sell, deal or otherwise be concerned with the
products, beverages or any other brands or trade marks/trade names.
So, , since the negative stipulation was confined in its application to the period of subsistence of the
agreement and the restriction imposed therein was operative only during the period the agreement was
subsisting, the said stipulation, it was held, could not be treated as being in restraint of trade so as to
attract the bar of section 27 of the Indian Contract Act.
ors/
5.CONCLUSION
Considering the restraint of trade, and it’s a reasonable agreement, but GBC has violated the terms, of
not branding exclusively. 1993 agreement was commercial agreement where under both parties
undertook obligations to ‘wholeheartedly’ promote the sale and production of Coca Cola goods for
their mutual benefit, such that the restriction not to deal with the competing goods was for facilitating
the distribution of goods of franchiser (Coke) and was not in anyway restraint of trade.
ors/
ors/

2MBA-027 (GBL V Coke)

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NALSAR UNIVERSITY OF LAW

Project on “Business and Commercial Contracts”

(Gujarat Bottling Co Ltd. V Coca Cola Co. (1955) 5 SCC 545)

Dr. Shaik Nazim Ahmed Shafi

2. Facts of the case

2. FACTS OF THE CASE

Whether 1994 agreement substituted 1993 agreement?

Is it total restraint or partial restraint ?

The agreement was:

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