Kerala High Court
Naijin Babu vs Appolo Shopping Mall Llp on 25 February, 2025
AR NO.269/2024 1
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE SYAM KUMAR V.M.
TUESDAY, THE 25TH DAY OF FEBRUARY 2025 / 6TH PHALGUNA, 1946
AR NO.269 OF 2024
PETITIONER:
NAIJIN BABU
AGED 40 YEARS
S/O.SAITHALAVI, THAZHATH VEETIL HOUSE,
VANDOOR P.O, VANDOOR VILLAGE, NILAMBUR TALUK,
MALAPPURAM. REPRESENTED BY POA HODER, AHAMMED
SHAMEER, I.V, AGED 40 YEARS, S/O MUHAMMED,
IDIYANA VEETIL HOUSE, VANDOOR P.O,
MALAPPURAM, PIN - 679328
BY ADVS.
P.JERIL BABU
SRINATH GIRISH
RESPONDENTS:
1 APPOLO SHOPPING MALL LLP
DOOR NO.5/2037 O, APPOLO TOWER, OPPOSITE
SAROVARAM PARK, ERANJHIPALAM P.O, KOZHIKODE.
REPRESENTED BY DESIGNATED PARTNER ABDUL RASHEED,
S/O ABDUL HAMEED, OTTAKATH MANAKARATHODI VEEDU,
MUTTIPALAM P.O, MANCHERI VILLAGE, ARUKIZHAYA
DESOM, ERNADU TALUK, MALAPPURAM, PIN - 676121
2 ABDUL RASHEED
AGED 54 YEARS
S/O ABDUL HAMEED, OTTAKATH MANAKARATHODI VEEDU,
MUTTIPALAM P.O, MANCHERI VILLAGE, ARUKIZHAYA
DESOM, ERNADU TALUK, MALAPPURAM, PIN - 676121
3 ABDURAHIMAN KOOLATHU
AGED 63 YEARS
AR NO.269/2024 2
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S/O KUNHAMMED KUTTY, KOOLATHUM VEEDU,
KARYAVATTOM VILLAGE, MANNARMALA DESOM,
MANNARMALA, PERITHALMANNA TALUK,
MALAPPURAM, PIN - 629325
4 SARAUDHEEN RAYAROTH
AGED 58 YEARS
S/O KUNHIPAKKI HAJI, RAYAROTH VEEDU,
THIRUTHIYADU VILLAGE, KAKATHINKUNNU DESOM,
PUTHIYARA P.O, KOZHIKODE TALUK, PIN - 673004
5 KARUVADAN UMMER
AGED 65 YEARS
S/O ALAVI,KARUVADAN VEEDU, PILAKKAL PAYYANADU
P.O, MALAPPURAM, PIN - 676122
6 BASHEER PUNNARAM VEETIL
AGED 67 YEARS
S/O KUNHABDULLA OTHAYOTH VEEDU AROOR AMSOM
PERUMUNDASSERY DESOM, AROOR P.O, KAKKATTIL VAZHI,
VATAKARA TALUK, KOZHIKODE, PIN - 673507
7 CHEMBALATHODI BEERANKUTTY
AGED 59 YEARS
S/O MOOSAKUTTY, PALLIYALI VEEDU, MORAYOOR AMSOM
DESOM, MORAYOOR P.O, MALAPPURAM, PIN - 673642
8 SABITH
AGED 43 YEARS
S/O ABDURAHIMAN, KOORIMANNIL MELEMANNIL,
KORAMBAPALAM KUNNATHU, VADAKKUMURI, IRIMBAZHI
P.O, ANAKKAYAM, MALAPPURAM, PIN - 676509
9 NASEERA
AGED 36 YEARS
W/O SABITH, KOORIMANNIL MELEMANNIL, KORAMBAPALAM
KUNNATHU, VADAKKUMURI, IRIMBAZHI P.O, ANAKKAYAM,
MALAPPURAM, PIN - 676509
10 KOORIMANNIL MEELEMANNIL THAJMAL HUSSAIN
S/O ABDUSALAM HAJI, KAKKAMOOLAKKAL VEEDU,
PERUMBALAM, P.O. MALAPPURAM, PIN - 676509
AR NO.269/2024 3
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BY ADVS.
M.P.SHAMEEM AHAMED
DANIYA RASHEED PALLIYALIL(K/001138/2022)
AHAMED IQBAL(K/4157/2024)
BY ADV.
SRI.M.P.SHAMEEM AHAMED, R1, R2, R7 & R8
THIS ARBITRATION REQUEST HAVING COME UP FOR ADMISSION
ON 25.02.2025, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
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ORDER
Dated this the 25th day of February, 2025 This Arbitration Request is filed invoking Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') seeking to appoint an Arbitrator to adjudicate the disputes and differences that have arisen between the petitioner and the respondents.
2. The 1st respondent is a partnership firm constituted vide Annexure A3 Limited Liability Partnership Agreement dated 24.12.2016. Petitioner executed Annexure A1 partnership Admission Agreement dated 31.03.2022 and became a partner of the 1 st respondent. He is thus a party to Annexure A3 LLP agreement and bound by the terms therein. Petitioner had in the said respect, invested an amount of Rs.10,00,000/- in the 1 st respondent firm. This was done by the petitioner enticed by the assurance of the respondents that good returns would be provided and that he would be given periodic updates on income and expenditure. It is alleged by the petitioner that the respondents failed to fulfil the said promise. AR NO.269/2024 5
2025:KER:23529 Petitioner hence requested that his investment of Rs.10,00,000/- be returned to him. This was not favourably responded. Later, the petitioner got reliable information that the respondents were discretely trying to alienate the properties of the 1 st respondent. He then filed a civil suit numbered CS No.20 of 2024 before the Commercial Court (Additional Sub Court- III) Kozhikode, inter alia seeking to realise Rs.10,00,000/- with interest from the respondents. The maintainability of the said suit was challenged by the respondents pointing to the arbitration clause viz., clause 38 in Annexure A3 agreement. The Commercial Court taking note of the arbitration clause, referred the parties to arbitration vide Annexure A4 order. Petitioner hence preferred Annexure A5 notice dated 02.11.2024 invoking the arbitration clause and nominating an arbitrator. Respondents however chose not to respond to the said notice of invocation and hence the petitioner has moved this Arbitration Request invoking Section 11 of the Act.
3. A counter affidavit has been filed on behalf of the 1 st respondent by the 7th respondent stating that the same binds the 1 st, 2nd and 8th respondents as well. It is contended therein that the AR NO.269/2024 6 2025:KER:23529 Arbitration Request is not maintainable since there exists no arbitrable dispute between the parties and that the Arbitration Request is premature. Though it is admitted that the petitioner had invested an amount of Rs.10,00,000/-, it is contended that no profits had been promised. The claim of the petitioner that he is entitled to be given a share of the profit is false and incorrect. It is stated that the original agreement dated 24.12.2016 (Annexure A3) had been drawn between the original partners and subsequently, whenever new partners were inducted, a partner admission agreement as in Annexure A1 was executed. Petitioner was also admitted as a partner vide the such a partnership admission agreement. Reliance is placed on clause 4 of the said Annexure A1 agreement and it is stated that as per the said clause, Annexure A1 shall form part of the Annexure A3 LLP agreement and all new partners are bound by the terms and conditions therein. It is stated that as per clause 18.2 of Annexure A3, pertaining to the resignation/retirement of partners, any partner who intends to withdraw from the 1 st respondent LLP have to give notice of such intention to the registered office at least 90 days prior to the date of such withdrawal and capital of the AR NO.269/2024 7 2025:KER:23529 concerned partner would be settled within one year. Further, such withdrawal or resignation is not automatic and the same has to be accepted in a partners meeting. The designated partners have to then intimate the acceptance or the rejection of the proposed resignation within 60 days. It is submitted that in view of the said clause, namely, clause 18.2, any person who intends to withdraw from the LLP has to necessarily make a request before the LLP and it is only after following the procedure stipulated therein that the partners would decide on the matter. Such procedures as laid down in the said clause governing the resignation and objection of partners, it is submitted, is of crucial importance to the 1 st respondent LLP since multiple resignations of the partners leading to the need to settle capital account could affect the very existence of the LLP. It is contended that an arbitral dispute can arise only if a claim/demand has been made with the 1 st respondent LLP as per clause 18.2 and upon the said claim/demand being rejected or denied. Since the resignation/retirement request of the petitioner and the question of returning his capital account had never come up for discussion before the 1st respondent and other partners, the AR NO.269/2024 8 2025:KER:23529 petitioner cannot claim a refund of his capital contribution or proceed to invoke arbitration in the said respect. Further, the learned counsel for the respondents referring to Annexure R1(A) copy of the audited balance sheet of the 1st respondent for the year ending 31.03.2024, submits that the 1st respondent has not made any profit at any point in time. The same also does not reveal that any decision had been taken by the 1st respondent LLP for distribution of the profits and also whether the petitioner had made any request for the payment of his profit share which has been declined by the 1 st respondent LLP. In the absence of these factors, it is contended that the petitioner cannot claim that an arbitral dispute has arisen between the petitioner and the 1st respondent. Therefore, it is submitted by the 1 st respondent that there is no arbitrable dispute between the parties and hence the AR is only to be dismissed.
4. Heard Sri.Srinath Girish, Advocate for the petitioner and Sri.M.P.Shameem Ahamed, Advocate appearing on behalf of respondents 1, 2, 7 and 8.
5. The learned counsel for the petitioner contended that the 1st respondent LLP has admitted that the petitioner by virtue of AR NO.269/2024 9 2025:KER:23529 the execution of Annexure A1 and upon his contribution of Rs.10,00,000/- to the partnership, became a partner of the 1 st respondent LLP. Thus the relationship ship between the petitioner and the 1st respondent and other partners is governed by the stipulations in Annexure A3 LLP Agreement. Petitioner is thus entitled to invoke the arbitration clause (Clause 38) in Annexure A3 and upon neglect or refusal, to move this Court invoking Section 11 of the Act. The Civil suit which had been filed by the petitioner seeking to realise the amounts due from the 1 st respondent and its partners was defended by the respondents referring to the arbitration clause and now the respondents cannot contend that the process of arbitration cannot be invoked by the petitioner unless the purported procedure for resignation/ retirement in the Annexure A3 is complied with. The demand for putting the respondents on notice already stands complied with by the filing of the suit and the issuance of the notice of invocation. The dispute and difference having thus been disclosed and brought to the notice of the respondents, the statutory requirements stand validly fulfilled. Nothing further is required to invoke, Section 11 of the Act. The AR NO.269/2024 10 2025:KER:23529 contention that no arbitrable dispute has arisen between the parties which could be referred to arbitration, is thus unsustainable in law. Reliance is placed on the dictum laid down by the Hon'ble Supreme Court in National Insurance Co. Ltd. v. M/s.Boghara Polyfab Pvt. Ltd. [2009 KHC 4264] wherein the preliminary issues that would arise for consideration in an application under Section 11 of the Act were enumerated in three categories. The third category therein pertain to issues which should be left exclusively to the arbitral Tribunal decide viz., whether a claim made, falls within the arbitration clause and regarding the merits of any claim involved in arbitration. Based on the said dictum, it is contended that the contention now put forth is one concerning the arbitrability of the dispute, which is the sole premise of the arbitrator to decide and not for this Court to adjudicate upon under a Section 11 reference. Reliance is also placed on the dictum laid down by this Court in Nino Brothers Engineering v. Shiji C.C. [2023 KHC 9162], wherein it had been held that factual disputations between the parties as to whether partnership deed was acted upon or otherwise are matters that will have to engage the attention of the Arbitrator AR NO.269/2024 11 2025:KER:23529 and cannot be decided by this Court. Reliance is also placed on the dictum in M/s.Kuldeep Kumar Contractor v. Hindustan Prefab Ltd. (2023 KHC 3395) to contend that the arbitration clause is independent of the underlying contract.
6. Per Contra, the learned counsel appearing for the respondents contended that in so far as the petitioner had not complied with the mandates of clause 18.2 of Annexure A3, it cannot be stated that the process for resignation/ retirement as envisaged in the agreement has been triggered off. No arbitrable dispute can possibly be stated to have arisen unless a demand has been made on the 1st respondent LLP as envisaged in clause 18.2 and the same has been rejected or denied by the 1 st respondent. Petitioner has neither made any demand for resignation or retirement nor has he made any request for payment of his share of profits. Hence there was no occasion for the 1 st respondent to decline or reject any such request or for a dispute or difference to crystalise. The clauses in Annexure 3 agreements have been evolved and incorporated by the parties with some specific objectives in mind. The 1st respondent LLP has a large number of AR NO.269/2024 12 2025:KER:23529 partners and this requires a streamlined and well-regulated operation and management of affairs. Clause 18.2 and other clauses in Annexure A3 had evolved and incorporated to take care of the peculiar and specific needs arising in the operation and functioning of the 1st respondent LLP. It is expected and necessary that all the partners comply with the stipulations in Annexure A3 agreement when it comes to their inter se relationship and the functioning of the 1st respondent LLP. If haphazard claims are put forth without first complying with the stipulations in Annexure A3, the functioning and operation of the 1 st respondent will be thrown into disarray. The petitioner, if he is desirous of resigning or retiring, ought to have followed the right and proper way ordained in the said respect in Annexure A3, ie., first to comply with clause 18.2 and if dissatisfied with or disputing the decision taken thereon by respondents, seek invocation of arbitration under clause 38. Unless the said course is followed, there can be no arbitrable dispute. No reference can be made under Section 11, unless an arbitrable dispute is disclosed. To buttress the contention that non-arbitrability could be taken note of at the stage of reference under Section 11 of AR NO.269/2024 13 2025:KER:23529 the Act, reliance is placed on the dictum laid down by the Hon'ble Supreme Court in SBI General Insurance Co. Ltd. v. Krish Spinning [2024 OnLine SC 1754] and in Vidya Drolia and others v. Durga Trading Corporation [(2021) 2 SCC 1]. It had been held in the said cases that a prima facie review of the aspects related to non-arbitrability could be undertaken by this Court as the object and purpose behind Section 8 and Section 11 of the Act are identical to compel and force parties to abide by their contractual understanding. This Court has ample powers to screen and knock down ex-facie meritless, frivolous and dishonest litigations, so as to ensure expeditious and efficient disposal at the referral stage. It is contended based on the dictum in Vidya Drolia (supra) that rarely as a demurrer, this court may interfere at Section 11 reference stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable. It is also contended that the purpose of the restricted and limited review is to check and protect the parties from being forced to arbitrate when the matter is demonstrably "non-arbitrable" and to cut off dead wood. The learned counsel thus seeks a dismissal of the AR NO.269/2024 14 2025:KER:23529 Arbitration Request in limine.
7. I have heard both sides in detail and perused the pleadings and documents. That the petitioner is a party to Annexure A3 LLP agreement and that he had invested Rs.10,00,000/- to become a partner of the 1st respondent is clearly admitted. The relevant arbitration in Annexure A3 reads as follows:
"38. Arbitration 38.1 The disputes in differences whatsoever which shall arise between the partners or between the partners and the Successors of any deceased partner or between partner and LLP whatsoever touching the affairs of the LLP are the interpretation of this Agreement shall be referred to a sole arbitrator to be appointed by the disputing parties on mutual agreement, in default either party to the dispute may approach the appropriate High Court for appointment of a sole arbitrator for resolution of the dispute in accordance with the provision of the Arbitration and Conciliation Act, 1996 as amended from time to time.
38.2 The Venue of the arbitration shall be the registered office of the LLP for the local limits of such office.
38.3 The language of arbitration shall be in English or Malayalam as the disputing parties may agree. for the purpose of interpretation of the LLP agreement, its English version shall apply even if there is an authentic Malayalam version of the same."
The petitioner had before invoking the above arbitration clause preferred a civil suit, which the 1st respondent had resisted relying on the very same arbitration clause. The Civil Court taking note of the AR NO.269/2024 15 2025:KER:23529 same had referred the parties to arbitration and the petitioner had subsequently issued Annexure A 5 invocation notice meeting the mandates of Section 21 of the Act. It is upon refusal of the 1 st respondent to act on such request under Section 21 that the petitioner has filed this Arbitration Request invoking Section 11 of the Act.
8. The relevant arbitration clause reproduced herein above specifically mandates dispute resolution through arbitration. The objection put forth by the 1 st respondent and other respondents mainly relates to the petitioner's invocation of the arbitration clause, which is termed as not in consonance with the mandates of Annexure A3 and invalid since no arbitrable dispute has arisen between the parties justifying such invocation. A dispute according to the 1st respondent, would arise for arbitration only upon compliance with the other mandates in Annexure A3. For instance, since the petitioner is seeking to retire/resign from the 1 st respondent partnership and is demanding the return of Rs.10,00,000/- advanced by him, for a dispute to arise on the said count, due compliance of the mandates of clause 18.2 regarding AR NO.269/2024 16 2025:KER:23529 resignation/retirement of partners is a sine qua non. Unless those mandates which inter alia include a prior notice of 90 days and a meeting of the designated partner are scrupulously met with, no dispute capable of arbitration could be said to exist and there cannot be any invocation of the arbitration clause. Though the contention that clauses such as 18.2 in Annexure A3 are justified and necessary to ensure operational feasibility and smooth functioning of the 1st opposite party appears attractive, the same cannot be taken recourse to or stretched to an extent as to render the arbitration clause in itself otiose and inoperative. The wording of clause 38 conveys clearly that disputes in differences whatsoever which shall arise between the partners shall be referred to arbitration. Though relying on Vidya Drolia (supra), it has been contended that the objective of Section 11 is to compel and force parties to abide by their contractual understanding and that a prima facie review of the aspects related to non-arbitrability could be undertaken by this Court under Section 11 of the Act to screen and knock down ex-facie meritless, frivolous and dishonest litigations so as to ensure expeditious and efficient disposal at the referral stage, none of the AR NO.269/2024 17 2025:KER:23529 said restrictions are prima facie seen attracted in the facts and circumstances of the case at hand so as to decline a reference to arbitration. Since the clause uses the words "any dispute or difference whatsoever", it follows that any dispute or difference between the parties, in all its myriad hues, colours and variations, could be subject to arbitration as envisaged in clause 38 irrespective of whether the party raising the dispute had complied with other clauses of Annexure A3, so as to couch or qualify the dispute or difference as one eligible to be arbitrated. In the facts and circumstances of the case at hand, where a suit had already been filed and a notice of invocation meeting the mandates of Section 21 had been issued by the petitioner, it cannot be contended at all that an arbitrable dispute or difference has not arisen between the parties justifying the invocation of the arbitration clause. As had been held in Nino Brothers Engineering (supra) factual disputations between the parties as to whether the partnership deed was acted upon or otherwise are matters that fall within the realm of the Arbitrator to decide. The Hon'ble Supreme Court in VGP Marine Kingdom Pvt Ltd and another v. Kay Ellen Arnold [(2023) 1 SCC AR NO.269/2024 18 2025:KER:23529 597] has held that unless on the facet it is found that the dispute is not arbitrable and if it requires further/deeper consideration, the dispute with respect to the arbitrability should be left to the arbitrator. There is nothing in the case at hand to show that the subject matter is non-arbitrable.
9. The pleadings reveal the existence of disputes between the parties under Annexure A3 and due invocation of the relevant arbitration clause. The essential elements to constitute an arbitration agreement are found satisfied. [See Babanrao Rajaram Pund v. Samarth Builders & Developers and another (2022) 9 SCC 691]. It is trite that the Arbitrator can decide on questions regarding jurisdiction/ arbitrability/maintainability and limitation, if any, in the arbitration proceedings.
10. Hence, I find it fit and appropriate to allow the Arbitration Request and to appoint a retired District Judge from the panel of Arbitrators maintained by this Court as the Arbitrator.
Accordingly, this Arbitration Request stands allowed and it is ordered as follows :
(i) Sri A.Haris, Retired District Judge, 'Nahar', V.K.K. AR NO.269/2024 19 2025:KER:23529 Menon Road, 36/1296-A, Kallai PO, Calicut 673 003 is nominated as the sole Arbitrator to resolve the disputes that have arisen between the Petitioner and the respondents under Annexure A 3 agreement.
(ii) The learned Arbitrator may entertain all disputes/ issues between the parties in connection with the said agreement, including questions of jurisdiction/ arbitrability/maintainability and limitation, if any, raised by the parties.
(iii) The Registry shall communicate a copy of this order to the learned Arbitrator within ten days from today and obtain a Statement of Disclosure from the learned Arbitrator as stipulated under Section 11(8) read with Section 12(1) of the Act.
(iv) Upon receipt of the Disclosure Statement, the Registry shall issue to the learned Arbitrator a certified copy of this order with a copy of the Disclosure Statement appended. The Original of the Disclosure Statement shall be retained in Court. AR NO.269/2024 20
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(v) The fees of the learned Arbitrator shall be governed by the Fourth Schedule of the Act.
Sd/-
SYAM KUMAR V. M. JUDGE csl AR NO.269/2024 21 2025:KER:23529 APPENDIX OF AR 269/2024 PETITIONER'S ANNEXURES Annexure A1 A TRUE COY OF THE PARTNERSHIP ADMISSION AGREEMENT DATED 31-03-2022 EXECUTED BETWEEN THE RESPONDENTS AND PETITIONER Annexure A2 A TRUE COPY OF THE PLAINT IN C.S. 20/2024 FILED BY THE PETITIONER AGAINST THE RESPONDENTS BEFORE THE COMMERCIAL COURT (ADDL. SUB COURT III), KOZHIKODE Annexure A3 A TRUE COY OF THE LLP AGREEMENT OF THE 1ST RESPONDENT DATED 24-12-2016 Annexure A4 A TRUE COPY OF THE ORDER DATED 12-07-2024 OF THE COMMERCIAL COURT (ADDL. SUB COURT III), KOZHIKODE Annexure A5 A TRUE COPY OF THE NOTICE DATED 02-11-2024 ISSUED BY ADV. P.P. SURENDRAN ON BEHALF OF THE PETITIONER TO THE RESPONDENTS 1 AND 2 RESPONDENTS' ANNEXURES Annexure R1-A Copy of the audited balance sheet of the 1st Respondent for the year ending 31.03.2024