The Court dismissed an application seeking injunction against the termination of a Dealership LOI. It held that the termination clause allows termination without cause and mandated use of arbitration for disputes.
Application dismissed; liberty granted to applicant to work out remedy for loss through arbitration.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
Original Application No.953 of 2023
Original Application No.953 of 2023
C.SARAVANAN, J.
Heard the learned counsel for the applicant and the learned Senior Counsel for the respondent.
quo. The Status Quo was ordered primarily elicit the response from the respondent for settling the dispute. However, the parties have not been able to arrive at any settlement.
different eventuality for terminating the contract. Clause 12 reads as under:
“ 12. Term and Termination :
i. This LOI shall be valid till the date of execution of the Dealership Agreement or upon the termination of the LOI by the parties herein in the manner and for the reasons set out in this LOI, whichever is earlier.
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Original Application No.953 of 2023
ii. This LOI may be terminated by either the Company or the Proposed Dealer by giving 30 days' notice in writing to the other party without any reason.
Iii. The Company shall have the right to terminate the LOI and re-assign the Dealership to other parties at the sole discretion of the Company in case a) there is any change in the ownership or control of the Proposed Dealer, b) in the event of the Proposed Dealer being declared bankrupt/insolvent by any competent court of law, c) in the event of any of the representations made herein by the Proposed Dealer being false or becoming false, d) the Proposed Dealer violates any material provision of this LOI and such default is not corrected to the satisfaction of the Company within 15 (fifteen) days of receipt of intimation regarding such violation, e) there is delay of payment to the Company without prior written approval of the Company, f) the Proposed Dealer (if a company) makes a composition with its creditors, g) Unable to fulfill any of its obligations under clause 5 of this LOI including but not limited to achieving the sales targets due to any reason such as lack of sufficient manpower, lack of sufficient sales promotional activity, lack of sufficient funds w.r.t. running business, etc.
iv. Upon termination of this LOI, for the reasons mentioned in Clause 12(iii) above or if the Proposed Dealer terminates the LOI without any cause, 50% of the Security Deposit shall be forfeited by the Proposed Dealer as compensation payable to the Company and balance Security Deposit, after making necessary deductions towards any pending dues, charges or other amounts payable by the Proposed Dealer to the Company as per the terms of LOI, shall be refunded to the Proposed Dealer. Such
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Original Application No.953 of 2023
compensation shall be deemed to be a genuine pre-estimate of the loss that will be caused to the Company in the event of such termination. The Company shall not be liable to pay any other amount apart from the remaining Security Deposit mentioned herein. The Proposed Dealer acknowledges and confirms that in the event of termination of the LOI, the Proposed Dealer shall not be entitled to make any claim for damages, loss of business or future profits from the Company.”
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Original Application No.953 of 2023
from terminating the contract in view of Section 14(1)(d) of the Specific Relief Act.
the LOI, it is always open to the applicant to invoke the dispute resolution mechanism prescribed by referring the dispute through arbitration in terms of Clause 19 of Letter of Intent (LOI). Clause 19 of Letter of Intent (LOI) reads as
under:-
“ 19. Dispute Resolution :
The Company and the Proposed Dealer agree that they will first attempt to resolve any dispute regarding this LOI through mutual consultation. However, it such consultations do not result in amicable settlement of the dispute within 30 days after one party has given written notice to the other to commence such consultations, then either party may refer the dispute to arbitration. Any dispute, controversy or
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Original Application No.953 of 2023
claim arising out of or relating to this LOI or breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the Arbitration and Conciliation Act, 1996 as at present in force. The arbitration proceeding shall be conducted by a sole arbitrator to be appointed by mutual consent of both the parties. In case of disagreement between the parties in appointment of sole arbitrator, the same shall be appointed as per Arbitration and Conciliation Act, 1996 (as amended from time to time). The language of arbitration proceeding shall be English and the venue of arbitration shall be Chennai . The award of the arbitral tribunal shall be final and binding on the parties. Each party shall bear arbitration proceeding expenses at its own cost.”
liberty is given to the applicant to work out the remedy for purported loss that the applicant may have suffered or is likely to suffer due to termination of the dealership under the Letter of Intent (LOI) dated 01.03.2021.
20.12.2023
jas
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Original Application No.953 of 2023
C.SARAVANAN, J.
jas
Original Application No.953 of 2023
20.12.2023
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2 issues framed by the court
Whether an injunction can be granted to restrain the termination of a Letter of Intent (LOI) by the respondent without cause.
Whether the applicant is required to invoke the dispute resolution mechanism (arbitration) prescribed in the LOI instead of seeking injunction.
2 provisions across 2 enactments
Applicant
Respondent
C.Saravanan
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
