Anoop Unnikrishnan & M/s Innovus Energies & Anupama Balaram & Rajesh S. Nair v. Johnson Stephen & M/s MCEES Trading and other corporate respondents (KSEB? Kerala High Court, OP(C).1171/21)

_**OP(C).1171/21**_ 1 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE V.G.ARUN** **TUESDAY, THE 3[RD] 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, ERNAKULAM682 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. ----------------------------------------------O.P(C).No. 1171 of 2021 ----------------------------------------------Dated this the 3[rd] day of August, 2021** ## **JUDGMENT** The petitioners are aggrieved by Exhibit P5 order by which the court below injuncted the 8[th] 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 1[st] 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 _**OP(C).1171/21**_ 5 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 1[st] 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 _**OP(C).1171/21**_ 6 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 _**OP(C).1171/21**_ 7 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 _**OP(C).1171/21**_ 8 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 1[st] respondent was constrained to move under Section 9(1), on being informed about the constitution of the 2[nd] 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 2[nd] petitioner being a benami firm constituted by the 1[st] 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 _**OP(C).1171/21**_ 9 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 1[st] 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_ _**OP(C).1171/21**_ 10 _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 4[th] respondent firm and they shall also withdraw the syphoned amounts presently lying in the relevant bank accounts of the 2[nd] respondent and the 4[th] 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 1[st] respondent firm to the Federal Bank account bearing No.16080100009335 of the 2[nd] 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 4[th] 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 4[th] respondent firm shall cause irreparable loss and irretrievable hardship to the applicant._ _**OP(C).1171/21**_ 11 _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 _**OP(C).1171/21**_ 12 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 _**OP(C).1171/21**_ 13 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 selfimposed 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_ _**OP(C).1171/21**_ 14 ## **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.