Bombay High Court Temporarily Restrains Fashion TV From Executing Franchise Agreements In Lucknow Without Making Offer To Current Franchisees

Justice Manish Pitale observed that prima facie, despite a First Right of Refusal (FROR) clause in the franchise agreement, FTV executed another franchise agreement with third parties.

“a specific Right of First Refusal in the territory i.e. territory of Lucknow for the period of the agreement, was granted to the petitioners. The effect of the said clauses makes out a prima facie case in favour of the petitioners that if the respondent intended to enter into a further franchisee agreement, the petitioners ought to have been first offered such a franchisee and if the petitioners refused to accept the offer, the respondent could engage with third party”, the court observed.

The court was dealing with a Commercial Arbitration Petition filed by Manoj Agrawal and Vibhor Mishra, current franchisees of FTV in Lucknow, seeking interim relief based on an arbitration clause in the franchise agreement.

The petitioners' claim stems from a franchise agreement titled "F-Spa Franchise Agreement," dated December 29, 2023, executed in their favour for the territory of Lucknow. Clause 3.2.5.2 of the agreement granted the petitioners a "First Right of Refusal" (FROR) in Lucknow territory if FTV intended to open another FSPA/F-Salon in the same area. According to this condition, FTV would necessarily have to offer such franchise to the petitioners first.

The dispute arose when, during negotiations for a franchise agreement for another location in Lucknow, the petitioners learned that FTV might not have abided by the FROR clause. The petitioners produced an email dated August 21, 2023, wherein FTV suggested that they had already executed a franchise agreement.

The petitioners submitted that unless urgent interim reliefs are granted, FTV may execute such franchise agreements despite the FROR clause which, in a way, gives exclusive right to the petitioners.

Despite serving FTV through courier and email, no representation was made on its behalf during the court proceedings.

The court observed that prima facie, the recitals and clauses of the agreement granted the petitioners a specific FROR for the Lucknow territory for the agreement's duration and opined that the concerned email gave the impression that FTV executed a franchise agreement without offering it to the petitioners first.

“despite the First Right of Refusal clause in the agreement, the respondent appears to have executed a franchisee agreement, although no details are forthcoming. The interpretation of the said clause and the extent of territory stated on the part of the respondent in the said email, prima facie appears to be in the teeth of the relevant clauses of the said agreement dated 29.12.2022”, said the court.

Thus, the court granted an ad-interim order restraining FTV from entering into any franchise agreement for the Lucknow territory without first offering the petitioners the opportunity to exercise their First Right of Refusal.

The matter has been listed for further consideration on October 16, 2023, and FTV has been granted permission to file a reply affidavit, which should include disclosure of any franchise agreements executed by FTV with third parties in the Lucknow territory.

Senior Advocate Zal Andhyarujina, along with Advocates Revati Desai, Aakash Prasad, Yash Joshi and Rishi Murarka represented the for petitioners.

Case no. – Commercial Arbitration Petition (Lodging) No. 25299 of 2023

Case Title – Manoj Agarwal and Anr. v. Fashion TV Ltd, Through Fashion TV India Pvt. Ltd.

Click Here To Read/Download Order