Karnataka High Court
Maverick Motors Llp vs Mr. Rohit Murthy on 29 April, 2025
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 29TH DAY OF APRIL, 2025
PRESENT
THE HON'BLE MR. N. V. ANJARIA, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE K. V. ARAVIND
COMMERCIAL APPEAL No.84 OF 2025
BETWEEN:
1. MAVERICK MOTORS LLP,
INCORPORATED UNDER LLP ACT, 2008
HAVING ITS REGISTERED OFFICE AT:
AT No.136/1, LALBAGH ROAD,
BANGALORE SOUTH - 560027.
REPRESENTED BY ITS
DESIGNATED PARTNER,
MR. PATHI DINESH BHAGAWATH,
2. MR. ADINARAYANA PATHI,
AGED 37 YEARS,
S/O MR. PATHI DINESH,
3. MR. PATHI DINESH BHAGAWATH,
AGED 35 YEARS,
S/O. MR. PATHI DINESH
PETITIONER Nos.2 AND 3
ARE RESIDING AT
No.149/150, 10TH A MAIN,
1ST BLOCK, JAYANAGAR,
BANGALORE - 560 011.
...APPELLANTS
(BY SRI HEMANTH RAO AND SRI PUNEETH R., ADVOCATES
FOR SRI RUKKOJI RAO H. S., ADVOCATE )
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AND:
1. MR. ROHIT MURTHY,
S/O. MR. KRISHNAMURTHY,
AGED ABOUT 36 YEARS,
RESIDING AT 168,
KAMADHENU, GREEN AVENUE,
LRN COLONY, SARADHA COLLEGE ROAD,
SALEM, HASTHAMPATTI,
TAMIL NADU - 636007.
ALSO, HAVING OFFICE AT:
AKB CORPORATE OFFICE,
2ND FLOOR, No.1669, TVR POLESTAR,
27TH MAIN ROAD, SECTOR 2,
HSR LAYOUT,
BENGALURU - 560102.
...RESPONDENT
(BY SRI B.C. TIRUVENGADAM, SENIOR ADVOCATE FOR SRI B.T. MANIK, ADVOCATE) THIS COMAP IS FILED UNDER SECTION 13 (1-A) OF THE COMMERCIAL COURTS ACT, 2015 PRAYING TO SET ASIDE ORDER DATED 3.02.2025 PASSED BY THE LXXXVI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, (COMMERCIAL COURT) BENGALURU (CCH-87) IN COMAA 17/24.
THIS COMAP HAVING BEEN HEARD AND RESERVED FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT THIS DAY, JUDGMENT WAS PRONOUNCED AS UNDER:
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CORAM: HON'BLE THE CHIEF JUSTICE MR. JUSTICE N. V. ANJARIA and HON'BLE MR. JUSTICE K. V. ARAVIND C.A.V. JUDGMENT (PER: HON'BLE MR. JUSTICE K. V. ARAVIND) Heard learned advocates Mr. Hemanth Rao and Mr. R. Puneeth for learned advocate Mr. H.S. Rukkoji Rao for the appellant and learned Senior Advocate Mr. B.C. Thiruvengadam assisted by learned advocate Mr. B.T. Manik for the respondent.
2. This appeal is filed under Section 13(1)(A) of the Commercial Courts Act, 2016, read with Section 37(1)(B) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act'), assailing the order dated 03.02.2025 passed in Com.A.A.No.17 of 2024 by the LXXXVI Additional City Civil and Sessions Judge (Commercial Court), Bengaluru.
3. The appellants filed a petition under Order XXXIX Rule 1 and 2 of CPC read with Section 9 of the Act seeking injunctive relief against the respondent. By order dated 20.01.2024, the Commercial Court granted an exparte ad interim order restraining the respondent from making unauthorized communications with Eicher Motors Limited, its vendors, or suppliers until the next date -4- of hearing. The interim order was extended from time to time. However, the Commercial Court, by applying Rule 9(4) of the High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001 (hereinafter referred to as 'Rules 2001'), set aside the interim order and consequently dismissed the petition. The Court held that if arbitral proceedings are not initiated within three months from the date of presentation of an application under Section 9 of the Act, any interim order granted shall stand vacated without the necessity of a specific order to that effect.
4. Learned advocate Mr. Hemanth Rao, appearing for the appellants, submits that the application under Section 9 of the Act was filed on 19.01.2024. The appellants had issued a notice under Section 21 of the Act on 18.01.2024, invoking the arbitration clause. In view of Section 23 of the Act, arbitration proceedings would be deemed to have commenced upon the issuance of notice under Section 21 of the Act. Therefore, the finding of the Commercial Court that arbitral proceedings were not initiated within three months is erroneous. Learned advocate further submits that the appellants had initiated arbitration proceedings at the earliest possible stage. However, due to the respondent's disagreement in -5- accepting the arbitrator proposed by the appellants, the appointment of the arbitrator was delayed.
4.1 It is further submitted that the respondent insisted on mediation instead of arbitration, to which the appellants agreed. However, the mediation proceedings failed. Thereafter, the appellants filed a petition under Section 11 of the Act on 17.01.2025 before this Court, which is presently pending consideration. It is further submitted that in the said petition, this Court has issued notice to the respondent, and his appearance is awaited.
5. Learned counsel for the appellant relied on the judgment in M/s. Abhijeet Toll Road (Karnataka) Limited vs. Karnataka Road Development Corporation Limited (MFA No.9227 of 2015) rendered by this Court, wherein the interplay between Rule 9(4) of the Rules, 2001 and Section 21 of the Act was interpreted. It is submitted that the said judgment is squarely applicable to the facts of the present case.
6. Learned Senior Advocate Mr. B.C. Thiruvengadam appearing for the respondent submits that the respondent was a partner in appellant No.1 firm. In view of the dealership agreement -6- dated 18.08.2022 between Eicher Motors Limited and appellant No.1, the partners are obligated to notify the company of any changes or variations in shareholding, voting rights, or management during the tenure of the agreement. It is submitted that the correspondence made by the respondent with the company was strictly in compliance with the terms of the agreement.
6.1 Learned Senior Advocate further submits that when an application under Section 9 of the Act is made and an interim order is passed, Rule 9 of the Rules 2001, comes into operation. In such a scenario, the applicant is required to initiate arbitral proceedings within three months from the date of presentation of the application under Section 9 of the Act, failing which any interim order granted shall stand vacated without the necessity of a specific order being passed by the Court. It is contended that the notice dated 18.01.2024, purportedly issued for the commencement of arbitral proceedings, does not comply with Rule 9(4) of the Rules, 2001. The language employed in Sub-rule (4) of Rule 9 refers to 'initiation,' which implies the appointment of an arbitrator, whereas Section 21 of the Act uses the term 'commencement,' which signifies the invocation of the arbitration clause. In other words, -7- learned Senior Advocate submits that a notice under Section 21 of the Act does not constitute compliance with Sub-rule (4) of Rule 9 of the Rules, 2001.
6.2 It is further submitted that the appellant has not acted bona fide either in complying with the terms of the Dealership Agreement or in initiating the appointment of an arbitrator. The interim order granted earlier by the Commercial Court was obtained by suppressing material facts regarding the obligations of the partner under the Dealership Agreement. The time gap between the legal notice dated 18.01.2024, the initiation of mediation proceedings, and the filing of the petition under Section 11 of the Act on 17.01.2025 before this Court was not bona fide and exceeded a reasonable period.
7. Having considered the submissions of the learned advocates for the parties and upon perusal of the appeal papers, the point that arises for consideration is:
'Whether the Commercial Court was justified in vacating the interim order dated 20.01.2024 by applying Rule 9(4) of the High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001?"-8-
8. Appellant No.1 is a Limited Liability Partnership firm, and Appellant Nos.2 and 3, along with the respondent, are its partners. There is no dispute between the parties regarding the arbitrability of the dispute. The appellant issued a notice under Section 21 of the Act, requesting the respondent to appoint an arbitrator for the resolution of the dispute. Thereafter, on 19.01.2024, a petition under Section 9 of the Act was filed, and the Commercial Court granted an ex parte ad interim order on 20.01.2024. The interim order remained in operation until the date of the impugned order. The Commercial Court vacated the interim order by applying Sub- rule (4) of Rule 9 of the Rules, 2001.
9. A composite reading of Section 21 of the Act and Sub-rule (4) of Rule 9 of the Rules, 2001, indicates that any interim order granted under Section 9 of the Act shall stand vacated without the necessity of a specific order being passed by the Court, if arbitral proceedings are not initiated within three months from the date of presentation of the application. Section 21 of the Act stipulates that arbitral proceedings commence on the date the respondent is requested to refer the dispute to arbitration. In the present case, such a request was made on 18.01.2024. Accordingly, the notice dated 18.01.2024 signifies the commencement of arbitral -9- proceedings. In view of the same, Sub-rule (4) of Rule 9 of the Rules, 2001, does not apply to the facts of the present case.
10. The Trial Court has interpreted Rule 9 of the Rules, 2001, without considering the notice issued under Section 21 of the Act. The Hon'ble Supreme Court, in Sundaram Finance Ltd. v. NEPC India Ltd. (AIR 1999 SC 565), has held that arbitral proceedings commence on the date on which the request for the dispute to be referred to arbitration is received by the respondent. In the present case, such a request was received on 18.01.2024.
11. Learned Senior Advocate appearing for the respondent has placed significant reliance on the judgment of this Court in M/s. Janardhana Enterprises vs. M/s. Fine Serve Hospitality Services (India) Pvt. Ltd., (MFA No.668 of 2019) to contend that if arbitral proceedings are not initiated within three months, the interim order passed under Section 9 of the Act stands vacated by operation of Sub-rule (4) of Rule 9 of the Rules, 2001. In the referred case, an order under Section 9 of the Act was passed; thereafter, a petition under Section 11 of the Act was filed, which was dismissed on the ground that no arbitral dispute existed. However, the factual context in the present case is distinguishable.
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12. In view of the judgments referred to supra, the respondent's contention that Section 21 of the Act employs the term 'commence,' whereas Sub-rule (4) of Rule 9 of the Rules, 2001, employs the term 'initiate,' indicating two distinct actions, and that the mere issuance of a notice under Section 21 of the Act does not amount to initiating arbitral proceedings, is untenable. It is a settled position of law that a petition under Section 9 of the Act can be maintained even before the issuance of a notice under Section 21 of the Act. In this context, the only requirement is the commencement of arbitration proceedings under the Act.
13. The learned advocates for both parties have advanced arguments on the interpretation and obligations arising under various clauses of the Dealership Agreement. However, consideration of these arguments is not necessary, as such contentions pertain to the merits of the dispute, which do not form the subject matter of the impugned order.
14. In light of the foregoing discussions, the impugned order vacating the ad interim order is unsustainable. In the present case, the Arbitral Proceedings commencement by issue of notice dated 18.01.2024 under Section 21 of the Act. Rule 9(4) of Rules 2001
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are not attracted in the present case. Accordingly, the following order is passed:
Order
(i) Appeal is allowed.
(ii) The order impugned dated 03.02.2025 in Com.A.A.No.17 of 2024 by LXXXVI Additional City Civil and Sessions Judge (Commercial Court) Bengaluru, is set aside.
(iii) The interim order dated 20.01.2024 is confirmed and continued till disposal of the petition under Section 11 of the Act (FR No.34 of 2025) pending before the Court.
SD/-
(N. V. ANJARIA) CHIEF JUSTICE SD/-
(K. V. ARAVIND) JUDGE MV