The Bombay High Court has dismissed a petition filed under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim protection of a terminated Authorised Channel Partner Agreement. The Court held that the reliefs sought would effectively revive the terminated contract, which is impermissible under law. The petitioner, Atlas Ceramics World LLP, had invested substantial resources in promoting the respondent's products but sought interim directions to prevent diversion of projects to other channel partners. The Court, while acknowledging arguable disputes, refused to grant reliefs that would compel continuation of a determinable contract.
Background & Facts
The Genesis
The petitioner, Atlas Ceramics World LLP, entered into an Authorised Channel Partner Agreement with Toto India Industries Pvt Ltd in October 2021. A Supplemental Agreement was executed in March 2022. Under these agreements, the petitioner was appointed as an Authorised Channel Partner for distribution and promotion of the respondent's TOTO products.
Key Facts
- The petitioner invested substantial amounts in setting up showrooms, employing staff, engaging architects, and promoting the respondent's products before various developers.
- The petitioner sourced multiple projects and received purchase orders from developers, which the respondent accepted by issuing proforma invoices.
- The agreements were non-exclusive, and the respondent reserved the right to supply products directly or through other channel partners.
- On 24 April 2026, the respondent issued a communication terminating the ACP Agreement under Article 9.1, citing a 90-day notice period.
- The petitioner protested the termination and sought reconsideration through representations dated 25 April 2026 and 1 May 2026.
- On 5 May 2026, the respondent informed the petitioner of its intention to end the commercial relationship within 90 days and proposed arrangements for transferring the work.
- The petitioner issued an arbitration notice on 5 June 2026 invoking the arbitration clause in Article 13 of the ACP Agreement.
- The respondent reiterated the termination in a communication dated 8 June 2026.
Procedural History
- The petitioner filed the present Section 9 petition on 22769 of 2026 before the Bombay High Court, seeking interim reliefs to protect the subject matter of the dispute until the Arbitral Tribunal was constituted.
- The petitioner sought three specific interim reliefs: (a) restraining the respondent from appointing alternate channel partners for Schedule I Projects, (b) directing the respondent to route future supplies for the Soham Group. Indraneel Kanakia Project through the petitioner, and (c) restraining the respondent from communicating with developers regarding transfer of projects.
Relief Sought
The petitioner sought interim reliefs under Section 9 of the Arbitration and Conciliation Act, 1996, to protect the subject matter of the dispute until the Arbitral Tribunal was constituted. The reliefs included:
- Restraining the respondent from introducing, appointing, or involving any alternate channel partner to handle existing orders in respect of Schedule I Projects.
- Directing the respondent to supply the Soham Group. Indraneel Kanakia Project exclusively through the petitioner.
- Restraining the respondent from issuing communications to developers stating that the petitioner's appointment had been terminated or that purchase orders would be transferred to another channel partner.
The Legal Issue
The central question was whether the petitioner was entitled to interim reliefs under Section 9 of the Arbitration and Conciliation Act, 1996, that would effectively revive or continue a contract which had been terminated under its own terms, particularly when the petitioner had expressly stated that it was not seeking continuation of the agreement or specific performance.
Arguments Presented
For the Petitioner
The petitioner argued that the reliefs sought were limited to protecting the subject matter of the dispute and did not seek continuation of the agreement or specific performance. It relied on Article 9.4 of the ACP Agreement, which permitted dealing with unsold products even after termination, and contended that the Schedule I Projects were the mechanism through which such rights could be exercised. The petitioner also relied on the respondent's internal Outstanding Supplies Reports, which identified the petitioner as the channel partner for those projects.
For the Respondent
The respondent contended that the ACP Agreement was a determinable contract under Article 9.1, permitting termination by either party with 90 days' notice. It argued that the reliefs sought by the petitioner would indirectly compel continuation of the terminated contract, which is impermissible under law. The respondent also relied on Article 1.4, which reserved its right to supply products through other channel partners, and contended that the petitioner's attempt to claim project-specific exclusivity was contrary to the express terms of the agreement.
The Court's Analysis
The Court examined the rival submissions and documents on record. It noted that the existence of the relationship and transactions between the parties was not in dispute. However, the Court held that the petitioner's investments in promoting the respondent's products did not create rights beyond the terms of the agreement. The Court also observed that the respondent's internal Outstanding Supplies Reports, while indicating the petitioner's involvement in projects, could not override the express terms of the ACP Agreement.
The Court rejected the petitioner's argument that each purchase order and proforma invoice constituted an independent transaction separate from the ACP Agreement. It held that these transactions were part of the broader contractual arrangement and could not survive termination of the parent agreement.
The Court acknowledged that the petitioner had raised arguable disputes requiring adjudication in arbitration. However, it held that the interim reliefs sought would effectively revive the terminated contract and compel the respondent to continue routing supplies through the petitioner, despite the contractual termination. The Court observed that such reliefs would amount to granting final relief at the interlocutory stage, which is impermissible under Section 9.
The Court also considered the balance of convenience and irreparable injury. It held that the petitioner's loss, if any, could be quantified and compensated by the Arbitral Tribunal. Granting mandatory directions at the interim stage would amount to regulating the respondent's day-to-day commercial operations, which the Court declined to do.
"Power under section 9 cannot be exercised in a manner which rewrites contractual obligations or compels continuance of a relationship which one party has chosen to terminate under contractual clause."
The Verdict
The Court dismissed the Section 9 petition. It held that the interim reliefs sought would revive the terminated contract and compel continuation of a determinable arrangement, which is impermissible under law. The Court appointed Mr. Rohan Cama, Advocate, as the Sole Arbitrator to adjudicate all disputes arising out of the ACP Agreement and Supplemental Agreement. The Arbitrator was directed to enter upon the reference after making the required disclosures and to decide the arbitral proceedings independently.
The Court clarified that all observations made in the judgment were purely prima facie and confined to the adjudication of the Section 9 petition. The Arbitrator was directed to decide the arbitral proceedings uninfluenced by any observations in the order.
What This Means For Similar Cases
Interim Reliefs Cannot Revive Terminated Contracts
Practitioners must note that interim reliefs under Section 9 cannot be used to revive or continue a contract that has been terminated under its own terms. Courts will examine the effect of the reliefs sought, not merely the language employed in the prayer clause.
Determinable Contracts Cannot Be Specifically Enforced
- The judgment reaffirms that determinable contracts, which can be terminated by either party with notice, cannot be specifically enforced.
- Courts will not grant interim reliefs that indirectly compel continuation of such contracts.
Balance of Convenience Favours Non-interference in Commercial Arrangements
- Courts are reluctant to interfere in day-to-day commercial operations through interim reliefs, especially where the loss can be quantified and compensated by the Arbitral Tribunal.
- The judgment underscores the importance of preserving the status quo until the Arbitral Tribunal adjudicates the disputes on merits.
Prima Facie Observations Are Not Final Determinations
- All observations made by the Court in Section 9 proceedings are purely prima facie and do not bind the Arbitral Tribunal.
- The Arbitrator is duty-bound to decide the arbitral proceedings independently, uninfluenced by any observations in the Section 9 order.
