M/S Pentium Construction Pvt. Ltd. v. M/S P.K Infrastructure

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** ## **&** **THE HONOURABLE MR.JUSTICE T.R.RAVI** **WEDNESDAY, THE 18TH DAY OF NOVEMBER 2020 / 27TH KARTHIKA, 1942** ## **Arb.A.No.44 OF 2020** **AGAINST THE ORDER IN CIVIL MISCELLANEOUS APPLICATION (ARB.) NO.14/2020 DATED 09-10-2020 OF DISTRICT JUDGE, KOZHIKODE .** ## **APPELLANTS/ RESPONDENTS:** **1 M/S.PENTIUM CONSTRUCTION PVT LTD., REPRESENTED BY ITS MANAGING DIRECTOR V.GOPINATHAN, ADMINISTRATIVE OFFICE AT 2ND FLOOR, MANANCHIRA TOWER, A.G.ROAD, KOZHIKODE - 673 001, NOW REPRESENTED BY ITS VICE PRESIDENT, MR.BABY K.MATHEW. 2 V.GOPINATHAN, S/O.LATE KARUNAKARAN NAIR P., MANAGING DIRECTOR, M/S.PENTIUM CONSTRUCTION PVT.LTD., ADMINISTRATIVE OFFICE AT 2ND FLOOR, MANANCHIRA TOWER, AG ROAD, KOZHIKODE, PIN- 673 001, NOW REPRESENTED BY ITS VICE PRESIDENT, MR.BABY K.MATHEW. 3 V.SETHUMADHAVAN, S/O.LATE KARUNAKARAN NAIR P., DIRECTOR, M/S.PENTIUM CONSTRUCTION PVT.LTD., ADMINISTRATIVE OFFICE AT 2ND FLOOR, MANANCHIRA TOWER, AG ROAD, KOZHIKODE - 673001, NOW REPRESENTED BY ITS VICE PRESIDENT, MR.BABY K.MATHEW.** **BY ADVS. SHRI.B.G.HARINDRANATH SRI.SANTHOSH MATHEW SRI.JENNIS STEPHEN SHRI.AMITH KRISHNAN H.** **Arb.Appeal No.44/2020 & - 2 - Arb.Request No.93/2020** ## **RESPONDENT/ PETITIONER:** **M/S.P.K.INFRASTRUCTURE, A REGISTERED PARTNERSHIP FIRM, HAVING ITS OFFICE AT 5/3403, 3RD FLOOR, SPACE MALL, MAVOOR ROAD, KOZHIKODE, REPRESENTED BY ITS MANAGING PARTNER P.SHAIBU, S/O.LATE P.KRISHNAN, RESIDING AT PUTHUKKUDI, SHINY NIVAS, PERUMANNA AMSOM, PUTHUR DESOM, KOZHIKODE TALUK, P.O.PANTHEERANKAVU, PIN - 673 019.** **BY ADV. SRI.P.DEEPAK BY ADV. SRI.T.SHAJITH BY ADV. SRI.S.K.SAJU** **THIS ARBITRATION APPEAL HAVING BEEN FINALLY HEARD ON 18.11.2020, ALONG WITH ARBITRATION REQUEST NO.93/2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **- 3 -** **Arb.Appeal No.44/2020 & Arb.Request No.93/2020** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** ## **&** **THE HONOURABLE MR.JUSTICE T.R.RAVI** **WEDNESDAY, THE 18TH DAY OF NOVEMBER 2020 / 27TH KARTHIKA, 1942** ## **ARBITRATION REQUEST No.93 OF 2020** **PETITIONER/S: M/S.P.K.INFRASTRUCTURE, A PARTNERSHIP FIRM HAVING ITS OFFICE AT 5/3403, 3RD FLOOR, SPACE MALL, NEAR MARKAZ COMPLEX, MAVOOR ROAD, KASABA AMSOM DESOM OF KOZHIKODE TALUK, PIN-673 004, (REPRESENTED BY ITS MANAGING PARTNER, MR.SHAIBU.P., AGED 40, S/O.(LATE) P.KRISHNAN, RESIDING AT PUTHUKKUDI, SHINY NIVAS, PERUMANNA AMSOM, PUTHUR DESOM, KOZHIKODE TALUK, P.O.PANTHEERANKAVU, PIN-673 019).** |||**BY ADVS.**| |---|---|---| |||**SRI.P.DEEPAK**| |||**SRI.S.K.SAJU**| |**RESPONDENT/S**<br>**:**||| |**1**||**M/S.PENTIUM CONSTRUCTION PVT. LTD.,**| |||**(REPRESENTED BY ITS MANAGING DIRECTOR**| |||**MR.V.GOPINATHAN, S/O.(LATE) V.KARUNAKARAN NAIR.P.),**| |||**ADMINISTRATIVE OFFICE, 2ND FLOOR,**| |||**MANANCHIRA TOWER, A.G.ROAD, CALICUT-673 001.**| |**2**||**MR.V.GOPINATHAN, S/O.(LATE) KARUNAKARAN NAIR.P.,**| |||**MANAGING DIRECTOR,**| |||**M/S. PENTIUM CONSTRUCTION PVT. LTD.,**| |||**ADMINISTRATIVE OFFICE, 2ND FLOOR,**| |||**MANANCHIRA TOWER, A.G.ROAD, CALICUT-673 001.**| **Arb.Appeal No.44/2020 & - 4 - Arb.Request No.93/2020** **3 MR.V.SETHUMADHAVAN, S/O.(LATE) KARUNAKARAN NAIR.P., DIRECTOR, M/S. PENTIUM CONSTRUCTION PVT. LTD., ADMINISTRATIVE OFFICE, 2ND FLOOR, MANANCHIRA TOWER, A.G.ROAD, CALICUT-673 001.** **R1 TO R3 BY ADVS. SHRI.B.G.HARINDRANATH SRI.SANTHOSH MATHEW SRI.JENNIS STEPHEN SHRI.AMITH KRISHNAN H.** **THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 18.11.2020, ALONG WITH Arb.A.44/2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **Arb.Appeal No.44/2020 & - 5 - Arb.Request No.93/2020** **K. Vinod Chandran & T.R.Ravi, JJ. ------------------------------------Arb.Appeal No.44/2020 & Arbitration Request No.93/2020** **-----------------------------------Dated, this the 18[th] day of November, 2020** ## **JUDGMENT** **Vinod Chandran, J.** **The appeal arises from an order in an application under Section 9 of the Arbitration and Conciliation Act, 1996 ['Act of 1996' for brevity]. The grievance of the petitioner before the District Court (respondent here) was that there are amounts due from the respondents (appellants here) with respect to the construction of a multi-storeyed apartment complex. Admittedly there are disputes between the parties, possible of resolution under the clause for arbitration in the agreement; which, despite repeated requests, the appellants have not thought it fit to facilitate by appointing an Arbitrator. The respondents sought for a prohibitory injunction restraining the appellants from alienating, encumbering or divesting title over the property until the dispute is resolved. The District Court granted the prayer, against which the appeal is filed. We were told that the respondents in the appeal** **Arb.Appeal No.44/2020 & - 6 - Arb.Request No.93/2020** **have also filed an Arbitration Request, which we called for to have a quietus insofar as the initiation of Arbitration.** **2. We heard Sri.B.G.Harindranath, learned Counsel appearing for the appellants and Sri.P.Deepak, learned Counsel appearing for the respondents in the appeal; which status is adopted herein for reference to the parties.** **3. There was a question raised by the Registry with respect to the Court Fees payable when the appeal was filed; which resulted in the case being posted as unnumbered. This Court by order dated 30.10.2020 directed the appeal to be numbered, leaving the question to be considered at the time of hearing. The proceedings initiated before the District Court is under Section 9 for interim measure. Appeal is provided under Section 37 of the Act. The instant appeal is from an order 'granting or refusing to grant any measure under Section 9', as contemplated in clause (b) of Section 37(1). In fact, prior to the amendment of 2016, clause (b) was numbered as clause** **(a) and clause (c) as clause (b). Clause (c) [which was clause (b) prior to amendment] refers to setting aside of an arbitral award under Section 34, which requires payment of** _**ad valorem**_ **Court Fee. Pre-amended clause (a) [which is** **Arb.Appeal No.44/2020 & - 7 - Arb.Request No.93/2020** **clause (b) now] was an appeal against granting or refusing a measure under Section 9, for which Court Fee is payable under Article 4. Sufficient support can be garnered from the decision of another Division Bench of this Court in** _**Asya v. Sundaram Finance Limited**_ **[** _**2016 KHC 537 = 2016 (3) KLT 195**_ **]. It was held that an appeal under clause (a) of Section 37(1) would attract Court Fee only in terms of Article 4(i) of Second Schedule to the Court Fees and Suits Valuation Act, 1959 (Kerala); which now is under clause (b).** **4. Though we broadly agree with the proposition laid down, in** _**Asya;**_ **with all the respect at our command, we notice an ambiguity in Paragraph 22(ii) of the operative portion. Paragraph 22(ii) declares for computation purposes, reference to Article 3(iii)(A)(1)(a), if the interim order challenged in appeal is incapable of inclusion under Article 4(i). Article 4 specifically speaks of a 'Memorandum of Appeal under the Arbitration and Conciliation Act, 1996'. Hence, any appeal under Section 37 of the Act of 1996, if the valuation exceeds Rs.15,000/would have to be subjected to Article 4(ii) and if its below Rs.15,000/- under Article 4(i). However that question does not arise here since Annexure A9 is the application** **Arb.Appeal No.44/2020 & - 8 - Arb.Request No.93/2020** **before the District Court which values the subject matter for the purpose of Court Fees at Rs.50/-. The Court Fees payable in appeal has to be computed under Article 4(i). We, hence, answer the question raised by the Registry, in favour of the appellants and proceed to consider the appeal on the Court Fees paid.** **5. We need not detail the facts and it would suffice to note that the appellants, by an agreement dated 15.09.2015, entrusted the construction of a residential complex with the respondent. Certain bills were paid; but those submitted after completion of the building has not been paid up. The appellants raised allegations of defective construction, which was responded by a denial and a request for referring the dispute for arbitration. The reference having not been made by the appellants, who, by the specific clause in the agreement, had the option to appoint the Arbitrator; the respondent approached the District Court for interim measure.** **6. The specific arbitration clause in the agreement for jurisdictional purposes chose Ernakulam, though the construction was carried out in Kozhikode. The appellants, as an objection, raised the issue of** **Arb.Appeal No.44/2020 & - 9 - Arb.Request No.93/2020** **jurisdiction of the District Court at Kozhikode. The learned Judge looked at the arbitration clause to find the authority to appoint an Arbitrator to be exclusively conferred on the appellants. The learned Judge was of the opinion that in that context the exclusive jurisdiction clause would not be applicable and the respondent would have choice to approach the Court as defined under Section 2(e) of the Act. We cannot agree with the finding of the learned Judge.** **7.** _**Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited & Others**_ **[** _**(2017) 7 SCC 678**_ **] considered the specific question of an exclusive jurisdiction clause for arbitration being provided in the agreement; even choosing a venue where no cause of action arises, which was held to be perfectly permissible. The lower Court has noticed the aforesaid judgment; but asserted jurisdiction on itself on the reasoning noticed above. If the party to the agreement who has been conferred with the authority to appoint an Arbitrator does not do so, the other party has to approach the Court for appointment of an Arbitrator, for which again the neutral venue, chosen by the parties to the agreement and specified in the** **- 10 -** **Arb.Appeal No.44/2020 & Arb.Request No.93/2020** **arbitration clause, would apply squarely. The respondent, who was a party to the agreement, had conceded to the neutral venue at Ernakulam, where no cause of action arose and also to the authority of the appellants to appoint an Arbitrator. The respondent has also now chosen to file an Arbitration Request before this Court; which we have called for and is before us. An interim measure under Section 9 also ought to be subjected to the exclusive jurisdiction conferred by agreement of parties to the neutral venue chosen; where no cause of action arise. We hence, set aside the order impugned in the appeal and allow the appeal.** **8. The learned Counsel for the appellants submitted that the appointment of Arbitrator got delayed only because of the pandemic situation. It is also submitted that despite the undertaking to reserve two Flats and not to alienate them, the District Court granted the injunction as prayed for. The parties are now on consensus insofar as appointment of an Arbitrator is concerned and have also, between them, chosen Justice S.Siri Jagan, a retired Judge of this Court, as Arbitrator. The parties have obtained the consent of Justice S.Siri Jagan. In such circumstances, Justice S.Siri Jagan is appointed as the** **- 11 -** **Arb.Appeal No.44/2020 & Arb.Request No.93/2020** **sole Arbitrator and we are of the opinion that by such appointment, he is entitled to fees as provided under the Act of 1996.** **9. We are also of the opinion that there should be an interim measure of security made with respect to the dues claimed by the respondent. The learned Counsel for the 1[st] appellants, for and on behalf of the appellants, undertakes that three Flats would be reserved as security for the amounts due from the appellants to the respondent. The learned Counsel for the respondent, points out that almost Rs.1.69 crore is due to him as on 2018 and together with interest the total amounts would come to Rs.2 crore. From the agreements executed by the appellants itself it is pointed out that a Type 'A' Flat was sold at Rs.72,31,000/and a Type 'B' for Rs.56,06,000/-. Hence, there shall be a direction that either one Type 'A' and two Type 'B' Flats or four Type 'B' Flats shall be reserved as security for the amounts due from the appellants to the respondent. The appellants shall file an affidavit within two weeks before the Arbitrator agreeing not to alienate or encumber in any manner the Flats as mentioned above; clearly specifying the number and the floor in which the Flats are located. Till** **Arb.Appeal No.44/2020 & - 12 - Arb.Request No.93/2020** **the satisfaction of the Arbitrator is recorded in the affidavit filed, the 1[st] appellants shall not further encumber the Flats in the apartment complex 'Pentium Eternia Vertical Homes' situated in Karaparambu, Kozhikode. After satisfaction is recorded, the injunction from alienation shall only apply to the Flats referred to in the affidavit; as accepted by the Arbitrator.** **The Appeal and the Arbitration Request are allowed. Parties shall bear their respective costs.** ## **K.VINOD CHANDRAN JUDGE** **T.R.RAVI JUDGE** **vku/-** **Arb.Appeal No.44/2020 & - 13 - Arb.Request No.93/2020** ## **APPENDIX OF Arb.A.NO.44/2020** ## **APPELLANTS' ANNEXURES:** **ANNEXURE A1 TRUE COPY OF THE AGREEMENT DATED 15/9/2015 EXECUTED BETWEEN THE APPELLANT AND THE RESPONDENT.** - **ANNEXURE A2 TRUE COPY OF THE PHOTOGRAPHS OF THE BUILDING.** - **ANNEXURE A3 TRUE COPY OF THE EMAIL DATED 27/9/2019 SENT BY THE APPELLANT TO THE RESPONDENT.** - **ANNEXURE A4 TRUE COPY OF THE REPLY DATED 27/9/2019 SENT BY THE RESPONDENT TO THE APPELLANT.** - **ANNEXURE A5 TRUE COPY OF THE LAWYER NOTICE DATED 29/10/2019 SENT ON BEHALF OF THE RESPONDENT TO THE PETITIONER.** - **ANNEXURE A6 TRUE COPY OF THE REPLY LAWYER NOTICE DATED 9/11/2019 SENT ON BEHALF OF THE APPELLANT TO THE RESPONDENT'S LAWYER.** - **ANNEXURE A7 TRUE COPY OF THE LETTER DATED 5/6/2020 SENT BY THE RESPONDENT TO THE APPELLANT.** - **ANNEXURE A8 TRUE COPY OF THE REPLY DATED 5/7/2020 SENT BY THE APPELLANT TO THE RESPONDENT.** - **ANNEXURE A9 TRUE COPY OF THE MEMORANDUM OF CIVIL MISCELLANEOUS APPEAL (ARB) NO.14 OF 2020 ON THE FILE OF THE DISTRICT COURT, KOZHIKODE.** - **ANNEXURE A10 TRUE COPY OF THE COUNTER FILED BY THE APPELLANT IN C.M.A.NO.14 OF 2020.** - **ANNEXURE A11 TRUE COPY OF THE UNDERTAKING IN THE FORM OF AN AFFIDAVIT FILED BY THE APPELLANT IN C.M.A.NO.14 OF 2020.** - **ANNEXURE 12(A) TRUE COPY OF THE SALE DEED DATED 1/10/2020 EXECUTED BETWEEN THE APPELLANT AND MRS.USHAKUMARI AND ANOTHER.** **Arb.Appeal No.44/2020 & - 14 - Arb.Request No.93/2020** **ANNEXURE A12(B) TRUE COPY OF THE SALE DEED DATED 1/10/2020 EXECUTED BETWEEN THE APPELLANT AND RAVINDRANATHAN AND ANOTHER.** **ANNEXURE A13 CERTIFIED EXTRACT OF THE MINUTES OF THE MEETING OF THE DIRECTORS OF THE APPELLANT COMPANY ALONG WITH THE AUTHORIZATION LETTER.** **Arb.Appeal No.44/2020 & - 15 - Arb.Request No.93/2020** ## **APPENDIX OF A.R.NO.93/2020** **PETITIONER'S/S ANNEXURES:** **ANNEXURE A1 A TRUE COPY OF THE PARTNERSHIP DEED ALONG WITH THE DOCUMENT SHOWING REGISTRATION OF THE PARTNERSHIP FIRM. ANNEXURE A2 TRUE COPY OF THE AGREEMENT DATED 25.09.2015 EXECUTED BETWEEN THE PETITIONER AND 1ST RESPONDENT. ANNEXURE A3 TRUE COPY OF THE NOTICE DATED 05.06.2020 ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT. ANNEXURE A4 TRUE COPY OF THE ORDER DATED 09.10.2020 IN CIVIL MISCELLANEOUS APPLICATION (ARB) NO.14/2020 OF THE DISTRICT JUDGE, KOZHIKODE.**