The Delhi High Court Tuesday refused to restrain lounge operator Encalm Hospitality Private Limited from dealing with banks directly, instead of solely through Dreamfolks Services Limited, an airport service aggregator, to provide airport lounge access.
After the court ruling, Dreamfolks Services, which also provides airport lounge services, said Tuesday it is discontinuing its service at domestic airport lounges, although its other domestic services and global lounge business will continue.
While refusing to restrain Encalm Hospitality from dealing with banks, Justice Amit Bansal noted that Dreamfolks Services failed to establish that there is an “exclusivity” between Dreamfolks Services and its clients, the banks.
“It appears that the petitioner’s clients (banks) are free to have similar agreements with other third-party service providers… On a prima facie view, there is no bar upon the respondent (Encalm Hospitality) to provide services” to the banks through third-party service providers,” Justice Bansal ruled.
Dreamfolks Services was embroiled in a legal dispute under the Arbitration and Reconciliation Act against Encalm Hospitality, with which it had entered into an agreement in 2022, valid for five years. Encalm Hospitality had agreed to provide services to Dreamfolks Services, and its customers by granting them access to the services at the lounges it operated.
Through the agreement, Dreamfolks Services, which has agreements with various banks that issued credit cards and other cards to their customers, essentially provided access to such cardholders to the airport lounges, allowing Dreamfolks to earn from the margin it pays Encalm Hospitality and recovers from the banks.
Encalm Hospitality had issued notices of termination of the agreement in August this year, and Dreamfolks Services had then accused the lounge operator of “breach” of the agreement, where the lounge operator was doing business directly with the banks, resulting in “significant downfall” in the business volumes of Dreamfolks Services.
Dreamfolks Services, in its petition before the Delhi High Court, was seeking that Encalm Hospitality be restrained from providing such services. Encalm Hospitality, on the other hand, had pointed out that the service aggregator’s agreements with banks were non-exclusive, and that the lounge operator was dealing with the banks only through third-party service providers.
The company provided lounge services domestically at all arrival terminals of Delhi Airport, as well as at domestic and international terminals of Hyderabad International Airport and Dabolim International Airport (formerly Manohar International Airport) in Goa.
In a company disclosure in August, as per SEBI regulations, Dreamfolks Services had announced that it had received communication from suppliers such as Adani Digital, Semolina Kitchens and Encalm Hospitality, indicating their intention to discontinue certain services with the company.
On September 16, the company again put out a disclosure after the HC verdict, announcing that “the services of domestic airport lounges have been discontinued” to its clients, effective from Tuesday.
Source: The Indian Express
