(Prayer: This Commercial Appeal is filed under Section 13 (1-A) of the Commercial Courts Act, 2015, r/w. Section 37 1(A) of the Arbitration and Conciliation Act, 1996 praying to pass an order towards setting aside the impugned judgment dated 18.01.2025 passed by the Hon'ble LXXXIV City Civil and Sessions Judge, at Bengaluru (Commercial Court - CCH- 85), in Com.A.P. No.136 of 2024 & etc.)

C.A.V. Judgment

Vibhu Bakhru, CJ.

1. The appellant [hereafter, '3M'] has filed the present appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 [A&C Act], impugning an order dated 18.01.2025 passed by the learned LXXXIV Additional City Civil and Sessions Judge, Bengaluru [Commercial Court] in Com. A.P. No.136/2024.

2. The respondent [hereafter, 'KAR'] had filed the said application to set aside the award dated 03.06.2024 in A.C.Nos. 452/2022, 453/2022 and 454/2022 [impugned award] delivered by an Arbitral Tribunal comprising of a sole arbitrator [Arbitral Tribunal]. The current commercial appeal (COMAP No.185/2025), pertains to the claims made in A.C.No.452/2022.

3. The impugned award is a common award passed in three arbitral proceedings. The Arbitral Tribunal had noted that the evidence and documents relied upon by the parties were common and therefore, the disputes involved are materially similar. Accordingly, the three arbitral proceedings were consolidated.

4. KAR was a claimant before the Arbitral Tribunal and had raised several claims arising from the franchise agreement entered into by the parties. The parties had entered into a Memorandum of Understanding dated 30.11.2015 and, pursuant thereto, entered into a Franchise Agreement dated 29.02.2016 [FA 2016]. Subsequently, parties entered into a Memorandum of Understanding [MOU] dated 04.04.2017 and, in furtherance of the said MOU, entered into a franchise agreement dated 06.12.2018. The said agreement was not stamped; therefore, the parties entered into a similar agreement on 31.12.2018 [FA 2018], which was duly stamped.

5. Under the FA 2016 and FA 2018, KAR was authorised to set up and operate Car Care Centres [CCC/s] for providing detailing services under the 3M brand [Franchise Business] using 3M products and use the brand name 3M in respect of the authorised units.

6. KAR opened three CCCs under FA 2016/FA 2018 at the following locations:

          (i) Electronic City (BPCL);

          (ii) Amruthahalli (IOCL); and

          (iii) Yelahanka.

7. The present petition pertains to the CCC - BPCL at Electronic City. KAR claimed that 3M had breached the terms of the franchise agreement, resulting in KAR incurring losses. Accordingly, KAR raised a claim for a sum of `2,28,50,000/- for loss allegedly suffered in connection with the CCC operated at Electronic City. In the aforesaid context, KAR raised the following claims:



8. KAR also filed separate claims of `3,35,50,000/- in respect of the CCC at Yelahanka and `2,57,50,000/- in respect of the CCC at Amruthahalli. As noted above, the impugned award is a common award in respect of the claims in respect of the three CCCs. However, separate applications were filed by KAR for setting aside the impugned award. The learned Commercial Court allowed the said applications by similarly reasoned but separate orders.

9. FA 2016 and FA 2018 included arbitration clauses. In view of the claims and the disputes that had arisen, KAR issued a notice dated 21.12.2020 calling upon 3M to appoint an arbitrator. Thereafter, KAR filed a petition under Section 11 of the A&C Act before this Court (Civil Miscellaneous Petition No. 161/2021) seeking appointment of an arbitrator. Similar petitions were filed in respect of claims relating to other CCC.

10. In the said proceedings, KAR relied on the Franchise Agreement dated 06.12.2018, which was admittedly superseded by FA 2018. 3M had participated in the said proceedings and conceded to the appointment of an arbitrator to arbitrate the disputes under FA 2018. The said contention was accepted, and an Arbitral Tribunal was constituted.

11. Before the Arbitral Tribunal, KAR filed statement of claims alleging that 3M had offered the Electronic CCC unit as a "flagship unit", representing that there was huge business potential owing to the IT and BT companies located in Electronic City. KAR alleged that 3M had given a rosy picture of the business potential and lured KAR into establishing the unit at Electronic City. KAR further alleged that the store manager resigned abruptly without notice on 07.05.2018, and that the Technical Auditor of 3M who used to visit the Electronic City unit had also left. KAR claimed that 3M failed to take any action in this regard, and that the persons subsequently suggested by 3M as replacements were not efficient enough to run a "flagship unit", resulting in the business declining. KAR also alleged that 3M had failed to perform its obligations under the franchise agreement, including failure to provide adequate training to the personnel at the unit. It claimed that 3M was guilty of non- performance and breach of contract, and of deceptively and negligently misrepresenting the viability of the business and the degree of support that would be provided.

12. KAR also claimed that it initially sent a notice making combined claims in respect of all three franchise agreements. Later, realising combing three franchise agreements together leading to technical objection regarding maintainability of arbitration. Therefore, separate notices were issued on 21.12.2020.

13. 3M had filed its statement of defence raising several issues. 3M claimed that KAR was an unregistered firm and therefore, was precluded from instituting action against 3M. It further claimed that even if it was accepted that KAR was a registered firm, it could not maintain any action as in terms of the partnership deed dated 07.03.2019 as its business was to "invest/purchase the land/industrial land, hotels, stocks, forex, dealers, consultant, travel agent, renting of properties etc." The partnership deed did not authorise KAR to carry on the Franchise Business which is "automobile detailing, cleaning or maintaining of vehicles". It also stated that in FA 2018, KAR was described as a sole proprietorship concern of Mr. Ramakrishna Rao. 3M claimed that the disputes raised were not arbitrable as under the FA 2018, KAR had undertaken to incur all costs and expenses for setting up the CCCs and was solely responsible for developing and conducting its business. 3M denied that it had breached any terms of FA 2018. It also contended that the statement of claims did not contain material particulars.

14. 3M also stated that initially a notice dated 13.07.2020 was issued by KAR claiming an amount of `8,28,90,351/- which was subsequently reduced in the subsequent notice dated 21.12.2020 and restricted to `2,28,50,000/-.

15. Both parties also led evidence before the Arbitral Tribunal.

16. The Arbitral Tribunal found that KAR had taken inconsistent positions and that there was no evidence to support its claims. In view of the above, KAR's claims were dismissed by the impugned award.

17. KAR filed an application to set aside the impugned award before the learned Commercial Court (Com. A.P. No. 136/2024). The learned Commercial Court set aside the impugned award on the ground that the Arbitral Tribunal had not answered all the issues.

18. The only question that falls for consideration of this Court is whether the impugned award is liable to be set aside on the ground that it is unreasoned. At the outset, we may observe that the statement of claims filed by KAR is sketchy, and the claims are not clearly articulated. For instance, KAR claims it suffered losses and 3M is liable to reimburse them. However, the statement of claims did not specify particulars of the losses suffered. Illustratively, the Statement of Claims mentions capital expenditure of `45,00,000/- and products and other charges of `80,00,000/-, but it neither specifies the nature of the said expenditure nor the manner in which it is computed. The claim of `20,00,000/- towards running expenditure is equally bereft of any particulars. It provides no clue as to, on what items, the said expenditure was incurred.

19. As noted above, 3M had filed its statement of defence raising several objections including as to the locus of KAR to make a claim.

20. Based on the pleadings of the parties, the Arbitral Tribunal had framed the following issues for consideration:

          "1. Whether the claimant being an unregistered Partnership Firm, can sue under Law?

          2. Whether the Claimant has the locus-standi to institute the present proceedings?

          3. Whether the disputes between the parties are arbitrable in nature?

          4. Whether the Claimant has any cause of action to file the present statement of claim?

          5. Whether the Claimant is entitled to any amounts as claimed?

          6. Whether the Respondent is entitled to costs as claimed?

          7. What order or award?"

21. As rightly noted by the learned Commercial Court, the Arbitral Tribunal did not proceed to answer each and every issue as framed. However, we do not concur with the learned Commercial Court's decision that the impugned award is liable to be set aside on that ground alone. It is clear from the reasoning that, after evaluating the evidence, the Arbitral Tribunal found that there was no material to sustain the claims raised by KAR.

22. In view of the said finding, it was not necessary for the Arbitral Tribunal to examine any further issues as the claim made by KAR was liable to be rejected on this ground alone.

23. The learned counsel appearing for KAR contended that the Arbitral Tribunal had grossly erred in the proceedings by raising an oral plea of novation. He submitted that it was 3M's contention that if the FA 2018 was found to be invalid, the franchise agreement dated 06.12.2018 would be operative. He submitted that the contention was raised as 3M had contended that FA 2018 was invalid. He stated that in the aforesaid context, KAR had taken a stand that if FA 2018 is held to be invalid, the earlier franchise agreement ought to be considered as binding between the parties. He contended that KAR could not be faulted for not making any averments to that effect in its pleadings, as the said contention was raised to counter the submissions advanced on behalf of 3M.

24. In our view, it is not necessary to examine the aforesaid contention as these controversies pale into insignificance once it is accepted that the impugned award, to the extent it holds that KAR has been unable to establish its claims by any material, is not required to be interfered with.

25. We find no material on record to establish that KAR suffered the loss as claimed or that such loss arose from 3M's failure to perform its obligations under the agreements.

26. In view of the above, the present appeal is allowed, and the impugned order is set aside.