Kerala High Court

Pooram Finserv Private Limited (Nbfc) vs Santhosh Kumar Robinson K.S on 6 September, 2024

Author: A.K.Jayasankaran Nambiar

Bench: A.K.Jayasankaran Nambiar

ARB.Appeal NO.35/2024               1



                                              2024:KER:68246


         IN THE HIGH COURT OF KERALA AT ERNAKULAM

                          PRESENT

    THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR
                             &
         THE HONOURABLE MR.JUSTICE SYAM KUMAR V.M.

 FRIDAY, THE 6TH DAY OF SEPTEMBER 2024 / 15TH BHADRA, 1946

                    ARB.A.NO.35 OF 2024
        ARISING OUT OF THE ORDER DATED 05.07.2024 IN AOP
NO.792 OF 2017 OF IVTH ADDITIONAL DISTRICT COURT, THRISSUR
APPELLANT:

         POORAM FINSERV PRIVATE LIMITED (NBFC)
         REG. OFFICE : 25/395/27, PATHAYAPURA,
         ROUND SOUTH, THRISSUR REP. BY ITS CHAIRMAN ANIL
         KUMAR C.K, PIN - 680001

         BY ADVS.
         SABU GEORGE
         P.B.KRISHNAN (SR.)
         P.B.SUBRAMANYAN
         MANU VYASAN PETER


RESPONDENT:

         SANTHOSH KUMAR ROBINSON K.S
         S/O ROBINSON, KANHIRAMKUZHI HOUSE,
         (SANTHOSH BHAVAN) MARIYAPURAM,
         THIRUVANANTHAPURAM, PIN - 695122


     THIS ARBITRATION APPEAL HAVING COME UP FOR ADMISSION
ON 06.09.2024, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
 ARB.Appeal NO.35/2024                   2



                                                     2024:KER:68246



                                                               C.R.

                              JUDGMENT

Dated this the 6th day of September, 2024

Syam Kumar V.M., J.

This appeal is filed challenging the Order dated 05.07.2024 of

the Additional District Court, Thrissur in Arb.O.P.No.792 of 2017.

Appellant herein was the respondent in the said Arb.O.P. The

Arb.O.P. had been filed before the District Court by the respondent

herein invoking Section 34 of the Arbitration and Conciliation Act,

1996 (hereinafter referred to as 'the Act of 1996') seeking to set

aside an arbitration award.

2. Arbitration proceedings had been initiated by the appellant

seeking to recover amounts due from the respondent under a loan

agreement. Though notice issued by the arbitrator had been received

by the respondent, he did not choose to participate in the arbitration

proceedings. An award for an amount of Rs.37,60,547/- with interest

and cost was rendered against the respondent by the arbitrator on

20.08.2017. The said award was challenged by the respondent before

the District Court by filing the above Arb.O.P. The learned Judge,

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after hearing both sides, concluded that the arbitration had been

conducted violating the mandates of Sections 11 and 12 of the Act of

1996. The District Court relied on the dictum laid down by this

Court in M/s.Hedge Finance Private Limited v. Bijish Joseph

(ILR 2022 (3) KER. 947), wherein it was held that "post-2015

amendment era, there are only two modes of appointment of a sole

Arbitrator (i) by express agreement in writing between the parties,

post the dispute, agreeing to waive the applicability of Section 12 of

the Act or (ii) by order of appointment by the High Court under

Section 11 of the Act. If the appointment of a sole arbitrator is made

other than by the above two methods, the appointment is ex facie

bad and is in contravention of the provisions of the Act, which goes

to the roots of the matter, and the Arbitrator becomes de jure

ineligible to act as an arbitrator by the operation of law". Thus

following the proposition laid down by this Court that there should

be neutrality not only for the arbitrator, but also in the arbitrator

selection process as well, the learned District Judge set aside the

award and allowed the Arb.O.P. filed by the respondent. The said

Order of the District Court is challenged in this Arb.Appeal.

3 We heard Sri.P.B.Krishnan, Senior Advocate instructed by

Sri.Sabu George learned counsel for the appellant.

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4. The principal contention put forth by the learned Senior

Counsel is that on the date of issuance of the impugned Order, the

District Court had no jurisdiction to entertain a petition filed under

Section 34 of the Act of 1996 since by that time, an amendment had

been effected to Section 15(2) of the Commercial Courts Act, 2015

transferring the jurisdiction to entertain a Section 34 application

falling within relevant pecuniary limit from the District Court to the

Commercial Court. Thus at the time of consideration of the above

Arb.O.P., the District Judge had no jurisdiction to entertain the same

and ought to have transferred it to the Commercial Court. Thus

terming the impugned Order as one rendered without jurisdiction,

the learned Senior Counsel seeks it to be set aside.

5. On the face of it, the contention raised by the learned Senior

Counsel based on lack of jurisdiction raised against the impugned

Order is appealing. However, it assumes relevance to also take note

of the findings on merit rendered by the District Court in the

impugned Order. After a discussion on merits, it has been

unequivocally found by the learned Judge that the arbitrator had

been appointed in stark violation of Sections 11 and 12 of the Act of

1996 and hence the award passed by him was unsustainable in law.

The said part of the impugned Order rendered on merits remains

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uncontroverted and valid. We cannot lose sight of the same while

proceeding to consider the prayer of the appellant to set aside the

impugned Order.

6. Indeed at the time of rendering the Order impugned, the

District Court had no jurisdiction to entertain the Arb.O.P. which had

been filed by the respondent invoking Section 34 of the Act of 1994.

The amendment to Section 15(2) of the Commercial Courts Act, 2015

had by then already transferred the said jurisdiction from the District

Court to the Commercial Court. The impugned Order does not

however reveal that the factum of absence of jurisdiction was

brought to the notice of the District Court or that it had engaged the

court's attention. Be that as it may, findings entered on the merits of

the matter by the District Court reveal that the award is not in any

terms sustainable in law. If it has been found so on merits by the

District Judge albeit, without jurisdiction, the same result would

befall the award had it been scrutinized by a Commercial Court.

Hence interfering with the Order of the District Court on the

technical ground of lack of jurisdiction and leaving it open to be

considered by a Commercial Court will not serve any worthy

purpose. It would be a mere exercise in futility. Moreover, the

plenary powers vested in this Court mandate that we should also

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take note of the equity involved. Equity demands that an illegally

rendered award, like the one in the case at hand, ought not to be

pursued beyond this Court once we are convinced that the same is

legally unsustainable. The power/duty vested in this Court in the said

respect flows from Article 215 of the Constitution of India which

declares the High Courts to be Courts of record and is set out below :

"215. High Courts to be courts of record.- Every High Court shall be a court of record and shall have all the powers of such a court including the power to punish for contempt of itself. "

Supreme Court in Life Insurance Corporation of India v. D.J.

Bahadur and others [(1981) 1 SCC 315], Naresh Shridhar

Mirajkar and others v. State of Maharashtra and another (AIR

1967 SC 1) and M.V.Elisabeth and others v. Harwan Investment

& Trading (P) Ltd. (AIR 1993 SC 1014) have held that the High

Courts in India are superior courts of records and have inherent

plenary powers. In M.M.Thomas v. State of Kerala and another

[(2000) 1 SCC 666], the Supreme Court explained the nature of the

plenary power by affirmatively quoting from the Halsbury's Laws of

England (4th Edn., Vol. 10, para 713) which had stated as follows:

"Prima facie, no matter is deemed to be beyond the jurisdiction of a superior court unless it is expressly shown to be so, while nothing is within the jurisdiction of an inferior court unless it is expressly shown on the face of the proceedings that the particular matter is within the

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cognizance of the particular court. An objection to the jurisdiction of one of the superior courts of general jurisdiction must show what other court has jurisdiction, so as to make it clear that the exercise by the superior court of its general jurisdiction is unnecessary. The High Court, for example, is a court of universal jurisdiction and superintendency in certain classes of actions, and can not be deprived of its ascendancy by showing that some other court could have entertained the particular action."

Again in Municipal Corporation of Greater Mumbai and

another v. Pratibha Industries Limited and others [(2019) 3 SCC

203], the Supreme Court relied on M.M.Thomas's case and on

Shivdev Singh and others v. State of Punjab and others (AIR

1963 SC 1909) while considering the issue of recalling an Order

passed under Section 9 of the Act of 1996, termed it a proper

exercise based on the plenary powers of the High Courts.

7. In view of the above, this Court has the power, nay duty, to

ensure that an inequity that could result from setting aside the

impugned Order of the District Court, albeit rendered without

jurisdiction, is not further perpetuated by relegating the illegal

award to be subjected to scrutiny before a court of competent