The termination of a Master Franchise Agreement is valid when substantiated by evidence of substantial underreporting of sales, obstructing compliance with royalty obligations.

SANDEEP V. MARNE, J.

1. Plaintiffs have filed the present Interim Application seeking stay on termination notice dated 14 August 2025 seeking to terminate the Master Franchise Agreement dated 1 March 2018 (MFA of 2018). Plaintiff has also sought temporary injunction to restrain Defendants from obstructing or interfering with Plaintiffs’ performance of MFA of 2018, Territory Assignment and Relinquishment Agreement dated 26 March 2018 and the Assignment and Novation Agreement dated 23 March 2018. Plaintiffs have also sought disclosure against Defendants about execution of any agreement with any entity having effect of obstruction/interference with performance of MFA of 2018, Territory Assignment and Relinquishment Agreement dated 26 March 2018 and the Assignment and Novation Agreement dated 23 March 2018. Plaintiffs have also sought temporary injunction to restrain Defendant Nos.3 to 5 from acting in furtherance of Agreement dated 20 November 2024 having the effect of assigning selling transferring or conveying rights and obligations of Defendant Nos.1 and 2 under MFA of 2018. Plaintiffs have also temporary injunction against Defendant Nos.3 to 5 for establishing business pertaining to Direct Hair Implantation related products and services in the Assigned Territories or from interfering in the Plaintiffs franchise business under MFA of 2018.

2. Brief facts leading to filing of the Suit are stated thus:

Plaintiff No.2 claims to be a reputed Doctor and Plastic Surgeon specialized inter alia in hair transplantation and Plaintiff No.2 is partner of Plaintiff No.1 Limited Liability Partnership (LLP). Defendant No.2 which has been subsequently novated by Defendant No.1 in 2021, has innovated Direct Health Implantation (DHI system) and has developed requisite instruments and products and is also owner of intellectual properties relating to DHI system. In the year 2009-2010 Defendant No.2 evinced intention to appoint a Master Franchise for the territory of India. Defendant No.4 and 5 were engaged in the business inter alia of providing luxury day spa services who are being referred to by Plaintiff as ARS Group. According to Plaintiff ARS group approached Defendant No.2 for securing franchise business from Defendant No.2. Accordingly, a joint venture was formed between Plaintiff, Defendant No.2 and Defendant No.4 vide Memorandum of Understanding dated 29 January 2010 for the purpose of providing hair restoration and allied services in India through Defendant No.3 which incorporated on 25 March 2010.

3. Master Franchise Agreement dated 26 May 2010 (MFA of 2010) was executed between Defendant No.2 and Defendant No.3 thereby granting exclusive license to Plaintiff No.1 to operate DHI franchise business in India for 10 years. A Joint Venture Agreement dated 25 June 2010 between Defendant No.4 and Plaintiffs for implementation of DHI franchisee. Differences occurred between Plaintiff and ARS group which laid to execution of Settlement Agreement dated 14 October 2017 between Plaintiffs, Defendant No.3 and Defendant No.5 under which Plaintiffs were granted Territories of Maharashtra, Gujarat, Madya Pradesh, Chhattisgarh, Goa, Orissa, Bihar, and Union Territories of Daman and Diu and Dadra Nagar Haveli (assigned Territories) while rest of the India was left with Defendant No.3 and 4. Plaintiffs divested of their shareholding in Defendant No.3 on consideration of Rs.1.82 crores. In accordance with terms of settlement, MFA of 2018 was executed between Plaintiff No.1 and D