Delhi District Court
M/S Shree Rathnam Restaurants Pvt. Ltd vs M/S Vrindavan Foods & Anr on 6 March, 2023
Object 3
1
2
IN THE COURT OF ANURAG SAIN, DISTRICT JUDGE
(COMMERCIAL COURT01), PATIALA HOUSE COURTS,
NEW DELHI
OMP(I) COMM 36/2022
M/s Shree Rathnam Restaurants Pvt. Ltd.
Through its Authorized signatory
having its Registered Office at C3,
2nd Floor, Malviya Nagar,
New Delhi110017
Email: [email protected]
.........Petitioner
Versus
1. M/s Vrindavan Foods & Anr
Through its Proprietor Mr. Prashant Aggarwal
A Proprietorship Firm
having its Registered Office at:
126, Railway Road, Mayur Lane More,
Kothi, Hapur, Uttar Pradesh245101
2. Mr Prashant Aggarwal
Proprietor M/s Vrindavan Foods
126, Railway Road, Mayur Lane More,
Kothi, Hapur, Uttar Pradesh245101
.......Respondents
Date of institution : 02.03.2022
Date of reserving judgment : 01.03.2023
Date of pronouncement : 06.03.2023
OMP (I) (COMM.) 36/2022 Page 1 of 25
JUDGMENT
1. The present petition under Section 9 of the Arbitration and Conciliation Act, 1996 seeking necessary interim directions before initiation of the Arbitral Proceedings has been moved on behalf of the petitioner against the respondents wherein the petitioner has made following prayers:
(i) Exparte adinterim injunction restraining the respondents, its employees, successors, executors, agents, administrators, representatives from running and operating the restaurant business under the brand name 'SHREE RATHNAM' on the patterns, format, knowledge, trade secrets etc. of the petitioner company; and
(ii) Exparte adinterim injunction restraining the respondents, their employees, successors, executors, agents, administrators, representatives from using, appropriating, exploiting, displaying, dealing with registered trademark and copyright i.e. 'SHREE RATHNAM', trade secret, confidential data, recipes, technical knowhow, business format etc. in any manner whatsoever of the petitioner; and
(iii) Pass such other further order(s) as the court may deem fit and proper in the facts and circumstances and in the interest of justice.
OMP (I) (COMM.) 36/2022 Page 2 of 25Brief facts of the case:
2. The petitioner is a company duly incorporated under the Companies Act 1956 and Mr. Lalit Sahni, Franchisee Head of the petitioner company is well conversant with the facts of the present case and is duly authorized vide Board Resolution dated 02.02.2022 to sign, verify, depose and institute the present petition and to do all other acts and things. Mr. Lalit Sahni is also the Franchise Head of M/s Sagar Ratna Restaurants Pvt.Ltd. which happens to be a sister concern of the petitioner company and is authorized representative of both entities.
3. That respondent no.1 is a proprietorship firm and is represented through its proprietor Sh. Prashant Aggarwal (Respondent no.2). Respondent no.1 through its proprietor, respondent no.2 warranted that it is the lessee/owner of the premises situated at Arjun Nagar Gate, Delhi Road, Hapur, U.P.
4. That the petitioner interalia is in the business of running and operating a chain of vegetarian restaurants both at National and International level and is owner of trade mark "SHREE RATHNAM' and other artistic and patterns denoting/publishing the Intellectual property in the aforementioned names/titles.
5. That as a result of the intrinsic and good quality of the product marketed, sold and developed by the petitioner over the year after thorough research and development, under the trade mark OMP (I) (COMM.) 36/2022 Page 3 of 25 "SHREE RATHNAM', the said trademark has acquired valuable goodwill, distinctiveness and reputation in respect of the said registered trademark and other intellectual property connected and used with the business. The petitioner is being recognized for its distinct business format, style, ambiance, décor, distinct furniture, crockery, utensils, equipment, recipes, food quality, aroma, manner of rendering service etc. of style and custom.
6. That considering the stature, recognition, likeliness, popularity etc. of the Trademark, Brand Name and goodwill of the petitioner, respondent no.1 through its partner respondent no.2 had willfully approached the petitioner with the request to grant franchise rights to run and operate the restaurant under the trademark of the petitioner on franchise basis and under the supervision and guidance of the petitioner. Thereafter, respondent no.1 through respondent no.2 entered into a Franchise Agreement dated 31.03.2017 (hereinafter referred to as the 'Agreement') as per the mutually agreed and decided terms and conditions and the same was executed for a period of nine years from the effective date of the agreement. Under the aforesaid agreement, the petitioner granted to respondent no.1 a franchisee to establish and operate a restaurant under the non assignable trademark 'Shree Rathnam' and admittedly the same OMP (I) (COMM.) 36/2022 Page 4 of 25 is being run by the respondents at the premises lessee/owner of the premises situated at Arjun Nagar Gate, Delhi Road, Hapur, U.P. on license basis.
7. Respondent no.1 was contractually and legally duty bound to adhere to the terms of the agreement and as per clause 2.1.3, respondent no.1 has to pay franchisee commission to the petitioner at the rate of 8% of net sales plus applicable service tax per month. Further clause 4.2.1 (xii) mandates respondent no.1 to possess licensed software and to ensure that it installs suitable and compatible hardware and software so as to have harmonious integration of the functionalities of both the respondent no.1 and the petitioner.
8. Respondent no.1 had unilaterally breached the agreement by deliberately defaulting in disclosing the true and correct sales figures from all means/concealing the accurate sales since the very inception of the agreement. The petitioner had requested respondent no.1 to disclose the true and correct daily sales from all means and clear the outstanding franchisee commission without fail via telephone and email communications on various occasions but despite the same, respondent no.1 failed to give any suitable reply and as such respondent no.1 committed breach of the agreement.
9. That the petitioner wrote emails dated 17.08.2021 and OMP (I) (COMM.) 36/2022 Page 5 of 25 23.08.2021 to the respondents but the respondents did not reply the same. The petitioner also wrote reminder emails dated 03.09.2021 and 06.09.2021 to the respondents. The petitioner also wrote another email dated 06.09.2021 to the respondents requesting them to share the true and correct sales from the month of August 2021 which was replied by respondent but the sales data so disclosed was not as per the agreed format.
10.That the respondents wrote a cryptic email dated 07.09.2021 to the petitioner stating that respondent no.1 has attached the sales generated since April 2020 till October 2020 with the email but no attachment was enclosed with the same. Vide email dated 10.09.2021, the petitioner once again reminded the respondents about the installation of the new billing software and also wrote another email dated 13.09.2021 to the respondent while raising the franchise commission invoice for the month of August, 2021.
11.The respondent wrote an email dated 21.09.2021 to the petitioner while enclosing the menu template for the purpose of software. On 29.09.2021, the petitioner wrote an email to the respondents while raising invoice for the purpose of installation of new billing software but despite repeated requests, respondent no.1 failed to clear the abovesaid invoice and did not cooperate with the petitioner in the installation of the new OMP (I) (COMM.) 36/2022 Page 6 of 25 billing software.
12.The petitioner wrote an email dated 30.09.2021 to respondent no.1 wherein it was also stated that the said email be treated as notice of termination.
13.The despite repeated requests and reminders till date, respondent no.1 has willfully failed to share the true ad correct daily sales report from all means with intent to conceal the true and exact daily sales from the petitioner due to which the petitioner has been unable to calculate the exact amount of the agreed franchise commission.
14.That as per the ledger of respondent no.1, a total of Rs. 5,94,013/ is outstanding against respondent no.1 as on 24.09.2021 and it continues to stand till date
15.That in the month of November, 2021, the petitioner came to know that respondent no.1 is also actively engaged in outdoor catering from the franchise restaurant outlet and the sale generated from the same are also concealed from the petitioner company.
16.That a legal notice dated 04.12.2021 was served upon the respondents no.1 and 2 by email as well as by registered post thereby calling upon the respondents to formally cease and desist from the operation of the franchise along with the trademark and other intellectual property of the petitioner with OMP (I) (COMM.) 36/2022 Page 7 of 25 immediate effect and also called upon to make payment of the outstanding franchise commission, compensation for the deliberate and willful breach of agreement and to disclose the actual daily sales since the inception of the agreement till the date of rendition of true account.
17.As the franchisee agreement stood terminated however, despite the same, respondent no.1 failed to adhere to the directions contained in notice dated 04.12.2021 and as such the respondents have no right to run the restaurant under the trademark of 'Shree Rathnam' or to do any business competing the business of the petitioner. The respondent wrote email dated 10.12.2021 to the petitioner while acknowledging the receipt of the legal notice dated 04.12.2021.
18.That despite the termination of the franchise agreement, respondent no.1 is still running the restaurant thereby infringing the trademark and thus, respondent is liable to pay damages to the tune of Rs. 25,00,000/ for using the trademark of the petitioner unauthorizedly post 04.12.2021.
19.That the petitioner has a good primafacie case, balance of convenience is also lies in favour of the petitioner and the petitioner will suffer irreparable loss and damages if the activities of respondent no.1 are allowed to be continued.
20.On these premise, the instant petition has been filed by the OMP (I) (COMM.) 36/2022 Page 8 of 25 petitioner against the respondent.
21.Written statement was filed on behalf of respondents no.1 and 2 wherein it has been averred that in terms of the agreement dated 31.03.2017, apart from the franchise fees and royalty paid to the petitioner company, respondent no.2 had taken on lease a 3000 sq. ft space for a rent of Rs. 65,000/ per month which has since increased 10% every two years and now stands at Rs.78,650/ per month as rent for running the restaurant. Apart from this, a sum of Rs.2,00,000/ every month is paid to the staff employed in the restaurant and anywhere between Rs.1015,000/ every month for the maintenance of the restaurant. The respondents invested Rs. 50,00,000/ into this business by renovating the rented restaurant space as per the specifications of the petitioner which is still remains invested and the respondent has not been able to recover the said amount as due to pandemic COVID 19, the restaurant remained shut for almost about two years and now it was time for respondent no.2 to recover his losses but due to unwarranted, wrong and illegal termination of the franchise, respondent no.1 is yet again is made to suffer losses.
22.It has been further averred that on 17.08.2021, Mr Lalit Sahni without furnishing his identification or disclosing the purpose of his visit, visited the premises of respondent no.1 without any prior notice or information to respondent no.2 and straightaway OMP (I) (COMM.) 36/2022 Page 9 of 25 entered into the billing section of respondent no.1 and started seeking explanations regarding sales figures of respondent no.1. The respondent had replied and submitted a detailed reply vide email to the petitioner on 07.09.2021.
23.It has been further averred that due to the demand of the local public, the respondent in January 2020 has started a banquet hall above the restaurant Shree Rathnam, in the name of 'Golden Tulip' which is on the first floor having its own separate kitchen and vendors which is in no way shape or form are connected to respondent no1.
24.It has been further averred that the billing software has been provided by the petitioner and there was no chance for respondents to conceal the sale figures as the entire sales are reflected in the billing software and the commission, as agreed upon, is being paid regularly by the respondent to the petitioner. The respondents have shared complete information in respect to sales and have paid the franchise commissions from time to time when it became due and the respondents have duly complied with the terms and conditions laid down in the franchise agreement.
25.It has been further averred that in terms of clause 7.5 article VIII of the franchise agreement, it has been agreed between the parties that 'during pendency of the arbitration proceedings, OMP (I) (COMM.) 36/2022 Page 10 of 25 both parties shall continue to fulfill their obligations under this Agreement' therefore the termination of the franchise agreement was absolutely unwarranted as the disputes if any could be settled by reconciliation of accounts as it is related to disagreement with respect to quantum of sales.
26.It has been further averred that the respondent replied to email dated 17.08.2021 vide reply dated 21.09.2021 with an attachment containing all the details as required by the petitioner. It has been further averred that there was no separate tab in the billing software provided by the petitioner for showing the sales generated from online platform Zomato and Swiggy and all the sales in respondent no.1 restaurant have been duly reflected in the billing software provided by the petitioner and maintained by the respondents. It has been further averred that the email dated 10.09.2021 and 13.09.2021 were replied by the respondents and further submitted that prior to August 2021, the invoices/bills raised by the petitioner were duly paid by the respondents. The respondent admitted the email dated 29.09.2021 but denied that respondent no.1 failed to clear the invoice raised by the petitioner and did not cooperate with the petitioner in the installation of the new billing software and engaged in generation of sales using unauthorized billing software. It has been further averred that OMP (I) (COMM.) 36/2022 Page 11 of 25 the respondent never refused for the installation of software. It has been further averred that the petitioner sent an email dated 29.09.2022 with proforma invoice dated 20.09.2022 attached for a new billing software which was to be installed in the premises of respondent but without giving sufficient time to the respondent to the said email, the petitioner unilaterally without any rhyme or reason gave a notice of termination of franchise vide email dated 30.09.2021 which shows the malafide conduct of the petitioner. It has been admitted that Rs.5,94,013/ is outstanding against respondent no.1 as on 24.09.2021.It has been further averred that the legal notice dated 04.12.2021 was wholly unwarranted and unjustified and the allegations are fale and frivolous.
27.It has been further averred that an injunction against the respondent shall cause irreparable loss and injury which cannot be compensated in terms of money whereas to the contrary, the claim of the petitioner is purely financial in nature. The terms of the agreement in any case are completely on sided, oppressive and even amount to restrain of legal rights, which are not strictly enforceable in law and are against public policy of India.
28.On there premise, the respondents have prayed for the dismissal of the present petition.
OMP (I) (COMM.) 36/2022 Page 12 of 2529.I have heard Ld. Counsels for the parties and perused the record.
30.Ld. counsel for the petitioner, in support of his contentions, has relied upon following judgments: (1) Hindustan Pencil (P) Ltd. Vs. India Stationery Products co. and Ors, MANU/DE/0383/1989 (2) D.S. Foods and Ors. V. Sagar Ratna Restaurants Pvt. Ltd. and Ors., MANU/DE/0375/2019 (3) Pepso Foods and Ors. Vs. Jai Drinks (P) Ltd., MANU/DE/1104/1996 (4) Little Millennium education Pvt. Ltd. Vs. Monica Lalchand Vaswani & Ors., MANU/DE/2677/2018 (5) Century 21 Real Estate LLC Vs. alchemist Ltd. and Ors, MANU/DE/0286/2022, and (6) Bolt Technology OU Vs. Ujay Technology Pvt. Ltd. & Ors, MANU/DE/3151/2022
31.On the other hand, in support of her contentions, Ld. Counsel for the respondents has relied upon following judgments: (1) Mas Financial Services Ltd. Vs. Margdarshak Financial Services, C/FA/1925/2021 of Hon'ble Gujarat High Court dated 23.11.2022.
(2) Atlas Interactive (India) Pvt. Ltd. Vs. Bharat Sanchar Nigam Ld. & Anrs, 126 (2006) Delhi Law Times 504, Delhi High Court.
OMP (I) (COMM.) 36/2022 Page 13 of 2532.Section 9 of the Arbitration and Conciliation Act, 1996 is set out hereinbelow for convenience: "9. Interim measures, etc. by Court.--A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court--
(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely:--
(a) the preservation, interim custody or sale of any goods which are the subjectmatter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subjectmatter of the dispute in arbitration, or as to which any question may arise therein and authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorizing any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.
33. The Hon'ble Supreme Court of India in a case titled as Firm Ashok Traders Vs. Gurumukh Dass Saluja, AIR 2004 SC 1433 held that application under Section 9 of the Arbitration and Conciliation Act, 1996 for interim relief is maintainable even before the commencement of the arbitral proceedings. It was also held that "Section 9 permits application being filed in the Court before the commencement of the arbitral proceedings OMP (I) (COMM.) 36/2022 Page 14 of 25 but the provision does not give any indication how much before. The word "before" means, inter alia, ahead of; in the presence or sight of; under the consideration or cognizance of. The two events sought to be inter connected by use of the term "before" must have proximity of relationship by reference to occurrence; the latter even proximity following the preceding event as a forceable or within sight certainly. The party invoking Section 9 may not actually commenced the arbitral proceedings but must be able to satisfy the Court that the arbitral proceedings are actually contemplated or manifestly intended and are positively going to commence within a reasonable time. What is the reasonable time will depend upon the facts and circumstances of each case and the nature of interim relief sought for would itself give an indication thereof. The distance of time, must not be such as, would destroy of proximity of relationship of the two events between which exists and elapses. Thus, what is required is that there must be proximity between moving the application seeking interim relief and referring the dispute for arbitration.
34.In the present case, admittedly, the petitioner has approached for initiation of arbitration proceedings.
35. It is not out of place to mention that the interim measures sought under Section 9 of the Arbitration and Conciliation Act, OMP (I) (COMM.) 36/2022 Page 15 of 25 1996 are similar in nature to the interlocutory or temporary injunctions granted by the courts under Order 39 Rules 1 and 2 of CPC and, therefore, the principles governing the grant of interlocutory injunctions would also be applicable to the application under Section 9 of the Arbitration and Conciliation Act, 1996 for grant of interim measure.
36. The Hon'ble Supreme Court of India in a case titled as Gujarat Bottling Col Ltd. & Ors. Vs. Coca Cola Co. & Ors., (1995) 5 SCC, 545, in Para43 has made following observations with regard to the grant of interlocutory injunction:
43. The grant of an interlocutory injunction during the pendency of legal proceedings is a matter requiring the exercise of discretion of the court. While exercising the discretion the court applies the following tests (i) whether the plaintiff has a prima facie case; (ii) whether the balance of convenience is in favour of the plaintiff; and (iii) whether the plaintiff would suffer an irreparable injury if his prayer for interlocutory injunction is disallowed. The decision whether or not to grant an interlocutory injunction has to be taken at a time when the existence of the legal right assailed by the plaintiff and its alleged violation are both contested and uncertain and its alleged violation are both contested and uncertain and remain uncertain till they are established at the trial on evidence. Relief by way of interlocutory injunction is granted to mitigate the risk of injustice to the plaintiff during the period before that uncertainty could be resolved. The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial. The need for such protection has, however, to be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated. The court must weigh one need OMP (I) (COMM.) 36/2022 Page 16 of 25 against another and determine where the balance of convenience lies.
37. It is settled proposition of law that the relief of injunction or interim measures under Section 9 of the Arbitration and Conciliation Act, 1996 can be granted if there is existence of prima facie case in favour of the petitioner, possibility of irreparable loss and injury to the petitioner and further the factors of balance of convenience are the prime considerations to be applied while deciding the petition under Section 9 of the Arbitration and Conciliation Act, 1996.
38. While applying the aforesaid test to the facts of the present case, the court has to decide the present petition under Section 9 of the Arbitration and Conciliation Act, 1996 filed by the petitioner. The facts of the present case show that it is not under dispute that a franchise agreement dated 31.03.2017 was executed between the parties and in terms of the franchise agreement, both the parties have to comply with the terms and conditions of the same. In nutshell, the allegations of the petitioner against the respondents are that the respondents committed breach of franchise agreement by deliberately defaulting in disclosing the true and correct sales figures from April 2020 to October 2020 and also the sales generated by the respondents by using online platforms like Swiggy or Zomato and in this regard, an email dated 23.08.2021 was sent by the OMP (I) (COMM.) 36/2022 Page 17 of 25 petitioner to the respondents for the sales concealed by respondent no.1. It is also the allegations of the petitioner against respondent no.1 that in the month of November, 2021, the petitioner came to know that respondent no.1 is also actively engaged in outdoor catering from the franchise restaurant outlet and the sale generated from the same are also concealed by the respondents from the petitioner.
39.Further, as per the case of the petitioner, on 29.09.2021, the petitioner sent an email to the respondents while raising invoice for the purpose of installation of new billing software as despite repeated requests, respondent no.1 failed to clear the said invoice and did not cooperate with the petitioner for installation of the new billing software. It is also the case of the petitioner that on 30.09.3021, the petitioner wrote an email to respondent no.1 qua concealment of true and correct sales from all means and vide this email dated 30.09.2021, the petitioner terminated the franchise agreement.
40. On the other hand, it is the defence of the respondents that all the sales in the restaurant have been duly reflected in the billing software provided by the petitioner itself and further there was no separate tab in the billing software provided by the petitioner for showing sales generated from online platform Swiggy or Zomato. It is further the defence of the respondents that OMP (I) (COMM.) 36/2022 Page 18 of 25 respondent no.2 is running a banquet hall on the first floor of the premises in the name and style of "M/s Golden Tulip"
which is altogether a separate entity and has no concern with respondent no.1; The said banquet hall is being run in a rented premsies with a monthly rent of Rs.25,000/ and having a separate and exclusive entrance; The staff working there is also different and has no concern with the staff of respondent no.1; Moreover, the banquet hall business is seasonal one and the food served there is of different variety as the customers are of a different class.
41.It is also the case of the respondents that respondents never refused for installation of software but without giving sufficient time to the respondents to reply email dated 29.09.2021, the petitioner unilaterally terminated the franchise agreement vide email dated 30.09.2021 which is wholly unwarranted and this action for termination was uncalled for.
42.Ld. counsel for the respondents argued that after the execution of the franchise agreement between the petitioner and the respondents which was in the year 2017, the respondents had invested huge amount in renovation, marketing etc. She further argued that the from the tenor and conduct of the petitioner, it can be clearly seen that the termination of the franchise agreement was an act of haste and without affording any OMP (I) (COMM.) 36/2022 Page 19 of 25 opportunity to the respondents to cure the breach of contract, if any and as such the termination of franchise agreement is illegal.
43. On the other hand, Ld. Counsel for the petitioner submitted that the petitioner has terminated the franchise agreement firstly through email dated 30.09.2021 sent by the petitioner itself. However, despite the receipt of the same, the respondents did not mend their ways and ultimately vide legal notice dated 04.12.2021, the franchise agreement was terminated by the petitioner.
44. In the present case, the franchise agreement has been terminated by the petitioner. It is also a fact that the said termination of the franchise agreement has not been challenged by the respondents by filing appropriate proceedings. The only contention of the respondents is that the same has been terminated by the petitioner in haste without giving time to the respondents to cure the breach of contract. Be that as it may be, the franchise agreement has been terminated and the respondents, if intent to, may file suit for damages before the Arbitrator. In this regard, the court finds support from the judgments passed by the Hon'ble High Court of Delhi in a case titled as Pepso Foods and Ors. Vs. Jai Drinks (P) Ltd., MANU/DE/1104/1996 and Little Millennium education Pvt. Ltd. Vs. Monica Lalchand Vaswani OMP (I) (COMM.) 36/2022 Page 20 of 25 & Ors., MANU/DE/2677/2018.
45. The arguments of the Ld. Counsel for the respondents that respondents have invested huge amount into restaurant respondent no.1 as per the licensed rights, manuals, materials, specifications etc. of the petitioner as agreed between the parties in the franchise agreement besides respondent no.2 has also paid one time nonrefundable franchisee fee of Rs. 1,15,000/ to the petitioner, provided bank guarantee of Rs.5,00,000/ to the petitioner and at this stage, the respondents are ousted from the contract without sufficient and good reasons on account of the alleged reasons which are far from truth, it would be difficult situation for them and it would cause irreparable loss and injury to the respondents. It has been further argued by the Ld. Counsel that considering the facts of the case even assuming that the petitioner has a primafacie case, but the balance of convenience does not lie in his favour. In support of the same, Ld. Counsel for the respondents has relied upon Mas Financial Services Ltd. Vs. Margdarshak Financial Services, C/FA/1925/2021 of Hon'ble Gujarat High Court dated 23.11.2022 and Atlas Interactive (India) Pvt. Ltd. Vs. Bharat Sanchar Nigam Ld. & Anrs, 126 (2006) Delhi Law Times 504, Delhi High Court.
46. I have gone through the judgments. Both the judgments do not OMP (I) (COMM.) 36/2022 Page 21 of 25 apply to the facts of the present case viz in Margdarshak Financial Services (Supra), the agreement was not terminated and in Atlas Interactive (India) Pvt. Ltd. Vs. Bharat Sanchar Nigam Ld. & Anrs (Supra), the petitioner was given 30 days notice before the termination of franchise agreement.
47. While passing an order under Section 9 of the Arbitration and Conciliation Act, 1996, the court cannot restore parties to previous position as was there before arising of dispute so that no dispute at all remains between the parties and nothing could be referred to the arbitration. The contention of the respondents that franchise agreement was a fixed term contract for nine years and could not be terminated unilaterally, is a baseless contention. The franchise agreement does not provide that it could not be terminated. The termination of the franchise agreement is provided in clause 7.2 of the franchise agreement where it is also provided that the petitioner may terminate the Agreement without any prior notice to the respondents in the event of breach or default by the respondents in carrying out their obligations and covenants with respect to payments of franchise commission for three consecutive months payable to the petitioner or The petitioner may also terminate this Agreement in the event of breach by the respondents of its obligations and covenants with respect to the LOI, Agreement, OMP (I) (COMM.) 36/2022 Page 22 of 25 Licensed Rights and the Trade Mark License, if such breach is not cured within a period of Thirty (30) from the date of notice in respect thereof.
48. In the facts of the present case the court is of the opinion that since the petitioner is the owner of registered trade name 'SHREE RATHNAM' and has earned a goodwill and reputation, and since the petitioner had permitted the respondents to use the same during the tenure of franchise agreement, which has been terminated by the petitioner, the petitioner would suffer an irreparable loss as passing of an order that the franchise agreement between the parties shall continue during the adjudication of the dispute under the Arbitration and Conciliation Act, 1996, in fact, would be allowing the entire relief to the respondents due to which the petitioner would suffer irreparable loss and injury which cannot not be compensated in terms of money, if the respondents are permitted to use the trade name of the petitioner as it may damage the goodwill and reputation of the petitioner. The respondents, if have suffered any damage because of the termination of the franchise agreement, are entitled to claim damages through the arbitration, if any. The franchise agreement between the petitioner and the respondents is the contracts of service where respondent no.2 used to do the OMP (I) (COMM.) 36/2022 Page 23 of 25 business through respondent no.1restaurant under the trademark of the petitioner. No court can force a contract of service on someone as a contract of service is not specifically enforceable. Section 14 of the Specific Relief Act provides that where compensation in money is adequate relief for non performance, such a contract cannot be specially enforced. The rights of the parties under the franchise agreement would be decided by the Arbitrator as and when the Arbitrator is appointed, however till then their rights need to be protected by way of granting interim measures under Section 9 of the Arbitration and Conciliation Act, 1996.
49.In view of my aforesaid discussion, the court is of the considered opinion that the petitioner has a prima facie case in its favour, the balance of convenience also lies in favour of the petitioner and further the petitioner is going to suffer an irreparable loss and injury if interim order is declined.
50.Accordingly, the petition under Section 9 of the Arbitration & Conciliation Act, 1996 filed by the petitioner is allowed and the respondents, its employees, successors, executors, agents, administrators, representatives are hereby restrained from running and operating the restaurant business under the brand name 'SHREE RATHNAM' on the patterns, format, knowledge, trade secrets etc. of the petitioner company and the OMP (I) (COMM.) 36/2022 Page 24 of 25 respondents, their employees, successors, executors, agents, administrators, representatives are also restrained from using, appropriating, exploiting, displaying, dealing with registered trademark and copyright i.e. 'SHREE RATHNAM', trade secret, confidential data, recipes, technical knowhow, business format etc. in any manner whatsoever of the petitioner. The order shall be operative for a period of 90 days from today. No order as to costs.
51.File be consigned to record room.
(Announced in the Open Court today on 6th March 2023) (Anurag Sain) District Judge (Commercial Court01, Patiala House Courts Complex, New Delhi OMP (I) (COMM.) 36/2022 Page 25 of 25