Conducting Agreements in India: Judicial Interpretations on Arbitration, Licenses, and Disputes

What Is a Conducting Agreement in India?

In the realm of Indian business and contract law, terms like 'conducting agreement' often arise in contexts involving hotels, restaurants, educational facilities, and other operational setups. But what exactly is a conducting agreement? If you've encountered this phrase in legal documents or business dealings, you're not alone in seeking clarity. While it may sound straightforward, it's not a rigidly defined term in the Indian judiciary system. Instead, it typically refers to arrangements where one party conducts business or activities on premises or under specific terms provided by another. This blog post delves into its definition, requirements, real-world examples, and common legal pitfalls, drawing from judicial precedents and legal principles.

Defining Conducting Agreements: Not a Standard Legal Term

A conducting agreement is not a specific legal term in the Indian judiciary system. However, legal documents and case law illuminate agreements tied to conducting specific activities or businesses. These often overlap with arbitration agreements, license arrangements, or operational contracts in sectors like hospitality. 2023 0 Supreme(SC) 1055

Key characteristics emerge from arbitration-focused documents:- Related to Defined Legal Relationships: These agreements must pertain to a defined legal relationship, whether contractual or non-contractual. 2023 0 Supreme(SC) 1055 2022 0 Supreme(SC) 401- Written Form Required: They need to be in writing, encompassing signed documents, exchanged communications, or statements of claim and defense. 2023 0 Supreme(SC) 1055 2022 0 Supreme(SC) 401- Clear Intention: Parties must demonstrate an intent to resolve disputes via arbitration or adhere to the terms. 2023 0 Supreme(SC) 1055- Implied Consent for Non-Signatories: A non-signatory may be bound if referenced and their conduct shows implied consent. 2023 0 Supreme(SC) 1199 2019 7 Supreme 546

In essence, conducting agreements framework revolves around these elements, providing a structure for business conduction while embedding dispute resolution mechanisms.

Arbitration Agreements: The Core Connection

Much of the legal discourse links conducting agreements to arbitration agreements, where parties agree to arbitrate disputes. For instance, the documents emphasize that such pacts must stem from a 'defined legal relationship.' 2023 0 Supreme(SC) 1055 2022 0 Supreme(SC) 401

The agreement must be in writing, which can include signed documents, exchanges of communication, or statements of claim and defense. 2023 0 Supreme(SC) 1055 2022 0 Supreme(SC) 401

This written intent ensures enforceability, particularly when activities like examinations or business operations are involved.

Real-World Examples from Indian Case Law

Conducting agreements frequently appear in hospitality and commercial disputes. Here's how courts have interpreted them:

Educational and Charitable Contexts

In one case, a Facilities Agreement between an educational institution and a company required the latter to provide premises for conducting examinations. 2021 0 Supreme(SC) 847
Another involved a charitable organization conducting a business to fund charity and education objectives. 1978 0 Supreme(SC) 184

These illustrate conducting agreements as operational pacts for specific purposes.

Hotel and Restaurant Businesses

Conducting agreements are commonplace in hotels, often styled as arrangements where one party 'conducts' the business on another's premises.

In a trade mark dispute, the plaintiff operated restaurants under a Conducting Agreement that ended in December 2013. The court examined whether marks like 'Carter’s Blue' conferred exclusivity, ruling that composite mark registration protects the whole, not parts, and granted injunctions against similar uses like 'Carter’s Express.' 2016 0 Supreme(Bom) 766
Courts have reclassified some as license agreements. For example, the conducting agreement was in fact nothing but licence agreement. Evidence like independent licenses, sales tax assessments, and profit appropriation showed the conductor operated independently. 2006 0 Supreme(Bom) 760
In rent control matters under the Bombay Rents, Hotel and Lodging House Rates (Control) Act, 1947, conducting agreements were deemed leave and license pacts, vesting exclusive jurisdiction in Small Causes Courts. Sections 15-A and 28 protected licensees as deemed tenants post-1973 amendments. 2006 0 Supreme(Bom) 760 2006 0 Supreme(Bom) 747

It is now settled law that in case of the leave and licence agreement or a conducting agreement what is required to be seen by the Court is the true and correct intention of the parties at the time of executing the said agreements. 2006 0 Supreme(Bom) 760

Common Disputes: Force Majeure, Extensions, and Termination

Disputes often center on term extensions, payments, and external events.

Force Majeure and COVID-19

In a City Civil Court appeal, the appellant invoked Article 19 (Force Majeure) during the pandemic, seeking exemption from fees under a conducting agreement. The court clarified: The force majeure clause allows for termination of contract obligations due to external factors but does not automatically extend the contract term without mutual written agreement. Article 16 governed renewal by mutual consent, and no modification evidence existed per Article 32. The appeal was dismissed. 2023 Supreme(Online)(Bom) 14056

Oral Extensions and Termination

Another case involved a hotel conducting agreement where the plaintiff claimed an oral extension. The court held: The burden of proof lies with the plaintiff to establish existence of oral assurance to extend the agreement. Time being of the essence, termination for non-payment was valid.

Pradeep Gajanan Rane vs Mohan P. Shetty & Ors.

Part Performance and Possession

Under Transfer of Property Act, 1882 - Section 53-A, possession as a conductor does not equate to part performance for assignment unless readiness to pay consideration is proven. The defendant was not put in possession in part performance of the agreement... but was only in the suit premises as Conductor. 2008 0 Supreme(Bom) 1736

In renegotiated deals, separate Business Conducting Agreement and Service and Amenities Agreement set minimum rents, highlighting structured terms. 2010 0 Supreme(Guj) 24

Key Requirements for Validity

To draft or enforce a conducting agreement effectively:1. Ensure Written Form with clear terms on duration, payments, and termination. 2023 0 Supreme(SC) 10552. Specify Intentions for arbitration or dispute resolution. 2023 0 Supreme(SC) 10553. Address Force Majeure explicitly, noting it typically allows termination, not extension. 2023 Supreme(Online)(Bom) 140564. Clarify Nature: Distinguish from leases to avoid rent control implications; courts probe true intent. 2006 0 Supreme(Bom) 7605. Mutual Consent for Changes: Oral promises rarely suffice.

Pradeep Gajanan Rane vs Mohan P. Shetty & Ors.

Conclusion and Key Takeaways

While 'conducting agreement' lacks a statutory definition, it embodies practical business arrangements, often intertwined with arbitration, licenses, and hospitality operations. Courts emphasize written terms, party intent, and evidence over labels. Common pitfalls include assuming automatic extensions via force majeure or unproven oral deals.

Key Takeaways:- Primarily operational pacts, akin to licenses in hotels/restaurants.- Link to arbitration requires defined relationships and writing. 2023 0 Supreme(SC) 1055 2022 0 Supreme(SC) 401- Disputes hinge on contract terms; seek mutual amendments.- Consult professionals for jurisdiction (e.g., Small Causes Court for licenses).

This post provides general insights based on case law and is not legal advice. For specific situations, consult a qualified Indian lawyer. Always review agreements thoroughly to align with your intentions.

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