Karnataka High Court
M/S Kuppanda Muthanna Associates vs Nilgiris Dairy Farm Pvt.Ltd on 1 September, 2010
Author: Ajit J Gunjal
Bench: Ajit J Gunjal
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 1ST DAY OF SEPTEMBER 2O.1"o_
BEFORE "
THE HONBLE MRJUSTICE AJIT J "T
CMP. No.38 OF-'201--{3. é V 'A
BETWEEN ' V S
M/S KUPPANDA MUTHANNA AS,S0.CIATES ' "
AREGISTERED PARTNERSHIP _ '-
310.1133, ASHOKA CIRCLE
KRISHNAMURTHYPURA.__ .
REPRESENTED BY ITS PARTNER jy
SRI.K.M. RAJAPPA. * I
. .. PETITIONER
[BY sRi:.,;AMARMOHA1§T
1. 1\11I.G1Rfs DAIRY PVT. LTD.,
.. 411310.50. REST.IjIOUSE
- ..._CRif3SENT ROADJCHURCH STREET
A v . _RA;§1c;AT,O.R_E - 560 001.
AJSVISERS PVT. LTD.
* THARERITOUSE, 4TH FLOOR
"DR... ANNIE BESANT ROAD
WORLI
.. ,_MU'rv1BA1 M 30.
RESPONDENTS
% ..{BT' SR1.ADI'I'YA SONDHI. ADV. FOR R1
SRLVIVEK HOLLA, ADV. FOR M/S VVADIA GHANDY 81
CO., ADVS. FOR R2.)
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THIS CIVIL 1ViISC.PE'I'I'£'ION FILED U/S.11 or THE
ARBITRATION AND CONCILIATION ACT, 1995, PRAYING To
APPOINT A SOLE ARBITRATOR AS PER CLAUSE 11 OF"'*i'I~IE
AGREEMENT FOR ISSUE or WARRANTS DATED 2;3j."2.os_7
(PRODUCED AS ANNEXURE--"A"), IN THE 1NTEI21s:S":°-
JUSTICE AND EQUITY.
THIS CMP COMING ON EoR_;ADMIss_3I'oN" %1+A:s [§AY';._ it "
THE COURT MADE THE FOLLOWING: ' -I' . " «
QWRMQE-3
This petition is fiied an
Arbitrator as per c1aus':e;~..1 1 ofvissue of
warrants, Whichpis thegoefitioner and
the reSponder1t"qn:1' Cop3I*:."of..vI¥hich is produced
at relating to the fiiing of this
petition Can' be follows:
2". _.The _petitioner entered into a franchise
f"fo_n 28.2.2002 with one M/s Nilgiris
Pursuant to the said Franchise
agre"eme.nt,*petitioner was permitted to run and operate
market in the name and Style of Niigiris
.'Sr11permarket at Mysore. In addition to the said
"Franchise agreement. first respondent entered into
Memorandum of Understanding on 15.4.2008 with the T
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petitioner in respect to the premises. The specific .._case
made out by the petitioner is that the first
was required to maintain standard and it
the Nilgiris Supermarket. But
maintain the standards as
The second respondent,
65% of the shares invfirst as well
as M/ S Nilgiris Franchise
3. The V that a meeting was
held between the fiI'St and second
respondzentst Franchise on 14.8.2008 at
Hotel According to the petitioner
the psghoitcomingpof the first respondent was addressed
VE'ir1d_,\the"second respondent has taken upon itself to
shortcomings.
415 not in dispute that a franchise agreement
A 'dbettxiveen the petitioner and the first respondent is
'V'-_._"'°terminated. It is not necessary for this Court to
"examine whether the termination is voluntary by the
petitioner or at the behest of second respondent. But
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the fact remains that there is a termination of the
Franchise agreement. '1' he petitioner is before
Court in O.S.Nos.4634 and 4635/200_9:,Vflseeiizirigf'_
appropriate rekiefs. The said suitsiare "'
is filed against respondent Nos.'
present We are concerned_V:V"u{ithV--'the for * it
issuance of warrants, h agreement
petitioner was of warrants as
specified in Schedule 'agreement is a
recognized 'franchise.
5, -petitioners these warrants
were requiréed any time within a period of
three 'years fromlgtthe date of execution of the agreement
dtiscretion of the Company.
."76.v"%E'i'heA'a1'VVgrieVance of the petitioner is that
notveithstanding the said agreement for issuance of
fwarrants no action has been taken to issue such
' Warrants. According to the petitioner the dispute inter
se between the petitioner and the respondents with
respect to the issuance of warrants is required to be -is
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resolved by an Arbitrator inasmuch as clause 11 of the
agreement contemplates such an action.
7. On notice respondents have entered
and filed their statement of objections. H
respondent No.1 is concerned,
Aditya Sondhi, learned V lvappeiaring
respondent No.1 that once is
terminated, question Vof,xpetirtio"n*e.rfsu:'enptitlglgfiérip*1/or the
warrant does not arise, regard to
Clause 3 of submit that
warrants {if the franchise remains a
franchise i°irst= and not otherwise. He
subrngits that petitioner is already before the
appropriate relief the cause of action
the petitioner is required to have his
. grievkance redressed in the said suit.
Mr. Vivek Holla, learned counsel appearing for
...Wrespondei1t No.2 submits that second respondent has
ujfnot taken over any part of first respondei1t~Company.
He also denies that they have share in the firstfi
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resp0ndent~Cornpany to the extent of 65%. He aiso
denies the minutes of the meeting, copy of whipephpgis
produced at Annexure~B inasmuch as
on record to show that they were signatoriesyiiéuipp ~
meeting. He would submit
the meeting is taken away, «questions
respondent being a party agr'eerrgent for
issuance of warrants _
9. Mr. Ma11m0han~-Eh appearing
for the the fact that
the terminated, arbitrai Clause
in the of warrants would survive
for e§)risiderati'or_i.' He submits that both the Franchise
pagreemengt _ar_1Vd agreement for issuance of Warrants
different conditions. He submits that
_ inde'ed,"---Vsecdnd respondent was a party to the minutes
it i,h_e meeting held on 14.8.2008, hence. it is not open
-- fc-rtthem to resile from the said agreement arrived at the
" htvminutes of the meeting. X
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10. I have given my anxious consideration to the
submissions made by learned counsel appearing.for.44'_the
petitioner as weil as learned counsel _
respondents.
11. Insofar as the cont'ention" regardiiig
existence of arbitral c1aus__e;».V_ once.__ the'~._FT.1}a1ic¥iise " V
agreement is terminated one is rejqu'ir_ed to dlookinto the
agreement for issuance of _fw'a1iran;'ts _itse»l_f." -Indeed clause
3 would read asdunderigi
3. Thetfvifarrants "issued only upon
the c_oii£;iit~icons ~be1«oW.._being fulfilled:
3.1'."'--'I_"heV Franchisefremains a franchisee of
5Ni}.girisx V' Franchise Private Limited
A i:[he-reincafterf 'N'EPL') or the Nilgiri Dairy Farm
:Li--mited (hereinafter 'NDFPL') as on
issue of Warrants under the
terjniswfof a validly executed and binding
franchise agreement [hereinafter referred to
in , was the 'Franchise Agreement')
12. It is no doubt true a reading of the said clause
~ would indicate that for the issuance of the said
Warrants the franchise agreement must be in force. It is
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_ 3 _ not in dispute that as on today the Franchise agreement is no longer in existence. The question W0l;lld44lll)_€ whether the arbitrai clause would _ consideration after the Franchise .agrceine"i1t is. "
terminated. Indeed, the Apexl~Co1irt.:' NATIONAL AGRICULTUR}iL--- cc}-loi:>.t "
FEDERATION INDIA .:_v5.._» TRADING LTD., reported in settled this question in which it had' ll is now statutolriljlr .'l'ii'eeogni'sed."'-S-uTo~--Section (l) of Secti_oii -'makes it clear that while considering' " "objection with respect fro thelll'ex_istence'v.o1""Nralidity of the arbitration arbitration clause which __for_rns=pl'art of the contract, has to be treated agreement independent of the other ter.iiisfof the contract; and a decision that t'he':.3ontract is null and Void shall not entail it l"'«.,.ipso jure the invalidity of the arbitration clause."
l3. Indeed, a perusal of the observation made by it the Apex Court would clearly indicate that _ 9 _ notwithstanding the termination of the Franchise agreement, arbitrai clause in the agreement for of warrants would survive for considerationd _ View that the suit, which is filed' by "
questioning the termination of is altogether different. Thellquegstilori to be decided by an aIjioitrator.l:i)§io_u1'd _be.the:,.enti§tlement of the petitioner for issuance- Qfgitlviellvtrarrants.
14. SinC'e,gp:gZ'the=_ ari3it.ral""'.iClauVs'e survives for consideration termination of the Franch_ise_ dispute is required to be resoivedllbpj/l an "arb.iVtrat0_r{ Indeed the Apex Court in another Case .. the case of NZSRINIVASA vs. MACHINE TOOLS LIMITED reported in has reiterated the principle laid E doviih iiivithelllcase of NATIONAL AGRICULTURAL coop.
-1 , '; ,lpp'::MARKE'1;ING FEDERATION INDIA LIMITED vs. GAINS TRADING LTD., reported in AIR 2007 sc 2327. The "Apex Court has observed that even if an agreement ceases to exist arbitration ciause of the agreement ItV
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remains in force and any dispute pertaining to the agreement is required to be resolved in accordance_:v_vith arbitral clause.
15. This takes us to the next ques.tiori:Ag.Va's' H whether second respondent is a"neCessa.ry.;a4nd._proper':
party to the proceedings having stand taken by the second"'rte"sponden.tV.'=-it in dispute that second resp_ond_.ent'isjgnet-.a signatory to the agreement of issuance of agreement is essentially" the and the first respondent it it
16.' It no'l'c1o"ubz Section 11 of the Act can be Iook._%into~ for and to ascertain whether the of the meeting which is stated to have second respondent and it could be an agreement which should bind second "'..jres'pondent and the arbital Clause in the agreement for ' issuance of warrants would be made applicable.
17. Indeed, a perusal of the minutes of the meeting. no doubt it indicates that certain action is .. 1 1 _ required to be taken by second respondent. up But however, that by itself cannot be said that the_,vse:eo1i._d respondent has taken over atleast to part ~ respondent»-Company at best. K V' second respondent can be termed ~ measure to bring the first on " it track. Indeed, no material before..thv:i§s Court to show that the secondllb,as.Va substantial stake to the "extent respondent-
Company. read into the minutes of meeting the respondents and the terms of the agreement for issue of"wa1'rants- which is executed between the d it "peti"tio1'15e"r and thevfirst respondent does not necessarily bind respondent who is not a signatory to the 'agree1rie.r'1t. Hence, the dispute inter Se between the "petitioner: and the first respondent is to be resolved by i.lajopoi:nting an arbitrator. Hence, I am of the View that a
-dispute inter se between the petitioner and first " respondent is required to be resolved by an arbitrator.
/ Insofar as the second respondent is concerned, the fl
-{2__ same is liable to be dismissed. Hence the following order is passed:
1. Petition is allowed.
2. Justice Chandrashekaraiah, No.2327, 7111 A MainV.i""2fi€% i;hs:'agc.."i"' Banashankari, Bangalore V __ T i ' if/Ola is " 2 it i A appointed as sole Ar1:§itt1_'atof"to reso1V'e_:'the dispute between the par-ties,'
3. The sole Arbit_tat0i3.L reference and cause noticeihtos the ipaftiesfg
4. co'mf:}iinicate'"t.hi--s': order to the soie 'addresses of the partiesias w_eI1'i7as aptfiearing for them.
5. The petitionuddinsofaf as second respondent V' "is stands"€Et'smissed.
st ;A;ip1ic:a1::1Q§1i%:;:Misc. CV1. 13383/2010 does for consideration stands disfiuséd of " Sd/-j Iudg3