DELHI HIGH COURT REFERRED MATTER T0 ARBITRATION: NEGOTIATION REQUIRES ACTIVE COMMUNICATION BETWEEN PARTIES, NON-RESPONSIVE PARTY NOT ACTIVELY PARTICIPATING

The Delhi High Court bench headed by single judge in the case M/S. Breakthrough Concepts Vs M/S. Atrix Group Of Restaurants and Anr. observed and has held that 'negotiation' necessitates communication between the involved parties, asserting that a party failing to respond to legal notices from another cannot be considered actively participating in the negotiation process.

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Facts of the Case: In the case, the franchise agreement forged on May 26, 2017 between M/s Kaur Cookies Pvt. Ltd. and Respondent No.1, facilitated by Respondent No. 2. Consequently, M/s Kaur Cookies Pvt. Ltd. underwent a transfer to the Petitioner, through a deed of assignment.

The petitioner in the plea contended that the Respondents approached them for a modification of the royalty and management fee, a request the Petitioner accommodated amidst the challenges posed by the COVID-19 Pandemic, wherein it reduced the fees to Rs.1 lakh per month.

Therefore, the Respondents allegedly defaulted on timely payments, accumulating a due of Rs.11,43,378.33 by February 2021.

The petitioner claimed to have reminded and requested Respondent No. 1 to settle their outstanding liability, with no positive response.