The enforceability of a negative covenant in a Franchise Agreement is determined by the nature of the shared sensitive and confidential information, and the court emphasized the prima facie nature of its observations and orders.

JUDGMENT

R.D.Dhanuka, J. - By this appeal filed under section 37 of the Arbitration and Conciliation Act, 1996 (for short "the Arbitration Act") the appellant (original respondent) has impugned the order dated 30th July, 2020 and 26th October, 2020 passed by the learned Single Judge thereby granting ad-interim measures in favour of the respondent (original petitioner) under section 9 of the Arbitration Act. Some of the relevant facts for the purpose of deciding this appeal are as under.

2. It was the case of the respondent that the respondent is engaged in the business of running wellness centers under the brand name and trademark of "IOSIS". The Founder and Managing Director of the respondent has specialized in cosmetology and wellness from London Beauty School (U.K.), beauty and cosmetology at Christine Valmy (U.S.) etc. The respondent has knowledge of running beauty salon, slimming, skincare centers and spas in India.

3. It was the case of the respondent that the appellant approached the respondent for franchise of the respondent in the month of December, 2018. Various correspondences were exchanged between the parties through emails. The respondent issued a Letter of Intent on 5th March, 2019 in favour of the appellant for setting up and operating the franchise center. It is the case of the respondent that on 31st March, 2019 the Franchise Agreement came to be executed between the parties. The appellant however committed default of the said Franchise Agreement. The appellant however through its advocate issued a termination notice on 21st June, 2020 terminating the business of the franchise center. The appellant however continued to operate the center and utilized the brand name, trademarks of the respondent contrary to clause (16) of the Franchise Agreement.

4. The respondent wrote a letter dated 28th June, 2020 denying the allegations made by the appellant in the letter dated 21st June, 2020 and called upon the appellant to adhere to clause (16) of the said Franchise Agreement. The appellant denied the contents of the said letter dated 28th June, 2020 vide a letter dated 2nd July, 2020. The respondent filed petition under section 9 of the Arbitration Act on 14th July, 2020 and prayed for ad-interim reliefs. The said petition was resisted by the appellant. The appellant raised a preliminary objection with respect to the maintainability of the said petition filed by the respondent under section 9 before this Court. In the said affidavit in reply, the appellant relied on the Letter of Intent dated 31st March, 2019 and alleged that the said Franchise Agreement was never signed and executed by and between the parties.

5. The matter appeared before the learned Single Judge on various dates. On 20th July, 2020 the appellant through its counsel made a statement that pursuant to the letter of termination, the appellant has completely ceased use of the respondent's franchise brand name, tradename, trademarks, printed material, brouchers equipments, technology and was not referring any of the clients of the respondent to itself. The learned Single Judge recorded the said statement as an undertaking to this Court. On 30th July, 2020, the appellant through its counsel also contended before the learned Single Judge that the appellant was not agreeable to acknowledge the Franchise Agreement between the parties and what has been relied upon by the respondent herein was a bogus document, not signed by the appellant.

6. This court prima facie held that the appellant has disowned any contractual relationship on the ground of Letter of Intent or any Franchise Agreement and not entitled to have any benefits under Letter of Intent or under Franchise Agreement in respect of facilities, brands, trademark which the respondent would otherwise provide. The appellant made a statement before the learned Single Judge that they are in no manner using the trademark/brand names or any of the facilities of the respondent. This Court accepted the said statement