Kerala High Court
Anoop Unnikrishnan vs Johnson Stephen on 3 August, 2021
OP(C).1171/21 1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE V.G.ARUN
TUESDAY, THE 3RD DAY OF AUGUST 2021 / 12TH SRAVANA, 1943
OP(C) NO. 1171 OF 2021
AGAINST THE ORDER/JUDGMENT IN CMA(Arb) 321/2021 OF PRINCIPAL
SUB COURT,ERNAKULAM, ERNAKULAM
PETITIONER/S:
1 ANOOP UNNIKRISHNAN,
AGED 49 YEARS
THE PARTNER, M/S. MCEES TRADING, DOOR NO.34/767 A,
GESIMA, KRRA-78, KANNANTHODATH ROAD, EDAPALLY,
KOCHI-682 024.
2 M/S. INNOVUS ENERGIEZ,
1ST FLOOR, BUILDING NO.34/3948, VAIKUMDAM,
PALARIVATTOM, MAMANGALAM, ERNAKULAM-682 025,
REPRESENTED BY PARTNER ANOOP UNNIKRISHNAN.
3 ANUPAMA BALARAM,
THE PARTNER, M/S. INNOVUS ENERGIES, W/O.SUNIL
KUMAR.T.K., NO.12A, NATIONAL RESIDENCY COMPLEX,
PALARIVATTOM-EDAPPALLY ROAD, BANK JUNCTION,
MAMANGALAM, EDAPALLY, KOCHI-682 024.
4 RAJESH S.NAIR,
THE PARTNER, M/S. INNOVUS ENERGIEZ, KANINAD, NEAR
KARIMUGAL, KARIMUGHAL PUTHENCRUZ ROAD, ERNAKULAM-
682 310.
BY ADVS.
VIZZY GEORGE KOKKAT
C.HARIKUMAR
RENJITH RAJAPPAN
RESPONDENT/S:
1 JOHNSON STEPHEN,
AGED 50 YEARS
S/O.LATE P.A.STEPHEN, THE THEN PARTNER, M/S. MCEES
OP(C).1171/21 2
TRADING, DOOR NO.34/767 A, GESIMA, KRRA-78,
KANNANTHODATH ROAD, EDPALLY, KOCHI-682 024,
PRESENTLY RESIDING AT PALLICKA HOUSE, KOTTAMAM,
KALABATTUPURAM ROAD, KALADY, ERNAKULAM DISTRICT-683
574.
2 SUNIL KUMAR.T.K.,
THE PARTNER, M/S. MCEES TRADING, DOOR NO.34/767 A,
GESIMA, KRRA-78, KANNANTHODATH ROAD, EDAPALLY,
KOCHI-682 024.
3 KOHLER POWER INDIA PRIVATE LIMITED,,
7TH FLOOR, PENTAGON P5, MAGARPATTA CITY, HADAPSAR,
PUNE, MAHARASHTRA-411 013, REPRESENTED BY MANAGING
DIRECTOR.
4 KOHLER POWER INDIA PRIVATE LIMITED,
REGIONAL OFFICE (SOUTH), 138/6, A CROSS, RMV
EXTENSION, SADASHIVNAGAR, BENGALURU-560 080,
REPRESENTED BY DIRECTOR, MANISH SHARAD PURANIK.
5 ATLAS COPCO (INDIA) LIMITED,
HAVING ITS REGISTERED OFFICE AT SVEANAGAR, DAPODI,
PUNE, MAHARASHTRA-411 012, REPRESENTED BY MANAGING
DIRECTOR.
6 FUJITEC INDIA PRIVATE LIMITED,
DOOR NO.66/343, 3RD FLOOR, DARUSSALAM BUILDING,
CHITTOOR ROAD, NEAR YMCA, ERNAKULAM-682 035,
REPRESENTED BY MANAGING DIRECTOR.
7 THERMAX (INDIA) PRIVATE LIMITED,
HAVING ITS REGISTERED OFFICE AT D-13, MIDC,
INDUSTRIAL AREA, RD AGA ROAD, CHINCHWAD, PUNE,
MAHARASHTRA-411 019, REPRESENTED BY MANAGING
DIRECTOR.
8 THE FEDERAL BANK LIMITED,
ERNAKULAM BYE PASS BRANCH, HIGHWAY HEIGHTS,
N.H.BYPASS PUTHIYA ROAD, ERNAKULAM-682 032.
R1 BY ADV JOHN MATHEW (THEREZHATH)
OTHER PRESENT:
OP(C).1171/21 3
SC ADV.PAULOCHAN ANTONY FOR R8
THIS OP (CIVIL) HAVING COME UP FOR ADMISSION ON
29.7.2021, THE COURT ON 03.08.2021 DELIVERED THE FOLLOWING:
OP(C).1171/21 4
V.G.ARUN, J.
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O.P(C).No. 1171 of 2021
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Dated this the 3rd day of August, 2021
JUDGMENT
The petitioners are aggrieved by Exhibit P5 order by which the
court below injuncted the 8th respondent Bank from transferring or
disbursing any amounts lying in the accounts of petitioners 1 and 2
and directed to maintain status quo with respect to the accounts
until further orders. The essential facts are as under;
The 1st petitioner and respondents 1 and 2 were partners of a
firm by name 'MCEES Trading'. The firm was doing the business of
trading and servicing of generators and other allied products. There
arose some dispute among the partners and the 1st respondent
issued notice dissolving the partnership and thereafter filed CMA.
(Arb).No.766 of 2020 before the Principal Sub Court, Ernakulam
seeking interim relief under Section 9 of the Arbitration and
Conciliation Act, 1996 (for short, 'the Act'). The CMA (Arb) was
dismissed by the Sub Court and the 1 st respondent preferred
Arbitration Appeal No.54 of 2021 before the High Court. In the
appeal this Court passed an interim order directing parties to
maintain status quo with respect to the accounts maintained by the
firm. The interim order was later modified permitting the respective
Banks to receive the inward remittances and credits from
M/s.MCEES Trading by maintaining the status quo order issued.
Later, by judgment dated 5.3.2021, the Arbitration Appeal was
allowed and an ad interim order of injunction passed under Section
9(1) of the Act restraining M/s.MCEES Trading, its partners and
agents or persons acting under them from alienating, encumbering
and dealing with the assets of the firm in any manner prejudicial to
the interest of the appellant till arbitration proceedings are initiated
before an Arbitrator appointed by the court. Being aggrieved by the
appellate court's refusal to freeze the accounts of the partnership
firm, the 1st respondent preferred Special Leave Petition before the
Honourable Supreme Court and obtained an interim order directing
that none of the parties should operate the bank account of the firm
until the appointment of an Arbitrator. Thereafter, as per the order
dated 24.6.2011 in AR.No.111 of 2020, this Court appointed Justice
(Rtd.) Thomas P.Joseph as the sole Arbitrator.
2. The Arbitral Tribunal held its first sitting on 9.7.2021 and
adjourned the matter to 14.7.2021 directing the claimant to file
statement of claim and interlocutory application if any by
13.7.2021. Accordingly, the statement of claim and I.A.No.1 of
2021, seeking to extend the operation of the orders issued by the
High Court and the Honourable Supreme Court, freezing the bank
accounts of MCEES Trading till final adjudication and disposal of the
arbitration claim, were filed on 13.7.2021. The interlocutory
application was heard by the Arbitral Tribunal on 14.7.2021 and
order pronounced on 15.7.2021, directing the parties not to operate
the bank accounts of MCEES Trading until final adjudication of the
dispute.
3. In the meanwhile, on 11.7.2021, the 1st respondent
approached the Principal Sub Court under Section 9 of the Act by
filing CMA.(Arb).No.321 of 2021. It was alleged that the petitioners
had constituted a benami firm (2nd petitioner herein) and had
syphoned off the funds of MCEES Trading, which fact had come to
the notice of the 1st respondent only after 9.7.2021. The 1 st
respondent apprehended that if he waits till 14.7.2021 for moving
the Arbitral Tribunal for interim relief, the petitioners may alienate
the remaining dealership and distribution rights of MCEES Trading to
the 2nd petitioner firm and will withdraw the syphoned off amounts
from their Bank accounts. The 1st respondent therefore sought
intervention of the court under Section 9(1). Along with the appeal,
the petitioner moved I.A.No.2 of 2021 praying for an interim
injunction against operating the bank accounts of petitioners 1 and
2 and to freeze the accounts. By Exhibit P5, the prayer for injunction
and freezing of accounts was granted and the CMA (Arb) posted for
hearing to 12.8.2021.
4. Sri.C.Harikumar, learned counsel for the petitioner took
strong exception to the manner in which the 1st respondent secured
Exhibit P5 order and assailed the authority of the court to pass the
order, in view of the interdiction contained in Section 9(3) of the Act.
In elaboration it was submitted that, having appeared before the
Arbitral Tribunal on 9.7.2021 and having sought time till 13.7.2021
for filing statement of claim and application for interim orders, the
1st respondent had committed fraud by clandestinely approaching
the civil court and obtaining the order. It is contended that as per
Section 9(3) of the Act, the Court cannot entertain an application for
interim measure under sub-section (1), unless circumstances exist
which may not render the remedy provided under Section 17
efficacious. According to the learned Counsel, no such special
circumstance was pointed out by the 1st respondent or considered
by the court. In any case, the accounts of the 2 nd petitioner firm,
which is not a party to the dispute, should not have been frozen.
Reliance is placed on the decision of this Court in Ashraf M. v.
Kasim V.K. [2018 (5) KHC 593] to buttress the contention that an
order passed under Section 9(1), after constitution of the Arbitral
Tribunal, without the court specifically finding as to why the remedy
provided under Section 17 is inefficacious, is illegal.
5. Sri.John Mathew Therezhath, learned counsel for the 1 st
respondent challenged the very maintainability of the original
petition in view of the efficacious alternative remedy available
under Section 37 of the Act. Reliance is placed on the decision of
the Apex Court in V.H.N.D.P Sabai v. Tuticorin Educational
Society [(2019) 9 SCC 538] in support of the challenge. On merits,
it is contended that the 1st respondent was constrained to move
under Section 9(1), on being informed about the constitution of the
2nd petitioner benami firm and syphoning of funds from the accounts
of MCEES Trading. The 1st respondent had received the information
only after the first sitting of the Arbitrator on 9.7.2021. The next
sitting being on 14.7.2021, he apprehended that the petitioners
may withdraw the syphoned amount lying in the account of the 2 nd
petitioner firm immediately. The 2nd petitioner being a benami firm
constituted by the 1st petitioner, the court is empowered to grant
the interim relief. It is contended that Exhibit P5 order was issued
by the court on being convinced that the remedy under Section 17
is not efficacious.
6. In reply, learned counsel for the petitioner argued that the
1st respondent having obtained Exhibit P5 fraudulently and the
court having passed the order without complying with the
requirement under Section 19(3), the objection as to maintainability
is not sustainable. It is contended that the exercise of jurisdiction
under Article 227, even in cases where alternative remedy is
available, is subject only to self imposed restrictions. The order
under challenge being per se illegal, this Court is justified in
interfering with the order in exercise of supervisory jurisdiction.
7. Indisputably, the 1st respondent had filed CMA (Arb) No.321
of 2021, seeking interim relief under Section 9(1), after appearing
before the Arbitral Tribunal and seeking time for filing statement of
claim and application for interim measures. The 1 st respondent's
explanation for filing the CMA (Arb) are available at paragraphs 22
and 23 of Exhibit P4, extracted hereunder;
"22. The Annexures A12 and A13 orders have been in
force till th date of appointment of the Arbitrator and the
commencement of the Arbitration proceedings, as the case
may be. The Honourable High Court of Kerala, vide
Annexure A14 order has extended the operation of the
relevant interim orders till the date of 15.7.2021. The
Hon'ble High Court of Kerala has appointed Hon'ble
Rtd.Justice Thomas P.Joseph as an arbitrator to consider the
arbitration claim. The Arbitrator has presently posted the
case on 14.7.221 and directed the applicant to file the
Statement of Claim and the relevant petitions thereto on
13.7.2021. Facts being so the above mentioned fresh facts
with respect to the fraudulent constitution of the 4 th
respondent Benami firm and syphoning of funds and
alienation of assets by the respondents 2 and 3, has come
to the notice of the applicant. In the above circumstance,
the applicant is constrained to apply for an urgent interim
orders, to secure the arbitration award that may be passed
with respect to the settlement of accounts. If the applicant
waits till 14.7.2021 to move the appropriate applications
before the arbitrator for passing the relevant interim orders
of freezing and for injunction in the wake of above stated
peculiar facts, changed circumstances and the causes of
action, the respondents 2 and 3 shall alienate the
remaining dealership and distribution rights of the 1 st
respondent firm to the 4th respondent firm and they shall
also withdraw the syphoned amounts presently lying in the
relevant bank accounts of the 2 nd respondent and the 4th
respondent firm. It shall cause irreparable loss and
irretrievable hardship to the applicant. The applicant seeks
to secure the arbitration award that may be passed in his
favour. The respondents 2 and 3 have mischievously
syphoned out and routed the amounts originally lying in the
Federal Bank Account bearing No.16085500000065 of the
1st respondent firm to the Federal Bank account bearing
No.16080100009335 of the 2nd respondent and also to the
Federal Bank Account No.16080200006470 of 4 th
respondent firm, in violation of the prohibitory orders
issued by the Hon'ble High Court as well as Supreme Court.
The withdrawal of the amount presently lying in the
account of the 4th respondent shall leave the applicant
without any remedy.. the alieantion of the existing
dealership and distribution rights owned by the 1 st
respondent firm with respect to the brands of respondents
7 to 11 to the 4th respondent firm shall cause irreparable
loss and irretrievable hardship to the applicant.
23. Section 9 of the Arbitration Act enables the
aggrieved party to approach the court of law, for interim
orders, even during the continuance of the arbitral
proceedings or at any time after the making of the arbitral
award but before it is enforced in accordance with section
36. The commencement of the arbitration proceedings shall
not prevent the applicant from approaching his Hon'ble
Court under Section 9 of the Act in view of the above
peculiar facts and circumstances of the case. Section 9(3)
of the Act provides that once the Arbitral Tribunal has been
constituted, the court shall not entertain an application
under sub-section (1) unless the court finds that the
circumstances exist which may not render the remedy
provided under the Section 17 efficacious. This allows the
court to intervene in the above exceptional circumstances
where the remedies that the Tribunal may grant are not
efficacious enough."
The extract of Exhibit P5 order obtained from the daily status report
of the court is produced as Exhibit R1(i). Therein, the court below
has made the following observation;
"Heard the learned counsel for the petitioner and perused
the affidavit and other documents. I am satisfied that the
petitioner has made out a prima facie case and delay in
granting the ex parte order of injunction would defeat the
purpose of this application. "
8. The judgment in Ashraf M. was rendered in an Arbitration
Appeal filed against an order refusing to grant an interim measure
under Section 9(1) of the Act. The Division Bench held that normally
the court shall not entertain an application under Section 9(1) of the
Act after constitution of the Arbitral Tribunal, but the court can
entertain the application if it finds that in the circumstances of the
case, the party does not have an efficacious remedy under Section
17 of the Act. It was also held that, an application for interim relief
under Section 9(1) of the Act shall be entertained and examined on
merits, once the court finds that the circumstances exists, which
may not render the remedy under Section 17 of the Act
inefficacious. On facts, the Division Bench found that the court
below had not made any discussion of the circumstances under
which the interim relief was claimed by the appellant and the
circumstances under which the remedy provided under Section 17
of the Act would be efficacious to the appellant. It was held that, a
mere statement by the court that the remedy provided under
Section 17 is efficacious, without reference to the circumstance
which makes it so, is not sufficient to reject an application under
Section 9(1).
9. As far as the instant case is concerned, copy of the
impugned order is not produced and only the diary extract of the
order is available. Hence, it is not discernible whether the court
below has passed the order after being convinced about the
circumstances which rendered the remedy under Section 17
inefficacious. There is no justification for interfering with an order,
without even reading the order in its entirety. Moreover, as held by
the Honourable Apex Court in V.H.N.D.T Sabai (supra), "when
there is a remedy of appeal before a civil court available to an
aggrieved person and such remedy is not availed of by him, it
would deter the High Court, not merely as a measure of self-
imposed restriction, but as a matter of discipline and prudence,
from exercising its power of superintendence under Article 227 of
the Constitution".
For the aforementioned reasons, I refrain from interfering with
the impugned Exhibit P5 order. It is made clear that I have not
expressed any opinion on the merits of the contention regarding the
manner in which the CMA (Arb) was filed and the legality of Exhibit
P5 order. Such contentions are left open for consideration by the
court below or the appellate court, as the case may be.
In the result, the original petition is dismissed.
Sd/-
V.G.ARUN, JUDGE
vgs
APPENDIX OF OP(C) 1171/2021
PETITIONER EXHIBITS
Exhibit P1 THE TRUE COPY OF JUDGMENT IN ARB.REQUEST
NO.111 OF 2020 OF THIS HON'BLE COURT
DATED 24.06.2021.
Exhibit P2 THE TRUE COPY OF THE PETITION IN IA NO.1
OF 2021 IN ARBITRATION NO.1 OF 2021 FILED
BY THE 1ST RESPONDENT BEFORE THE HON'BLE
ARBITRAL TRIBUNAL.
Exhibit P3 THE TRUE COPY OF THE CERTIFICATE ISSUED
BY AKASH BINOY & ASSOCIATES, COMPANY
SECRETARIES EVIDENCING INCORPORATION OF
M/S. ENERGENIQ SALES AND SERVICES PRIVATE
LIMITED DATED 12.07.2021.
Exhibit P4 THE TRUE COPY OF THE PETITION WITHOUT
ANNEXURES IN CMA (ARB.)NO.321 OF 2021
FILED BY THE 1ST RESPONDENT DATED
11.07.2021.
Exhibit P5 THE TRUE COPY OF THE ORDER IN IA NO.2 OF
2021 IN CMA (ARB) NO.321 OF 2021 PASSED
BY THE HON'BLE PRINCIPAL SUB COURT
(COMMERCIAL COURT), ERNAKULAM DATED
13.07.2021.
