IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE V.RAMKUMAR & THE HONOURABLE MR. JUSTICE P.Q.BARKATH ALI MONDAY, THE 28TH NOVEMBER 2011 / 7TH AGRAHAYANA 1933 Arb.A.No. 48 of 2011() ---------------------- OPARB.1/2011 of DISTRICT COURT, LAKSHADWEEP .................... APPELLANT-Applicant in I.A. - Petitioner in O.P. (Arb) -------------------- MUTHUKOYA THOOPIYAKAL, S/O LATE ABDULLA KOYA HAJI, THOOPIYAKAL HOUSE, AMINI, U.T.OF LAKSHADWEEP. BY ADV. SRI.P.B.KRISHNAN SMT.GEETHA P.MENON SRI.P.B.SUBRAMANYAN RESPONDENT(S): Respondents in I.A.-Respondents in O.P. (Arb) --------------- 1. UNION TERRITORY OF LAKSHADWEEP, REPRESENTED BY THE ADMINISTRATOR, KAVARATTI- 682 555. 2. THE DIRECTOR OF TOURISM, UNION TERRITORY OF LAKSHADWEEP, KAVARATTI- 682 555. 3. THE LAKSHADWEEP SOCIETY FOR THE PROMOTION OF RECREATIONAL TOURISM & SPORTS (SPORTS), REPRESENTED BY ITS MANAGING DIRECTOR, KAVARATTI- 682 555. Adv. Sri. S. Radhakrishnan for respondents. THIS ARBITRATION APPEALS HAVING BEEN FINALLY HEARD ON 24/11/2011, THE COURT ON 28-11-2011 PASSED THE FOLLOWING: CR V. RAMKUMAR & P.Q. BARKATH ALI, JJ. ........................................................ Arbitration Appeal No. 48 of 2011 ......................................................... Dated: 28th November 2011 JUDGMENT In this appeal filed under Sec. 37 of the Arbitration and Conciliation Act, 1996 (“the Act” for short), the appellant who was the petitioner in O.P. (Arbitration) No. 1 of 2011 on the file of the District Court, Lakshadweep , challenges the order dated 13-10- 2011 passed by the said Court dismissing the interlocutory application (I.A. N o. 157 of 2011) filed by the appellant in the said O.P. THE BACKGROUND FACTS 2. The first respondent is the Union Territory of Lakshadweep represented by its Administrator at Kavaratti. The 2nd respondent is the Director of Tourism, Union Territory of Lakshadweep, Kavarati. The 3rd respondent is the Society for Promotion of Recreational Tourism and Sports (SPORTS), Kavaratti, represented by its Managing Director. Arbitration Appeal No. 48 of 2011 -:2:- The facts leading to this appeal are as follows:- 1996 R3 invited global tenders for the running of a twenty bed tourism resort at Agatti Island called Agatti Island Beach Resort (AIBR). The appellant (Muthukoya Thoopiyakal) who belongs to the Scheduled Tribe and who is an islander hailing from the Amini Island of the Union Territory of Lakshadweep, was the successful bidder. 1-11-1996: Ext.A1 registered lease deed was executed between the appellant and R3 (SPORTS) as per which the 20 bed resort AIBR was let out to the appellant for a period of 5 years on a rent of Rs. 5 lakhs for the first year, Rs. 6 lakhs for the second year , Rs. 7 lakhs for the 3rd year, Rs. 8 lakhs for the 4th year and Rs. 9 lakhs for the 5th year. Clause 9 of the lease deed provides that in case the lessee opts to continue the lease agreement after the expiry of the lease period he may apply for renewal of the lease suggesting his terms and conditions at least six months before the expiry of the lease to be extendable for further periods of 5 years or more . Clause 20 of the lease deed provides that any dispute arising between the lessor and the lessee during the currency of the lease or after its expiry or earlier termination shall be settled by arbitration of two arbitrators one to be appointed by each party and that the arbitrators will select an umpire before commencing the arbitration hearing the venue of which shall be Kavaratti . 2001 : Six months before the expiry of the lease the appellant exercised his option for renewal of the lease for a further period of 5 years. 19-10-2001: In a special general body meeting in which the appellant also attended, R3 reviewed its earlier Arbitration Appeal No. 48 of 2011 -:3:- decision not to renew the lease and resolved that in view of the fact that the resort was run by an islander who was given only five year's term initially and he had, despite difficulties, cleared all the dues, the request of the appellant deserves favourable consideration. Accordingly, it was decided to renew the lease for another 5 years on the terms recommended by the meeting dated 4-6-2001 of the Board of Management namely, a minimum guarantee of Rs. 8 lakhs or 22% of the gross turnover whichever is higher. The appellant was agreeable to those terms. 22-4-2002; R2 sent a letter to the appellant inviting his attention to the meeting of R3 held on 19-10-2001 and the undertaking by the appellant to pay Rs. 8 lakhs or 22 % of the gross turnover whichever was higher per year as rent and called upon the appellant to pay the rent immediately to R1 under receipt head 3452 Tourism 800 other receipts. It appears that since the minimum rent of Rs. 8 lakhs fixed for renewal was less than the rent of Rs. 9 lakhs fixed under Ext.A1 lease deed for the period from 1- 11-2000 to 31-10-2001, R1 intervened and insisted that the renewal shall only be for a period of two years. A notice to that effect was served on the appellant on 10-07-2003. As the appellant was not agreeable for the same he instituted a suit O.S. 6 of 2003 before the District Court, Lakshadweep, seeking specific performance of the agreement to renew the lease as decided on 19-10-2001 and consequential injunction calling upon R1 and R2 (who were defendants 2 and 3) to execute the renewal of the lease deed. The first defendant in the suit was the Union of India. Pending suit R3 was impleaded as defendant No.4. While so, R1 to R3 constituted a committee to look into the matter and suggest remedial measures. 12-7-2005 : The above committee met . Arbitration Appeal No. 48 of 2011 -:4:- 17-7-2006 : The committee recommended renewal of the lease from 1-11-2001 to 31-10-2006 subject to two conditions namely; i) The appellant shall submit to R2 duly audited balance sheets certified by registered chartered accountants/auditors and filed before the concerned authorities for the financial years 2001-02,2002 - 03, 2003-04, 2004-05 and 2005-06. ii) The appellant shall abide by the Coastal Zone Regulation in force and shall dismantle immediately any unauthorised structures. 14-09-2006 R2 informed the appellant the above decision and called upon the appellant to submit the duly audited balance sheets within one month of receipt of the letter and added that the terms and conditions of the lease agreement for renewal of the lease would be formulated on receipt of those documents. 11-12-2006 The District Court took note of the recommendations of the committee and placed on record the acceptance by the appellant to abide by the first condition. Regarding the second condition the Court found that the structures referred to in the second condition was outside the tenanted premises and, therefore, the same cannot be a pre-condition for renewal of the lease already agreed upon. The suit was accordingly decreed on consent directing the defendants (Union of India and R1 to R3) to renew and execute the lease deed in favour of the plaintiff for a further period of 5 years from 1-11-2006 to 31-10- 2011 on terms mutually agreed upon. Ext.A2 is the Judgment and Ext.A3 is the decree in that suit. According to the appellant in spite of his repeated requests R1 to R3 did not renew and execute the lease deed . The appellant would have it that the rent for the first and second year 2006-2007 and 2007- 2008 was paid by him and received by R2 and since Arbitration Appeal No. 48 of 2011 -:5:- the renewed lease deed was not executed by R1 to R3, he paid rent only at the rate of Rs. 8 lakhs per year thereafter. 8-3-2010 The appellant was served with a notice demanding Rs. 36,76,000/- by way of arrears of rent. The appellant filed W.P. (C) 31573/2010 before this Court challenging the notice dated 8-3-2010 and alleging that even the payment of Rs. 8 lakhs per year was not accounted for and stating that actually Rs. 17 lakhs alone was due. The appellant paid Rs. 17 lakhs as directed by this Court in the above Writ Petition. 4-4-2011 The appellant issued Ext.A4 notice seeking renewal of the lease beyond 31-10-2011 and also submitted balance sheets for the years 2007,2008, 2009 and 2010 showing a larger turnover during those periods. The appellant also stated that as per the turnover shown a further amount of Rs. 9.14 lakhs would be due from him and he was willing to pay the same. According to the appellant his request for renewal was not heeded to and he, therefore, paid Rs. 9.14 lakhs . 28-07-2011 Appellant sent Ext.A5 letter again seeking renewal of the lease. 12-08-2011 Appellant sent Ext. A6 lawyer notice under Sec. 80 C.P.C. again seeking renewal of the lease. 02-09-2011 R2 issued Ext.A7 notice stating inter alia that Ext.A1 lease agreement was continued but alleged that the appellant had been making defaults and expressed their unwillingness to renew the lease. The appellant was called upon to hand over vacant possession of AIBR on or before 31-10-2011. Arbitration Appeal No. 48 of 2011 -:6:- 22-09-2011 Appellant sent Ext.A8 notice nominating his arbitrator and calling upon R1 to R3 to nominate their arbitrator. 30-09-2011 Ext.A9 reply was sent informing the appellant that the respondents had no obligation to nominate their arbitrator since the period of lease was over on 31- 10-2011 . 10-10-2011 Appellant filed O.P. (Arbitration) 1 of 2011 before the District Court, Lakshadweep at Kavaratti, for a permanent prohibitory injunction restraining the respondents from evicting the appellant from the resort in question or in any manner preventing the entry of tourists to the said resort or from interfering with the right of the appellant to operate the resort till the disputes are finally adjudicated and a final award is passed by the proposed arbitral tribunal and for a permanent prohibitory injunctions restraining the respondents from enforcing Ext.A7 notice 2-09- 2011 till the final award is passed. The appellant also filed I.A. 157 of 2011 in O.P. (Arbitration) No. 1 of 2011 seeking an interim injunction restraining the respondents from enforcing Ext.A7 notice and from evicting the appellant from the resort in question or preventing the entry of tourists to the resort and in any manner interfering with the rights of the appellant to operate the resort, accommodate and entertain guests/tourists therein pending disposal of the O.P. 10-10-2011 The appellant also filed an Arbitration Request as A.R.47 of 2011 before the Chief Justice, High Court of Kerala under Sec. 11 (6) of the Act for the appointment of an arbitrator. The said request is now pending before Hon'ble Mr. Justice Siri Jagan, the designated Judge. 13-10-2011 The District Judge as per the impugned order dismissed I.A. 157 of 2011 on merits and without a counter. Arbitration Appeal No. 48 of 2011 -:7:- O.P. (Arbitration) No. 1 of 2011 now stands posted before the District Court on 28-11-2011. 17-10-2011 The appellant filed this appeal before this Court under Sec. 37(1) (i) of the Act read with Sec. 104 and Order 43 Rule 1 (r) C.P.C. challenging the order dated 13-10-2011 passed on I.A. 157/2011. OBJECTION REGARDING THE MAINTAINABILITY OF THIS APPEAL 3. Advocate Sri. S. Radhakrishnan, the learned Standing Counsel for R1, also representing R2 and R3 raised a preliminary objection regarding the maintainability of this appeal. IS AN INTERIM ORDER GRANTING OR REFUSING AN INTERIM MEASURE PENDING AN APPLICATION UNDER SECTION 9, APPEALABLE ? The objection of the respondents is as follows:- The main relief prayed for in Arbitration O.P. 1/2011 is one in terms of Section 9 (ii) (d) of the Act . Eventhough the prayer in the said O.P. is for a perpetual injunction, the purpose of Sec. 9 of the Act itself is for enabling a party to seek any of the interim measures as enumerated therein and such measures are to be claimed before or during arbitral proceedings or at any time after the arbitral award but before its enforcement. I.A. 157/2011 filed along with the above O.P. Arbitration Appeal No. 48 of 2011 -:8:- was one for an interim injunction in terms of the main relief of injunction prayed for in the O.P. When the main relief which can be claimed in an O.P. filed under Sec. 9 of the Act itself is an interim measure, it was not open to the appellant to seek an interim relief in the main O.P. by filing an interlocutory application. The Court below also could not have entertained I.A. 157/2011 which was ab initio not maintainable. The order impugned in this appeal is the order passed on I.A. 157/2011. The main O.P. is still pending before the District Court and stands posted to 28-11-2011. The counter-affidavit of R1 to R3 in the main O.P. has only been filed now after the impugned order. What is appealable under Sec. 37 (1) (a) of the Act is an order granting or refusing to grant an interim measure under Sec. 9 . An order on the original petition filed under Sec. 9 of the Act is yet to be passed. Hence, the present appeal against an order passed on an interlocutory application filed in the original petition is not maintainable. An identical question came up for consideration before a Division Bench of the Karnataka High Court in M/s. Nikitha Build-Tech (P) Ltd. Bangalore v. M/s. Natural Textiles Pvt. Ltd., Bangalore - AIR 2010 Karnataka 170 and it has been held that an interlocutory application was not maintainable in a petition under Sec. 9 of the Act and the appeal preferred against the order on the interlocutory petition was not maintainable. Arbitration Appeal No. 48 of 2011 -:9:- JUDICIAL EVALUATION OF THE OBJECTION 4. We are afraid that we are unable to accept the above submission, which at first blush, seems to be attractive. It is true that what Section 9 of the Act provides for is only an interim measure of protection by the Court either before or during arbitral proceedings or at any time after the passing of an arbitral award but before its enforcement. The appellant has already moved the Hon'ble the Chief Justice under Sec. 11 (6) of the Act on 10- 10-2011 and the said proceedings are pending before the designated Judge of this Court as Arbitration Request No. 47 of 2011. Hence, it cannot be said that when the appellant filed the O.P. under Section 9 of the Act, he did not have any intention to take the matter to arbitration. But an applicant under Section 9 of the Act has to further show that there exists an “arbitration agreement” within the meaning of Section 7 of the Act and that he himself is a party to such arbitration agreement as indicated by the definition of the expression “party” contained in Section 2 (h) of the Act and that the proposed arbitral proceedings also will be between the parties to such arbitration agreement. Here the appellant and R1 to R3 are at issue regarding the existence of an arbitration agreement for the period beyond 31-10-2001 and also on the question whether R1 and R2 could be treated as parties to the arbitration agreement notwithstanding Ext. A2 judgment and Arbitration Appeal No. 48 of 2011 -:10:- Ext. A3 decree. Well, we do not purpose to go into these contested issues in this appeal for reasons to be indicated later. Our immediate concern is regarding the objection as to the maintainability of this appeal. Section 37 of the Act providing for appeals reads as follows:- “37. Appealable orders:- (1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:- a) granting or refusing to grant any measure under Section 9; b) setting aside or refusing to set aside an arbitral award under Section 34. 2) An appeal shall also lie to a Court from an order granting of the arbitral tribunal:- a) accepting the plea referred in sub-section (2) or sub- section (3) of Section 16; b) granting or refusing to grant an interim measure under Section 17. 3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court”. 5. Thus, what is appealable under Section 37 (1)(a) is an “order” granting or refusing to grant any “measure” under Sec. 9. The section does not say “interim order” or “final order”. It only says Arbitration Appeal No. 48 of 2011 -:11:- “order”. It is pertinent to note that I.A. No. 157/2011 was also filed, inter alia, invoking Section 9 of the Act. The “measure” under Section 9 is an “interim measure of protection” in respect of any of the enumerated situations contemplated by clauses (a) to (d) of Section 9 (ii) or “such other interim measure of protection as may appear to the Court to be just and convenient” and covered by the residuary clause (e) to Section 9 (ii). Section 9 of the Act reads as follows:- “9. Interim measures, etc. by Court - A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Sec. 36, apply to Court:- i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or ii) for an interim measure of protection in respect of any of the following matters, namely:- a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; b) Securing the amount in dispute in the arbitration; c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, Arbitration Appeal No. 48 of 2011 -:12:- which may be necessary or expedient for the purpose of obtaining full information or evidence; d) interim injunction or the appointment of a receiver; e) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it”. The latter part of Sec. 9 which reads “and the court shall have the same power for making orders as it has for the purpose of and in relation to any proceedings before it” is of great significance since it is to the civil court that the application under Section 9 is made and such civil court has ancillary, incidental, auxiliary or inherent powers to do justice to the parties before it. The relevance of the above provision in Sec. 9 of the Act has been specially noticed by the Apex Court in Adhunik Steels Limited v. Orissa Manganese and Mninerals (P) Ltd. - (2007) 7 SCC 125 where it has been observed as follows:- “11. It is true that Section 9 of the Act speaks of the court by way of an interim measure passing an order for protection, for the preservation, interim custody or sale of any goods, which are the subject-matter of the arbitration agreement and such interim measure of protection as may appear to the court to be just and convenient. The grant of an interim prohibitory injunction or an interim mandatory injunction are governed by well-known rules and it is difficult to imagine that the legislature while enacting Section 9 of the Act intended to make a provision which was dehors Arbitration Appeal No. 48 of 2011 -:13:- the accepted principles that governed the grant of an interim injunction. Same is the position regarding the appointment of a receiver since the section itself brings in the concept of “just and convenient” while speaking of passing any interim measure of protection. The concluding words of the section, : “and the court shall have the same power for making orders as it has for the purpose and in relation to any proceedings before it” also suggest that the normal rules that govern the court in the grant of interim orders is not sought to be jettisoned by the provision. Moreover, when a party is given a right to approach an ordinary court of the country without providing a special procedure or a special set of rules in that behalf, the ordinary rules followed by that court would govern the exercise of power conferred by the Act. On that basis also, it is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and the concept of just and convenient while passing interim measures under Section 9 of the Act”. (emphasis supplied) A party approaching the civil court with a request for an interim measure of protection under Section 9 of the Act, will naturally be apprehending some danger or adverse consequences at the hands of the respondents. It is to forestall such danger or adverse consequences that he is approaching the civil court under Sec. 9 of the Act. The Kerala Arbitration and Conciliation (Court) Rules, 1997 (“the Rules” for short) prescribe the form of application to be filed before the civil court and the procedure to be followed by the civil court . Rule 3 of the Rules makes the relevant provisions of the Code of Civil Procedure, 1908 (“C.P.C.” for short) and the Kerala Civil Rules of Practice, 1971 applicable for verification of pleadings in the case of every application presented before the Court. Rule 6 Arbitration Appeal No. 48 of 2011 -:14:- enjoins that when an application is made under the Act the Court shall order notice thereof to all the respondents and to such other person as may appear to the Court to be likely to be affected by the proceedings and calling upon them to show cause within the time specified in the notice, as to why the reliefs sought in the application should not be granted. Rule 11 of the Rules reads as the follows:- “11. In matters not provided for in these Rules, the provisions of the Code of Civil Procedure, 1908, the Kerala Civil Rules of Practice, 1971 and the circular orders issued by the High Court of Kerala from time to time shall mutatis mutandis apply to all proceedings under the Act including appeals”. If an order on a petition under Sec. 9 of the Act can be passed only after complying with the above procedure and after calling upon the respondent to show cause against granting the relief prayed for, in very many cases the application itself may become infructous on the happening of the apprehended danger or adverse consequences. Hence, a power to grant an ad interim measure of protection to the applicant in deserving cases cannot be denied to the civil court which has all the ancillary powers to do so. If the applicant is asked to wait until the respondents file their objections or until the matter is finally heard, it would amount to negation of justice to such applicant. Hence, depending upon the expediency of and the dire need for the interim order passed by the court on the apprehended danger or adverse consequences pending final disposal of an application under Sec. 9, it can be said that an appeal from such interim order would be maintainable if such interim order Arbitration Appeal No. 48 of 2011 -:15:- partakes the character of a final order. It is true that in an appropriate case an ad interim order can be passed on the application filed under Section 9 itself. But since the application, as insisted by the Rules, is to be filed as an original petition, the