IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH & THE HONOURABLE MR. JUSTICE M.L.JOSEPH FRANCIS WEDNESDAY, THE 12TH AUGUST 2009 / 21ST SRAVANA 1931 Arb.A.No. 26 of 2009() ----------------------------- AGAINST THE ORDER DATED 22/07/2009 IN IA.4669/2009 IN OPARB.861/2009 of I ADDL.DISTRICT COURT, ERNAKULAM .................... APPELLANT/RESPONDENT: --------------------------------------- M/S.BHARAT SANCHAR NIGAM LTD. (BSNL), REGISTERED OFFICE AT BHARAT SANCHAR BHAVAN, NEW DELHI AND REP. BY ITS DEPUTY MANAGER (MOBILE & BUSINESS DEVELOPMENT) OFFICE OF PRINCIPAL GENERAL MANAGER, TELECOM, BSNL, ERNAKULAM SSA, KERALA, TELECOM CIRCLE. BY ADV. SRI.K.RAMAKUMAR, SENIOR ADVOCATE SRI.T.RAMPRASAD UNNI SRI.J.R.PREM NAVAZ RESPONDENT/PETITIONER: --------------------------------------- M/S.LEE BUILDERS, REP. BY ITS AUTHORISED REPRESENTATIVE, MR.BABU THOMAS, S/O. THOMAS, AGED 37 YEARS, KANNAMPURAM BUILDING, M.C.ROAD, PERUMBAVOOR. BY ADV. SRI.K.R.VINOD SRI.K.V.VINOD SRI.K.P.WILSON (KOTHAMANGALAM) THIS ARBITRATION APPEAL HAVING BEEN FINALLY HEARD ON 12/08/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX: APPELLANT'S EXHIBITS: NIL RESPONDENT'S EXHIBITS: ANNEXURE R1A--THE COPY OF THE COMMUNICATION DATED 11.6.2009 ISSUED BY BSNL ANNEXURE R1B--THE COVERING PAGES OF THE COPY OF THE NEW TENDER NOTIFICATION. ANNEXURE R1C--THE COPY OF THE JDUGMENT IN WPC 18820/09 DATED 9.7.2009 OF THE HON'BLE HIGH COURT. ANNEXURE R1D--THE COPY OF THE PROSECUTION PETITION FILED BEFORE THE DISTRICT COURT ERNAKULAM. ANNEXURE R1E--THE COPY OF THE STAY PETITION FILED BEFORE THE DISTRICT COURT ERNAKULAM. ANNEXURE R1F--THE COPY OF THE COUNTER AFFIDAVIT FILED BY THE PETITIONER TO THE STAY PETITION. ANNEXURE R1G--THE COPY OF THE NOTICE DATED 29.7.2009 ISSUED BY THE ARBITRATOR. K.M.JOSEPH & M.L.JOSEPH FRANCIS, JJ. ------------------------------------------------------ Arb.Appeal No.26 of 2009 ---------------------------------------------- Dated, this the 12th day of August, 2009 J U D G M E N T K.M.Joseph, J. Appellant is the respondent in a petition filed under Section 151 of Code of Civil Procedure. By the impugned order, the District Judge, Ernakulam has allowed the petition filed by the respondent and stayed further proceedings pursuant to the tender notification dated 26.6.2009 till the dispute between the parties is decided by the arbitrator appointed. It is made clear that the appellant can receive the tenders (EOI) as per the notification. 2. We heard Sri.K.Ramakumar, learned senior counsel for the appellant and Sri.K.R.Vinod, learned counsel appearing on behalf of the respondent. 3. The admitted facts are as follows: The appellant has appointed 15 franchisees for the Ernakulam area. The respondent is one of such franchisees. The appointment is for two years. The respondent filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 Arb.Appeal No.26/2009 -2- and obtained an order of injunction against the appellant against terminating his franchise. According to the respondent, a counter affidavit is filed by the appellant to the effect that the appellant has terminated the franchise of the respondent. Subsequently, according to the respondent, it issued Annexure R1 (B) notification inviting expression of interest from persons seeking appointment as franchisees in respect of the 15 areas. The respondent approached this Court by filing a writ petition culminating in Annexure R1( C) judgment. Therein a learned Single Judge of this Court took the view that it is for the respondent either to take steps with regard to the disobedience of the order of injunction or if there is a fresh cause of action to work out his remedies. It is accordingly that the respondent has filed the present petition culminating in the impugned order. According to the respondent, this is a case where after having obtained an order of injunction and the matter is pending arbitration he is sought to be displaced by appointment of fresh franchisees under Annexure R1 (B) notification and accordingly accepting Arb.Appeal No.26/2009 -3- his contention the learned District Judge has passed the order staying the proceedings pursuant to Annexure R1 (B). 4. Learned senior counsel for the appellant on the other hand would point out that the impugned order is totally beyond the power conferred under Section 9 of the Act. He would submit that the jurisdiction under Section 9 is limited and the purport of the said provision is only to protect the interest of the party which is the subject matter of arbitration. He would complain that the respondent was one of the 15 franchisees appointed in the Ernakulam District. Under clause 8 of the agreement between the appellant and respondent the appellant is entitled to appoint additional franchisees to which no exception can be taken by the respondent. This he points out is the unambiguous effect of the provisions of clause 8. He would furthermore complain that the respondent was only one of the 15 franchisees. Annexure R1 (B) notification invited expression of interest in respect of 15 areas. He poses the question as to how respondent could have obtained order under Section 9 of the Act in respect of the areas over which Arb.Appeal No.26/2009 -4- he has absolutely no right in terms of the franchise agreement. 5. To this the learned counsel for the respondent would contend that there are 15 franchisees all of whom had approached the District Court and obtained injunction. He would further point out that there is nothing mentioned in Annexure R1 (B) to indicate that the notification has been purportedly issued in exercise of the right of appointment of additional franchisees. Further, he would invite our attention to the counter affidavit filed by the appellant in the District Court to point out that the impression that was created was that despite the order of injunction against termination of franchise agreement between the appellant and the respondent, the respondent is about to be displaced and other persons are going to be appointed as franchisees. 6. Section 9 of the Arbitration and Conciliation Act, 1996 contains among other powers the power to issue such other interim measure of protection as may appear to the Court to be just. This is after specifically enumerating Arb.Appeal No.26/2009 -5- various reliefs which may be granted by the Court. Learned counsel for the respondent also invited our attention to paragraph 9 of the judgment of the Apex Court in ITI Ltd. v. Siemens Public Communications Network Ltd. {2002 KHC 1279}. It reads as follows: “ But Mr.Parasaran contended that the said order is based on an earlier reported judgment of this Court in the case of Shyam Sunder Agarwal & Co. v. Union of india (1996 (2) SCC 132). According to Mr.Parasaran, the Court in the case of Nirma Ltd. (supra) has erroneously founded its conclusion on the said judgment in Shyam Sunder Agarwal's case. Learned counsel argued that the case of Shyam Sunder Agarwal (supra) arose under the Arbitration Act, 1940 which Act had made the provisions of the Code specifically applicable to proceedings arising under the said Act in the civil court whereas in the present Act such provision making the Code applicable is not found. Therefore, there is a substantial difference in law between the cases of Shyam Sunder Agarwal (supra) and Nirma Ltd. (supra). Therefore, the order of this Court in Nirma Ltd. (supra) is not a good law, hence, requires reconsideration.” 7. The question which arises for our consideration is whether the District Court, Ernakulam was justified in Arb.Appeal No.26/2009 -6- passing the impugned order be it under Section 9 or Section 151. We have no hesitation in saying that the learned District Judge was in error in the first place in staying the entire proceedings pursuant to Annexure R1 (B). The District Judge failed to notice that Annexure R1 (B) purports to invite expression of interest in respect of 15 franchisees. The respondent was only a franchisee of one of the 15 areas. Even assuming for a moment that he had made out a case in respect of his franchise the Court could not have passed an order staying further proceedings in respect of the entire area. 8. Furthermore, even with respect to the area over which the respondent has been granted rights of franchise we are of the view that we need not maintain the order passed by the District Judge, Ernakulam. This is for the following reason. Respondent has been granted franchise in respect of one of the 15 areas. It is for a period of two years. There was a move to terminate his franchise. He invoked Section 9 and he has been granted an order of injunction against termination. According to the appellant, franchise was terminated. According to the respondent steps were Arb.Appeal No.26/2009 -7- taken to terminate the franchise. It is common case that there is an order of injunction. As long as the order of injunction is in force the rights of the respondent under the franchise agreement in question cannot be impaired. Under the very agreement under which the respondent claims his right, the appellant has a legal right to appoint additional franchisees. On a perusal of paragraph 2 of the counter affidavit filed by the appellant in the court below the appellant has specifically referred to clause 8 and what is more referred to is the legal right to appoint additional franchisees. The fact that an order of injunction has been issued against the termination/purported termination cannot take away the right of the BSNL to appoint additional franchisees. Even if there is no termination/purported termination, the appellant would be well within its rights to appoint additional franchisees. The respondent cannot claim greater right only because the Court has passed an order of injunction against termination during the pendency of arbitration. In other words, both the appellant and the respondent would be bound by the terms of Arb.Appeal No.26/2009 -8- the agreement. Neither Section 9 of the Arbitration and Conciliation Act nor Section 151 of Code of Civil Procedure could possibly clothe the court with power to confer a greater right on the respondent than he has under the agreement. No doubt, learned counsel for the respondent would point out that there was some confusion both by reason of absence of words in Annexure R1 (B) to indicate that the notification was issued for appointment of additional franchisee as also the contents of para 10 of the counter affidavit. But learned senior counsel for the appellant would make it clear that the order of injunction will be honoured as long as it stands and the respondent can continue as franchisee as long as there is order of injunction and also that Annexure R1 (B) notification is issued for appointment of additional franchisees. In the light of this unambiguous statement by the learned senior counsel for the appellant which we would accept and record, we are of the view that we need not maintain the impugned order. Accordingly, we allow the appeal and set aside the impugned order. We also make it clear that nothing stated in Arb.Appeal No.26/2009 -9- our judgment will stand in the way of the appellant moving to vacate the order of injunction if it is so advised. I.A.No.2174/2009 is closed. (K.M.JOSEPH) JUDGE. (M.L.JOSEPH FRANCIS) JUDGE. MS