Delhi High Court Refuses Interim Injunction Against Encalm Hospitality In Lounge Services Contract Dispute

Delhi High Court Refuses Interim Injunction Against Encalm Hospitality In Lounge Services Contract Dispute

In a recent legal development, the High Court of Delhi has turned down a request for an ex-parte ad-interim injunction filed by Dreamfolks Services Ltd. against Encalm Hospitality Pvt. Ltd. The dispute, arising from a service agreement for airport lounge access, centered on allegations of contractual breach regarding the respondent’s dealings with shared clients.

Background of the Dispute

Dreamfolks Services Ltd. serves as a technology platform facilitating travel and lifestyle services, including lounge access, for various banks. In July 2022, the company entered into an agreement with Encalm Hospitality Pvt. Ltd., which manages airport lounges, to provide these services to their customers.

Following a notice of termination issued by Encalm on August 4, 2025, Dreamfolks approached the High Court. They alleged that Encalm had breached the contract by conducting business directly with Dreamfolks’ clients—specifically ICICI Bank, Axis Bank, Yes Bank, and American Express—thereby causing a decline in the petitioner's business volume.

The Core Legal Clash

The legal impasse focused on the interpretation of "exclusivity" and the scope of Clause 4.4 of the agreement. Dreamfolks argued that the clause prohibited the respondent from performing direct business with their clients. Conversely, Encalm asserted that the contract was strictly non-exclusive and that the banks were free to engage other service providers. Encalm further contended that their dealings were conducted through third-party service providers, which did not constitute an "agency" relationship as envisioned by the contract.

Judicial Analysis

Justice Amit Bansal, in his assessment of the case, highlighted the lack of evidence supporting the exclusivity of the client arrangements. The Court pointed to disclosures made to the Bombay Stock Exchange and the National Stock Exchange of India, which indicated that banks like Axis and ICICI maintained agreements with other service entities simultaneously.

The Court further differentiated this case from Global Music Junction Pvt. Ltd. v. Shatrughan Kumar , noting that the current agreement lacked an explicit negative covenant restricting the respondent from entering into agreements with other vendors.

Key Observations

The judgment provides significant clarity on how courts interpret commercial contracts during ongoing termination periods:

• "The petitioner has failed to place on record any material to show that there is an exclusivity between the petitioner and its Clients."
• "There is no such explicit clause in the Agreement between the parties restricting the respondent from entering into agreements with third-party service providers."
• "A combined reading of Clauses 11.1 and 11.2 of the Agreement makes it obvious that even if termination by the respondent is held to be unlawful, the remedy for the petitioner would be monetary compensation."

Court’s Decision

Ultimately, Justice Bansal concluded that there was no prima facie basis to grant the injunction. While the Court refused to restrain Encalm from operating, it upheld its earlier directive ordering the respondent to maintain detailed records and accounts of all transactions with the disputed clients. This ensures that, should the petitioner prove a breach during arbitration, there remains a clear trail for assessing potential financial compensation. This ruling reinforces the judicial inclination toward upholding the commercial freedom of parties unless specific exclusionary clauses are clearly established in the contract.