There is no legal definition or specific law governing franchising India.  There are no legal requirements or compliance procedures imposed on the franchisor prior to offering franchises in India. There are no disclosure requirements for franchisors.

 

There is no specific government agency which regulates the offer and sale of a franchise.  The Parties are free to contractually agree to any terms and conditions. There are no laws or government agencies which regulate the offer and sale of franchise. Any entity competent to contract under the Indian Contract Act, 1872 (the Contract Act) can enter into a franchise agreement and must adhere to the applicable law.

 

Franchise arrangements normally include a (limited) license in favour of the franchisee to use the trademarks of the franchisor. While there is considerable freedom of contract exercisable by the parties in relation to the grant of license, it is common to seek a registration of the trademarks by the franchisor under the Trade Marks Act. Furthermore, payment of royalty amounts pursuant to a grant of a licence by an international franchisor to an Indian franchisee would be subject to the provisions of the Foreign Exchange Management Act (FEMA).

 

All agreements, including franchise agreements, fall under the ambit of the Contract Act. As per its provisions, fraud is one of the grounds on which the contract is voidable at the instance of the party who has been defrauded, in which case such party may either repudiate the contract or insist on the performance of the contract such that they would be placed in the position that they would have been in if the fraudulent representations were true.

 

There are also criminal remedies in respect of fraud, if it falls within the definition of the offence of criminal fraud as per the provisions of the Indian Penal Code, 1860.