Authored By: Jyoti Kumari (LL.B), Law Centre 2, Faculty of Law, Delhi University, India, Research Writer at Law Audience®,
Edited By: Mr. Varun Kumar, Advocate, Himachal, Punjab & Haryana and Founder at Law Audience
Sec9 sec2 sec2(1) sec2(2) sec2(5) of arbitration and conciliation act 1996 and sec151of cpc
Background:
There was a contract between marriot international inc (America) and anshal hotel limited(india)
Under which anshal was the owner of the hotel as he was the investor and responsible for all financial obligations.
Marriott was responsible for managing the hotel, staff, marketing and branding maintaining international service standards.
But after some time ansal started making allegations against marriottt about poor management and financial losses and ansal terminated the agreement.
Even after the breach of contract ansal continued to use the name Marriott.
Since Marriott was an internationally well-known brand name, Marriott approached the court alleging infringement of its trademark rights.
Plaintiff:
Marriott is a registered trademark; therefore, it can be used only with permission. otherwise people may be misled due to its misuse.
As soon as the contract came to an end, the use of the name Marriott should also have ceased.
Marriott given the points before the court: –
Wrongful termination of agreement:
the allegation made by ansal were false and the termination was carried out in the violation of the procedure prescribed agreement.
Breach of contract:
Defendant unilaterally and wrongfully terminated the agreement without any valid or contractual justification.
Violation of arbitration clause:
The hotel contract contained an arbitration clause through which disputes could be resolved, but the defendant, without invoking it, arbitrarily terminated the contract.
Loss and damages:
Due to the premature termination the plaintiff suffered substantial financial losses, including incentive fees, future profits, management fees for which it was entitled to compensation.
Enforceability of foreign arbitral award:
The plaintiff said that the foreign arbitration award was legal and compulsory, could be enforced in india under the arbitration and conciliation act and did not go against india’s public.
Defendant:
Mismanagement by the plaintiff:
The defendant argued that the plaintiff failed to properly manage the hotel resulting in operational inefficiencies, financial losses, and deterioration of service standards.
Justified termination:
The defendant contented that the termination of the agreement was lawful and necessary due to persistent breaches and poor performance by the plaintiff.
Award contrary to public policy of India:
the defendant argued that enforcement of the foreign arbitral award would be contrary to the public policy of India, as it imposed excessive and unreasonable financial liability.
Failure to perform contractual obligations:
It was argued that Marriott failed to discharge its obligations as stipulated under the agreement, and such failure provided sufficient grounds for termination of the management contract.
Opposion to enforcement:
On the basis of above submissions, the defendant urged the Indian court to declined the enforcement of the foreign arbitral award.
Since Ansal was the owner of the hotel, it claims a right to use the name; otherwise, it would suffer substantial financial loss;
Legal Issue:
Whether the foreign arbitral award was enforceable in India and whether Ansal hotel had valid grounds to resists enforcement.
whether Marriott a protected trademark and whether its name be used after the termination of the agreement?
Whether the award was against the public policy of India and whether the termination of the agreement was lawful. refused enforcement of the foreign arbitral award.
Where the inherent power of the court under sec151 of code of civil prpcedure,1908 could be invoked to refused enforcement of the foreign arbitral award.
Is resolving the dispute through arbitration rather than through the court legally appropriate?
Analysis:
In Marriott international inc vs. ansal hotel lim, the dispute arose from a hotel management contract between the parties. Marriott, a global hotel company, was engaged to manage and run a hotel belonging to ansal hotel limited. The contract expressly included an arbitration clause, which provided that all disputes between the parties were to be settled through arbitration.
Sec2(1) of arbitration and conciliation act:
This sec deals with definition of important terms like arbitration, arbitration agreement, arbitral tribunal, court and international commercial arbitration, used in this act
According to the sec, the dispute in this case was a commercial dispute, as it related to a hotel management contract involving business and trade. Therefore, the provisions if the arbitration act were applicable.
Sec2(2) of arbitration and conciliation act:
This sec state that rules of the act apply when the arbitration is happening in India. Some parts of the law can also apply to international arbitration happening outside India, unless the parties agree not to follow them.
This sec provides that even if the arbitration takes place outside of India. certain provisions of the act can still apply .in this case the arbitration was a foreign arbitration, but Marriott sought relief from the Indian court. The court accepted that the act could still be applied for limited purposes, especially tp support the arbitration process.
Sec2(5) of arbitration and conciliation act:
This sec provides that the arbitration and conciliation act apply to all arbitrations and all arbitration proceedings, unless the parties have agreed otherwise. It ensures that the governs arbitration matters by default, giving uniformity and clarity to arbitration law in India.
This sec says that the arbitration and conciliation cat applies to all arbitrations unless the parties have expressly excluded its application. in this agreement, there was no such exclusion. hence the act governed the arbitration agreement between Marriott and ansal.
Sec9 of arbitration and conciliation:
This section gives the court power to grant temporary or interim relief to a party, either before the arbitration starts or while it is going. Such relief may include protection of property, stopping further losses, or maintaining the existance situation until the dispute is finally decided.
To protect the legal rights and business interests, Marriott approached the Indian court by filling an application under sec 9 of arbitration and conciliation act 1996.marriott used this provision because ansal had terminated the agreement illegally, and Marriott wanted to prevent further financial and reputational image.
The hotel carefully examined the hotel, management agreement and also considered the behaviour of both parties. the court observed that since the parties had agreed to resolves disputes through arbitration, ansal was legally bound to follow this method. Instead of using arbitration, ansal unilaterally terminated the agreement, which was against the agreed dispute resolution process. The tribunal concluded that the termination made by ansal was wrongful and without sufficient justification. the court clearly stated that Indian court strongly support arbitration and will interfere with arbitral awards only in very limited cases. Since the awrd was lawful and not against public policy, the court allowed its enforcement.
Sec151 of cpc:
This sec of cpc saves the inherent power of the court.it allows the court to pass orders necessary to meet the end of justice or to prevent abuse of the process of the court.it is a discretionary power and must be used carefully.
Ansal said that enforcing the foreign arbitral award would cause injustice and therefore the court should use sec151 of cpc to stop enforcement.Marriott on other hand argued that sec151cpc cannot be used to override a special law.
Court carefully analysed the argument .it held that sec151 cpc is meant to support justice, not to destroy valid legal processes. The court observed that inherent powers cannot be used in a way that goes against the express provisions of a statute.
Judgement:
The termination of the hotel management agreement by ansal limited was wrongful and a breach of contract.
The foreign arbitral award passed in favour of Marriott international inc was valid, binding and enforceable in India.
Ansal’s termination of the agreement was wrongful.
The foreign arbitral award was valid and enforceable iin india.
Enforcement of the award was allowed and ansal was directed to comply with the award.
The inherent power under sec151 of code of civil procedure could not be used to refuse enforcement of a foreign arbitral award when the arbitration and conciliation act 1996 provides a complete statutory framework.
