The Delhi High Court bench headed by single judge in the case M/S. Breakthrough Concepts Vs M/S. Atrix Group Of Restaurants and Anr. observed and has held that ‘negotiation’ necessitates communication between the involved parties, asserting that a party failing to respond to legal notices from another cannot be considered actively participating in the negotiation process.
Facts of the Case:
In the case, the franchise agreement forged on May 26, 2017 between M/s Kaur Cookies Pvt. Ltd. and Respondent No.1, facilitated by Respondent No. 2. Consequently, M/s Kaur Cookies Pvt. Ltd. underwent a transfer to the Petitioner, through a deed of assignment.
The petitioner in the plea contended that the Respondents approached them for a modification of the royalty and management fee, a request the Petitioner accommodated amidst the challenges posed by the COVID-19 Pandemic, wherein it reduced the fees to Rs.1 lakh per month.
Therefore, the Respondents allegedly defaulted on timely payments, accumulating a due of Rs.11,43,378.33 by February 2021.
The petitioner claimed to have reminded and requested Respondent No. 1 to settle their outstanding liability, with no positive response.
Further, the petitioner asserted that four legal notices, were subsequently dispatched in an attempt to prompt compliance. Despite these efforts, the Respondents allegedly remained non-responsive. Thus, the Petitioner invoked the arbitration clause. The Petitioner approached the Delhi High Court, High Court and has filed an application as stated under Section 11 (5) and section (6) of the Arbitration and Conciliation Act, 1996, the Arbitration Act, wherein seeking the appointment of a Sole Arbitrator to address the dispute s between the parties.
Observations Made By High Court:
The High Court in the case observed and has held that the Petitioner diligently pursued resolution by consistently dispatching demand notices to the Respondents, all of which went unanswered.
The court held that this showed the Petitioner’s earnest attempt to seek a resolution before resorting to court intervention.
The High Court while interpreting the term negotiation held that it is imperative to understand it in a pragmatic context. Thus, the Negotiation necessitates communication between the involved parties, and for it to be effective, it must be a reciprocal exchange.
On the other hand, the respondent failed to actively participate in the negotiation process, as evidenced by their lack of response.
The High Court while acknowledging its limited jurisdiction under Section 11(5) and (6) of the Arbitration Act, emphasized that its role is confined to determining the existence of an arbitration agreement.
The court in the case held that where an agreement between the parties and an arbitrable dispute are admitted, the court should deem it appropriate to refer the matter to arbitration.
The High Court in the case observed and has referred the disputes to an arbitral tribunal.
Therefore, the Delhi International Arbitration Centre was urged to appoint an Arbitrator to preside over and adjudicate the disputes between the parties. The counsel, Advocates Mr. Ansh Singh Luthra, Mr. Harmanpreet Singh Kohli, Ms. Nikhar Luthra and Mr. Madhav Kumar appeared for the Petitioner.
The counsel, Advocate Mr. Gaurav Prakash Pathak represented the respondent.