Kerala High Court
Indo Thai Calicut Private Ltd vs The Airport Director on 9 July, 2025
AR No.99 of 2025
1
2025:KER:50181
CR
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE M.A.ABDUL HAKHIM
WEDNESDAY, THE 9TH DAY OF JULY 2025 / 18TH ASHADHA, 1947
AR NO. 99 OF 2025
PETITIONER:
INDO THAI CALICUT PRIVATE LTD
A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES
ACT, 2013, HAVING ITS REGISTERED ADDRESS AT 29/709, 714 STAR
BUILDING, MAVOOR ROAD) PARAYANCHERI, CALICUT AND REPRESENTED
BY FAISAL SIDDIQUI, AGED 49 YEARS, S/O MOHD ZAKAULLAH
SIDDIQUI, DIRECTOR IN INDO THAI CALICUT PRIVATE LIMITED,
29/709, 714 STAR BUILDING, MAVOOR ROAD, PARAYANCHERY,
CALICUT, KOZHIKODE, KERALA, PIN - 673004
BY ADVS.
SHRI.M.K.SUMOD
SMT.VIDYA M.K.
SMT.THUSHARA.K
RESPONDENTS:
1 THE AIRPORT DIRECTOR
AIRPORT AUTHORITY OF INDIA CALICUT INTERNATIONAL AIRPORT,
CALICUT AIRPORT, MALAPPURAM DISTRICT, PIN - 673621
2 AIRPORT AUTHORITY OF INDIA
CALICUT INTERNATIONAL AIRPORT, CALICUT AIRPORT, MALAPPURAM
DISTRICT, CALICUT REPRESENTED BY THE AIRPORT DIRECTOR,
CALICUT INTERNATIONAL AIRPORT, CALICUT AIRPORT, MALAPPURAM
DISTRICT, PIN - 673621
BY ADV SRI.V.SANTHARAM
THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 09.07.2025,
THE COURT ON THE SAME DAY PASSED THE FOLLOWING:
AR No.99 of 2025
2
2025:KER:50181
CR
ORDER
Dated this the 09th day of July, 2024
1. This is an Application under S.11(6) of the Arbitration and Conciliation Act to appoint an Arbitrator under Clause 15.3 of Annexure A1 Agreement to resolve the dispute between the Applicant and the respondents arising out of the said Agreement.
2. The Application is opposed by the respondents by filing Counter Affidavit.
3. I heard the learned counsel for the Applicant, Sri. M.K. Sumod and the learned counsel for the respondents, Sri. V. Santharam.
4. The Applicant, through its holding Company M/S. Indo Thai Airport Management Services Pvt. Ltd., executed Annexure A1 Concession Agreement dated 19.07.2021 with the 2nd respondent represented by the 1st respondent. The Agreement was for providing ground handling services by the Applicant at Calicut AR No.99 of 2025 3 2025:KER:50181 Airport. The period of Annexure A1 Agreement was for a period of ten years. The period has not expired and parties have been still continuing with the Annexure A1 Agreement.
5. The 1st respondent issued Annexure A14 Show Cause Notice dated 20.12.2021 to the Applicant alleging violation of Annexure A1 Agreement on account of non-achievement of Certificate of Operational Readiness (COD) as per the prescribed timeline, non- intimation of the Tariff Application submitted to AERA and non- intimation of the details of Escrow Account opened for the purpose of contract. The Applicant approached this Court by filing WP(C) No.2611/2022 challenging Annexure A14 Show Cause Notice and seeking extension for achievement of COD till such time COVID restrictions upon air travel are lifted completely. This Court disposed of the said Writ Petition as per Annexure A15 judgment directing the Applicant to submit explanation to Annexure A14 and directing the respondents to consider the same within a period of AR No.99 of 2025 4 2025:KER:50181 two weeks. The Applicant submitted A16 Reply to Annexure A14, mainly contending that the Applicant is entitled to get relaxation of conditions for achieving COD on account of the COVID pandemic, as the same has been declared as an event of Force Majeure by the Ministry of Finance. The 1st respondent issued Annexure A22 Notice demanding Rs.7,31,46,240/- as damage charges on the allegations that the Applicant achieved COD after a delay of 272 days and that the conditions could not be relaxed on the ground of Force Majeure. The Applicant challenged Annexure A22 in this Court by filing WP(C) No.34051/2022 and the same was disposed of by this Court as per Annexure A25 judgment observing that the remedy of the applicant is to invoke Arbitration clause in Annexure A1 Agreement and not to seek relief under Article 226 of the Constitution of India. Thereafter, the 1st respondent issued Annexure A26 dated 11.04.2023 calling upon the applicant to explain as to the non-payment of Rs.6,68,90,087/- towards the AR No.99 of 2025 5 2025:KER:50181 payment of MMG and Rs.7,31,46,240/- towards damage charges. The Request of the Applicant dated 18.08.2023 for referring the dispute to the Dispute Resolution Committee (DRC) was approved by the 1st respondent, constituting the DRC at the station level by Annexure A29 dated 11.09.2023. In Annexure A29, the Applicant was demanded to pay the damage charges in accordance with clause 7.1.6 of the Annexure A1 Agreement subject to the condition that if the dispute is settled in favour of the Applicant, the 2nd respondent shall refund the disputed dues as per the decision of the DRC or arbitration, without any interest. The Applicant as per Annexure A31 dated 10.02.2025 notified the 1st respondent, his willingness to adjudicate the dispute through Arbitration by suggesting the name of the Arbitrator. In Annexure A31, the Applicant informed the 1st respondent that the Applicant is willing to hold further discussions in order to resolve the disputes amicably. The 1st respondent issued Annexure A32 AR No.99 of 2025 6 2025:KER:50181 dated 10.03.2025 stating that they had closed the Dispute Resolution Committee because of the failure of the Applicant to make pre-deposit and insisted the applicant to make the pre- deposit for referring the dispute for arbitration in line with Clause 15.6 and 7.1.6 of Annexure A1 Agreement.
6. The contention of the Counsel for the Applicant is that the insistence of the respondents for pre-deposit for referring the dispute for arbitration by referring Clauses 15.6 and 7.1.6 of the Annexure A1 Agreement is unreasonable and the same is violative of Article 14 of the Constitution of India. The learned counsel further contended that the Applicant sought for appointment of an Arbitrator since the attempts of the Applicant to settle the dispute amicably and through the DRC failed on account of the illegal insistence of the respondents for payment of the disputed amount. The learned counsel contended that the appointment of the Arbitrator provided under clause 15.3 of AR No.99 of 2025 7 2025:KER:50181 Annexure A1 Agreement is not conditional or subject to Clause 15.6. Clause 15.3 provides that DRC has to give its recommendation within 45 days of the reference of the case. Even after the expiry of 45 days, the DRC did not give its recommendation and hence the resolution of the dispute through the DRC could not be taken as an objection against the appointment of the Arbitrator. Clause 15.6 if construed as mandating payment of the disputed amount as a pre-condition for invoking Arbitration clause, the same is violative of Article 14 in view of the decision of the Hon'ble Supreme Court in ICOMM Tele Limited v. Punjab State Water Supply and Sewerage Board and Another [(2019)4 SCC 401] and Lombardi Engineering Limited v. Uttarakhand Jal Vidyut Nigam Limited [(2024) 4 SCC 341].
7. The learned Counsel for the respondents contended mainly that the Applicant has not complied with the pre-conditions for invoking AR No.99 of 2025 8 2025:KER:50181 the Arbitration clause under clause 15 of Annexure A1 Agreement. Annexure A1 Agreement provides for a three-tier Dispute Resolution Mechanism - firstly, through amicable settlement, secondly, in case the dispute remains unresolved amicably, by reference to the DRC of the 1st respondent and thirdly, in case the dispute remains unresolved through the DRC, by reference to the Arbitral Tribunal. As per Clause 15.6 read with Clause 7.1.6, the payment of the disputed amount is a pre-condition for invoking the three-tier dispute resolution mechanism provided in Annexure A1 Agreement. Learned counsel cited the decisions of the Hon'ble Supreme Court in Visa International Limited v. Continental Resources (USA) Limited [(2009) 2 SCC 55] and M.K. Shah Engineers & Contractors v. State of M.P. [(1999) 2 SCC 594], the decisions of the Delhi High Court in Sushil Kumar Bhardwaj v. Union of India [2009 SCC OnLine Del 4355], Ved Prakash Mithal & Sons v. Delhi Development Authority and Another AR No.99 of 2025 9 2025:KER:50181 [2018 SCC OnLine Del 9884] and Sanjay Iron and Steel Limited v. Steel Authority of India [2021 SCC OnLine Del 4566] and the decisions of the Bombay High Court in Quick Heal Technologies Limited v. NCS Computech Private Limited and Another [2020 SCC OnLine Bom 693] and Capacite Infraprojects Ltd. v. T. Bhimjyani Realty Pvt. Ltd. [2023 SCC OnLine Bom 1657] in support of his contentions.
8. I have considered the rival contentions.
9. The execution of Annexure A1 Agreement and the existence of the Arbitration Clause therein are admitted by the parties. Admittedly, there is a dispute between the Applicant and the respondents with respect to the demand of a sum of Rs.7,31,46,240/- towards damage charges by the 1st respondent from the Applicant on the ground that the Applicant achieved COD after a delay of 272 days. The contention of the Applicant is that the Application has legal justification for the delay as the Applicant AR No.99 of 2025 10 2025:KER:50181 is prevented by Force Majeure on account of the COVID Pandemic. The respondents have raised two objections against the invocation of the Arbitration clause. Firstly, the Applicant did not invoke the first two modes for the dispute resolution mechanism before invoking the third mode of dispute resolution, namely, the arbitration. Secondly, the Applicant has not made payment of the disputed amount in order to invoke the dispute resolution mechanism provided in the Annexure A1 Agreement.
10. In ICOMM Tele Limited (supra), the Hon'ble Supreme Court held that the clause insisting on pre-deposit for invoking the Arbitration clause is discriminatory and arbitrary. In the said case, the Hon'ble Supreme Court struck down Clause 25(viii) of the Notice Inviting Tender therein which mandated pre-deposit of 10 per cent for invoking Arbitration on the ground that it would discourage arbitration, contrary to the object of declogging the court system and would render the arbitral process in effective and expensive. AR No.99 of 2025 11
2025:KER:50181 The said decision in ICOMM Tele Limited is followed by the Hon'ble Supreme Court in Lombardi (Supra) in which the Hon'ble Supreme Court ordered to ignore the pre-condition to deposit total amount contained in clause 55 of the GCC on the ground that the same is violative of the fundamental rights guaranteed under the Constitution. The Hon'ble Supreme Court further held that the Court dealing with an Application under 11(6) can consider whether a particular condition in the Arbitration clause is arbitrary or violative of Article 14 of the Constitution of India. In the light of the principles laid down in the aforesaid two decisions of the Hon'ble Supreme Court, I hold that Clause 15.6 so far as it insists payment of pre-deposit for the purpose of invoking the dispute resolution mechanism provided under Clauses 15.2 and 15.3 in Annexure A1 Agreement is illegal as it is arbitrary and violative of Article 14 and the same is to be ignored while considering the request to invoke the dispute resolution mechanism provided in AR No.99 of 2025 12 2025:KER:50181 Annexure A1 Agreement. Since I have found that the clause insisting on pre-deposit is liable to be ignored, the question whether clause 15.3 providing arbitration clause is subject to clause 15.6 providing pre-deposit does not arise for consideration.
11. The next question is whether the applicant is entitled to invoke the Arbitration Clause without resorting to the amicable settlement provided in clause 15.2 and without resorting to the resolution of the dispute through the DRC provided under the first part of Clause 15.3. On going through the scheme of the agreement, it is seen that a three-tier dispute resolution mechanism is provided in it. At first, the Applicant has to attempt an amicable settlement. In case the dispute remains unresolved amicably, the same shall be referred to the DRC. In case the dispute still remains unresolved after the recommendation of the Dispute Resolution Committee, the same shall be referred to the Arbitral Tribunal. It is clear from Annexure A29 letter dated 11.09.2023 issued by the 1st AR No.99 of 2025 13 2025:KER:50181 respondent that the Applicant had requested for referring the dispute to the DRC and the 1st respondent had constituted the DRC. But in the very same letter, the 1st respondent insisted for payment of damage charges in accordance with clause 7.1.6 of Annexure A1 Agreement. On account of the insistence on such an unreasonable condition of pre-deposit, the respondents have made the resolution of the dispute through DRC nugatory. It is seen from Annexure A31 issued by the Applicant to the 1st respondent that the Applicant has stated that the Applicant is willing to hold discussions in order to resolve the disputes amicably. The said letter was replied to by Annexure A32 by the 1st respondent, stating that the refusal of the applicant to make payment of the disputed amount led to the closure of DRC proceedings. Even though the Applicant made an offer to hold discussions to resolve the disputes amicably, the respondent did not respond to the said offer. Thus, it is clear that the Applicant AR No.99 of 2025 14 2025:KER:50181 attempted to resolve the dispute through amicable settlement and through DRC, but the same did not take place on account of the unreasonable demand made by the respondents to make the pre- deposit, which I have already found arbitrary. Then the question arises whether the applicant is to be directed to start from the first mode of the dispute resolution mechanism provided in Annexure A1 Agreement without the condition to make the pre-deposit and to entertain the application for appointment of the Arbitrator only after exhausting the first two modes in the dispute resolution mechanism.
12. Let me analyse the decisions cited by the learned counsel for the respondents in this regard.
13. In M.K. Shah( supra), the Hon'ble Supreme Court held that the steps preceding the coming into operation of the arbitration clause though essential are capable of being waived and if one party has by its own conduct or the conduct of its officials, disabled such AR No.99 of 2025 15 2025:KER:50181 preceding steps being taken, it will be deemed that the procedural prerequisites were waived and that the party at fault cannot be permitted to set up the bar of non-performance of prerequisite obligation so as to exclude the applicability and operation of the arbitration clause.
14. In Visa International (supra), in answer to the contention that the pre-condition for amicable settlement of the dispute between the parties has not been exhausted and therefore the application seeking appointment of arbitrator is premature, the Hon'ble Supreme Court held that from the correspondence exchanged between the parties it is clear that there was no scope for amicable settlement, for both the parties have taken rigid stand making allegations against each other; that the exchange of letters between the parties undoubtedly discloses that attempts were made for an amicable settlement but without any result leaving no option but to invoke arbitration clause. In the case on hand, the AR No.99 of 2025 16 2025:KER:50181 parties have not taken a rigid stand. There is still scope for amicable settlement between the parties, especially when the parties have been continuing with the contract discharging their obligations.
15. In Sushil Kumar (supra), the Delhi High Court rejected the Application for the appointment of an arbitrator as premature on the ground that there is no pleading or proof of compliance of the procedure prescribed in the Arbitration clause. In the said case, the decision of the Superintending Engineer was a pre-condition for invocation of arbitration clause. It is held that steps preceding arbitration are to encourage conciliation and the designate of the Chef Justice ought to encourage such mechanism for conciliation agreed upon by the parties. The said decision was followed by the Delhi High Court in the subsequent decision in Ved Prakash (supra), dismissing an Application for the appointment of an arbitrator, referring to non-compliance with the hierarchical AR No.99 of 2025 17 2025:KER:50181 manner of adjudication of the claims with specific timeline for the decision of each authority. In the said case, the relevant clause required the party to explore the possibility of an amicable settlement before seeking the appointment of an arbitrator. In Sanjay Iron (supra), the Delhi High Court opined that the very purpose of keeping conciliation clause in any Agreement is to shorten the path for settlement of disputes between the parties and then directed the parties to first explore the possibility of resolution of disputes through conciliation.
16. In Quick Heal (supra), the Bombay High Court dealt with a provision for amicable settlement prior to the arbitration and the same was held to be mandatory. In Capacite (supra), the Bombay High Court held that when the parties agreed that before they trigger the arbitration agreement, they would agitate their grievance through Dispute Adjudication Board, then it was the choice of the parties to so determine and once this choice is made, AR No.99 of 2025 18 2025:KER:50181 it must be adhered to, and in its absence Section 11 is not permitted to be invoked.
17. It is the choice of the parties to agree on a particular mode of dispute resolution when they enter into an agreement. The parties are free to frame a hierarchy by prescribing a stage-wise dispute resolution mechanism one after another. Courts will have to respect and follow such dispute resolution mechanism agreed by the parties, so long as the same does not offend any law. A hierarchy for dispute resolution is made for easy settlement of the disputes and to shorten the path for dispute resolution. It is always a lighter mode that is invoked first than a heavier mode to resolve the dispute. In view of the legal principle laid down by the Hon'ble Supreme Court and various High Courts, I hold that when a dispute resolution mechanism is provided in an Agreement, the parties can seek reference to arbitration provided therein only after exhausting the previous modes for dispute resolution. AR No.99 of 2025 19
2025:KER:50181
18. Let me examine the dispute resolution mechanism in the present case to check whether it prevents the Applicant from seeking appointment of an arbitrator without resorting to amicable settlement and settlement of the dispute through DRC.
19. It is clear from Annexure A29 and A31 that the Applicant requested for holding discussions for amicable settlement and reference to DRC for resolving the dispute. On account of the insistence of the respondents to make the pre-deposit as required under Clause 15.6, the dispute could not be attempted to be resolved through amicable settlement and through DRC. On account of the existence of Clause 15.6, the parties were under bonafide dispute with respect to the requirement of pre-deposit. Such dispute is settled only in this judgment. The parties have not terminated the Annexure A1 Agreement and they have still been continuing with the Annexure A1 Agreement. Hence, there is still scope for holding amicable settlement and dispute resolution AR No.99 of 2025 20 2025:KER:50181 through DRC to resolve the dispute. In such situation, the parties are to be relegated to the first two modes of dispute resolution mechanism before invoking the Arbitration Clause. In case the dispute is not resolved after resorting to the first two modes, the applicant can very well approach this Court with a fresh Request for appointment of an Arbitrator.
20. The learned counsel for the applicant pointed out that the DRC is constituted at the station level and in order to make the dispute resolution through DRC more powerful and effective, the officers from the head office of the 2nd respondent are also to be included. The Applicant is free to make such requests to the respondents and the respondents shall consider such request while constituting the DRC.
21. In the light of the aforesaid findings, this Arbitration Request is dismissed, reserving liberty to the applicant to approach this Court again in case the dispute is not resolved after resorting to the first AR No.99 of 2025 21 2025:KER:50181 two modes in the dispute resolution mechanism provided in Annexure A1 Agreement and declaring that Clause 15.6 so far as it insists on the payment of pre-deposit for the purpose of invoking the dispute resolution mechanism provided under Clauses 15.2 and 15.3 in Annexure A1 Agreement is illegal and the same is to be ignored while considering the request to invoke the dispute resolution Mechanism provided in Annexure A1 Agreement.
Sd/-
M.A.ABDUL HAKHIM JUDGE Jma/shg AR No.99 of 2025 22 2025:KER:50181 APPENDIX OF AR 99/2025 PETITIONER ANNEXURES Annexure A1 A COPY OF THE AGREEMENT DATED 19/07/2021 AND EXECUTED BETWEEN THE PETITIONER AND THE 2ND RESPONDENT HEREIN Annexure A2 A TRUE COPY OF THE LOIA DATED 19/02/2021 ISSUED BY THE GENERAL MANAGER OF THE 2ND RESPONDENT TO THE PETITIONER Annexure A3 A TRUE COPY OF THE LETTER DATED 16TH MARCH 2021 ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT Annexure A4 A COPY OF THE LETTER DATED 3RD JUNE 2021 ISSUED BY THE PETITIONER THROUGH ITS HOLDING COMPANY TO THE CHAIRMAN OF THE 2ND RESPONDENT Annexure A5 A COPY OF THE LETTER ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER DATED 28TH JULY 2021 Annexure A6 TRUE COPY OF THE LETTER DATED 10/09/2021 BY THE PETITIONER TO THE 1ST RESPONDENT Annexure A7 TRUE COPY OF THE LETTER DATED 15/09/2021 BY THE PETITIONER TO THE 1ST RESPONDENT Annexure A8 A TRUE COPY OF THE LETTER DATED 18TH OCTOBER 2021 BY THE 1ST RESPONDENT TO THE PETITIONER Annexure A9 TRUE COPY OF THE CIRCULAR DATED 26TH NOVEMBER 2021 ISSUED BY THE DIRECTOR GENERAL OF CIVIL AVIATION Annexure A10 TRUE COPY OF THE CIRCULAR DATED 1ST DECEMBER 2021 ISSUED BY THE DIRECTOR GENERAL OF CIVIL AVIATION Annexure A11 TRUE COPY OF THE CIRCULAR DATED 9TH DECEMBER 2021 ISSUED BY THE DIRECTOR GENERAL OF CIVIL AVIATION Annexure A12 TRUE COPY OF THE CIRCULAR DATED 19/01/2022 ISSUED BY THE DIRECTOR GENERAL OF CIVIL AVIATION Annexure A13 A COPY OF THE REPLY LAWYER NOTICE DATED 02/12/2021AND ISSUED BY 1ST RESPONDENT'S LAWYER TO THE PETITIONER'S LAWYER Annexure A14 A COPY OF THE SHOW CAUSE NOTICE DATED 20TH DECEMBER 2021 ISSUED BY THE 1ST RESPONDENT Annexure A15 A COPY OF THE JUDGMENT DATED 27TH JANUARY 2022 IN WRIT PETITION (CIVIL) NO. 2611 OF 2022 BY THIS HON'BLE COURT Annexure A16 A TRUE COPY OF THE EXPLANATION DATED 17TH FEBRUARY 2022 SUBMITTED BY THE PETITIONER TO THE 1ST RESPONDENT Annexure A17 A COPY OF THE LETTER ISSUED BY THE 1ST RESPONDENT AR No.99 of 2025 23 2025:KER:50181 TO THE PETITIONER DATED 18TH MARCH 2022 Annexure 18 A COPY OF THE LETTER ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT DATED 4TH APRIL 2022 Annexure A19 A COPY OF THE 1ST RESPONDENT'S LETTER TO THE PETITIONER DATED 19TH APRIL 2022 Annexure A20 A TRUE COPY OF THE LETTER ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT DATED 29TH APRIL 2022 Annexure A21 A TRUE COPY OF THE LETTER ISSUED BY THE 1ST RESPONDENT DATED 6TH JUNE 2022 Annexure A22 A COPY OF THE 1ST RESPONDENT'S LETTER DATED 6TH SEPTEMBER 2022 Annexure A23 A TRUE COPY OF THE APPLICANT'S LETTER DATED 4TH NOVEMBER 2022 Annexure A24 A TRUE COPY OF THE LETTER ISSUED BY THE 1ST RESPONDENT DATED 8TH FEBRUARY 2023 TO THE PETITIONER Annexure A25 A COPY OF THE ORDER DATED 24TH MARCH 2023 IN WRIT PETITION (CIVIL) NO. 34051 OF 2022 Annexure A26 TRUE COPY OF THE LETTER DATED 11/04/2023 AND ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER Annexure A27 TRUE COPY OF THE LETTER DATED 20/04/2023 AND ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT Annexure A28 TRUE COPY OF THE LETTER DATED 04/07/2023 AND ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER Annexure A29 TRUE COPY OF THE LETTER DATED 11/09/2023 AND ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER Annexure A30 TRUE COPY OF THE LETTER DATED 28/03/2024 AND ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER Annexure A31 TRUE COPY OF THE LETTER DATED 10/02/2025 AND ISSUED TO THE 1ST RESPONDENT Annexure A32 TRUE COPY OF THE LETTER DATED 10/03/2025 AND ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER Annexure A33 A TRUE COPY OF THE RESOLUTION OF THE BOARD OF DIRECTORS OF THE PETITIONER COMPANY DATED 21/04/2025