Malayalam Industries Ltd. v. Indian Council of Arbitration and Fortune Park Hotels Limited

``` OP(C) NO. 1550 OF 2012 ``` 1 ## **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ## **`THE HONOURABLE MR.JUSTICE C.S.DIAS`** ## **`TUESDAY, THE 15[TH] DAY OF NOVEMBER 2022 / 24TH KARTHIKA, 1944`** ## **`OP(C) NO. 1550 OF 2012`** ## **`IA 5073 of 2011 IN OS 390/2011 OF II ADDITIONAL SUB COURT,ERNAKULAM PETITIONER/S:`** ``` MALAYALAM INDUSTRIES LTD. MERMAID COMPLEX, KANIYAMPUZHA ROAD, VYTTILA,KOCHI - 682 019, REPRESENTED BY ITS DIRECTOR -K.JAYASANKAR, S/O.LATE V.S.KRISHNA PILLAI,LAKSHMI NIVAS, VYNEETHI, THRIPUNITHURA - 682301,ERNAKULAM DT. ``` ``` BY ADVS. SRI.N.SUBRAMANIAM SRI.P.T.GIRIJAN SRI.M.S.NARAYANAN SMT.USHA NARAYANAN ``` ## **`RESPONDENT/S:`** ``` 1THE INDIAN COUNCIL OF ARBITRATION A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, SPONSORED BY THE MINISTRY OF COMMERCE, GOVERNMENT OF INDIA, HAVING ITS REGISTERED OFFICE AT FEDERATION HOUSE, TANSEN MARG, NEW DELHI -110001 REPRESENTED BY ITS REGISTRAR. ``` ``` 2M/S FORTUNE PARK HOTELS LIMITED A COMPANY REGISTERED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956, HAVING ITS REGISTERED OFFICE AT 25, COMMUNITY CENTRE, BASANT LOK VASANT VIHAR,NEW DELHI - 110 057 AND ITS CORPORATE OFFICE AT ITC GREEN CENTRE, PLOT NO.10, INSTITUTIONAL AREA,SECTOR 32, GURGAON-122 001. ``` ``` BY ADVS. SRI.ANIL D. NAIR SMT.NIVEDITA A.KAMATH SRI.J.R.PREM NAVAZ ``` ``` THIS OP (CIVIL) HAVING COME UP FOR FINAL HEARING ON 15.11.2022, ``` ``` THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` ``` OP(C) NO. 1550 OF 2012 ``` 2 ## **JUDGMENT** Aggrieved and dissatisfied with Ext.P12 order passed in IA. 5073 of 2011 in OS.390 of 2011 and Ext.P13 judgment passed in the suit by the Court of the Subordinate Judge, Ernakulam, the plaintiff in the suit has filed the original petition. The respondents in the original petition are the defendants in the suit. 2. The antecedent facts leading to Ext.P12 order, in a nutshell, are: the petitioner and the 2[nd] respondent had entered into an agreement, whereby the 2[nd] respondent agreed to provide technical audit services for the operation and marketing of the petitioner’s hotel. There was an arbitration clause in the agreement, wherein it was agreed that the disputes between the parties shall be settled through arbitration by a sole arbitrator to be appointed by the 1[st] respondent as per the “ICA Arbitration Rules”. Disputes arose between the petitioner and the 2[nd] `OP(C) NO. 1550 OF 2012` 3 respondent, which led to the petitioner making a demand for arbitration. On receipt of the demand, the 2[nd] respondent initiated arbitration proceedings through the 1[st] respondent. Then, the petitioner filed O.P No.106 of 2010 before the Court of the District Judge, Ernakulam, under Section 9 of the Arbitration and Conciliation Act,1996, (in short, the Act) for interim measures. Later, the 1[st] respondent issued Ext.P1 letter stating that the 2[nd] respondent had raised a claim for an amount of Rs.1,85,89,933/-. The petitioner was directed to file its defence statement and also pay an amount of Rs.1,45,625/- as preliminary expenses. The petitioner paid the above said amount on 31.1.2011. The letter was placed before the Arbitration Committee of the 1[st] respondent, to appoint a sole arbitrator. Immediately, the petitioner sent Ext.P2 letter reminding the 1[st] respondent that as the claim amount was Rs.1,85,89,933/-, the dispute has to be adjudicated by a tribunal of three arbitrators. But, ``` OP(C) NO. 1550 OF 2012 ``` 4 the 1[st] respondent negatived the demand by stating that as per Clause 15 of the agreement the dispute is to be decided by a sole arbitrator and there was no necessity to appoint a tribunal. Having lost confidence in the 1[st] respondent, the petitioner sought for refund of the preliminary charge of Rs.1,45,625/-. The 1[st] respondent failed to pay the said amount. Consequentially, the petitioner filed O.S.No.390 of 2011 before the court below for recovery of Rs.1,45,625/with interest from the 1[st] respondent. The 1[st] respondent was set ex-parte. The 2[nd] respondent entered appearance and filed IA. 5073 of 2011 (Ext.P10) under Section 8 of the Act, to refer the parties to arbitration. Even though the petitioner filed Ext.P11 written objection to Ext.P10 application, the court below, by the impugned Ext.P12 order, allowed Ext.P10 application and relegated the parties to arbitration. The court below also, by the impugned Ext.P13 judgment dismissed the suit. Ext.P12 order ``` OP(C) NO. 1550 OF 2012 ``` 5 and P13 judgment are palpably wrong and unsustainable in law. Hence the original petition. 3. Heard Sri.N.Subramaniam, the learned counsel appearing for the petitioner and Sri.Anil D. Nair, the learned counsel appearing for the 2[nd] respondent. 4. The question is whether there is any error or illegality in Exts.P12 and P13. 5. The petitioner had filed the suit against the 1[st] respondent, for a recovery of the preliminary charge of Rs.1,45,625/-. 6. Admittedly, the 1[st] respondent has not contested the suit and was set ex-parte. 7. Interestingly, the 2[nd] respondent, against whom no relief is prayed for, appeared in the suit and filed Ext.P10 application under Section 8 of the Act, to refer the parties to arbitration. 8. The 2[nd] respondent relied on clause 15 of an agreement that was executed between the petitioner ``` OP(C) NO. 1550 OF 2012 ``` 6 and the 2[nd] respondent to refer disputes between them to arbitration. 9. No material was produced by the 2[nd] respondent to establish that there is an arbitration agreement between the petitioner and the 1[st] respondent, to refer the parties to arbitration. 10. The law with respect to referring parties to arbitration is no longer _res integra_ , in view of the categoric declaration by a three-Judge Bench of the Honourable Supreme Court in **Vidya Drolia and others** v. **Durga Trading Corporation [(2021) 2 SCC 1]** , wherein it is emphatically declared that the parties can be referred to arbitration provided there is a valid agreement in the said regard. 11. On an analysis of the pleadings and materials on record, there is nothing on record to establish that there is an agreement between the petitioner and the 1[st] respondent and they have agreed to settle their disputes through arbitration. ``` OP(C) NO. 1550 OF 2012 ``` 7 12. Admittedly, the 1[st] respondent has not even contested the suit and no relief is sought against the 2[nd] respondent. Therefore, the 2[nd] respondent had no _locus standi_ to file an application under Section 8 of the Act, to refer the disputes to arbitration, that too, without producing a scrap of paper. 13. Unfortunately, the court below has not considered this pivotal aspect; instead has, by the impugned Ext.P12 order, referred the parties to arbitration and consequentially dismissed the suit. I hold that the court below has overstepped its authority and powers and Exts.P12 and P13 are patently wrong, improper and irregular, which warrants interference by this Court under Article 227 of the Constitution of India. In the result, I allow the original petition as follows: - (i) Ext.P12 order and Ext.P13 judgment passed in O.S No.390 of 2011 by the Court of the Subordinate Judge, Ernakulam, are set aside. ``` OP(C) NO. 1550 OF 2012 ``` 8 - (ii) O.S No. 390 of 2011 is restored back to file. - (iii) The petitioner and the respondents are directed to appear before the court below on 12.12.2022. - (iv) The court below shall decide and dispose of O.S No.390 of 2011, in accordance with law, as expeditiously as possible. - (v) Needless to mention, if the 1[st] respondent appears in the suit and files an application under Section 8 of the Act, following the principles stated above, then the court below shall consider such application, in accordance with law. _Sd/-_ ## **C.S.DIAS, JUDGE** okb/15.11.22 //True copy// P.S. to Judge ``` OP(C) NO. 1550 OF 2012 ``` 9 ## **`APPENDIX OF OP(C) 1550/2012`** ## `PETITIONER EXHIBITS` ``` Exhibit P1THE TRUE COPY OF LETTER DATED 1.09.2010 Exhibit P2TRUE COPY OF LETTER DATED 29.09.2010 Exhibit P3TRUE COPY OF LETTER DATED 13.11.2010 Exhibit P4TRUE COPY OF LETTER DATED 7.12.2010 Exhibit P5TRUE COPY OF LETTER DATED 27.1.2011 Exhibit P6TRUE COPY OF LETTER DATED 8.2.2011 Exhibit P7TRUE COPY OF LETTER DATED 8.3.2011 Exhibit P8TRUE COPY OF LAWYER NOTICE DATED 18.3.2011 Exhibit P9TRUE COPY OF PLAINT IN OS 390/2011 DATED 11..4.2011 Exhibit P10TRUE COPY OF I.A 5073/2011 DATED 19.8.2011 Exhibit P11TRUE COPY OF COUNTER DATED 5.9.2011 Exhibit P12TRUE COPY OF ORDER DATED 9.1.2012 Exhibit P13TRUE COPY OF JUDGMENT DATED 9.1.2012 ```