Calcutta High Court
Park Hotel Limited vs Ics Club Marketing (India) Private ... on 24 July, 2003
Equivalent citations: 2004(2)ARBLR495(CAL), 2004(2)CHN1
Author: Subhro Kamal Mukherjee
Bench: Subhro Kamal Mukherjee
JUDGMENT Subhro Kamal Mukherjee, J.
1. Park Hotel Limited has filed A. P. No. 129 of 2003. A. P. No. 143 of 2003 has been filed by ICS Club Marketing (India) Private Limited. Both the applications have been filed under Section 9 of the Arbitration and Conciliation Act, 1996 ('the said Act' in short).
2. In connection with A.P. No. 129 of 2003, Ashim Kumar Banerjee, J. on May 22, 2003, inter alia, granted leave under Clause 12 of the Letters Patent and ad interim order in terms of prayer (b) of the notice of motion.
3. The said prayer (b) runs as under:
"(b) An order of injunction restraining the respondents and each one of them, their servants and agents from selling and/or issuing any membership card by the name of "Preferred at the Park".
4. The respondent No. 1 in A. P. No. 129 of 2003, namely, M/s. ICS Club Marketing (India) Private Limited filed G. A. No. 2105 of 2003, inter alia, for vacating the said ad interim order dated May 22, 2003 passed by Ashim Kumar Banerjee, J.
5. When the said application being G.A. No. 1205 of 2003 came up for hearing before me, I decided to hear both the applications under Section 9 of the said Act being A.P. Nos. 129 of 2003 and 143 of 2003 finally.
6. By consent of the parties both the said applications were taken up for hearing together.
7. The brief facts leading to the filing of the said applications are summarised as under:
Park Hotel Limited is a company engaged in hotel business while M/s. ICS Club Marketing (India) Private Limited is a company engaged in business, inter alia, of creating, running, promoting and managing club loyalty system in the hotel industry. The said ICS Club Marketing (India) Private Limited is the Indian branch of International Club Systems.
On June 11, 2001 a marketing agreement was entered into between International Club Systems represented by its Indian Branch, ICS Club Marketing (India) Private Limited, and the Park Hotel Ltd., Kolkata.
Under the agreement Indian ICS Club Marketing (India) Private Limited (hereinafter referred to as 'ICS' in short) would act as the club-marketing representative of the Park Hotel Ltd., Calcutta (hereinafter referred to as 'the Park Hotel' in short) to market and promote the facilities and services of "Preferred at the Park".
8. The relevant clauses of the said agreement are as under:
"12. MEMBERSHIP PROGRAMME PROMOTION TARGET The sales target of the Club Programme will be total 2,500 prime memberships. The main sales drive is estimated at 24 weeks.
The card member sales target is not in any way guaranteed, but ICS shall use its best efforts to reach this target within the initial sales drive period. Should this target not be met within the initial sales drive period, then the sales drive period may be extended should market conditions allow.
14. TERMINATION This Agreement shall remain in effect for a period of three years (3), from the date of it's signature and will be automatically renewed for a similar period unless either party gives prior written notice no less than 90 days prior to expiration of this agreement.
16. OWNERSHIP OF MEMBERSHIP PROGRAMME MATERIALS The intellectual copyright of all existing PATP documents utilized in the promotion and marketing of the Membership Programme, including but not limited to brochures, promotional literature, membership cards and all other products related, similar to, or derived from the Membership Programme which may be subsequently developed, shall be the joint property of the hotel, subject to any rights previously contained herein. However, any material developed by ICS for PATP shall be the joint property of the contractual parties herein.
The hotel shall not participate in any manner in the promotion or sale of any same or similar card loyalty programme during the duration of this contract without the express written consent of ICS.
The club membership database shall remain the joint property of ICS and hotel, subject to any rights therein and may be used by either party hereto for any marketing promotions during the course of this agreement and thereafter.
21. LAW AND LITIGATION This Agreement shall be interpreted in accordance with Indian law in any and all matters, such as interpretation, meaning and construction of this agreement.
In the event of any dispute or difference arising out of this contract between the parties with regard to the interpretation of same or the rights, liabilities or duties arising out of it or otherwise in connection with this contract, the matter shall be resolved by appointing two arbitrators, one by each party hereto. The arbitrators thus appointed shall appoint a mediator before entering upon the reference. The decision of the mediator shall be final and binding on both parties under the provision of the Indian Arbitration Act of 1940, as amended from time to time.
If either party hereto brings any further action to enforce the terms hereof or to declare rights hereunder, the prevailing party in such action shall be entitled to an award of reasonable costs of litigation, including attorney's fees, in such amount as may be determined by the Delhi Courts."
9. On November 1, 2001 Park Hotel addressed a letter to ICS B.V., the respondent No. 2 in A.P. No. 129 of 2003, alleging that ICS has totally failed to provide proper services in terms of the said agreement dated June 11, 2001 resulting in extreme guest dissatisfaction and loss of revenue to the Park Hotel. It was, also, alleged that the failure on the part of ICS resulted in the loss of goodwill and dilution of the brand participation. The Park Hotel requested ICS to note that the failure on the part of ICS to perform the obligations under the agreement has affected the Park Hotel adversely in terms of huge loss of business and goodwill for which ICS was solely responsible. It was, also, informed that it was becoming extremely difficult to continue the existing arrangement with ICS and was being very seriously reviewed by the Park Hotel.
10. On March 3, 2003 ICS informed the Park Hotel that following a recent internal review it was decided to temporarily suspend new card sales activity with effect from March 7, 2003 for a minimum period of one month as ICS thought it necessary to give the market a rest.
11. On March 7, 2003 ICS informed the Park Hotel that as it was necessary to give the market a rest, it was not necessary for ICS to maintain a marketing room for the club in the hotel premises and informed the Park Hotel that ICS was vacating the office space provided by the Park Hotel to ICS with immediate effect from March 7, 2003.
12. On March 10, 2003 the Park Hotel informed ICS that ICS grossly violated the basic purpose of programme. It was, further, alleged that due to failure on the part of ICS to comply with the terms and conditions of the agreement, tremendous damage has been caused to the brand position of the hotel.
13. On March 20, 2003 ICS, however, replied to the said letter dated March 10, 2003 and, inter alia, denied and disputed the allegations contained in the letter dated March 10, 2003.
14. On March 29, 2003 ICS furnished the relevant reports pertaining to the card sales with effect from July, 2001 and it was reported that ICS has sold 4418 cards from the week ending July 13, 2001 until February 28, 2003. However, it was indicated that 507 cards were cancelled.
15. By a letter dated April 9, 2003 the Park Hotel requested ICS to pay outstanding commission charges.
16. On May 8, 2003, ICS sent an e-mail message to the Park Hotel indicating, inter alia, that ICS would loose money if it was to restart 'Preferred at the Park Club' in its current configuration. A restart of the current club would simply be a money loosing exercise for ICS. ICS proposed to create a new club or rather re-brand the currant 'Preferred at the Park Club' and to re-launch it. It was suggested that it would be necessary to redefine the benefit package to be offered to the cardholders and that ICS was in a position to restart the club after May 27, 2003.
17. On May 19, 2003 the Park Hotel, on the allegation of continuous and repeated breaches committed by ICS, terminated the agreement dated July 11, 2001 and asked ICS not to issue any further membership card or to undertake any marketing or promotional activities. It was, also, alleged that the Park Hotel suffered loss and damages for the alleged breaches committed by ICS and it was indicated that the Park Hotel estimated the said damages to be not less than 50 (fifty) lakh. It was contended that the Park Hotel reserved the right to claim damage along with the commission due to the Park Hotel in arbitration in terms of the arbitration agreement as incorporated in the agreement dated June 11, 2002.
18. A. P. No. 129 of 2003 has been filed by the Park Hotel on the allegation that ICS failed and neglected to comply with the terms of the agreement and as such the Park Hotel terminated the agreement dated June 11, 2001. It has been alleged that ICS failed and neglected to pay the legitimate commissions payable to the Park Hotel. It has been, further, alleged that even after termination of the agreement, it has been apprehended, ICS would continue to sell the membership cards of the Park Hotel and as such it has been expedient that interim orders should be passed in favour of the Park Hotel to restrain ICS from selling the membership cards to protect the rights and interest of the Park Hotel.
19. A. P. No. 143 of 2003 has been filed by ICS, inter alia, to restrain the Park Hotel from appointing any third party as club marketing representative for marketing and promoting the facilities and services of the Park Hotel under PATP scheme or any same or similar club loyalty programme, to restrain the Park Hotel from participating in promotion or sell of the same or similar card loyalty programme to PATP scheme, to restrain the Park Hotel from selling or issuing any membership card in the name of "Preferred at Park" or any card bearing any resemblance whatsoever, to restrain the Park Hotel from carrying on any promotional or marketing activity in respect of any membership card in the name of "Preferred at Park" or any card bearing any resemblance in the name or appearance; It is alleged in the said application that the agreement was not terminable until June, 2004 and the Park Hotel should be restrained from marketing any card loyalty programme as the scheme related to PATP, the subject-matter of the agreement dated June 11, 2001, was a new concept introduced by ICS. The Park Hotel after gaining access to such concept wanted to deprive ICS of the benefit accruing thereof. The purported termination of agreement was void and it has been purportedly terminated on the incorrect allegations that ICS failed to market and promote the facilities when ICS enrolled over 3911 members, which exceeded the sales target as contained in the said agreement. Therefore, the Park Hotel should be restrained from yielding any benefit by using such concept and/or a scheme by selling cards by itself or through any other agency.
20. Mr. Anindya Kumar Mitter, learned senior advocate, appearing for the petitioner in A.P. No. 143 of 2003, argued that the agreement dated June 11, 2001 was an agreement for a fixed duration, but the Park Hotel terminated the agreement on the false pretext when ICS made the scheme popular. It is submitted that agreement could not be terminated until the expiry of initial three years term and as such the termination of the agreement by the Park Hotel was void. The agreement is valid till June, 2004. The agreement dated June 11, 2001 was purportedly terminated on May 19, 2003 and the application under Section 9 of the said Act has been filed by the Park Hotel on May 19, 2003 itself. It was alleged that the agreement was terminated without giving any due and proper notice to ICS. It is, further, alleged that the Park Hotel has been selling the membership cards after May 19, 2003 and in violation of the terms of the agreement approached and hired many employees of ICS including one of its manager for the purpose of selling the cards. Mr. Mitter has, also, drawn my attention to the provision of Section 42 of the Specific Relief Act, 1963 and submitted that as ICS was appointed as the sole agent to market and promote the facilities and the services for a fixed duration, the Park Hotel should be restrained from selling the membership cards to restrain a breach of an implied negative stipulation in the contract.
21. Mr. Soumendra Nath Mukherjee, learned advocate, appearing in support of A. P. No. 129 of 2003, submitted that ICS has failed and neglected to perform its obligation under the agreement dated June 21, 2003 and as such the Park Hotel was within its rights to terminate the agreement to safeguard the goodwill of the hotel in the market. It is submitted that in view of the termination of the agreement, it is no longer open to ICS to market the membership cards on behalf of the Park Hotel. Mr. Mukherjee has drawn my attention to the letter dated March 3, 2003 of ICS, which has been annexed as annexure E at page 39 of the application being A.P. No. 129 of 2003, and submitted that ICS itself decided to suspend new card sales activity to give the market a rest and, in fact, ICS has vacated the space provided to it in the hotel premises for the purpose of promoting and selling of the cards, Mr. Mukherjee submits that the acts and omissions of the part of ICS including non-payment of due commissions to the Park Hotel has caused tremendous financial loss as also loss in reputation and as such the Park Hotel decided to snap the relationship between the parties. Mr. Mukherjee submits that from the correspondences it is clear that ICS had no intention to continue with the sale of membership cards. Only after termination of the agreement, ICS has come with an application under Section 9 of the said Act, inter alia, to restrain the Park Hotel to promote its business in order to acquire unlawful gain. Mr. Mukherjee, further, submits that the contract between the parties is no longer subsisting and the Park Hotel has already appointed another agent and the said agent is now marketing for the Park Hotel. Finally, Mr. Mukherjee has drawn my attention to the statements made in paragraph 12 of the application being G. A. No. 2105 of 2003 filed by ICS and submitted that ICS has already estimated its loss at Rs.30 (thirty) lakh and, therefore, ICS is not entitled to any order of injunction.
22. In order to obtain an order of injunction it is not enough for the petitioner to establish that the petitioner has a prima facie case to go to trial. The petitioner must, further, show that in the event of withholding the prayer of injunction, the petitioner will suffer irreparable loss and injury and in the event of the success of the petitioner in the main proceeding, the petitioner will not have the proper remedy by way of adequate pecuniary damages. Moreover, it is incumbent on the part of the petitioner to establish a clear necessity for affording an immediate protection to the legal right of the petitioner, if there be any. In considering the question of balance of convenience, the Court is to consider the comparative mischief or inconvenience of both the parties. The burden of proving prima facie case, balance of convenience and irreparable injury is on the party praying for injunction.
23. The Park Hotel appointed ICS for promoting a club loyalty programme. The Park Hotel felt that ICS was not operating properly and omissions on the part of ICS were causing injury to the Park Hotel financially and even the goodwill of the Park Hotel was hampering. I have noted hereinabove that ICS decided to temporarily suspend new card sales and even vacated the room provided to ICS in the hotel premises. In an e-mail message dated May 8, 2003 ICS alleged that ICS would loose money if ICS was to restart the sale of cards in the current configuration and as such a restart of the current club would simply a money loosing exercise for ICS. However, on May 19, 2003 the Park Hotel, on the allegation of continuous and repeated breaches, terminated the agreement dated July 11, 2001. The Park Hotel appointed ICS for promoting its business and being dissatisfied with the activities of ICS terminated the contract. The Park Hotel is to provide services to the customers. The Park Hotel cannot be restrained by an order of injunction from offering its services to the customers in one-way or other. ICS has no right to restrain the Park Hotel from promoting its business after termination of the agency. ICS has no right to interfere with the business of the Park Hotel. In fact ICS has categorically stated in the application that it has already estimated its loss on account of termination of the agreement at Rs.30 (thirty) lakh. When a petitioner itself admits that their exists standard for ascertaining the actual damage caused by the termination of the agreement, the petitioner is not entitled to get an order of temporary injunction. On the contrary, when the agreement has been terminated, ICS cannot be permitted to promote the card sales for the Park Hotel when services to the customers are to be provided by the Park Hotel. ICS will not suffer any loss or injury it the Park Hotel provides services to the customers, but if the claim of ICS fails and if the Park Hotel is injuncted from selling its product/service, the inconvenience suffered by the Park Hotel would remain irremediable.
24. In my view, justice will be subserved if I dispose of both the applications by restraining JCS and their agents from selling or issuing any membership card by the name of "Preferred at Park" till the differences and disputes between the parties are adjudicated by the arbitral tribunal. However, any action taken by the Park Hotel in the meantime will abide by the result of the arbitral proceeding.
25. I make it clear that I have no occasion to go into the merits of the claims and the counter claims of the parties concerning the termination of the agreement and all points are kept open to be adjudicated by the arbitral tribunal. I direct the parties to refer their disputes to arbitration forthwith.
26. The parties are directed to bear their respective costs in both the applications.
27. In view of the disposal of A.P. No. 129 of 2003 finally no separate order is required to be passed in connection with G.A. No. 2105 of 2003 and the same is, also, disposed of.
28. Xerox certified copy of this order, if applied for, is to be supplied to the applicants expeditiously.