Lease machine
AAK
(Querist) 29 January 2012
This query is : Resolved
Dear Experts need your help
A Ltd is intending to lease a machine to B ltd for production of XXX material to its various customers.
A Ltd has indirect stake in C Ltd.
C Ltd is carryings its business in the same XXX material in Bihar, Delhi, UP etc
Now A ltd is intending to lease a machine to B ltd but it should not want that B Ltd should any way compete with C Ltd’s customers.
Can non competitive clause can be included in the lease agreement with B Ltd?
Is that agreement be valid. Whether it amounts to cartel under competition act?
Can any one pls suggest how to protect the interest of C Ltd by including some indirect clause?
Thak you
Regards
AAK
Raj Kumar Makkad
(Expert) 29 January 2012
The proposed clause cannot be inserted in the lease-deed/agreement for a machine. A ltd. cannot impose any term to B ltd. not to compete with C only because it is leasing out a machine to it.
The interest of C cannot be protected by this means rather C should eb capable enough to compete with B or A should drop its idea to lease out its machine in the hands of B ltd and should strengthen its stake in C ltd.
AAK
(Querist) 29 January 2012
Thanq for the quick response Mr.Makkad sir.
can follwoing clauses be made to indirectly restrain B Ltd
1] B Ltd shall use this machine solely and exclusively for the Customer listed in Annexure – 1 to this Agreement and for the volume permitted in Annexure – 1, which list may be amended from time upon request from B Ltd to A Ltd, at the sole discretion of A Ltd.
2] B Ltd shall PAY LEASE RENT as enumerated in Annexure 1 for using the machinery as a rate fixed by A Ltd for every Customer. Fixing of rate may differ based on the product and complexity of the job. Such rate shall be agreed by the parties through exchange of letters effecting amendment to Annexure – 1 if required.
3] If B ltd uses the machine for any purposes other than those specified in the Agreement, B Ltd shall be liable to pay A Ltd compensation of Rs.XXXCrores.
Raj Kumar Makkad
(Expert) 29 January 2012
It depends upon B Ltd, whether the terms are acceptable to it or not. There is no mention of C ltd. in the draft clauses to which you initially want to secure.
AAK
(Querist) 29 January 2012
Sir, indirectly i will list in Annexure1 all the other customers with whom C Ltd is not working. So that indirectly B Ltd has to work with the only with customers as stated by A Ltd. In this way i am trying to secure interest of C ltd. Do you think it will work? can it be termed valid?
Devajyoti Barman
(Expert) 29 January 2012
yes it is valid one but better avoided...
R.RAJENDRAN
(Expert) 30 January 2012
In the agreement, a clause on unfair trade practice may be incorporated, in such a way that the interest of your company 'c' is not affected.
J K Agrawal
(Expert) 30 January 2012
The Monopoly and Restrictive Trade practice Act prohibits all these terms.
Instead of providing the machine on lease you entruct machine on bailment "to execute jobs of certain area customers". In case of bailment the owner of machine is you, your self and the user is under instructions of you.
It is a smart idea to overcome the law.
M V Gupta
(Expert) 30 January 2012
If the agrement states that B ltd has approached A ltd to lease out its machines to produce goods for sale to its specified customers, it may not attract the provisions of the Monopoly and Resticive Trade Practice Act
prabhakar singh
(Expert) 30 January 2012
i agree with last advise of mr.m.v. Gupta.
AAK
(Querist) 31 January 2012
Thanq very much experts for your opinion..
