Ayyappan Ashokan vs K.P.Indrapalan
2021 Latest Caselaw 20241 Ker

        IN THE HIGH COURT OF KERALA AT ERNAKULAM
                         PRESENT
           THE HONOURABLE MR.JUSTICE V.G.ARUN
  THURSDAY, THE 30TH DAY OF SEPTEMBER 2021 / 8TH ASWINA,
                          1943
                  OP(C) NO. 865 OF 2021
    AGAINST THE ORDER/JUDGMENT IN CMA(Arb) 1/2020 OF
        PRINCIPAL SUB COURT,ALAPPUZHA, ALAPPUZHA
PETITIONER/S:

         AYYAPPAN ASHOKAN
         AGED 37 YEARS
         S/O P.V.ASHOK KUMAR, NANICHAM HOUSE,
         VADAKKEVILA P.O.MADANADA, KOLLAM-691 010.
         BY ADVS.
         RAMEEZ NOOH
         SHRI.SIRAJ ABDUL SALAM

RESPONDENT/S:

         K.P.INDRAPALAN
         AGED 57 YEARS
         S/O K.G.PURUSHOTHAMAN, INDRAPRASTHAM,
         CHARUMOOD, MAVELIKKARA, ALAPPUZHA-690 505.
         BY ADVS.
         M.G.KARTHIKEYAN
         NIREESH MATHEW


  THIS OPC HAVING BEEN FINALLY HEARD ON 26.07.2021,

THE COURT ON    30.09.2021 DELIVERED THE FOLLOWING:
 O.P.(C) No.865 of 2021

                                      -2-


                                 JUDGMENT

Dated this the 30th day of September, 2021

The petitioner and the respondent entered

into Ext.P1 partnership agreement with the

objective of conducting a bar attached hotel by

name 'M/s.Hotel Sixer. As per the terms of the

partnership agreement, petitioner is eligible for

10% of the total share of profits and the

respondent, for 90%. Dispute arose regarding the

conduct of business by the respondent and

thereupon, invoking the arbitration clause in the

agreement, the petitioner filed an application

under Section 9 of the Arbitration and

Conciliation Act, 1996 before the District Court,

Alappuzha ('the Act' for short) and obtained

Ext.P3 interim order, requiring the respondents

to maintain a separate account with regard to the

income derived from the day-today business and to O.P.(C) No.865 of 2021

submit the particulars of that account before the

court and also injuncting the respondents from

obstructing the petitioner's entry to the hotel.

2. The respondents on the other hand filed an

arbitration request before this Court, pursuant

to which a retired District Judge was appointed

as the sole Arbitrator. Pending the arbitral

proceedings, the respondents tried to renew the

FL3 licence of the hotel. The petitioner raised

objection before the Commissioner of Excise and

also filed WP(C) No.11275 of 2020 before this

Court. In spite of the objection and pendency of

the writ petition, the FL3 licence was renewed.

Thereupon, the writ petition was closed reserving

petitioner's liberty to file appeal before the

Commissioner of Excise. Accordingly, the

petitioner filed Ext.P5 appeal.

3. The star classification issued to M/s.

Hotel Sixer by the Ministry of Tourism, O.P.(C) No.865 of 2021

Government of India was due to expire on

15.07.2020. At that juncture, the petitioner

filed Ext.P6 representation before the Hotel and

Restaurants Approval and Classification Committee

(HRACC) (South) raising objection against grant

of reclassification till the dispute between the

partners is resolved through arbitration. Based

on the objection, the HRACC (South) issued Ext.P7

communication informing the petitioner that the

application for reclassification will not be

processed till the final outcome of the arbitral

proceedings.

4. In the meanwhile, the respondents

approached this Court by filing WP(C) No.12847 of

2020 seeking a declaration that M/s. Hotel Sixer

is entitled to continue the business on the

strength of the bar licence renewed for the year

2020-2021, till a decision is taken by the HRACC

(South). The hotel business is being continued on O.P.(C) No.865 of 2021

the strength of the interim orders issued in the

writ petition.

5. Pending WPC No.12847 of 2020, the

respondent moved Ext.P8 application before the

Arbitral Tribunal under Section 17 of the Act,

seeking a clarification to the effect that the

pendency of the arbitration proceedings is not a

legal bar in the HRACC (South) issuing

certificate of classification. The petitioner

filed Ext.P9 objection contending that the

application is not legally maintainable as the

relief sought does not fall within the purview of

the Act and is not the subject matter of the

arbitration agreement or the dispute. In spite of

the objection, the Arbitral Tribunal issued

Ext.P10 order, clarifying that the pendency of

the arbitral proceedings is not at all a legal

bar for renewal of classification as per law and

usual norms. Aggrieved, the petitioner preferred O.P.(C) No.865 of 2021

an appeal before the Commercial Court, Alappuzha.

The appeal stands dismissed by Ext.P11 order.

Hence, the original petition.

6. Sri.M.G.Karthikeyan, learned Counsel for

the petitioner submitted that the clarification

sought by the respondent being beyond the scope

of the partnership agreement and the dispute

referred to arbitration, the Arbitral Tribunal

had exceeded its jurisdiction in issuing Ext.P10

order. It is contended that this crucial legal

aspect was also not considered by the appellate

court. In support of the contention, reliance is

placed on the decision of the Apex Court in Booz

Allen and Hamilton Inc v. SBI Home Finance Ltd

and others [(2011) 5 SCC 532]. The further

contention is that, since the mismanagement of

the hotel and the allegation of misappropriation

and defalcation of accounts is pending in

arbitration, the clarification granted under O.P.(C) No.865 of 2021

Ext.P10 will cause substantial prejudice to the

petitioner.

7. In reply, Sri.Millu Dandapani, learned

Counsel for the respondent drew attention to

Section 5 of the Act, which limits the extent of

judicial intervention to the minimum, even under

Article 227. In support of this contention,

reliance is placed on the decision in Deep

Industries Limited v. Oil and Natural Gas

Corporation Ltd and another [(2020) 15 SCC 706]

Referring to Section 17 of the Act, it is

contended that the Arbitral Tribunal is vested

with the authority to pass an order in the nature

of Ext.P10 and the appellate court had rightly

declined to interfere with the order. The learned

Counsel referred to the decision in State of Goa

v. Praveen Enterprises [(2000) 12 SCC 581] to

contend that the jurisdiction of the arbitrator

to decide disputes is curtailed only when the O.P.(C) No.865 of 2021

arbitration agreement requires specific disputes

to be referred to the arbitration and stipulates

that the arbitrator will have jurisdiction to

decide only the disputes so referred. Drawing

attention to Clause 22 of Ext.P1 agreement it is

contended that the jurisdiction of the arbitrator

is not limited in any manner by the said clause.

Finally, it is contended that there is no bona

fides behind the challenge, the petitioner being

a partner with only 10% share holding, and the

attempt being to scuttle the functioning of the

hotel.

8. Before proceeding to decide the

questions canvassed, it is necessary to consider

the scope of intervention in a pending arbitral

proceedings. Section 5 of the Arbitration Act

stipulates that notwithstanding anything

contained in any other law for the time being in

force, in matters covered by Part I, no judicial O.P.(C) No.865 of 2021

authority shall intervene except as provided in

the Part. Section 17 of the Act vests the

Arbitral Tribunal with the power to order interim

measures. As per Section 17(1)(ii)(e), the

Arbitral Tribunal can grant such other interim

measures of protection as may appear to be just

and convenient. In the instant case, the

functioning of the hotel would have been

adversely affected if the application for

reclassification was kept pending by the HRACC

(South), as proposed in Ext.P7 communication.

Reading of Ext.P7 shows that the sole reason for

refusal to process the application was the

information given by the petitioner about the

dispute and the pendency of arbitration

proceedings. Being so, it was well within the

powers of the Arbitral Tribunal to have clarified

the position by stating that mere pendency of the

arbitral proceedings is not a legal bar in O.P.(C) No.865 of 2021

respect of renewal of classification as per law

and usual norms. In this regard, it may be

profitable to refer to the observation of the

Honourable Supreme Court at paragraphs 16 and 17

of Deep Industries (supra), which is extracted

hereunder;

"16. Most significant of all is the non obstante clause contained in Section 5 which states that notwithstanding anything contained in any other law, in matters that arise under Part I of the Arbitration Act, no judicial authority shall intervene except where so provided in this Part. Section 37 grants a constricted right of first appeal against certain judgments and orders and no others. Further, the statutory mandate also provides for one bite at the cherry, and interdicts a second appeal being filed [see Section 37(2) of the Act].

17. This being the case, there is no doubt whatsoever that if petitions were to be filed under Articles 226/227 of the Constitution against orders passed in appeals under Section 37, the entire arbitral process would be derailed and would not come to fruition for many years. At the same time, we cannot forget that Article 227 is a constitutional provision which remains untouched by the non obstante clause of Section 5 of the Act.

In these circumstances, what is important to note is that though petitions can be O.P.(C) No.865 of 2021

filed under Article 227 against judgments allowing or dismissing first appeals under Section 37 of the Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumbrated by us hereinabove so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction."

9. For addressing the contention of the

petitioner that the clarification beyond the

scope of the arbitration dispute, it is essential

to have a look at arbitration clause in Ext.P1

agreement, is extracted hereunder;

"22. Any dispute or difference of opinion which may arise between the partners or their representatives with regard to the construction, effect or meaning of any clause or clauses of this Deed or any part thereof; or in respect of the accounts, profits and losses of the business of the firm; or with regard to rights and liabilities of the partners under this deed or in respect of the dissolution or winding up of the business of the firm or relating to any other affairs of the firm shall be referred of the firm or relating to any other affairs of the firm shall be referred to and settled by arbitration and the proceedings of such arbitration shall be governed by the Indian Arbitration and Conciliation Act, 1996."

The aforementioned clause does not in any O.P.(C) No.865 of 2021

manner curb or curtail the scope of arbitration.

On the other hand, the clause provides for

arbitration of not only the rights and

liabilities of the partners and dissolution or

winding of the business of the firm, but also

disputes relating to any other affairs of the

firm. The conduct of the hotel including its

classification is definitely part of the affairs

of the firm. Being so, the clarification given

under Ext.P10 order is not beyond the scope of

the dispute referred to arbitration. As such, the

dictum laid down by the Apex Court in Praveen

Enterprises does not apply to the facts of the

instant case.

In the result, the original petition is

dismissed.

Sd/-

V.G.ARUN

JUDGE Scl/ O.P.(C) No.865 of 2021

APPENDIX OF OP(C) 865/2021

PETITIONER EXHIBITS EXHIBIT P1 TRUE COPY OF THE DEED OF PARTNERSHIP DATED 10.1.20213 ENTERED INTO BETWEEN THE PETITIONER AND THE RESPONDENT EXHIBIT P2 TRUE COPY OF THE FIR NO 1610/2017 DATED 13.12.2017 REGISTERED ON THE FIRS OF NOORANADU POLICE STATION AGAINST THE RESPONDENT EXHIBIT P3 TRUE COPY OF THE INTERIM ORDER DATED 23.12.2017 IN CMP NO 492/2017 PASSED BY THE ADDITIONAL DISTRICT COURT-1 ALAPPUZHA (VACATION BENCH) EXHIBIT P4 TRUE COPY OF ORDER DATED 5.4.2018 IN IA NO 124/2018 IN OP(ARB) NO 2/2018 PASSED BY THE ADDITIONAL DISTRICT COURT-1 MAVELIKKARA EXHIBIT P5 TRUE COPY OF THE MEMORANDUM OF APPEAL DATED 20.6.2020 FILED BY THE PETITIONER BEFORE THE COMMISSIONER OF EXCISE EXHIBIT P6 TRUE COPY OF THE REPRESENTATION DATED 20.6.2020 FILED BY THE PETITIONER BEFORE THE REGIONAL DIRECTOR, INDIA TOURISM EXHIBIT P7 TRUE COPY OF THE E-MAIL COMMUNICATION DATED 6.7.2020 OF THE REGIONAL DIRECTOR (SOUTH), HOTEL & RESTAURANTS APPROVAL AND CLASSIFICATION COMMITTEE (HRACC) (SOUTH) EXHIBIT P8 TRUE COPY OF THE APPLICATION DATED 18.7.2020 IN IA NO 2/20 IN AR NO 7/2018 FILED BY THE RESPONDENT U/S 17 OF THE ARBITRATION & CONCILIATION ACT 1996 BEFORE THE ARBITRAL TRIBUNAL, THIRUVANANTHAPURAM EXHIBIT P9 TRUE COPY OF THE COUNTER AFFIDAVIT DATED 28.7.2020 FILED BY THE PETITIONER IN IA NO 2/2020 IN A.R NO 7/2018 BEFORE THE ARBITRAL TRIBUNAL, THIRUVANANTHAPURAM O.P.(C) No.865 of 2021

EXHIBIT P10 TRUE COPY OF THE ORDER DATED 17.8.2020 PASSED BY THE SOLE ARBITRATOR IN IA NO 2/2020 IN AR NO 7/2018 EXHIBIT P11 TRUE COPY OF THE ORDER DATED 17.3.2021 PASSED BY THE HON'BLE COMMERCIAL COURT, ALAPPUZHA IN CMA9ARB) NO 1/2020 EXHIBIT P12 TRUE COPY OF THE PROCEEDINGS IN AR NO 7/2018 ON THE FILES OF ARBITRAL TRIBUNAL