The court upheld the exclusive jurisdiction of Kolkata for arbitration proceedings as per the agreement, allowing the appointment of an arbitrator despite parallel proceedings in another jurisdiction.

JUDGMENT :

Shampa Sarkar, J.

1. This is an application under Section 11 (5) and (6) of the Arbitration and Conciliation Act 1996, for appointment of an Arbitrator. The case of the petitioner was that the respondent No.1 entered into a Unit Franchise Agreement with the petitioner on January 1, 2022, which was valid for two years from the effective date of the agreement, that is, January 1, 2022 or from the day of commencement of business. The terms and conditions were mutually agreed between the parties.

2. The said agreement was executed in the office of the petitioner within the jurisdiction of this court. It was agreed that the respondent No.1 would act as the franchisee of the petitioner in the States of Jammu and Kashmir, Himachal Pradesh and Punjab and for the same purpose, it would make a payment of royalty of Rs.300 per metric tonne along with applicable taxes for the first four months and thereafter, would pay an amount of Rs.400 per metric tonne on a monthly basis along with taxes.

3. On the request of the respondent No.1, the petitioner deployed its own sales team in the States of Jammu and Kashmir, Himachal Pradesh and Punjab and it was agreed between the parties that the cost for deployment of the sales team would be borne by the respondent No.1. According to the petitioner, it was obligatory on the part of the respondent No.1 to provide proper report of the sales statement periodically. It was contended by the petitioner that various discrepancies were detected by the petitioner with regard to sale of the products. The respondent No.1 did not take any consent or approval for relocating the manufacturing operations and the unit was given on lease to a third party, which started that manufacturing activity for the products at Bardi, Himachal Pradesh. This was in violation of the terms and conditions of the agreement.

4. Accordingly, it is alleged that the manufacturing of the materials abruptly stopped and the brand value and the reputation of the petitioner suffered. According to the petitioner, it had incurred huge loss and damages to the tune of 40 lakhs. When the petitioner confronted the respondent No.1 about the illegal activities, the respondent No.1 allegedly accepted the breaches and requested the petitioner to permit the respondent No. 2, a group company of the respondent No.1, having a common promoter to discharge the obligations of the said agreement. By an email dated March 14, 2022, the respondent No.2 requested the petitioner to amend the agreement and to incorporate the name of the respondent No.2 therein, and also requested the petitioner to allow the operation of the manufacturing unit at Bardi, Himachal Pradesh. The respondent No.2 assured to abide by the terms and conditions and also proposed to execute a supplementary agreement. It was proposed that the production of the materials would commence immediately after the renewal of the said agreement.

5. Having no other alternative, the petitioner contended to have accepted such proposition and a supplementary agreement was executed on April 25, 2022, between the parties, for a further period of two years on similar terms and conditions. The supplementary agreement was made a part of the original franchise agreement. According to the petitioner, the respondent No.2 failed to perform its obligations and the entire production was stopped till May 2022. This jeopardized the entire business cycle of the petitioner in the said States. Due to non-performance on the part of the respondent No.2 as well, the petitioner suffered loss and damages, which led to loss of distributors, dealers and customers.

6. The petitioner sent various emails, asking the respondents to release the wages and salary of the sales team deployed by the petitioner, but the respondents deliberately paid no heed to such request. Lastly, the petitioner had no other alternative, but to terminate and revoke the franchise agreement dated January 1, 2022, as well as the supplementary agreement dat