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2021 Supreme(Online)(KER) 32627
HIGH COURT OF KERALA
Devan Ramachandran, J
PLUS MAX DUTY FREE PRIVATE LIMITED – Appellant
Versus
AIRPORTS AUTHORITY OF INDIA – Respondent
AR/70/2021
B.ASHOK SHENOY, P.S.GIREESH, ARJUN R NAIK, V.SANTHARAM - SC
The legal principle established is that the arbitrability of disputes should primarily be determined by the arbitrator, and preconditions to arbitration are invalid if they contradict statutory provisions.
Headnote:
Arbitration - Disputes related to Agreement - Arbitration and Conciliation Act, 1996 Section 11, 16; Airport Authority of India Act Section 28A(d) - The court affirmed the necessity of arbitration per the agreement, referencing precedents that disputes and arbitrability must be assessed by the arbitrator rather than the court.
Fact of the Case:
The petitioner company sought arbitration for disputes arising from an agreement with the respondents, which were rejected based on claims of non-arbitrability under the Airport Authority of India Act. The petitioner asserted its right to compel arbitration as per the agreement's provisions.
Finding of the Court:
The court found that the arbitration clause in the agreement was operative and that the issue of arbitrability should be determined by the arbitrator. It also ruled that a bank guarantee stipulation was not a condition precedent to invoke arbitration.
Issues: The primary issues included whether the disputes were arbitrable under the Agreement and the necessity of a bank guarantee prior to arbitration.
Ratio Decidendi: The court maintained that arbitration agreements are valid irrespective of other contractual terms, and disputes pertaining to arbitrability should initially be addressed by the arbitrator not the court.
Final Decision: The court allowed the arbitration request and appointed a sole arbitrator to resolve the disputes.
O R D E R
The petitioner is stated to be a company registered under the provisions of the Companies Act and have approached this Court invoking Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’
for short).
2. According to the petitioner, they had entered into Annexure A2 Agreement with the respondents, but that certain disputes have arisen with respect to its terms and in relation to it; thus constraining them to approach this Court because, as per Clause 22 thereof, all such disputes can be adjudicated and resolved only through the mechanism of arbitration. They say that, however, when they approached the respondents through Annexures A3, A4, A6 and A9 seeking that either their claims be acceded to or a suitable Arbitrator be appointed under the terms of the aforementioned Clause of the Agreement, they responded through Annexures A5, A7 and A10 refusing to accede to either, saying that the disputes are not arbitrable as per the provisions of the Airport Authority of India Act (AAI Act for short). They say that, therefore, they are left without any other option, but to approach this Court through this Arbitration Request.
3. I have heard Sri.B.Ashok Shenoy – learned counsel for the petitioner and Sri.V.Santharam –
learned Standing Counsel for the respondents.
4. Sri.V.Santharam commenced his arguments against the grant of reliefs sought for in this Arbitration Request specifically adverting to the counter affidavit filed by his clients, and in particular paragraphs 3 and 11 thereof. He argued that, as per Section 28A(d) of the AAI Act, questions regarding payment of rent and other amounts due to his clients can only be considered by the jurisdictional Estate Officer; and therefore, that the disputes now raised by the petitioner are not arbitrable.
5. As the second contention against the claim of the petitioner in this Arbitration Request, Sri.V.Santharam pointed out that, even assuming that this Court obtains jurisdiction to refer the parties to arbitration, such an order can be issued only if the petitioner complies with the contractual provisions of Clause 22.2.4 of Annexure A2 Agreement. He showed me that, going by the said Clause, the petitioner should furnish a bank guarantee for an amount equal to the disputed amount, which shall be initially kept valid for two years and then extended until the decision of the Arbitrator is issued. He predicated that since the petitioner has not provided any such bank guarantee, this Court is incapacitated from allowing their request for appointment of a sole Arbitrator and thus prayed that this Arbitration Request be dismissed.
6. In reply, Sri.Ashok Shenoy – learned counsel for the petitioner, submitted that law is now well settled that, while this Court acts under Section 11 of the Arbitration and Conciliation Act, 1996 , it is only enjoined to verify whether there is an arbitration Agreement in existence and if it provides for an arbitration Clause. He submitted that in this case, both aspects are uncontested and consequently, that this Court is obligated to appoint an Arbitrator in terms of the Agreement.
7. As regards the arbitrability of the disputes are concerned, Sri.Ashok Shenoy submitted that it has been unmistakably declared inVidya Drolia v. Durga Trading Corporation [2021(2) SCC 1] that the issue whether the disputes are arbitrable or otherwise, is to be considered, at the first instance, by the Arbitrator himself, since he has the statutory competence to do so under Section 16 of the Act.
8. As regards the contention of Sri.V.Santharam edificed on Clause 22.2.4 of the Agreement is concerned, Sri.Ashok Shenoy submitted that it is clear therefrom that furnishing of a bank guarantee is not a condition precedent for the reference of disputes to an Arbitrator; and that, in any event of the matter, after the amendment of the Act in the year 2016, this Court will have to disregard such Clauses. In support of this argument, Sri.Ashok Shenoy
