Case Note & Summary
The dispute arose out of a franchise agreement dated 24 March 2011 between Deepak Thorat (Petitioner) and Vidli Restaurant Ltd. (Respondent), with Vithal Venkatesh Kamat as a confirming party. The agreement permitted the Petitioner to use the trade mark 'Vithal Kamats' as a non-exclusive and non-transferable licensee within specified territories (Mulshi, Umraj, and Kolhapur). The agreement contained a negative covenant that after termination, the Petitioner shall not use any of the words or trade marks or trade name i.e. any permutation or combination whatsoever of 'Vithal Kamats', 'Original Family Restaurant', 'Achha Hai, Sachha Hai', or the face/logo or any other marks belonging to the Respondent or the confirming party. It was admitted that the franchise agreement had terminated. The Respondent claimed that the Petitioner's use of the mark 'IDLI & KAMATS FEEL THE SOUTHERN TOUCH' after termination breached the negative covenant. The Respondent initially filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 before the High Court, which was later converted into an application under Section 17 before the arbitral tribunal. The sole Arbitrator, by order dated 2 May 2017, granted an interim injunction restraining the Petitioner from using the mark. The Petitioner appealed under Section 37 of the Act. The High Court upheld the Arbitrator's order, finding that the Arbitrator had correctly applied the principles for grant of interim relief, including prima facie case, balance of convenience, and irreparable injury. The court noted that the negative covenant was clear and the use of the word 'Kamats' in the new mark was a prima facie breach. The appeal was dismissed.
Headnote
A) Arbitration - Interim Relief under Section 17 - Negative Covenant - The Arbitrator granted an interim injunction restraining the petitioner from using the mark 'IDLI & KAMATS FEEL THE SOUTHERN TOUCH' after termination of the franchise agreement, which contained a negative covenant prohibiting use of any permutation or combination of the words 'Vithal Kamats' or any marks belonging to the respondent. The court held that the Arbitrator's order was justified as there was a prima facie case of breach of the negative covenant, balance of convenience in favour of the respondent, and irreparable injury if the injunction was not granted. (Paras 2-6)
Issue of Consideration
Whether the learned Arbitrator was justified in granting an interim injunction restraining the Petitioner from using the mark 'IDLI & KAMATS FEEL THE SOUTHERN TOUCH' after termination of the franchise agreement, in view of the negative covenant contained in the agreement.
Final Decision
The High Court dismissed the appeal and upheld the Arbitrator's interim order restraining the Petitioner from using the mark 'IDLI & KAMATS FEEL THE SOUTHERN TOUCH'.
Law Points
- Interim relief under Section 17 of Arbitration and Conciliation Act
- 1996
- Negative covenant in franchise agreement
- Prima facie case for breach of negative covenant
- Balance of convenience in favour of restraining use of mark containing similar word
- Irreparable injury if injunction not granted
Case Details
2017 LawText (BOM) (07) 103
Commercial Arbitration Petition (L) No.290 of 2017
Mr. Vishal Kanade, a/w. Mr. Vivek Patil, Mr. Yogendra Shriwadkar, Mr. Sandesh Godse and Ms. Sharayu Pednekar, i/b. Vivek Patil & Associates, for the Petitioner. Mr. Mayur Khandeparkar, a/w. Mr. Devesh Juvekar and Mr. Dikshat Mehra, i/b. M/s. Rajani Associates, for the Respondent.
Deepak Thorat S/O Dinkar Thorat
Vidli Restaurant Ltd. (Formerly known as Vithal Kamats Restaurants Pvt. Ltd.)
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Nature of Litigation
Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 against an interim order passed by the sole Arbitrator under Section 17 of the Act.
Remedy Sought
The Petitioner sought to set aside the Arbitrator's interim injunction restraining him from using the mark 'IDLI & KAMATS FEEL THE SOUTHERN TOUCH'.
Filing Reason
The Petitioner challenged the Arbitrator's order granting interim injunction in favour of the Respondent.
Previous Decisions
The sole Arbitrator, by order dated 2 May 2017, granted an interim injunction restraining the Petitioner from using the mark 'IDLI & KAMATS FEEL THE SOUTHERN TOUCH'.
Issues
Whether the learned Arbitrator was justified in granting an interim injunction restraining the Petitioner from using the mark 'IDLI & KAMATS FEEL THE SOUTHERN TOUCH' after termination of the franchise agreement, in view of the negative covenant contained in the agreement.
Submissions/Arguments
The Petitioner argued that the Arbitrator's order was not justified as the mark used by the Petitioner was different from the registered trademark and there was no breach of the negative covenant.
The Respondent argued that the use of the word 'Kamats' in the mark was a clear breach of the negative covenant which prohibited any permutation or combination of the words 'Vithal Kamats'.
Ratio Decidendi
The court held that the Arbitrator had correctly applied the principles for grant of interim relief, including prima facie case, balance of convenience, and irreparable injury. The negative covenant in the franchise agreement was clear and the use of the word 'Kamats' in the new mark was a prima facie breach. Therefore, the interim injunction was justified.
Judgment Excerpts
The learned Arbitrator, by his impugned order dated 2 May 2017, granted an interlocutory injunction restraining the Petitioner herein from using the mark 'IDLI & KAMATS FEEL THE SOUTHERN TOUCH' in any of the restaurants.
The agreement had a negative covenant to the effect that after expiration of the term of the franchise agreement, or any earlier termination or revocation thereof, the Petitioner shall not use 'any of the words or trade marks or trade name i.e. any permutation or combination whatsoever i.e. "Vithal Kamats" "Original Family Restaurant" "Achha Hai, Sachha Hai" or the face/logo or any other marks belonging to/owned' by the Respondent or the confirming party.
Procedural History
The Respondent initially filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 before the High Court, which was later converted into an application under Section 17 before the arbitral tribunal. The sole Arbitrator passed an interim order on 2 May 2017 granting injunction. The Petitioner appealed under Section 37 of the Act before the High Court, which dismissed the appeal on 27 July 2017.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 17, Section 37
