M/S KAR CARE v. M/S 3M INDIA LIMITED, Karnataka High Court, Judgment, Law, casemine.com

Factual and Procedural Background

The petitioner, M/s Kar Care, a partnership firm, entered into a Franchise Agreement dated 06.12.2018 with the respondent, M/s 3M India Limited. The agreement contained an arbitration clause under Article 32, providing for resolution of disputes by a sole arbitrator nominated by the franchisor. Upon arising of disputes, the petitioner invoked the arbitration clause by issuing a notice dated 21.12.2020 and nominated its arbitrator. The respondent did not reply to this notice. The petitioner filed this Civil Miscellaneous Petition under Section 11(5) of the Arbitration and Conciliation Act, 1996, seeking appointment of a sole arbitrator to resolve the disputes and outstanding issues between the parties.

The respondent appeared and filed objections, contending that the original agreement was superseded by a subsequent agreement dated 31.12.2018. However, the respondent's counsel conceded that the arbitration clause in the later agreement was substantially the same as that in the earlier agreement.

Legal Issues Presented

Whether the Court should appoint a sole arbitrator to adjudicate the disputes between the parties under the arbitration clause contained in the Franchise Agreement.

Whether the subsequent agreement dated 31.12.2018, which allegedly supersedes the earlier agreement, affects the appointment of the arbitrator or the arbitration proceedings.

Arguments of the Parties

Petitioner’s Arguments

The petitioner relied on the Franchise Agreement dated 06.12.2018 containing an arbitration clause under Article 32, providing for sole arbitration by a nominee of the franchisor.

The petitioner issued a notice invoking arbitration and nominated an arbitrator, but received no response from the respondent.

The petitioner sought appointment of a sole arbitrator under Section 11(5) of the Arbitration and Conciliation Act, 1996 to resolve the disputes.

Respondent’s Arguments

The respondent contended that the agreement dated 06.12.2018 was superseded by a subsequent agreement dated 31.12.2018.

However, the respondent’s counsel admitted there was no material difference in the arbitration clause between the two agreements, though other clauses may differ slightly.

The respondent submitted that the appointment of an arbitrator could proceed in terms of the arbitration clause contained in the later agreement.

Court's Reasoning and Analysis

The Court examined the arbitration clauses contained in both the original Franchise Agreement dated 06.12.2018 and the subsequent agreement dated 31.12.2018. The Court noted that the arbitration clauses in both agreements were substantially identical, particularly in providing for arbitration by a sole arbitrator nominated by the franchisor, with Bangalore as the seat and venue of arbitration. The Court observed that the respondent’s counsel conceded the arbitration clause remained materially unchanged despite the subsequent agreement. Given this, the Court found it appropriate to appoint a sole arbitrator to resolve the disputes under the aegis of the Arbitration Centre attached to the Court, leaving all contentions regarding the agreements open for the arbitrator to decide. The Court also noted the existence of similar applications and directed that the appointed arbitrator hear all related matters together.

Holding and Implications

The petition is allowed.

The Court appointed Sri Rama Rao Kulkarni, retired District Judge, as the sole arbitrator to adjudicate the disputes between the parties under the Arbitration Centre attached to the Court. The Registry was directed to forward a copy of the order to the Director of the Arbitration Centre for necessary action. The arbitrator is also directed to consolidate and take up similar related matters together.

The decision directly facilitates the commencement of arbitration proceedings but does not set any new legal precedent or address the substantive merits of the disputes. The appointment of the arbitrator ensures that the arbitration process mandated under the agreement(s) proceeds in accordance with the Arbitration and Conciliation Act, 1996.

M/S KAR CARE v. M/S 3M INDIA LIMITED

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CMP No. 162 of 2021

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 30^TH DAY OF JUNE, 2022

BEFORE

THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ

CIVIL MISC. PETITION NO. 162 OF 2021

BETWEEN:

M/S KAR CARE

A PARTNERSHIP FIRM AT

NO.1 AND 2, VAISHNAVI LAYOUT

VIDYARANYAPUA, BENGALURU-560097

REP. BY ITS MANAGING PARTNER

SRI. RAMAKRISHNA RAO. P

…PETITIONER

(BY SRI. BAPAT SAMPATH VINAYAKA RAO, ADVOCATE)

AND:

M/S 3M INDIA LIMITED REGD. OFFICE PLOT NO.48-51

ELECTRONICS CITY, HOSUR ROAD

BENGALURU-560100

ALSO AT:

CORPORATE OFFICE: CONCORDE BLOCK

UB CITY, 24, VITTALMALLYA ROAD

BENGALURU-560001

REP BY ITS MANAGING DIRECTOR

…RESPONDENT

(BY SMT. USHA.L, ADVOCATE FOR

SRI. SHUJATH AHMED, ADVOCATE)

THIS CMP IS FILED UNDER SECTION 11(5) OF THE

ARBITRATION AND CONCILIATION ACT, 1996, PRAYING TO TO

APPOINT A SOLE ARBITRATOR TO RESOLVE THE DISPUTES AND

OUTSTANDING ISSUES BETWEEN THE PARTIES IN ACCORDANCE

WITH THE PROVISIONS OF THE FRANCHISE AGREEMENT DATED

06.12.2018 AND IN ACCORDANCE WITH ARBITRATION AND

CONCILIATION ACT, 1996 IN THE INTEREST OF JUSTICE.

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THIS CMP COMING ON FOR ADMISSION, THIS DAY THE

COURT MADE THE FOLLOWING:

ORDER

1. The petitioner is before this Court seeking for the following reliefs:

"To appoint a sole arbitrator to resolve the disputes and outstanding issues between the parties in accordance with the provisions of the Franchise Agreement dated 06.12.2018 and in accordance with Arbitration and Conciliation Act, 1996 in the interest of justice".

2. The petitioner claims that the petitioner had entered into an agreement dated 06.12.2018 with the respondent, which is governed by an arbitration clause in terms of Article 32 thereof, which is reproduced hereunder for easy reference:

Article 32

APPLICABLE LAW AND SETTLEMENT OF DISPUTES

1. This agreement and the rights and obligations of the Parties hereunder shall be construed and interpreted in accordance with Indian substantive and procedural laws, applicable to Agreements made and to be performed entirely therein. Subject to Article 32(2), the courts at Bengaluru shall have the jurisdiction over disputes and differences arising out of this Agreement.

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from receipt of the written notice (setting out the dispute or claim) by the other part, the complaining party may issue a notice of reference, invoking settlement of such dispute through arbitration. Arbitration: All disputes and differences arising between the parties hereto as also between the Franchisor and the Franchisee, including any dispute or difference in regard to the existence, validity, interpretation, breach or termination of this Agreement), or in regard to any claim of one party against the other or in regard to the rights and obligations of any party or parties under this contract or otherwise shall be referred to under the provisions of the Arbitration and Conciliation Act 1996 or its modifications thereof absolutely and fully. The parties hereby agree that all disputes shall be referred to sole arbitrator to be nominated by Franchisor. The sole arbitrator shall have summary powers and shall be bound to give reasons for his holdings. The decision of arbitrator shall be final and binding on both the Parties. The seat and venue of Arbitration shall be Bangalore. English shall be the language of the arbitral proceedings. Nothing in this Article shall be construed as preventing either Party from seeing appropriate interim relief(s) in any competent court in Bangalore. It is made clear that Bangalore courts would have exclusive jurisdiction to entertain all petitions from either Party seeking appropriate interim relief(s) and challenge to the arbitral award.

3. The disputes having been arisen, the petitioner had invoked the arbitration clause vide notice dated 21.12.2020 and nominated its arbitrator. Despite the same being served, no reply was received. Hence, the petitioner is before this Court seeking for the aforesaid reliefs.

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4. Notice having been ordered, the respondent has entered appearance and filed its Statement of Objections contending that the agreement relied upon by the petitioner is superseded by another agreement dated 31.12.2018.

5. On enquiry whether there is any material difference from earlier agreement produced by the petitioner, learned counsel for the respondent fairly submits that there is no such difference as regards the arbitration clause but however submits that as regards the other clauses there may be slight differences. The arbitration clause in the agreement produced by the respondent dated 31.12.2018 at Article 32 reads as under:-

Article 32

APPLICABLE LAW AND SETTLEMENT OF DISPUTES

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over disputes and differences arising out of this Agreement.

2. The Parties shall attempt in good faith to resolve any dispute, difference or claim arising out of or in relation to this Agreement through mutual discussion. In case it is not resolved within 30 days from receipt of the written notice (setting out the dispute or claim) by the other part, the complaining party may issue a notice of reference, invoking settlement of such dispute through arbitration. Arbitration: All disputes and differences arising between the parties hereto as also between the Franchisor and the Franchisee, including any dispute or difference in regard to the existence, validity, interpretation, breach or termination of this Agreement), or in regard to any claim of one party against the other or in regard to the rights and obligations of any party or parties under this contract or otherwise shall be shall be referred to under the provisions of the Arbitration and Conciliation Act 1996 or its modifications therof absolutely and fully. The Parties hereby agree that all disputes shall be referred to the sole arbitrator to be nominated by Franchisor. The sole arbitrator have summary powers and shall be bond to give reasons for his holdings. The decision of arbitrator shall be final and binding on both the Parties. The seat and venue of Arbitration shall be Bangalore. English shall be the language of the arbitral proceedings. Nothing in this Article shall be construed as preventing either Party from seeing appropriate interim relief(s) in any competent court in Bangalore. It is made clear that Bangalore courts would have exclusive jurisdiction to entertain all petitions from either Party seeking appropriate interim relief(s) and challenge to the arbitral award.

6. In view of the above, she submits that an arbitrator could be appointed to arbitrate the dispute in terms of the agreement produced by the respondent

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leaving all the contentions open. Hence, I pass the following:

ORDER

i. The petition is allowed.

ii. Sri.Rama Rao Kulkarni, retired District Judge of the District Judiciary of the State of Karnataka is appointed as a sole arbitrator to arbitrate the dispute between the parties under the aegis of the Arbitration Centre attached to this Court.

iii. Registry is directed to forward a copy of this order to Director, Arbitration Centre for doing the needful.

iv. There being similar other applications which are also filed and which have been allowed today, the said arbitrator to take up all the three matters together.

Sd/-

JUDGE

Prs*

CMP 162 of 2021

M/S KAR CARE v. M/S 3M INDIA LIMITED

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner’s Arguments

Respondent’s Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

M/S KAR CARE v. M/S 3M INDIA LIMITED

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