MANU/MH/0359/2009 Equivalent Citation: 2009(4)BomCR139 IN THE HIGH COURT OF BOMBAY Arbitration Petition (L) No.

356 of 2009 Decided On: 08.05.2009 Appellants: Nandos Indage Restaurants Pvt. Ltd. Vs. Respondent: Nando's Resources B.V. and Anr. Hon'ble Anoop V. Mohta, J. Judges/Coram:

Counsels: For Appellant/Petitioner/Plaintiff: Sunip Sen and Nishad G. Kulkarni, Advs., i/b., Legasis Partners Pvt. Ltd. For Respondents/Defendant: D.J. Khambata, Sr. Counsel and Nandini Khaitan, Adv., i/b., Khaitan and Co. Subject: Arbitration Catch Words Mentioned IN Acts/Rules/Orders: Arbitration and Conciliation Act, 1996 - Section 9, Arbitration and Conciliation Act, 1996 - Section 35; Specific Relief Act, 1966 ;Arbitration Act ;Code of Civil Procedure (CPC) ;Bombay High Court (Original Side) Rules, 1980 - Rule 803 Cases Referred: Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd. (2007) 7 S.C.C. 125; Goyal MG Gases Pvt. Ltd. v. Air Liquide Deutschland GmbH and Ors.MANU/DE/0098/2005; MSM Satellite (Singapore) Pte. Ltd. v. Board of Control for Cricket in India Arbitration Petition (Ld) No. 284 of 2009 Citing Reference:

Mentioned

Case Note: Arbitration Enforcement of Agreement Security - Sections 9 and 35 of the Arbitration and Conciliation Act, 1996 and Rule 803 of Bombay High Court (Original Side) Rules, 1980 - Whether, under Section 9 of Act, Court can pass order in present facts and circumstance of Case against Respondent No. 2 who is not a party to Agreement in question? Held, initially this Court has passed interim order against both Respondents as pass order of injunction restraining respondents from creating any third party rights in respect of exclusive rights conferred upon petitioner under master franchise agreement executed between parties hereto Therefore, relief basically can be granted only against Respondent No. 1 and not against Respondent No. 2 - Submission that in view of clause 2 and admittedly, Respondent No. 2 is owner of brand, petitioner is entitled to claim relief against respondent No. 2 is unacceptable - Franchise agreement has always different commercial facets and aspects, and therefore, knowing this fully, parties entered into such type of agreement - Admittedly, even at time of entering into this agreement respondent No. 2 was not made party and he is not even signatory to this agreement - Parties are well aware of nature and purpose of such franchising contract - All parties signatories to this agreement are necessary parties for any relief under Section 9 of Act Petitioner, at this stage, nowhere able to demonstrate how they can enforce this contract against Respondent No. 2 or how they can execute any award even if, is passed in their favour, against Respondent No. 2 - Submission based upon later part of Section 9 Act and Section 35 of Act, read with Rule 803 of Rules, 1980 is that in view of these provisions, Court under Section 9 of Act, can pass appropriate order or directions including interim order or protection even against third person - In present facts as noted, there is no such case made out to pass any interim order or directions against Respondent No. 2 - In result, interim order granted against Respondent No. 2 is stand vacated - It will continue against Respondent No. 1 only - Petitioner wants to file rejoinder to reply filed by Respondent No. 1 to oppose interim order as already granted Matter be listed for hearing on interim relief and admission on prescribed date Interim order against Respondent No. 1 only shall continue till then JUDGMENT Anoop V. Mohta, J. 1. The Petitioner has entered into a Master Franchise Agreement with Respondent No. 1 (the franchisor). Respondent No. 2 is a foreign origin company and the owner, who has granted the rights to respondent No. 1 to use the specialised experience and skill in the establishment and operation of distinctive fast food and the restaurant outlets each of which trades under the name and style as "Nando's Chickenland" using the system and the trademarks. The necessary Clause (2) is reproduced as under: 2.1 The FRANCHISOR possesses in terms of a master license agreement with Nando's International Limited and has been granted the rights to use and grant others the right to use the specialised experience, knowhow and skill in the establishment and operation of distinctive fast food and restaurant outlets each of which trades under the name and style of "Nando's

Chickenland" using the system and the trademarks. 2. Admittedly, this agreement in question is between the Petitioner and Respondent No. 1 and the Sureties. Therefore, the parties are bound by the Agreement including Arbitration Clause. The Petitioner has, therefore, invoked Section 9 of the Arbitration and Conciliation Act, 1996 (for short, "the Act"). The purpose and scope of Section 9 of the Act is to grant interim measures order to protect the property / subject matter of the agreement. 3. To grant any such orders of protection, the Court under Section 9 of the Act needs to consider various aspects and principles as laid down under the provisions of Civil Procedure Code. (C.P.C.) and the Specific Relief Act, 1966. (Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd. reported in MANU/SC/2936/2007: AIR2007SC2563 ). It does not mean that the scope and purpose of the Arbitration Act need to be overlooked while passing any interim order or protection. It also means that while granting any order under Section 9 of the Act, those principles must be taken note of. 4. Therefore, the parties to the Arbitration agreement/clause are necessary and proper parties in such proceedings. The arbitration itself means the consent of the parties right from the constitution of the Arbitral Tribunal itself because the parties have agreed that in case of any difference and dispute between them, they would appoint, by consent, an arbitral tribunal consisting of an arbitrator/arbitrators. Therefore, in my view, while invoking Section 9 of the Act and while passing any order, it is necessary that the Court must consider who are the parties to the Arbitration agreement so that appropriate and effective order can be passed. 5. The point is that whether, under Section 9 of the Act, the Court can pass order in the present facts and circumstance of the Case against Respondent No. 2 who is not a party to the Agreement in question. 6. This Court on 16th April, 2009, after considering the averments and urgency shown, has passed the interim order against both the Respondents which is as under:

(a) that pending the initiation, hearing and final disposal of arbitration proceedings and making of the Award and the implementation thereof, this Hon'ble Court be pleased to pass an order of injunction restraining the respondents from; (i) creating any third party rights in respect of the exclusive rights conferred upon the petitioner under the master franchise agreement dated October 18, 2004 executed between the parties i.e. Exhibit "A" hereto.
7. This prayer itself contemplates the Arbitration Proceedings and the award between the parties. The protection prayer is pending the Arbitration proceeding and till the making of the award, not to create any third party right or interest, based upon the Agreement dated 18th October, 2004, executed between the petitioner and respondent No. one only. (Exhibit "A" ). Admittedly, Respondent No. 2 is not a party to the Agreement. The relief, therefore, basically can be granted only against Respondent No. 1 and not against Respondent No. 2.

8. There is no case or any supported material on record to justify that Respondent No. 2 is a necessary party in this proceeding. The submission that in view of clause 2 as reproduced above, and admittedly, Respondent No. 2 is the owner of the brand the Petitioner is entitled to claim relief against Respondent No. 2 is unacceptable. 9. The franchise agreement has always different commercial facets and aspects, and therefore, knowing this fully, the parties entered into such type of agreement. Admittedly, even at the time of entering into this agreement Respondent No. 2 was not made party and he is not even signatory to this agreement. The parties are well aware of the nature and purpose of such franchising contract. All the parties signatories to this agreement are the necessary parties for any relief under Section 9 of the Act. 10. The Petitioner, at this stage, nowhere able to demonstrate how they can enforce this contract against Respondent No. 2 or how they can execute any award even if, is passed in their favour, against Respondent No. 2. 11. The submission based upon the later part of Section 9 and Section 35 of the Act, read with Rule 803 of the Bombay High Court (Original Side) Rules, 1980 is that in view of these provisions, the Court under Section 9 of the Act, can pass appropriate order or directions including interim order or protection even against the third person. 12. Those provisions are as under:

Section 9 ... and the court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it. Section 35 Finality of arbitral awards. Subject to this Part an arbitral award shall be final and binding on the parties and persons claiming under them respectively. Rule 803E. Notice of Filing Application to persons likely to be affected. Upon any application by petition under the Act, the Judge in chambers shall, if he accepts the petition, direct notice thereof to be given to all persons mentioned in the petition and to such other persons as may seem to him to be likely to be affected by the proceedings, requiring all or any of such persons to show cause, within the time specified in the notice, why the relief sought in the petition should not be granted.
13. I am of the view that these provisions do not apply automatically. The Court needs to consider facts and circumstances of each case. In the present facts as noted, there is no such case made out to pass any interim order or directions against Respondent No. 2. 14. The learned Counsel appearing for the Petitioner has relied on Goyal MG Gases Pvt. Ltd. v. Air Liquide Deutschland GmbH and Ors. reported inMANU/DE/0098/2005, and an unreported Judgment of this Court in Arbitration Petition (Ld) No. 284 of 2009, MSM Satellite (Singapore) Pte. Ltd. v. Board of Control for Cricket in India dated 23rd March,

2009. Admittedly, those were not cases based upon the peculiar Master Franchise Agreement. The facts and circumstances are totally distinct and distinguishable. When the parties moved an application under Section 9 of the Act to protect the property or subject, and before that or during that proceedings, if the subject property itself is transferred or vested with third person illegally, in such exceptional cases and in the interest of justice, the Court may pass appropriate order and to preserve or protect the subject matter/property. In a given case such order may be against the person who is not party to the agreement. There is no such case made out in the case in hand. Therefore, these provisions as well as, the Judgments, in my view, are of no assistance to the Petitioners, to have the interim order as granted exparte, to continue against Respondent No. 2. 15. Those provisions, need not be read in isolation. Once the parties entered into an Arbitration clause and then invoked Section 9 of the Act and other proceedings, the Arbitration Act to be taken note of first and then the general provisions of law. Once, the Arbitration is invoked, party cannot submit its say that provisions of the section and scope of the purpose of the Arbitration Act may be overlooked and the General provisions of the CPC or Specific Relief Act, be taken note of. In my view, both need to read together. In view of this matter, considering the scope and purpose of Arbitration Proceedings, this is not the case where any relief can be granted including the interim measures or protection to the Petitioner against Respondent No. 2. 16. In the result, the interim order dated 16th April, 2009 granted against Respondent No. 2 is stand vacated. It will continue against Respondent No. 1 only. 17. The learned Counsel appearing for the Petitioner submitted to stay this order. Considering the reasoning given above, I am not inclined to grant the stay of this order. 18. The Petitioner wants to file rejoinder to the reply filed by Respondent No. 1 to oppose the interim order as already granted on 16th April, 2009. The matter be listed for hearing on interim relief and admission on 12th June, 2009. The interim order against Respondent No. 1 only shall continue till then. 19. S.O. to 12th June, 2009.

Manupatra Information Solutions Pvt. Ltd.