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Judgment
Aravind Kumar, J.—These revision petitions are directed against common order passed by XVIII Addl. City Civil and Sessions Judge, Bengaluru in O.S. Nos. 2758, 2759, 2760, 2762 and 4051/2012 dated 05.03.2013. Though matters are listed for admission, by consent of learned advocates appearing for both parties it is taken up for final disposal. Heard the learned advocates appearing for the parties and perused the order under challenge as also the pleadings and documents.
The short point that arises for consideration in these revision petitions is whether the application filed by defendant invoking Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ''Act'' for the sake of brevity), ought to have been allowed by the Trial Court or orders passed dismissing the applications, requires to be affirmed.
Facts in brief leading to the filing of these revision petitions can be crystallized as under. Parties are referred to as per the rank in Trial Court.
Parties to the proceedings are none other than uterine brothers and they have been litigating in relation to the use of word "VASUDEV ADIGAS" in the restaurant business being carried on by them respectively. Undisputedly, an agreement has been entered into between plaintiff and defendant on 23.06.2006, whereunder plaintiff has permitted the defendant to operate a restaurant under the name and style of "VASUDEV ADIGAS - SAMPIGE" at Malleshwaram, Bangalore City.
It is the case of plaintiff that it is the user of Trademark "ADIGAS" with effect from 1993 and subsequently it has been got registered with the Registry of Trademark and over the years it has established a good reputation and goodwill in the market, and the trademark and trade name "VASUDEV ADIGAS" has become a household name in relation to running of vegetarian restaurants. Plaintiff has further contended before the Court below that defendant being the younger brother of Managing Director of the plaintiff company approached it and sought for licence to run the restaurant under the trade name "Vasudev Adigas" and as such, an agreement dated 23.06.2006 came to be entered into. Under the said agreement defendant has agreed to pay royalty every year for the use of trademark Vasudev Adigas'' by defendant. Though defendant was permitted to use the said trademark in running a restaurant at Sampige Road, Bangalore, defendant has not only established the said restaurant at said place but also started establishing many more such restaurants at various other places in Bangalore City as under:
Hence, plaintiff instituted suits against defendant seeking an order of perpetual injunction to restrain the defendant from running restaurant by using the name ''Adigas'' in various localities of Bangalore. On service of suit summons defendant appeared but did not file its written statement. However, an application u/s 8 of the Arbitration and Conciliation Act, 1996 came to be filed contending inter alia that there is an arbitration agreement between the parties and as such, dispute being arbitrable in nature, it has to be referred to arbitration and proceedings has to be stopped and in other words, proceedings ought not to be continued in view of Arbitration Clause. As such, defendant sought for reference to arbitration for adjudication of dispute contending that subject matter is covered under Arbitration Clause of agreement dated 23.06.2006.
Section 8 of the Act empowers the Court or Judicial Authority before which an action is brought in a matter which is the subject matter of arbitration agreement to refer the parties to arbitration and the primary requirement would be that defendant before disclosing the defence or filing written statement, such an application is required to be filed seeking for reference to the arbitration. The other condition prescribed under Sub-Section (2) of the Act is, such application should be accompanied by original arbitration agreement or duly certified copy thereof Section 8 reads as under:
Power to refer parties to arbitration where there is an arbitration agreement.-(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.
(3) Notwithstanding that an application has been made under Sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.
There cannot be any dispute to the proposition for initiating proceedings u/s 8 of the Act, it is absolutely essential and necessary that there should be an agreement between the parties namely an agreement to submit themselves to the jurisdiction of an Arbitral Tribunal or proceedings. In the instant case the defendant in support of his application filed seeking reference to arbitration, has referred to Clause 17 of the agreement dated 23.06.2006 and said clause reads as under:
17) ARBITRATION
In case of any dispute arising between the FARNCHISOR and the FRANCHISEE, regarding the interpretation of this agreement or other matters, the same shall be settled by arbitration by a mutually agreed arbitrator, failing which the dispute to be resolved as per the provisions of ARBITRATION ACT, as amended.
A perusal of the agreement would clearly indicate that the FRANCHISEE therein namely defendant had approached the FRANCHISOR namely plaintiff for a licence to operate a restaurant in the name of "VASUDEV ADIGAS-SAMPIGE" at 15th cross, Sampige Road, Malleswaram, Bangalore and by virtue of parties agreeing to the terms and conditions set out in the said agreement plaintiff permitted the defendant to operate and run a restaurant in the said name upon the terms and conditions agreed thereto. On these aspects there is no dispute between the parties. However, plaintiff contended that defendant without obtaining permission or license from it, has started using the name "VASUDEV ADIGA" or "ADIGAS" and has started establishing restaurants across the Bangalore City under various names as extracted herein above by prefixing and suffixing the above said names. On account of alleged infringement of Trademark and alleging passing off the trademark of plaintiff to the customers by defendant, suits for perpetual injunction came to be filed, which is noted hereinabove in the tabular column.
Trial Court after considering the rival contentions has held that arbitration clause as pressed into service is outside the scope or purview of the agreement and when there was no agreement between the parties in respect of said businesses being run by defendant, it cannot be construed that Arbitration Clause exists and as such, it dismissed the applications. It is not in dispute that applications for reference to arbitration has been filed in these five suits above referred to on the basis of an Arbitration clause found in the agreement as already extracted hereinabove. As to whether said clause would form basis and whether said clause can be construed as subject matter of a contract between the parties covering the businesses other than agreed to between the parties under agreement dated 23.06.2006, is the question which requires to be examined into by this Court since trial court has held the same in the negative. A dispute for being referred to arbitration rests on mutual voluntary agreement entered into by the parties to submit their disputes or matter of differences to the selected persons, whose determination is to be accepted as a substitute to the judgment of the Court. An arbitration agreement is not required to be in any particular form. What is required to be ascertained is whether the parties had agreed upon to resolve their disputes or if it arises between them in respect of "subject matter of contract", then only, such dispute shall be referred to arbitration and such an arrangement between the parties would definitely spell out that there is an arbitration agreement between the parties. If not it cannot be construed or held that there is any arbitration agreement between the parties.
In view of the fact that the very existence of arbitration agreement has been challenged by plaintiff in these suits before trial court and reiterated before this Court the clause pressed into service namely arbitration clause of the agreement dated 23.06.2006 requires to be examined by this Court. A perusal of agreement as a whole and the arbitration clause in particular would clearly indicate that the parties were ad-idem insofar as agreement to which they have affixed their signatures. It is specifically agreed and admitted between the parties that if any disputes were to arise between them regarding interpretation of "said agreement or other matters related thereto", to be settled by arbitration by a mutually agreed arbitrator as per the provisions of Arbitration Act.
The intention of parties has to be gathered from the said clause itself. Mere use of terms ''arbitrator'' or ''arbitration'' in an agreement does not necessarily make it an arbitration agreement between the parties or the absence of use of these two words cannot necessarily have the effect of taking away such an agreement if it has been entered into between the parties. The intention of parties has to be gathered from reading of the agreement in its entirety. In this background when Clause 17 of the agreement and Section 8 of the Act are read conjointly, it would clearly indicate that when an action is brought before the Court by either of the parties to arbitration by invoking said clause in the agreement, the essential requirement would be that the parties should have agreed upon to refer the matter to arbitration, which covers the "subject matter of agreement". A dispute which is alien to agreement or which is outside the scope of agreement cannot be brought under the umbrage of such agreement to invoke Section 8 of the Act.
Sri H.N. Narendra Dev, learned counsel for defendant has also referred to the legal notice dated 21.01.2013 issued by plaintiff to buttress his arguments that plaintiff himself has admitted about defendant acting in gross violation of Franchise Agreement dated 23.06.2006 by using registered trademark of plaintiff and as such, he contends that the parties themselves have understood that it is a part of the agreement and now plaintiff cannot turn around and contend that it is not a part of the agreement. Stray sentence in the legal notice will not par-take the character of agreement. Unless there is agreement between the parties, it does not give jurisdiction to a party to invoke Section 8 of the Act and seek for reference to arbitration. As such, contention raised by learned counsel for revision petitioner is without merit and it is hereby rejected.
Learned counsel appearing for defendant has vehemently contended that arbitration clause has to be read in conjunction with Clause 13 of the agreement, whereunder the use of Trademark "Adigas" is with the franchisor and when franchisor alleges either improper use or misuse or passing off or infringement, it encompasses such disputes also to be brought within the scope of arbitration clause. In this regard he has relied upon the following judgments:
(i) Rashtriya Ispat Nigam Limited and Another Vs. Verma Transport Company, .
(ii) Ministry of Sound International Ltd. Vs. Indus Renaissance Partners Entertainment Pvt. Ltd., .
(iii) Motorpresse International Verlagsgeselischaft Holding mbH and Co. Vs. Mistrale Publishing Pvt. Ltd., .
The Hon''ble Apex Court in the case of Sukanya Holdings Pvt. Ltd. Vs. Jayesh H. Pandya and Another, while examining and interpreting the word "matter" referred to Section 8 of the Act, held that if the entire subject matter of the suit is the subject matter of arbitration agreement, the provision of Section 8 would get attracted and if matter lies outside the arbitration agreement clause in the agreement relating to arbitration, it would not get attracted. It has been held by Hon''ble Apex Court as under:
The relevant language used in S. 8 is - "in a matter which is the subject matter of an arbitration agreement." Court is required to refer the parties to arbitration. Therefore, the suit should be in respect of "a matter" which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced - "as to a matter" which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of S. 8. The words ''a matter'' indicates entire subject matter of the suit should be subject to arbitration agreement.
The next question which requires consideration is - even if there is no provision for partly referring the dispute to arbitration, whether such a course is possible u/s 8 of the Act? In our view, it would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action that is to say the subject matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, it follows that bifurcation of the subject matter of an action brought before a judicial authority is not allowed.
Secondly, such bifurcation of suit in two parts, one to be decided by the arbitral tribunal and other to be decided by the civil Court would inevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing the cost of litigation would be frustrated by such procedure. It would also increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums.
In the background of law laid down by the Hon''ble Apex Court in the above referred judgment, when facts on hand are examined, Arbitration clause No. 17 found in the agreement dated 23.06.2006 would clearly indicate that it is an arbitration agreement and both parties have agreed to resolve their disputes arising out of said agreement namely agreement dated 23.06.2006 which relates to the business run under the name and style of "VASUDEV-ADIGAS - SAMIPIGE" at Malleshwaram. However, if the defendant were to indulge in any other activity, which is outside the scope of agreement to which parties were not ad idem, it cannot be held that Arbitration clause referred to in the agreement would become part and parcel of such agreement. When there is no contract between the parties to refer the dispute other than the subject agreement, it cannot be construed or held that the subject matter of the suits would also fall within the purview of the agreement dated 23.06.2006 or parties have to take recourse as provided there under namely arbitration clause i.e., Clause 17.
The words "this agreement" referred to in Clause 17 of the Agreement dated 23.06.2006 would lay to rest all contentions raised contrary to said words. The arbitration clause referred to in the said agreement relates dispute arising between the parties in the said agreement alone and nothing beyond it. It would also be appropriate to notice at this juncture itself that plaintiff as the Franchisor has permitted use of the word "VASUDEV ADIGAS - SAMPIGE" to the Franchisee - defendant and it is agreed to between the parties that if there is any dispute with regard to said name of "VASUDEV ADIGAS - SAMPIGE" either being used by the defendant in any other place than permitted and plaintiff were to initiate action against defendant alleging passing off or infringement of said name, then defendant would be well within his bound to contend that it is the subject matter of said agreement between the parties and he would have been justified in invoking Section 8 as well as Clause 17 of the agreement seeking for reference of such dispute to arbitral Tribunal. It is neither the case of plaintiff nor the defence of defendant that trade name "Vasudev Adigas - Sampige" is being used or infringed or is being passed off by defendant or the use of trade name "Vasudev Adigas - Sampige" by defendant is sought to be prohibited by plaintiff by filing a suit for perpetual injunction in the instant case. Defendant cannot contend that such agreement would also encompasses those disputes within the sweep of the agreement in question i.e., dated 23.06.2006, which are outside the scope of the Agreement. On the other hand it is the specific case of the plaintiff in all these suits that defendant is adopting the trademark of "Adigas" or "Vasudev Adiga" and in a calculated manner attempting to pass off goods and services as that of plaintiff and giving an impression to the general public that they are the branch/sister concern of plaintiffs well established fast food joint. What is agreed to under the subject agreement as agreed to between the parties relates only to the business run under the name of "Vasudev Adigas - Sampige" and not any other businesses. Hence, clause -17 of the Agreement dated 23.06.2006 cannot be invoked in respect of other business as allegedly run by defendant to refer the matter for Arbitration, since it is outside the purview of suit Agreement.
Hence, for reasons aforestated, I am not inclined to accept the contentions raised by learned counsel appearing for petitioner and in view of the same order passed by the Trial Court dismissing the applications for referring the dispute to arbitration is not being interfered as it is a well reasoned order and does not suffer from any infirmity or material irregularity calling for exercise of revisional jurisdiction by this Court. Hence, I pass the following:
ORDER
i. Revision Petitions are dismissed with costs.
ii. Petitioner is directed to pay cost of Rs. 5,000/- in each of these Revision Petitions to respondent within an outer limit of four weeks from today, failing which respondent would be at liberty to recover the same.