IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON TUESDAY, THE 8TH DECEMBER 2009 / 17TH AGRAHAYANA 1931 Arb.APPEAL .No. 51 of 2009 ---------------------- OP (ARB).112/2009 of DISTRICT & SESSIONS COURT,TRIVANDRUM .................... APPELLANT/COUNTER PETITIONER ---------------------------------------- M/S. C SAT CABLE VISION, SHENOY BUILDING, CHERAI ERNAKULAM, REP. BY ITS PROPRIETOR, P.R.REGHUVEER DAS, AGED 54 YEARS, S/O. RATNAKARA SHENOY, RESIDING AT KALAPARAMBIL, DEVASWOM NADA, CHERAI P.O., CHERAI, ERNAKULAM. BY ADV. SRI.DINESH R.SHENOY SRI.G.HARIKRISHNAN (TRIPUNITHURA) SRI.MAHESH MENON RESPONDENT/ PETITIONER ------------------------- M/S. ASIANET SATELLITE COMMUNICATION LTD., 3RD FLOOR, KARIMPANAL ARCADE, EAST FORT, THIRUVANANTHAPURAM, REP. BY GIRISH K.S., S/O. KRISHNANKUTTY NAIR, AGED 37, ITS JUNIOR EXECUTIVE LEGAL. BY ADV. SRI.SAJI VARGHESE THIS ARBITRATION APPEALS HAVING BEEN FINALLY HEARD ON 08/12/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: P.R. RAMAN & P.R. RAMACHANDRA MENON, JJ. ............................................................................... ARBITRATION APPEAL NO. 51 OF 2009 ......................................................................... Dated this the 8th December, 2009 J U D G M E N T P.R. Raman, J: Appellant is aggrieved by the order passed by the District Court in O.P.(Arbitration )No.112 of 2009 filed by the respondent herein. The respondent herein approached the court below under Section 9 of the Arbitration and Conciliation Act 1996 claiming certain interim reliefs. According to them, they are in the field of distribution of Cable T.V. programmes and also providing cable network services in the State of Kerala. They have got their own established network and cable channels and are providing superior quality signal and services. The appellant herein had approached them with a proposal for setting up of joint venture business in Cherai in Ernakulam district and some adjoining areas with the intention of providing the subscribers with better and quality telecast of cable TV programmes. They reached a Memorandum Of Understanding for entering into the joint venture. The respondent paid a sum of Rs. Five lakhs as advance. The appellant, on the other hand, given an undertaking stating the total number of active customers, the ARBITRATION APPEAL NO. 51 OF 2009 2 monthly revenue and monthly profits of his existing business. He also undertook that the network generates a monthly profit of Rs.4,31,000/- and that the total value of the business owned by him at the time of execution of the agreement was Rs. 80 lakhs. 60% of the value was agreed to be purchased by the respondent herein and they executed a joint agreement and a further amount of Rs. 19 lakhs was paid by the respondent herein. Thus a total of Rs.24 lakhs had been paid by the respondent. There are other conditions also between the parties. It was contended that though the income generated from the joint venture was agreed to be shared between the parties in the ratio of 60:40, no amount had been paid to the respondent herein. The rest of the contentions are not relevant at this stage. 2. The appellant herein admitted the joint agreement entered into between the parties, but contended that they had large business in Ernakulam district, specified area in Cherai having 1485 direct connections and 12,000 link connections at the time of signing the Memorandum Of Understanding and joint venture agreement. It was contended by the appellant herein that after the agreement, the respondent deliberately ARBITRATION APPEAL NO. 51 OF 2009 3 with an intent to catch the entire business run by the appellant herein, given the connections at the specified area of the appellant. Contrary to the various conditions mentioned in the joint venture agreement, they also gave thousands of link connections in the specified area, as a result of which the appellant had to suffer loss of about Rs.3 lakhs till 14.11.2008 for non payment of subscription amount by the subscribers, since the respondent's agents are collecting subscriptions by giving direct connections in the specified area of the appellant. It was also stated that a notice was issued on 06.12.2008 stating that due to the breach of conditions of agreement by the respondent, the appellant had suffered a loss of Rs. 8 lakhs till 06.12.2008 and that they are rescinding the agreement dated 29.09.2008. 3. The court below marked Exts. P1 to P4 and Exts. R1 to R5 for the limited purpose of disposal of the petition. The interim direction sought for was to direct the appellant to furnish security for Rs.34,34,400/-. Necessary issues were framed including whether the respondent was entitled to get an injunction order restraining the appellant herein from collecting the amount from the Cable T.V. subscribers of the joint venture. ARBITRATION APPEAL NO. 51 OF 2009 4 The court below, after consideration of the plea raised between the parties and also referring to the documents produced, passed an interim order, by which the appellant was directed to furnish bank guarantee for Rs.10 lakhs in the name of the District Court for a period of two years and also to deposit 25% of the gross total income of the business every month before the District Court towards share of the respondent herein without fail and appointed the appellant as the Receiver. The appellant was also directed to submit the monthly account before the District Court . It was also made clear that in case of failure to comply with the directions issued as aforesaid, the direction to appoint him as Receiver will be terminated and an official receiver will be appointed to manage the business. 4. Thus it can be seen that the Court, with a view to watch the conduct of the parties and having been prima facie satisfied, thought it fit to appoint the appellant herein as the Receiver with liability to account, directed the appellant to furnish bank guarantee for Rs. 10 lakhs and to deposit 25% of the gross total income of the business every month. 5. Adv. Mr. Dinesh R. Shenoy, the learned Counsel for the ARBITRATION APPEAL NO. 51 OF 2009 5 appellant submitted that the directions to furnish bank guarantee works out much hardship to him and that instead of furnishing bank guarantee for Rs.10 lakhs, he prayed that, it may be modified so as to enable him to furnish it by way of immovable property. Incidentally, he has also requested that some modification in respect of the direction to deposit 25% of the total income may also be made. 6. The learned Counsel appearing for the respondent submitted that the appellant had disposed of more than 11 items of property and therefore substituting the security by way of immovable property will not instill any confidence. He also prays that if he is appointed as the Receiver, he is prepared to comply with the above conditions. 7. We are not proposing to go into the rival claims made by the parties as they are matters for adjudication by appropriate forum in accordance with the arbitration clause contained in the agreement. The limited question for consideration is as to whether the conditions imposed are onerous and any modification is necessary to reduce the hardship, if any, in enforcing the conditions. We find that the direction to furnish ARBITRATION APPEAL NO. 51 OF 2009 6 security for Rs.10 lakhs by way of bank guarantee may cause undue hardship to the appellant. Rather, it will be sufficient, if the same is reduced to Rs. Five lakhs and for the balance amount of Rs. Five lakhs, to furnish security by way of immovable property. But we do not propose to make any variation regarding the deposit of 25% of the total income, at this stage. However, since the appellant is appointed as the Receiver, he is bound to account the income generated from the business. If the disputes are not finally settled within another period of six months, it will be open to him to convince the Court that the direction to deposit 25% of the total income in the factual situation requires some modification. In that event, the court will consider such request and pass appropriate orders, after hearing both the parties. With regard to the direction to the appellant to furnish bank guarantee for Rs.10 lakhs, we modify the same by directing to furnish Bank guarantee for an amount of Rs. Five lakhs and to deposit the bank guarantee before the court below. The appellant shall furnish security for the balance amount by way of immovable property. For that purpose, a list of items of immovable property along with the title documents ARBITRATION APPEAL NO. 51 OF 2009 7 be furnished before the court below with notice to the respondent herein. In such an event, the court below, after hearing the parties, will accept such of those properties as are found to be under the legal ownership of the appellant and are found to be sufficient to discharge his liability of furnishing security to the satisfaction of Rs.5 lakhs. The order passed by the court below is modified to the above extent. In view of pendency of the matter before this court, the time for compliance, as stipulated in the order of the court below, is extended by two weeks from today. P.R. RAMAN, JUDGE. P.R. RAMACHANDRA MENON, JUDGE. lk