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THE PROFESSIONAL HAIR SALON AND SPA INDIA PVT LTD v. KS ENTERPRISES AND ORS
Factual and Procedural Background
The petitioner, The Professional Hair Salon and Spa India Pvt Ltd, a company operating salon and spa services under the brand name "Monsoon", filed this petition under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of a Sole Arbitrator to adjudicate disputes arising out of a Franchisee Agreement dated 31st May, 2019. The respondent No.1 is a sole proprietorship which had taken the Monsoon salon under the Franchisee Agreement; respondent Nos. 2 and 3 are described as representatives of respondent No.1.
The petitioner alleged recurring breaches by the respondents from the outset, principally the regular non-payment and delayed payment of monthly royalties of INR 50,000. After repeated alerts and opportunities to rectify, the petitioner terminated the Agreement by letter dated 22nd December, 2021 and issued a legal notice dated 10th February, 2022 seeking overdue royalties. The petitioner subsequently invoked the arbitration clause by a legal notice dated 10th March, 2022 and filed the present petition under Section 11.
The respondents opposed the petition's averments but conceded that the disputes are arbitral in nature and raised no objection to the court appointing an independent arbitrator.
Legal Issues Presented
- Whether this Court should appoint a Sole Arbitrator to adjudicate the disputes between the parties arising out of the Franchisee Agreement dated 31st May, 2019.
Arguments of the Parties
Petitioner's Arguments
- The petitioner operates the "Monsoon" brand and entered into a Franchisee Agreement dated 31st May, 2019 with respondent No.1.
- Respondent(s) repeatedly failed to pay monthly royalties of INR 50,000 on schedule despite being alerted to the defaults.
- Because of persistent non-payment, the petitioner terminated the Agreement on 22nd December, 2021 and issued a legal notice on 10th February, 2022 demanding overdue royalties.
- The petitioner invoked the arbitration clause by legal notice dated 10th March, 2022 and sought appointment of a Sole Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.
Respondents' Arguments
- The respondents vehemently opposed the averments in the petition (specific defensive contentions were not detailed in the opinion).
- However, the respondents conceded the arbitral character of the disputes and stated they had no objection to the appointment of an independent arbitrator by the Court.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court heard learned counsel for the parties and perused the record. Noting the parties' agreement as to the arbitral nature of the disputes and the absence of objection to an appointment, the Court found it appropriate to appoint a Sole Arbitrator to adjudicate the disputes arising from the Franchisee Agreement dated 31st May, 2019. The opinion records procedural directions rather than an extended doctrinal analysis.
The Court additionally directed that the appointed arbitrator must ensure compliance with Section 12(1) of the Arbitration and Conciliation Act, 1996 before entering the arbitration reference, and specified the arbitrator's fees regime and initial case-management timeline.
Holding and Implications
Holding: The Court appointed Ms. Neelakshi Bhadauria, Advocate as Sole Arbitrator to adjudicate the disputes under the Franchisee Agreement dated 31st May, 2019 and disposed of the petition along with any pending applications.
Implications and direct effects on the parties:
- The appointed arbitrator must ensure compliance with Section 12(1) of the Arbitration and Conciliation Act, 1996 before acting.
- The arbitrator's fees shall be as prescribed under the DIAC (Administrative Cost and Arbitrators Fees) Rules, 2018 as amended by notification dated 15th November, 2022.
- The parties are to appear before the arbitrator within 10 days from the date of the order on a mutually fixed date.
- All contentions of the parties are expressly kept open for determination in arbitration.
- The petition is disposed of and the order is to be uploaded on the Court website.
The opinion does not discuss or announce any broader legal precedent beyond these procedural directions; no new precedent was set by the order.
NEUTRAL CITATION NO. 2023/DHC/001845
ARB.P. 1139/2022 Page 1 of 4
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of order : 13th March, 2023
+ ARB.P. 1139/2022
THE PROFESSIONAL HAIR SALON AND SPA INDIA PVT
LTD. ..... Petitioner
Through: Mr.A.P.S. Jadaun, Advocate versus
KS ENTERPRISES AND ORS. .....Respondents Through: Ms.Kashish Sareen, Advocate
CORAM:
HON'BLE MR. JUSTICE CHANDRA DHARI SINGH
O R D E R
CHANDRA DHARI SINGH, J (Oral)
1. The present petition has been filed on behalf of the petitioner under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of Sole Arbitrator for adjudication of disputes arising between the parties arising with respect to the Franchisee Agreement dated 31stMay, 2019.
2. Learned counsel appearing on behalf of the petitioner submitted that petitioner is a company incorporated under the Companies Act, 1956 engaged in the business of health, wellness and lifestyle operating a salon and spa services throughout the territory of India under the brand name
"Monsoon".
3. It has been submitted on behalf of the petitioner that respondent No. 1 is a sole proprietorship which had taken the Monsoon salon under a
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Franchisee Agreement from the Petitioner. It is further submitted that respondent No.2 and 3 are the representatives of the respondent No. 1 sole proprietorship.
4. It has been submitted on behalf of the petitioner that the respondent approached the petitioner with an intention to open a franchise and the petitioner agreed to the offer made by the respondent, that were subsequently reduced to writing vide Franchisee Agreement dated 31stMay,
2019.
5. It has been submitted on behalf of the petitioner that the petitioner has had problems with the respondents' franchise from the outset and has often alerted them of these problems. The petitioner's major problem was that royalties were not paid on schedule. It is further submitted that the respondents were obligated to pay monthly royalties to the tune of INR 50,000/-. Unfortunately, the respondent began regularly failing to meet its duties under the Franchise Agreement by failing to pay royalties on time.
6. It is submitted on behalf of the petitioner that despite providing the respondents with numerous opportunities to rectify, the petitioner ultimately was forced to terminate the Agreement on 22ndDecember, 2021, via a letter noting that further business interactions could not be supported or prolonged owing to the non-payment of royalties.
7. It is further submitted that in light of the aforementioned letter, the petitioner further issued the respondent with a legal notice dated 10th February, 2022, requesting the payment of overdue royalties.
8. It is submitted on behalf of the petitioner that the respondent
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responded to the Legal Notice dated 10thFebruary, 2022, purposefully seeking to place the responsibility on the petitioner, by using a fabricated factual matrix to excuse themselves from paying the petitioner's legitimately due sums.
9. Learned counsel appearing on behalf of the petitioner submitted that being aggrieved by the actions of the respondent, the petitioner was constrained to invoke the arbitration clause as provided in the Franchisee Agreement vide Legal Notice dated 10thMarch, 2022.
10. Learned counsel appearing on behalf of the respondent vehemently opposed the averments made in the instant petition however has fairly conceded to the arbitral nature of disputes between the parties and has no objection if an independent arbitrator is appointed by this Court for redressal of disputes.
11. Heard the learned counsel for the parties and perused the record.
12. As agreed on behalf of the parties, this Court finds it appropriate to appoint a Sole Arbitrator to adjudicate the disputes between the parties arising out of the Franchisee Agreement dated 31stMay, 2019. Hence, the following order:
ORDER
(i) Ms. Neelakshi Bhadauria, Advocate is appointed as a sole arbitrator to adjudicate the disputes between the parties which have arisen under the Franchisee Agreement dated 31stMay, 2019;
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(ii) The learned sole arbitrator, before entering the arbitration reference, shall ensure the compliance of Section 12(1) of the Arbitration and Conciliation Act, 1996;
(iii) The learned sole arbitrator shall be paid fees as prescribed under The Delhi International Arbitration Centre (DIAC) (Administrative Cost and Arbitrators Fees) Rules, 2018 as amended vide notification dated 15thNovember, 2022;
(iv) At the first instance, the parties shall appear before the learned sole arbitrator within 10 days from today on a date which may be mutually fixed by the learned sole arbitrator;
(v) All contentions of the parties are expressly kept open.
13. A copy of the order be forwarded to the learned sole arbitrator on the following address:
Ms. Neelakshi Bhadauria, Advocate
A/152, IV Floor, Defence Colony
New Delhi - 110024
Mobile No.: +91-8053461050
E-mail ID: neelakshi.bhadauria1@gmail.com
14. Accordingly, the instant petition is disposed of alongwith pending applications, if any.
15. The order be uploaded on the website forthwith.
CHANDRA DHARI SINGH, J
MARCH 13, 2023
SV/UG
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