High Court of KeralaSingle Judge2021-09-16Arbitration petition allowed with appointment o...

MRO-TEC Realty Limited v Kerala State Electronic Development Corporation Limited

Case / Petition Number:A.R.No.87 of 2018

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: Devan Ramachandran
Judgment Date: 2021-09-16
Court Decision / Holding: The court allowed the arbitration petition, rejecting the 2nd respondent’s appointment and directing the appointment of a new, independent sole arbitrator, Adv. Geetha K., with seat in Thiruvananthapuram. It ordered disclosure under Section 11(8) read with Section 12(1), directed the registry to communicate with the arbitrator, fixed the date for appearance, and mandated costs to be shared equally. The petitioner was to pay Rs.15,000 to the 2nd respondent (counsel) within two weeks. The Fourth Schedule fees regime was applicable, and the proceedings were to commence without delay.”,
Final Disposition: Arbitration petition allowed with appointment of an independent sole arbitrator; procedural directions issued, including disclosure and cost-sharing.

Parties to the Case

Appellants / Petitioners

MRO-TEC Realty Limited

Respondents

Kerala State Electronic Development Corporation Limited, Power Electronics Group, Keltron Equipment Complex, Kerakulam, Thiruvananthapuram - 695 564
Adv. M.A. Zohra, Arbitrator

Legal Representation & Advocates

Counsels for Petitioners

• K.S. Jaykar

Counsels for Respondents

• Smt. Latha

Case Synopsis & Summary

This Arbitration Request (A.R.No.87 of 2018) before the Kerala High Court concerns a dispute under Annexure-1 between MRO-TEC Realty Limited (petitioner) and Kerala State Electronic Development Corporation Limited (KSEDC) with the involvement of arbitration proceedings. The petitioner sought that a sole arbitrator be appointed to adjudicate disputes arising from Annexure-1. Although the 1st respondent initially agreed to appoint an arbitrator, it nominated the 2nd respondent (the 1st respondent’s counsel) as arbitrator, claiming compliance with Clause 8 of Annexure-1 as amended; however, the petitioner challenged this nomination under Section 12(5) of the Arbitration and Conciliation Act, 1996. The petitioner’s counsel argued that the pre‑amendment clause permitted the Managing Director to appoint the arbitrator, but post‑TRF Limited v Energo Engineering Projects Limited (2018) 8 SCC 377, such a clause must be jettisoned in favor of an independent arbitrator. The 1st respondent’s counsel suggested the petitioner pay half of the 2nd respondent’s fees if the court did not accept the nomination of the 2nd respondent. The judge explored this option, and while the court sought payment of Rs.15,000 to the 2nd respondent, it ultimately held that a new independent arbitrator must be appointed. Consequently, the court appointed Adv. Geetha K. as sole arbitrator with the seat in Thiruvananthapuram, ordered disclosure under Section 11(8) read with Section 12(1), and directed cost sharing and a Rs.15,000 payment by the petitioner. Appearance was fixed for 27.10.2021. The order reflects a shift from the clause‑based nomination to independent appointment consistent with TRF.)

Provisions of Law Cited

Arbitration and Conciliation Act, 1996, Section 12(5)Arbitration and Conciliation Act, 1996, Section 11(8)Arbitration and Conciliation Act, 1996, Section 12(1)Arbitration and Conciliation Act, 1996, Fourth ScheduleCompanies Act, 1956

Legal Doctrines & Maxims

TRF Limited v Energo Engineering Projects Limited (2018) 8 SCC 377 – independent arbitrator principle; jettison of MD‑appointment clause under post‑amendment framework

Submissions & Arguments

Contentions of Appellants / Petitioners

The applicants contended that the nomination of the 2nd respondent (the 1st respondent’s counsel) as arbitrator violates Section 12(5) of the Arbitration and Conciliation Act, 1996, especially post-amendment, and that Clause 8 of Annexure-1 must yield to the requirement of an independent arbitrator. They relied on the Supreme Court’s TRF principle to discard the MD’s exclusive appointment power and urged the court to appoint an independent arbitrator. They indicated willingness to pay a share of the arbitrator’s fees to facilitate a fair appointment, consistent with the court’s directions.

Contentions of Respondents

The respondents argued that Annexure-1 pre‑amendment empowered the Managing Director to appoint the arbitrator per Clause 8, and that nomination of the 2nd respondent was valid under that clause. They asserted that the court should not disrupt the agreed mechanism unless compelled by law, and that any change should maintain fairness, including sharing costs. They offered a compromise of cost-sharing if the court found the 2nd respondent’s appointment unacceptable but did not otherwise concede the independent arbitrator outcome.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
TRF Limited v Energo Engineering Projects Limited	[(2018) 8 SCC 377]	Positive	Used to justify discarding the MD‑appointment clause and directing appointment of an independent arbitrator in light of post-amendment jurisprudence.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE DEVAN RAMACHANDRAN** **THURSDAY, THE 16[TH] DAY OF SEPTEMBER 2021 / 25TH BHADRA, 1943** ## **AR NO. 87 OF 2018** ## **APPLICANT:** **MRO-TEC REALTY LIMITED, REGISTERED AND CORPORATE OFFICE AT #6, NEW BEL ROAD, CHIKKAMARANAHALLI, BENGALURU, KARNATAKA - 560 054, REPRESENTED BY ITS CHIEF FINANCIAL OFFICER, TEL0 98453 48450.** **BY ADV K.S. JAYKAR** **RESPONDENTS:** **1 KERALA STATE ELECTRONIC DEVELOPMENT CORPORATION LIMITED, POWER ELECTRONICS GROUP, KELTRON EQUIPMENT COMPLEX,KERAKULAM, THIRUVANANTHAPURAM - 695 564, REPRESENTED BY IT'S MANAGING DIRECTOR, TEL 0471-2724444. 2 ADV. M.A. ZOHRA, ARBITRATOR, 36/2403, PRINCE COTTAGE (ALIF), VR (ER) A NO.1, VATTEKKATTU ROAD, ERNAKULAM-682 017, TEL. 93498 29574** **BY ADV SMT.K.LATHA** **THIS ARBITRATION REQUEST HAVING COME UP FOR ADMISSION ON 16.09.2021,** **THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **A.R.No.87 of 2018** **2** ## **ORDER** Dated this the 16[th] day of September, 2021 ``` The petitioner, which is stated to be a company registered under the provisions of the Companies Act, 1956, has approached this Court seeking that a suitable sole arbitrator be appointed to adjudicate and resolve certain disputes which arisen between them and the 1[st] respondent- Corporation, touching upon and relating to the terms of Annexure-1 agreement. ``` ``` 2.The petitioner says that even though the 1[st] respondent acceded to their request for appointment of an Arbitrator, they went ahead and appointed the 2[nd] respondent, who is their own counsel as such, and that this is illegal and unlawful, going by the provisions of Section 12(5) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act” for short). ``` ``` 3.The petitioner, therefore, prays that this Court ``` **A.R.No.87 of 2018** **3** ``` declare that 2[nd] respondent is incapacitated from acting as an Arbitrator and that a new Arbitrator be appointed, so as to resolve and adjudicate the disputes between the parties at the earliest. ``` ``` 4. I have heard Sri.K.S.Jaykar, learned counsel for the petitioner and Smt.Latha, learned counsel for the 1[st] respondent. ``` ``` 5.Smt.Latha submitted that Annexure-1 agreement was entered into between the parties prior to the amendment to the Act; and consequently, that nomination of an arbitrator could have been made only as per Clause 8 thereof. She argued that, as is evident from the said clause, it is solely the Managing Director of the 1[st] respondent, who is competent to appoint the Arbitrator and that this has been done, nominating the 2[nd] respondent. However, to a pointed question from this Court, Smt.Latha submitted that if this Court is not inclined to accept the nomination of the 2[nd] respondent for the reason that she is the counsel for the 1[st] ``` **A.R.No.87 of 2018** **4** ``` respondent, she will not stand in the way of a new Arbitrator being appointed, provided the petitioner defray 50% of the bills already raised by the 2[nd] respondent, when she had discharged functions in such position. She pointed out that 2[nd] respondent has charged an amount of Rs.30,000/- for two sittings and that her client will pay 50% of it, while the balance 50% be directed to be paid by the petitioner. ``` ``` 6. I, therefore, asked Sri.K.S.Jaykar whether his client would be willing to pay the amount of Rs.15,000/- to the 2[nd] respondent and he answered affirmatively. ``` ``` 7.That being said, when I examine Annexure-1 agreement, it is clear that the disputes between the parties will certainly have to be resolved through the mechanism of arbitration, as per Clause 8 thereof. Of course, said clause provides that the Managing Director of the 1[st] respondent shall appoint the Arbitrator. However, after the judgment of the Honourable Supreme Court in TRF Limited v. Energo Engineering Projects Limited [(2018) 8 SCC 377], it is ``` **A.R.No.87 of 2018** **5** ``` limpid that this Court will have to jettison such clause and appoint an independent Arbitrator. ``` ``` In the afore circumstances, and since Smt.Latha also agrees to this Court appointing a new Arbitrator on the condition that Rs.15,000/- be directed to be paid by the petitioner to the 2[nd] respondent. I allow this arbitration request in the following terms: ``` - `(a) I nominate, Adv.Geetha K., Eramath, TC 20/303` ``` (1), Durga Nagar, Melaranoor, Karamana P.O., Thiruvananthapuram, as the sole Arbitrator, to adjudicate and resolve the disputes and differences between the parties to this case arising from Annexure 1 agreement. ``` - `(b) The seat of arbitration shall be at` - `Thiruvananthapuram.` ``` (c) The Registry is directed to communicate a copy of this order to the learned Arbitrator within a period of two weeks from today and to obtain a Statement of ``` **A.R.No.87 of 2018** **6** ``` Disclosure from her under Section 11(8) read with Section 12(1) of the Arbitration and Conciliation Act, 1996. ``` ``` (d) Once the Disclosure Statement is obtained from the learned Arbitrator, the Registry shall release the certified copy of this order, with a copy of the said statement appended to it, retaining the original of the ``` - `(e) The fees of the Arbitrator shall be governed by` - `the Fourth Schedule to the Arbitration and Conciliation Act, 1996.` ``` (f) The parties to this case are ad idem that they will share the arbitration costs and fees equally and it is so recorded. ``` - `(g) The petitioner, as conceded by them, will pay an` - `amount of Rs.15,000/- to the 2[nd] respondent, by way of a Demand Draft drawn in her name, within a period of two weeks from the date of the receipt of a copy of this` **A.R.No.87 of 2018** **7** ``` judgment and will forwarded it to her through registered post/Acknowledgement Due, in the address shown in the cause title of this case. ``` ``` (h) In order to enable the Arbitrator to commence the proceedings without delay, I direct the parties to mark appearance before her at 11.00 AM on 27.10.2021. ``` **`Sd/-` DEVAN RAMACHANDRAN JUDGE** NR/16/09/2021 **A.R.No.87 of 2018** ## **8** ## **APPENDIX** **PETITIONER'S ANNEXURE ANNEXURE I TRUE COPY OF THE TENDER DOCUMENT DATED 06.01.2014, ENTERED INTO BETWEEN THE PETITIONER AND 1ST RESPONDENT.** **ANNEXURE II TRUE COPY OF THE ARBITRATION NOTICE DATED 22.06.2018 ISSUED BY THE 1ST RESPONDENT.** **ANNEXURE III TRUE COPY OF THE LETTER DATED 21.07.2018, ISSUED BY THE 2ND RESPONDENT.** **ANNEXURE IV TRUE COPY OF THE PROCEEDINGS OF THE 2ND RESPONDENT DATED 22.09.2018** **RESPONDENT'S ANNEXURE** **ANNEXURE R1(a) THE TRUE COPY OF THE DETAILS OF PENDING COMPLAINTS OF END-USERS** **ANNEXURE R1(b) TRUE COPY OF THE MINUTES OF THE MEETING HELD ON 15.02.2017 BETWEEN MR.H.NANDI, THE MANAGING DIRECTOR OF AETHON AND TWO OTHERS, AND KELTRON** **ANNEXURE R1 (c) TRUE COPY OF THE COMMUNICATION DATED 07.03.2017 ANNEXURE R1 (d) TREU COPY OF THE REGISTERED LETTER DATED 10.07.2018 ISSUED BY THE ARBITRATOR FOR COMMENCING ARBITRATION PROCEEDINGS ANNEXURE R1 (e) TRUE COPY OF THE COMMUNICATION DATED 03.10.2018.**