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2021 DIGILAW 29 (BOM)

Lakme Lever Pvt Ltd v. Annapurna Enterprises

2021-01-06

G.S.PATEL

body2021
JUDGMENT 1. Heard through video conferencing. 2. The Petition is under Section 9 of the Arbitration and Conciliation Act 1996. It arises from a Franchise Agreement dated 13th July 2015 between the Petitioner and the 1st Respondent, of which the 2nd Respondent is the sole proprietor. The Respondents are based in Ranchi, Jharkhand. 3. Before I proceed to the merits of the matter, I note that by previous orders I more than once required the Petitioners to serve the Respondents. This has been done. The Respondents are not present. They are also not represented. 4. There is an Additional Affidavit by the Petitioners sworn by one Rakesh Kumar Saini which points out that despite the termination of the Franchise Agreement, and to which I will presently refer, and in direct violation of the terms of the Franchise Agreement the Respondents have continue unlawfully and illicitly the use of Petitioner's brand, brand equity, name, logo, and other materials holding themselves out to be a franchisee of the Petitioner. It is for this reason that Mr Shukla now presses for urgent ad-interim reliefs, though after notice. 5. The Petitioner is a wholly-owned subsidiary of Hindustan Unilever Limited, one of India's largest FMCG companies. HUL is the registered proprietor of trademarks Lakme, Lakme Salon, Lakme Beauty Salon and various other logos and artworks. The services of the Petitioner under one or more of these marks is well known and has established reputation in the beauty and wellness segment. 6. The parties entered into a Franchise Agreement on 13th July 2015. The Respondents were to conduct a beauty salon at Ward No. 2, First Floor, Shop Nos. 105/106, Mangal Kunj, Kanke Road, Ranchi, Jharkhand 834008 on the terms and for the consideration set out in that agreement. This was a five-year agreement with effect from 7th August 2015 and it was subject to renewal only on certain terms and conditions. 7. There is no doubt that the agreement contains an arbitration clause 23.1. The arbitration is to be in Mumbai. This is stated in more than one place. It is also stated that the Courts in Mumbai alone would have exclusive jurisdiction. 8. After the agreement, the Respondents began running the salon in Ranchi. A more detailed look at the provisions is not necessary at this stage. The arbitration is to be in Mumbai. This is stated in more than one place. It is also stated that the Courts in Mumbai alone would have exclusive jurisdiction. 8. After the agreement, the Respondents began running the salon in Ranchi. A more detailed look at the provisions is not necessary at this stage. It is sufficient to note that the Franchise Agreement defined clear parameters and conditions on which the Respondents were permitted to run the franchise. There were, for instance, detailed provisions regarding billing and accounting. Various systems, procedures and protocols were stipulated. 9. On 4th October 2019, the Petitioner pointed out various breaches by the Respondents. These will undoubtedly be addressed in an ensuing arbitration. However, the Petitioners by their notice also said that unless remedied, those breaches would compel the Petitioner to terminate the agreement. 10. There was no reply. There was also no compliance with the Petitioner's requisitions. The Petitioners then issued a show-cause notice on 29th January 2020 asking the Respondents to explain their conduct and to show cause why the Franchise Agreement ought not to be terminated. The Petitioners noted that there were serious discrepancies noticed during audits. 11. Once again, there was a failure to respond or to comply. 12. On 26th February 2020, the Petitioner by its legal notice terminated the Franchise Agreement. I am not at this stage concerned with the money claim that the Petitioners may make in arbitration. Importantly, however, the Petitioners have sought an injunctive relief against the Respondents and this is summarized in paragraph 10 of the Petition at pages 10 and 11 thus: "10. The Petitioner states that after Franchise Agreement was validly terminated by the Petitioner, the Respondents failed to adhere to the consequence of termination set out in the said Franchise Agreement by which it was bound; viz.: (i) Cease to trade under the Trade name "LAKME" in any form; (ii) Cease and Desist from Contacting any customers or receive calls from Customers; (iii) Refrain from holding the Respondents as the operator of the Franchise Business under branch Lakme; (iv) Not to make or receive any call with the customers of the business; (v) Remove all boards, signage, graphics, and pictures of models, stationary, furniture, accessories, towels, Lakme Professional Consumables, Posters, Graphics, Uniforms, designs like Mandala, words "LAKME" or logo of the Company on it. (vi) Refrain from divulging any Confidential Information; (vii) Give to the Company all customer list and full details contacts of customers; (viii) Pay all monies dues; (ix) Return the Stationery, Manual, Menu, SOP etc. without copying it; (x) Immediately stop using Petitioner's specified interiors, colors, architectural designs, mirrors, stands, furniture, Mandela, etc. These acts / omissions amounted to serious breaches of the Franchise Agreement. The fact that the Agreement stood terminated is not disputed by the Respondents. The Respondents in spite of accepting the termination have however failed and/or neglected to comply with its post termination obligations." 13. The Additional Affidavit filed by the Petitioners indicates that the Respondents continue to use the name 'Lakme Salon'. They also continue to offer some of the Petitioner's signature services. The Respondents' employees continue to wear a uniform as specified in the Franchise Agreement, i.e. representing themselves as employees of a franchisee of the Petitioner. Paragraph 4 of the Affidavit makes the foregoing abundantly clear and in paragraph 5 the deponent states that the Respondents continue to project themselves as franchisee of the Petitioner. 14. The Franchise Agreement contains an explicit provision as to what is to happen upon termination. This is to be found in clause 22.4 at page 71. That entire clause is in fact captioned as 'Consequences of Termination'. Clause 22.4.1 sets out various actions that are to be taken by the Respondents upon termination. 14. The Franchise Agreement contains an explicit provision as to what is to happen upon termination. This is to be found in clause 22.4 at page 71. That entire clause is in fact captioned as 'Consequences of Termination'. Clause 22.4.1 sets out various actions that are to be taken by the Respondents upon termination. Clause 22.4 and 22.4.1 read thus: "22.4 CONSEQUENCES OF TERMINATION: 22.4.1 Upon the early termination or expiration of this Agreement for any reason whatsoever, the Franchisee shall: a. immediately pay to the Franchisor full amount of all monies due then or thereafter due together with any interest thereon; b. immediately cease to operate the Salon and to use the SOP, and shall not thereafter hold itself out in any way as a Franchisee of the Franchisor and refrain from any action that would or may indicate any relationship between it and the Franchisor; c. immediately cease to use in any way whatsoever any and all of the Licensed Rights and any other trade names, logos, devices, insignia, procedures or methods which are or may be associated with the Trade Marks or the Business System; d. immediately return to the Franchisorr such items or materials under its control or in its possession bearing any of the Trade Marks or otherwise dispose of or destroy as the Franchisor shall direct all signs, advertising materials, stationery, invoices, forms, specifications, designs, records, data, samples, models, programs, drawings pertaining to or concerning the Salon or the Business System or bearing any of the Trade Marks and thereupon provide a certificate duly signed by its authorized officer evidencing the compliance of the aforesaid provisions; e. immediately remove or permanently cover all signs or advertisements identificable in any way with the Franchisor and in the event of failure promptly so to do, the authorized agents of the Franchisor shall be entitled without seeking any further permission or consent of the Franchisee to enter the Salon Premises for such purpose; f. immediately return to the Franchisor, the SOP and all copies of the SOP in its possession and/or under its control; g. immediately return all items of equipment held on loan or hire from the Franchisor under the terms of this Agreement; h. immediately do all such acts and things and execute all such documents as the Franchisor shall require, in particular but without limitation such notification of cessation of use of the Trade Marks; i. not in any manner obstruct the Franchisor from operating the Salon; j. otherwise perform its obligations and observe the covenants relating to termination as set out in this Agreement; 22.4.2 The expiration or termination of this Agreement for any reason whatsoever shall be without prejudice or impair to the accrued rights of the Parties and shall not relieve either of the Parties or their prior respective obligations and any provision hereof and subsequent to such expiry or termination hereof shall remain in full force and effect and shall be enforceable notwithstanding such expiry or termination; 22.4.3 The Franchisee shall have no further right to use the Trade Marks and/or any deceptively similar marks, product marks, service marks, symbols pertaining to the other Parties or the System or otherwise use or exploit the intellectual property rights of the other Parties. 22.4.4 The non-compliance of any of the provisions of clause 22.4 aforesaid shall attract a penalty of Rs. 50,000/- (Rupees Fifty Thousand only) per day on day to day basis which shall be without any prejudice to the rights and remedies that the Franchisor shall have in law. 22.4.5 The Franchisor shall not be responsible for any damage or claim arising out of the contract in compliance of the various provisions of the Agreement including but not limited to removal of furniture, graphics, signage, Mandela, boards and or any other materials bearing the logo of the Franchisor or the word "Lakme"." 15. I come now to the prayers in the Petition. These read as follows: "(a) pending the appointment of arbitrator and pending hearing and final disposal of the Arbitration Proceedings and till the execution and implementation of the Award which may be passed therein:- (i) The Respondents by themselves, their servants, agents or affiliates or otherwise whosoever be restrained by an Order and injunction of this Hon'ble Court from operating any Salon bearing the mark 'Lakme' or using the operating manual, system, license rights or any other trade name, logos, devices, insignia, procedures or methods of the Petitioner or holding itself out in any manner as a Franchisee of or in any way connected/associated with the Petitioner and/or from using in any manner, including as sign board, on the stationary, bills, etc., the brand name/ Trademarks viz. "LAKME" and/or "LAKME SALON" / "LAKME BEAUTY SALON", or any mark / marks deceptively similar thereto or containing the mark / marks / word Lakmeor any other word / mark deceptively similar thereto, by itself or in combination with any other word / words; (ii) the Respondents be ordered and directed to forthwith return to the Petitioner all material, all copies of the operating manual, equipments in the subject salon or any other place otherwise to the Petitioner forthwith or within such time as this Hon'ble Court deems fit and proper; (iii) for the purpose of clause (a)(ii) above, a Receiver / Commissioner be appointed with all powers under Order 40 Rule 1 Code of Civil Procedure, 1908, to supervise, inspect and take possession of all material referred to in (ii) above, and hand over the same to the Petitioner and do all that is necessary to ensure that the Respondents have returned to the Petitioner all material, all copies of the operating manual, equipments to the Petitioner; (iv) The Respondents be ordered and directed to deposit in this Hon'ble Court the sum equivalent to the outstanding dues aggregating to Rs. 1,06,30,380 (Rupees One crore Six Lakhs Thirty Thousand Three Hundred and Eighty Only)." 16. There is an ample prima facie case and the balance of convenience is undoubtedly with the Petitioner. I have no doubt that significant prejudice and injury has already been caused to the Petitioner. 17. There will immediately need to be an injunction in terms of prayer clause (a)(i). 18. However, in view of the Additional Affidavit that has been filed, I will also make an order in terms of prayer clause (a)(iii)appointing the Court Receiver of this Court as the Receiver to take possession of all the material referred to in prayer clause (a)(ii), i.e., all the material with the name of the Petitioner on it, from the premises of the Respondents. 19. This order will continue until further orders of the Court. 20. The Court Receiver will make arrangements to visit the premises. The police authorities at the local police station in Ranchi are directed to act upon an authenticated copy of this order and render all assistance to the Court Receiver. The police authorities will not insist on a certified copy of this order. 21. The Court Receiver is empowered to forcibly take possession of all these materials. The police authorities at the local police station in Ranchi are directed to act upon an authenticated copy of this order and render all assistance to the Court Receiver. The police authorities will not insist on a certified copy of this order. 21. The Court Receiver is empowered to forcibly take possession of all these materials. The Court Receiver is not appointed of the shop premises themselves. The Court Receiver will specifically remove the name board and take into custody all the materials, including uniforms, printed materials and other physical objects that have the name of the Petitioner on it. These materials will be stored at a secured location to be provided by the Petitioner at its own cost. 22. An authenticated copy of this order will be served on the Respondents. 23. Affidavit in Reply, if any, is to be filed and served on or before 1st February 2021. 24. I am making it clear that on the next occasion I will consider making a further order in terms of prayer clause (a)(iv) requiring a money deposit to secure the claim of the Petitioners. 25. The Respondents are put to notice that a continued failure to appear before this Court will invite serious consequences. 26. They are also put to notice that any attempt to obstruct the work of the Court Receiver will immediately invite an action for enforceable compliance including by way of suo motu contempt proceedings. 27. For the present, list the matter on 8th February 2021 along with the Report of the Receiver, which is to be made and filed before that date. 28. Liberty to the Petitioner and the Court Receiver to apply. 29. This order will be digitally signed by the Private Secretary of this Court. All concerned will act on production of a digitally signed copy of this order.