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2021 Supreme(Online)(KER) 25221
HIGH COURT OF KERALA
V. G. Arun, J
AYYAPPAN ASHOKAN – Appellant
Versus
K.P.INDRAPALAN – Respondent
OP(C)/865/2021
RAMEEZ NOOH, SHRI.SIRAJ ABDUL SALAM, M.G.KARTHIKEYAN, NIREESH MATHEW
The Arbitral Tribunal retains broad jurisdiction under the Arbitration Act to address interim measures relevant to partnership disputes, reinforcing limited judicial intervention.
Headnote:
Arbitration - Partnership Dispute - Arbitration and Conciliation Act, 1996 - Sections 5, 9, 17 - The court upheld the powers of the Arbitral Tribunal under the Arbitration and Conciliation Act, confirming its authority to clarify the application of interim measures during ongoing arbitration.
Fact of the Case:
Petitioner and respondent entered into a partnership agreement to run a hotel, with disputes leading to arbitration. The petitioner raised concerns about the respondent’s management and filed for an interim order to maintain financial transparency.
Finding of the Court:
The court found that the Arbitral Tribunal acted within its jurisdiction under the Arbitration Act, and the dispute regarding hotel management fell under the scope of arbitration, thus granting interim measures was appropriate.
Issues: Whether the Arbitral Tribunal exceeded its authority by clarifying the legal standing of the partnership during arbitration.
Ratio Decidendi: The court ruled that the existence of an arbitration clause does not limit the tribunal's ability to address issues related to the partnership and affirmed the tribunal's jurisdiction in issuing clarity on operational matters.
Final Decision: The original petition is dismissed.
JUDGMENT
Dated this the 30th day of September, 2021 The petitioner and the respondent entered into Ext.P1 partnership agreement with the objective of conducting a bar attached hotel by name 'M/s.Hotel Sixer. As per the terms of the partnership agreement, petitioner is eligible for 10% of the total share of profits and the respondent, for 90%. Dispute arose regarding the conduct of business by the respondent and thereupon, invoking the arbitration clause in the agreement, the petitioner filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 before the District Court, Alappuzha ('the Act' for short) and obtained Ext.P3 interim order, requiring the respondents to maintain a separate account with regard to the income derived from the day-today business and to submit the particulars of that account before the court and also injuncting the respondents from obstructing the petitioner's entry to the hotel.
2. The respondents on the other hand filed an arbitration request before this Court, pursuant to which a retired District Judge was appointed as the sole Arbitrator. Pending the arbitral proceedings, the respondents tried to renew the FL3 licence of the hotel. The petitioner raised objection before the Commissioner of Excise and also filed WP(C) No.11275 of 2020 before this Court. In spite of the objection and pendency of the writ petition, the FL3 licence was renewed. Thereupon, the writ petition was closed reserving petitioner's liberty to file appeal before the Commissioner of Excise. Accordingly, the petitioner filed Ext.P5 appeal.
3. The star classification issued to M/s.
Hotel Sixer by the Ministry of Tourism, Government of India was due to expire on 15.07.2020. At that juncture, the petitioner filed Ext.P6 representation before the Hotel and Restaurants Approval and Classification Committee (HRACC) (South) raising objection against grant of reclassification till the dispute between the partners is resolved through arbitration. Based on the objection, the HRACC (South) issued Ext.P7 communication informing the petitioner that the application for reclassification will not be processed till the final outcome of the arbitral proceedings.
4. In the meanwhile, the respondents approached this Court by filing WP(C) No.12847 of 2020 seeking a declaration that M/s. Hotel Sixer is entitled to continue the business on the strength of the bar licence renewed for the year 2020-2021, till a decision is taken by the HRACC (South). The hotel business is being continued on the strength of the interim orders issued in the writ petition.
5. Pending WPC No.12847 of 2020, the respondent moved Ext.P8 application before the Arbitral Tribunal under Section 17 of the Act, seeking a clarification to the effect that the pendency of the arbitration proceedings is not a legal bar in the HRACC (South) issuing certificate of classification. The petitioner filed Ext.P9 objection contending that the application is not legally maintainable as the relief sought does not fall within the purview of the Act and is not the subject matter of the arbitration agreement or the dispute. In spite of the objection, the Arbitral Tribunal issued Ext.P10 order, clarifying that the pendency of the arbitral proceedings is not at all a legal bar for renewal of classification as per law and usual norms. Aggrieved, the petitioner preferred an appeal before the Commercial Court, Alappuzha. The appeal stands dismissed by Ext.P11 order.
Hence, the original petition.
6. Sri.Millu Dandapani, learned Counsel for the petitioner submitted that the clarification sought by the respondent being beyond the scope of the partnership agreement and the dispute referred to arbitration, the Arbitral Tribunal had exceeded its jurisdiction in issuing Ext.P10 order. It is contended that this crucial legal aspect was also not considered by the appellate court. In support of the contention, reliance is placed on the decision of the Apex Court in Booz Allen and Hamilton Inc v.
