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2021 Supreme(Del) 1556

IN THE HIGH COURT OF DELHI AT NEW DELHI
C.Hari Shankar, J.
Vidya Mandir Classes Limited - Appellant
Versus
Harsh Tiwary - Respondent
Original Miscellaneous Petition (I) (COMM.) No. 353 of 2021, Miscellaneous Application No. 14193 of 2021
Decided On : 01-12-2021

The court emphasized the arbitrability of certain disputes and the grant of injunctions based on a prima facie case of unauthorized trademark use.

Headnote:

Arbitration - Franchise Agreement - Section 9 of the Arbitration and Conciliation Act, 1996 - 2, 6.1.9, 6.1.17, 9.1, 10.4, 14.1, 14.2 and 17 - The court restrained the respondent from using the petitioner's registered trademark 'VIDYAMANDIR CLASSES' and 'VMC' in connection with providing educational/coaching/tutorial services, and directed the return of proprietary material provided to the respondent.

Fact of the Case:

The petitioner provided tutorial and coaching services under the brand name 'VIDYAMANDIR CLASSES' through a Franchise Agreement with the respondent. The petitioner alleged that the respondent collected fees in cash and did not deposit them in the designated bank account, leading to termination of the agreement. The respondent continued to use the petitioner's trademark after termination, prompting the petitioner to seek arbitration.

Finding of the Court:

The court found that the issues of default and termination were arbitrable disputes and should be examined by the arbitrator. However, the court found a prima facie case of unauthorized use of the petitioner's trademark by the respondent, leading to the grant of injunctions and the return of proprietary material.

Issues: The issues involved the alleged default by the respondent in complying with the agreement, the validity of the termination, and the unauthorized use of the petitioner's trademark by the respondent.

Ratio Decidendi: The court held that issues of default and termination were arbitrable and should be left for consideration by the arbitrator. However, the court found a clear prima facie case of unauthorized use of the petitioner's trademark, leading to the grant of injunctions and the return of proprietary material.

Final Decision: The petition was allowed, and the respondent was restrained from using the petitioner's registered trademark 'VIDYAMANDIR CLASSES' and 'VMC' in connection with providing educational/coaching/tutorial services. The respondent was also directed to return all proprietary material provided by the petitioner.

JUDGMENT

C. Hari Shankar, J. - Given the urgency of the matter, short notice had been issued in this petition.

2. Pleadings in this petition had been completed and learned Counsel for the parties have also filed written submissions. They have also been heard at length. Given the nature of the controversy, the Court proceeds to dispose of the matter with the consent of learned Counsel for the parties.

3. This petition, preferred under Section 9 of the Arbitration and Conciliation Act, 1996, ("the 1996 Act"), seeks pre-arbitral interim reliefs.

4. The petitioner provides tutorial and coaching services for students who desire to seek admission to the Indian Institutes of Technology (IITs). The petitioner has been providing these services under the moniker "VIDYAMANDIR CLASSES".

5. On 29th September, 2017, the petitioner and the respondent entered into a Franchise Agreement, whereunder the petitioner granted a license to the respondent to use the brand name "VIDYAMANDIR CLASSES" of the petitioner, and to make use of its teaching material for providing coaching classes to IIT aspirants. The agreement was to remain in force for a period of five years, i.e. till 28th September, 2022. The entire period was to be treated as a lock-in period.

6. Clauses 2, 6.1.9, 6.1.17, 9.1, 10.4, 14.1, 14.2 and 17 of the agreement read thus:

    "2. SCOPE OF AGREEMENT

    2.1 Subject to the terms and conditions of this Agreement and in consideration of these presents the Franchisee hereby accepts to run the Center in accordance with the Guidelines and discharge all Franchisees Functions in accordance with the this Agreement as required by the Franchisor.

    2.2 It is hereby clarified that notwithstanding anything to the contrary contained herein, the Franchisee is not permitted to use the name of the Franchisor and/or the Trade Names / Trade Descriptors for business of the Franchisee or any other entity or other area of business, on the internet/ web/ print or any other media for any purpose which the Franchisee has not specifically been bestowed permission to conduct under this Agreement.

    2.3 The non-exclusive license to use the Brand is limited to the period of this Agreement and/ or its earlier determination/ termination as provided hereinafter.

    2.4 Franchisee will market the product in local area with the permission and approval of Franchisor and acquire good number of students, they will be responsible for all the operational Cost and expenses to run the Centre and vmc will share the Revenue as mentioned in the Schedule mentioned below.

    2.5 Franchisee will be responsible to get all prior permissions from local authority to operate the centre in that vicinity. He will also be responsible for routine operation of the centre and will also ensure that class should be conducted as per pre decided schedule and course should be completed as per schedule shared by VMC.

    2.6 Franchisee will be bound by the quality parameters of VMC which may change as required in future and the same will be informed either in writing or Electronic mode.

    2.7 Franchisor has assured the Franchisee that whenever VMC will open Physical Centre in the same territory or in any other Territory First Preference will be given to Franchisee.

    *****

    6.1.9 The Franchisee shall have no claim, lien, right of retention, sale or set-off or other right, title or interest whatsoever in or on any data, books, brochures, booklets, agreements, forms, client list, supplier list, records, reports, statements, slips, files, copies, Schemes, and other such items as may be intimated by the Franchisor to the Franchisee from time to time, (hereinafter collectively referred to as "Items") which come into the Franchisees power or possession under, pursuant to or in connection with this Agreement for any reason whatsoever and upon demand by the Franchisor the Franchisee shall forthwith deliver all Items to the Franchisor, retaining only such documents or copies thereof as it may, by law, be required to so retain.

    *****

    6.1.17 The Fr

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