Jansamma Regi W/o Regi. K. Palackal v. Usha Mani W/o Mani, Partner, Ekp Enterprises
2018-11-27
P.V.ASHA
body2018
DigiLaw.ai
ORDER : 1. The petitioner along with respondents 1 and 2 executed and registered Annexure A partnership deed on 01.04.2015 and constituted a partnership firm at will, in the name and style of E.K.P Enterprises with Registration No.3180/2016, for carrying out business. Clause 19 of the Partnership Deed (Annx. A) reads as follows: “Any dispute or differences between the partners relating to the partnership shall be settled by mutual discussion or by arbitration”. 2. There arose certain difference of opinion and disputes between the petitioner and the respondents. The petitioner thereupon issued Annx. B notice on 30.07.2018 dissolving the partnership and also nominating Adv. Johson Joseph as Arbitrator as per Clause 19 of the Partnership Deed for deciding the disputes among the partners of the firm. The respondents thereupon jointly sent Annx.C reply notice, informing that the Arbitrator suggested by her was not acceptable to them and proposing Adv. Mathew Kurian as Arbitrator. This Arbitration Request is filed thereafter under section 11 (5) and (6) of the Arbitration and Conciliation Act, 1996 ('the Act' for short) for appointment of an Arbitrator for deciding the disputes among the petitioner and the respondents. 3. The respondents filed a counter affidavit dated 18.11.2018 producing the copy of OP(ARB) No.26/2018 filed by the petitioner before the District Court, Thodupuzha under Section 9 of the Act and also the copy of the order of this Court in Crl.M.C.No.5999/2018 filed by the respondents and certain others against the petitioner directing that the respondents shall not be arrested till 14.09.2018 in respect of Crime No.1056/2018. In the counter affidavit it is stated that there is no Arbitration Clause in the Partnership Deed and that the Clause relied on by the petitioner is not sufficient for making a request. It is further stated that the Partnership Deed does not mention the Arbitrator, the venue of arbitration etc. which are the fundamental requirements for intended arbitration clause and that the firm has been dissolved on account of the petitioner's notice. They stated that the dispute is not one which can be decided by appointment of an Arbitrator. Relying on the judgment of this Court in T.A. Kadeeja vs. R.K.Manjusha : 2018 (2) KHC 298 and the judgments of the Supreme Court relied on in that, it is stated that the Arbitration Request is not maintainable.
They stated that the dispute is not one which can be decided by appointment of an Arbitrator. Relying on the judgment of this Court in T.A. Kadeeja vs. R.K.Manjusha : 2018 (2) KHC 298 and the judgments of the Supreme Court relied on in that, it is stated that the Arbitration Request is not maintainable. Pointing out Arbitration O.P.No.26 of 2018 filed by the petitioner, it is stated that the petitioner has alleged misappropriation, malfeasance and misfeasance which are sufficient enough for not referring the matter to an Arbitrator. Pointing out Annx.R1(b), interim order in the Criminal MC, it is stated that the allegation against the husbands of the respondents and their relatives, against whom crime is registered, are liable to be subjected to judicial scrutiny before the appropriate forum and therefore the dispute falls outside the purview of the Act. Pointing out the criminal case filed by the petitioner before the Thodupuzha Police Station against the respondents, their husbands and relatives, the respondents seriously opposed the very maintainability of the arbitration request. 4. An additional counter affidavit was filed thereafter on 20.11.2018 stating that the petitioner has raised serious allegations against the conduct of the partnership business as evident from the complaint preferred by her against respondents 1 and 2 and others before the Police Station, leading to Annx.R1(c)FIR. In the complaint before the Police she has alleged that respondents and others have criminally conspired to cheat her and to commit criminal breach of trust with an intention to make undue gain to them and to commit wrongful and illegal loss to the petitioner by withdrawing Rs.15 lakhs and alleging sale of two lorries of the firm and unlawfully taking the profit of Rs.3 lakhs from the month of February 2018. Based on her complaint, Annx.R1(c) FIR was registered against them and their men on 01.08.2018 before the Police Station, Thodupuzha and investigation on it is in progress. Pointing out that serious allegations are raised against the respondents it is stated that an Arbitrator cannot solve the dispute and the request is not maintainable as it would affect the right of the respondents in the trial of the criminal case and their right under Article 21 of the Constitution of India. 5. The learned counsel on either side relied on various judgments of the apex court.
5. The learned counsel on either side relied on various judgments of the apex court. According to the learned counsel for the petitioner, an Arbitration Request is maintainable and the Arbitrator can go even into the question of fraud alleged against the respondents as it is relating to the partnership. It is pointed out that even the arbitrability of the dispute can be gone into by the Arbitrator. On the other hand the learned counsel for the respondents vehemently argued that filing of a criminal complaint would show that Clause 19 which provides for resolution of disputes by Arbitrator would no longer be in force or it cannot be resorted to in view of the allegations raised by the petitioner herself against the respondents. 6. It is pertinent to note that there is an agreement in the Partnership Deed Annx.A for resolution of dispute by an Arbitrator. When Annx.B notice was issued to the respondents they did not have any complaint with respect to the arbitration clause. Their objection was only against the Arbitrator nominated by the petitioner. However it is seen that Annx.C reply was sent to the petitioner on 08.08.2018 whereas the petitioner filed a compliant against the respondents and their relatives, before the Police Station on 04.08.2018 as seen from Annex.R1(c). Apparently filing of the complaint before the Police Station would not have come to the knowledge of respondents when Annx.C notice was issued. Crime No.1056 of 2018 has been registered against the respondents under Section 120B, 406, 420 and 34 IPC at the Police Station, Thodupuzha and the respondents along with their husbands and others have filed Crl.M.C.No.5998 of 2018 to quash the FIR and an interim order Annx.R1(b) was passed on 12.09.2008 not to arrest them till 14.09.2018. The Crl.M.C. is stated to be pending. 7. The petitioner has not disclosed the filing of complaint before the Police Station, in this Arbitration Request. However, the question to be considered is whether filing of a complaint before the Police Station and registration of a Crime would stand in the way of appointing an Arbitrator under Section 11 of the Act.
7. The petitioner has not disclosed the filing of complaint before the Police Station, in this Arbitration Request. However, the question to be considered is whether filing of a complaint before the Police Station and registration of a Crime would stand in the way of appointing an Arbitrator under Section 11 of the Act. In Annx.R1(a) petition, filed under Section 9 of the Act before the District Court, Thodupuzha the petitioner has alleged that respondents 1 and 2 entered into a criminal conspiracy to knock off the properties of the petitioner and to run the business of the partnership firm at the cost of the petitioner with sinister motives. It is also alleged that respondents 1 and 2 appointed a Manager for the partnership firm for siphoning the income of the firm and the Partnership Deed itself was prepared by respondents 1 and 2 and their husbands to defraud the petitioner. It is further alleged that a cash credit facility for the firm was obtained from the Dena Bank offering the petitioner's property as collateral security. It is alleged that the firm purchased 7 lorries with the funds of the partnership firm in the name of respondents 1 and 2, except one. The irregularity in the payment towards the purchase of vehicles, misappropriation of the rental income from the vehicles are also alleged against the respondents pointing out that the firm or respondents 1 and 2 has not been able to clear the dues to the financiers and therefore the property of the petitioner which is given as collateral security is under threat of proceedings under the SARFEASI Act. It is pointing out these aspects that the petitioner filed an application under Section 9 of the Arbitration Act as OP(ARB) No.26 of 2018 praying for an injunction restraining the respondents from alienating or encumbering the assets of the firm. In Annx.R1(c) FIR also it is alleged that the respondents along with their husbands and the Manager have withdrawn a sum of Rs.15 lakhs from the Dena Bank and sold two lorries of the firm in February 2018 for a sum of Rs.20 lakhs and causing unlawful loss to the petitioner by breach of trust, conspiracy, misfeasance, etc. 8. The learned counsel for the petitioner pointed out in the light of the judgments of the apex court in Ranjith Kumar Bose and Ors. vs. Anannya Chowdhury and Ors.
8. The learned counsel for the petitioner pointed out in the light of the judgments of the apex court in Ranjith Kumar Bose and Ors. vs. Anannya Chowdhury and Ors. : (2014) 11 SCC 446 , Booz Allen and Hamilton Inc. vs. SBI Home Finance Ltd. And Ors. : (2011) 5 SCC 532 , Ayyasamy A. vs. A.Paramasivam and others : (2016) 10 SCC 386 and Swiss Timing Ltd. Vs. Organising Committee, Commonwealth Games 2010 : AIR 2014 SC 3723 that there is no embargo in appointing an Arbitrator. It is pointed out that petition under Section 9 of the Arbitration Act is filed in order to see that the subject matter of the arbitration is preserved. It is also pointed out that as long as there is no statutory forum prescribed for determining the issues between the petitioner and respondents, the mere fact that a complaint is lodged before the Police will not stand in the way of seeking appointment of an Arbitrator. 9. On the other hand the learned counsel for the respondents relied on the judgment of Chancery Division in Russel vs. Russel : (1880) LR 14 Ch D 471, Abdul Kadir Shamsuddin Bubere vs. Madhav Prabhakar Oak and another : AIR 1962 SC 406 and Radhakrishnan N. vs. M/s. Maestro Engineers and others : (2010) 1 SCC 72 and argued that when allegations of fraud are raised by the parties against whom arbitration is sought, this Court is not empowered to entertain the arbitration request or to appoint an Arbitrator as it will affect the right of defence of the respondents. Pointing out that in the cases which were considered by the apex court, there were only allegations of fraud whereas in the present case the petitioner has already initiated criminal proceedings against the respondents alleging fraud, misfeasance etc., it was argued that the petitioner has to seek other remedies. It is pointed out that if the arbitration was sought by the respondents against whom the charges of fraud were alleged this Court would have been justified in appointing an Arbitrator.
It is pointed out that if the arbitration was sought by the respondents against whom the charges of fraud were alleged this Court would have been justified in appointing an Arbitrator. Pointing out the judgments in Russel Vs Russel, Abdul Kadir's case, N. Radhakrishnan's case, Booz Allen and Hanilton's case (supra), Bharat Rasiklal Ashra v. Gautam Rasiklal Ashra and another : AIR 2011 SC 3562 and Ayyasamy's case where all these questions have been considered, the learned counsel for the respondents argued that the petitioner cannot invoke Clause 19 when allegations of fraud are raised against the respondents. The judgment of this Court in Idukki District Cricket Association vs. Athulya Cricket Club Nediyasala and another : 2012 (1) KHC 677 , Babu Raj T. and another vs. Faizal K. : 2014 (2) KHC 340 are also relied on in support of the contention. 10. In reply to this the learned counsel for the petitioner pointed out that even in Ayyasami's case (supra) the apex court after considering all the earlier judgments on the point, appointed an Arbitrator despite the fact that fraud was alleged. 11. From the judgments relied on by the learned counsel for the respondents, it is seen that except in Bharat Rassiklal's case, all those were cases in which petitions were filed under Section 8 of the Arbitration Act. In Bharat Rasiklal Ashra v. Gautam Rasiklal Ashra: (2012) 2 SCC 144 , allegations of fabrication and forgery with regard to the contract containing the arbitration agreement was made by one party. It was held that existence of a valid and enforceable arbitration agreement is a condition precedent before an Arbitrator can be appointed under Section 11 of the Act and when serious allegations of fraud and fabrication are made which relates to the very validity of the arbitration agreement, it is not possible for the Court to proceed to appoint an Arbitrator without deciding the said issue. In that context it was held that the allegations of fraud, forgery and fabrication relating to the very existence of an agreement for arbitration, have to be considered before appointment of Arbitrator under Section 11 of the Act. The issues to be considered in an application under Section 11, are laid down by the Constitution Bench in SBP & Co. v. Patel Engg. Ltd: (2005) 8 SCC 618 .
The issues to be considered in an application under Section 11, are laid down by the Constitution Bench in SBP & Co. v. Patel Engg. Ltd: (2005) 8 SCC 618 . In para 12 of the judgment in Bharat Rasiklal's case it was observed as follows: 12. Following the decision in SBP & Co. this Court in National Insurance Co. Ltd. held as follows: (National Insurance Co. Ltd. case, SCC p. 283, paras 22 & 22.1-22.3) “22. Where the intervention of the court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide. 22.1. The issues (first category) which the Chief Justice/his designate will have to decide are: (a) Whether the party making the application has approached the appropriate High Court. (b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement. 22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are: (a) Whether the claim is a dead (long-barred) claim or a live claim. (b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection. 22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are: (i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration.” 12. In this application, the petitioner is invoking Section 11 (5) and (6). In view of the amendment brought about by the 2015 Amendment Act and insertion of sub section 6A, the power of this Court is confined to examination of existence of an arbitration agreement.
(ii) Merits or any claim involved in the arbitration.” 12. In this application, the petitioner is invoking Section 11 (5) and (6). In view of the amendment brought about by the 2015 Amendment Act and insertion of sub section 6A, the power of this Court is confined to examination of existence of an arbitration agreement. Sub section 6A reads as follows: The Supreme Court or, as the case may be, the High Court, while considering any application under subsection (4) or sub-section (5) or sub-section (6) shall notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement. 13. Therefore notwithstanding any judgment or decree of any Court, the Supreme Court or High Court while considering any application under subsection 4 or 5 or 6 shall confine to the examination of the existence of an arbitration agreement. The petitioner approached this Court when the respondents did not agree to the appointment of the Arbitrator nominated by her. It cannot be said that there is no agreement. From Annx.C reply of the respondents, it can be seen that the respondents did not have any dispute over clause 19 enabling appointment of an Arbitrator to resolve the disputes. It is only after coming to know about the registration of a complaint/filing of an FIR that the respondents have changed their attitude before this Court. 14. In the additional counter affidavit the respondents have raised a contention that there is not even an agreement for resolving the dispute by arbitration. Clause 19 of the agreement is not disputed by them. An agreement is defined under Section 2(b) of the Act, an arbitration agreement is an agreement which is referred to in Section 7 of the Act. Section 7 of the Act reads as follows: 7. Arbitration agreement.—(1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in— (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. 15. On the face of Clause 19 in Annx.A agreement, there is no basis for the contention of the respondent that there is no agreement to resolve the dispute by arbitration. The contention that clause 19 is not sufficient for appointing an Arbitrator is also not correct. In para 17 of the judgment in Vimal Kishor Shah v. Jayesh Dinesh Shah: (2016) 8 SCC 788 ), the apex court held that in order to constitute a valid, binding and enforceable arbitration agreement, the following requirements contained in Section 7 have to be satisfied strictly: “(1) there has to be an agreement, (2) it has to be in writing, (3) parties must sign such agreement or in other words, the agreement must bear the signatures of the parties concerned, and (4) such agreement must contain an arbitration clause. 16. Therefore the objections raised by the respondent that there is no arbitration agreement in Annx.A or that clause 19 is not sufficient are all baseless and hence unsustainable. 17. In Ayyasami's case the dispute was between brothers who were partners running the business in Hotel. Despite the provision for arbitration, the respondents therein filed a civil suit in the year 2012. Appellant sought for referring the matter for arbitration, filing a petition under Section 8. The respondents objected the same on the ground that there were serious allegations of fraud against the appellants. The trial court rejected the petition filed by the appellant.
Despite the provision for arbitration, the respondents therein filed a civil suit in the year 2012. Appellant sought for referring the matter for arbitration, filing a petition under Section 8. The respondents objected the same on the ground that there were serious allegations of fraud against the appellants. The trial court rejected the petition filed by the appellant. The decision was upheld by the High Court also, relying on N. Radhakrishnan v. Maestro Engineers: (2010) 1 SCC 72 . The judgment in Swiss Timing Ltd. v. Commonwealth Games 2010 Organising Committee: (2014) 6 SCC 677 was not relied on. The allegations against the appellant were that he was not depositing day-to-day collection into the bank account; he fraudulently, signed and issued cheques from the account of the partnership firm; the money was siphoned off and misappropriated from the common fund; he kept the account books with him, without allowing others to examine it, etc; there was a CBI investigation involving seizure of amounts from the near relatives of the appellant, etc, which was claimed to be the funds of the hotel. The apex court found it necessary to decide on the question of arbitrability of the agreement in the circumstances of the case. Referring to the judgment in Kvaerner Cementation India Ltd. v. Bajranglal Agarwal: (2012)5 SCC 214 , it was reiterated that under Section 16 the Arbitral Tribunal has the power to rule on its own jurisdiction even when any objection is raised with respect to existence or validity of the arbitration agreement. The apex court observed that even though there is no provision in the Act, which excludes any category of dispute from arbitrability, courts have held the disputes relating to (i) patent, trade marks and copyright (ii) antitrust/ competition laws; (iii) insolvency/winding up;(iv) bribery/corruption;(v) fraud and (vi) criminal matters, as non arbitrable. After referring to the dictum laid down in Russel V Russel, which was followed in Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak: AIR 1962 SC 402 and thereafter in N.Radhakrishnan V Maestro Engineers; (2010) 1 SCC 72 , the apex court observed that N. Radhakrishnan's case was rendered after finding that the allegations raised in that case were serious. It was explained that mere allegation of fraud would not be sufficient to hold that the matter is incapable of arbitration.
It was explained that mere allegation of fraud would not be sufficient to hold that the matter is incapable of arbitration. It was held that the allegations of fraud should be not only serious but it may in normal course even constitute criminal offence, they are also complex in nature and the decision on these issues demands extensive evidence for which the civil court should appear to be more appropriate forum than the Arbitral Tribunal. 18. In N. Radhakrishnan's case, the applicant who filed petition under Section 8 had raised serious allegations against the respondents of having committed malpractices in the account books, and manipulation of the finances of the partnership firm. It was held that it cannot be properly dealt with by the Arbitrator, and ought to be settled by the Court, through detailed evidence led by both parties. In that case the judgment in Abdul Khadir's case (supra), was relied on, where the provisions considered were those contained in 1940 Act which are different from Section 8 of 1996 Act and it was found that allegation of fraud was a reason sufficient, not to refer the matter for arbitration. 19. In Ayyasami's case, the apex court, after discussing the dictum laid down in Boozen Allen's case (supra) and the discussion of the 246th Law Commission Report in paragraphs 50 and 51, regarding the view taken by various Courts on arbitrability of disputes where fraud is alleged, it was held as follows: 25. In view of our aforesaid discussions, we are of the opinion that mere allegation of fraud simpliciter may not be a ground to nullify the effect of arbitration agreement between the parties. It is only in those cases where the court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by the civil court on the appreciation of the voluminous evidence that needs to be produced, the court can sidetrack the agreement by dismissing the application under Section 8 and proceed with the suit on merits.
It can be so done also in those cases where there are serious allegations of forgery/fabrication of documents in support of the plea of fraud or where fraud is alleged against the arbitration provision itself or is of such a nature that permeates the entire contract, including the agreement to arbitrate, meaning thereby in those cases where fraud goes to the validity of the contract itself of the entire contract which contains the arbitration clause or the validity of the arbitration clause itself. Reverse position thereof would be that where there are simple allegations of fraud touching upon the internal affairs of the party inter se and it has no implication in the public domain, the arbitration clause need not be avoided and the parties can be relegated to arbitration. While dealing with such an issue in an application under Section 8 of the Act, the focus of the court has to be on the question as to whether jurisdiction of the court has been ousted instead of focusing on the issue as to whether the court has jurisdiction or not. It has to be kept in mind that insofar as the statutory scheme of the Act is concerned, it does not specifically exclude any category of cases as non-arbitrable. Such categories of non-arbitrable subjects are carved out by the courts, keeping in mind the principle of common law that certain disputes which are of public nature, etc. are not capable of adjudication and settlement by arbitration and for resolution of such disputes, courts i.e. public fora, are better suited than a private forum of arbitration. Therefore, the inquiry of the Court, while dealing with an application under Section 8 of the Act, should be on the aforesaid aspect viz. whether the nature of dispute is such that it cannot be referred to arbitration, even if there is an arbitration agreement between the parties.
Therefore, the inquiry of the Court, while dealing with an application under Section 8 of the Act, should be on the aforesaid aspect viz. whether the nature of dispute is such that it cannot be referred to arbitration, even if there is an arbitration agreement between the parties. When the case of fraud is set up by one of the parties and on that basis that party wants to wriggle out of that arbitration agreement, a strict and meticulous inquiry into the allegations of fraud is needed and only when the Court is satisfied that the allegations are of serious and complicated nature that it would be more appropriate for the Court to deal with the subject-matter rather than relegating the parties to arbitration, then alone such an application under Section 8 should be rejected. 20. In that case the apex court found that the only allegation of fraud was that the appellant issued a cheque for Rs.10,00,050/- to his son without the consent of other partners. It was also found that the CBI raid in the house of a relative of the appellant did not have any connection with the partnership firm even according to those who alleged fraud. Therefore the agreement was found arbitrable in that case. All these cases relied on by the learned Counsel are under Section 8 of the Act. 21. Section 8 of the Arbitration Act provides for referring a dispute by a judicial authority in case a party to the arbitration agreement applies not later than the date of submitting his first statement on the substance of the dispute. Before amendment to Section 8 in 2016, the provision under Section 8 provided that a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall if party so applies not later than when submitting his statement on the substance of dispute refer the parties to arbitration. After amendment such reference is to be made unless it finds that prima facie no valid arbitration agreement exists. There is considerable difference between the provisions contained in Section 8 and Section 11(6) and (6A) of the Arbitration Act. Subsection 6A of Section 11 provides that consideration of this Court shall only be confined to the existence of an arbitration agreement.
There is considerable difference between the provisions contained in Section 8 and Section 11(6) and (6A) of the Arbitration Act. Subsection 6A of Section 11 provides that consideration of this Court shall only be confined to the existence of an arbitration agreement. Section 8 and Section 11 (5),(6) and (6A) of the Act, as amended by the Arbitration and Conciliation (Amendment) Act,2015 read as follows: 8. Power to refer parties to arbitration where there is an arbitration agreement.— [(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.] Before amendment it read as follows: 8. Power to refer parties to arbitration where there is an arbitration agreement.— (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. Section 11 (5), (6) and (6A) read as follows: 11. Appointment of arbitrators.—xxx (5) Failing any agreement referred to in subsection (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by 2[the Supreme Court or, as the case may be, the High Court or any person or institution designated by such court].
(6) Where, under an appointment procedure agreed upon by the parties,— (a) a party fails to act as required under that procedure; or (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request 3[the Supreme Court or, as the case may be, the High Court or any person or institution designated by such court] to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. (6-A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or subsection (6), shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement. Sub-section 6 A is inserted by the amendment Act of 2015. 22. In this context it is relevant to note the observations of the apex court in Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd.: (2011) 5 SCC 532 32. The nature and scope of issues arising for consideration in an application under Section 11 of the Act for appointment of arbitrators, are far narrower than those arising in an application under Section 8 of the Act, seeking reference of the parties to a suit to arbitration. While considering an application under Section 11 of the Act, the Chief Justice or his designate would not embark upon an examination of the issue of “arbitrability” or appropriateness of adjudication by a private forum, once he finds that there was an arbitration agreement between or among the parties, and would leave the issue of arbitrability for the decision of the Arbitral Tribunal. If the arbitrator wrongly holds that the dispute is arbitrable, the aggrieved party will have to challenge the award by filing an application under Section 34 of the Act, relying upon sub-section (2)(b)(i) of that section. 33. But where the issue of “arbitrability” arises in the context of an application under Section 8 of the Act in a pending suit, all aspects of arbitrability will have to be decided by the court seized of the suit, and cannot be left to the decision of the arbitrator.
33. But where the issue of “arbitrability” arises in the context of an application under Section 8 of the Act in a pending suit, all aspects of arbitrability will have to be decided by the court seized of the suit, and cannot be left to the decision of the arbitrator. Even if there is an arbitration agreement between the parties, and even if the dispute is covered by the arbitration agreement, the court where the civil suit is pending, will refuse an application under Section 8 of the Act, to refer the parties to arbitration, if the subject-matter of the suit is capable of adjudication only by a public forum or the relief claimed can only be granted by a special court or Tribunal. 23. Though the order declining request, in Babu Raj T & another V Faizal: 2014(2) KHC 340 relied on by the learned Counsel for the respondents, was in a dispute between partners and respondents had alleged fraud, misrepresentation etc. and filed a complaint before the Judicial Magistrate Court and summons was issued to petitioners, it was one rendered before the amendment introducing Subsection 6A. Moreover, there is no precedential value for that order as held in Ayyasami's case and State of W.B. v. Associated Contractors : (2015) 1 SCC 32 . 24. In the above circumstances, the judgments referred to by the learned counsel for the respondents would not apply to the facts and circumstances of the case in order to decline the request. More over a mere filing of a complaint before the Police by itself cannot be said to be an embargo for an Arbitrator to consider these questions. It will be open to the Arbitrator to consider even the question of arbitrability as pointed out by the learned counsel for the petitioner. Therefore though the petitioner has raised allegation of fraud against the respondents and has filed a complaint before the Police Station based on which a crime is registered and the respondents have taken up the matter before this Court challenging the FIR, all those are disputes arising out of the partnership. 25.
Therefore though the petitioner has raised allegation of fraud against the respondents and has filed a complaint before the Police Station based on which a crime is registered and the respondents have taken up the matter before this Court challenging the FIR, all those are disputes arising out of the partnership. 25. In the light of the observations in paragraph 32 of the judgment in Booz Allen's case (supra) and in the light of the provisions contained in Section 6A, which starts with a non-obstante clause and provides that the examination by this Court shall be confined to the existence of an arbitration agreement, I am of the view that the request of the petitioner is liable to be allowed and an Arbitrator is liable to be appointed for resolving the disputes between the petitioner and respondents. I therefore allow the request. Sri. Thomas Pallickaparambil, Retired District Judge, Evas' House, River Gate Apartments, Manakkad P.O, Thodupuzha, Pin-685608 is appointed as Arbitrator to resolve the disputes by and between the parties. The learned Counsel for the petitioner is directed to obtain and produce before the Registry, a disclosure statement from the Arbitrator as provided in Section 11(8) of the Arbitration and Conciliation Act, 1996. Registry will release the certified copy of the order only on production of the same. Original of the disclosure statement shall be retained with the Registry and a copy shall be appended to the certified copy of this Order.