Allowed

Travancore Rural Development Producer Company Ltd. v. Divya Lekshmi Sanal

Kerala HC7 Jun 2024AR/74/2024

Case brief

AI extract

What is this about?

A producer company sought appointment of an arbitrator to recover loan dues from its member and guarantors. The earlier unilateral appointment was invalid under Section 12(5). The High Court set aside the prior award, upheld the arbitration clause minus the unilateral-appointment portion, and appointed a fresh sole arbitrator.

What did the court decide?

Annexure-A8 award set aside; Adv. Biju B.K. nominated as sole Arbitrator with disclosure requirements and fees per the Fourth Schedule.

Travancore Rural Development Producer Company Ltd. Vs Divya… — Arbitration | Kerala HC (2024)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR. JUSTICE G.GIRISH

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FRIDAY, THE 7TH DAY OF JUNE 2024 / 17TH JYAISHTA, 1946

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AR NO. 74 OF 2024

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PETITIONER:

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TRAVANCORE RURAL DEVELOPMENT PRODUCER COMPANY LTD.
P.R.SMARAKA BUILDING, ADOOR (REPRESENTED BY ITS
EXECUTIVE DIRECTOR & PRINCIPAL OFFICER ZEENA R AGED 48
YEARS W/O SETHU, MELATHIL HOUSE, THENUMTHARA MURI,
PERINGANAADU VILLAGE, ADOOR TALUK.)-, PIN - 691523

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BY ADVS.
P.PAULOCHAN ANTONY
SREEJITH K.
R.GIRISH

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RESPONDENTS:

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1 DIVYA LEKSHMI SANAL 1. DIVYA LEKSHMI SANAL D/O NARAYANAN PANICKER VADAKKE MADAM, MARAMON THOTTAPUZHASSERY, PATHANAMTHITTA, PIN - 689549

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2 NARAYANA PANICKER

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S/O PADMANABHA PANICKER VADAKKE MADAM, MARAMON
THOTTAPUZHASSERY, PATHANAMTHITTA, PIN - 689549

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3 OMANA AMMA W/O NARAYANAN PANICKER VADAKKE MADAM, MARAMON THOTTAPUZHASSERY, PATHANAMTHITTA, PIN - 689549

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THIS ARBITRATION REQUEST HAVING COME UP FOR ADMISSION
ON 04.06.2024, THE COURT ON 07.06.2024 DELIVERED THE
FOLLOWING:

A.R.No.74/2024

G.GIRISH, J.

---------------

A.R.No.74 of 2024

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------------------------------

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Dated this the 7^th day of June, 2024

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-------------------------------------------------

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O R D E R

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The applicant, a producer company, has filed this application under Section 11 of the Arbitration and Conciliation Act, 1996 for the appointment of an Arbitrator for the resolution of the dispute related to the non-payment of the loan availed by the 1^st respondent, with respondents 2 and 3 as guarantors.

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The 1^st respondent is said to be a member of the applicant company who joined the Members Mutual Fund Scheme launched by the applicant. She is said to have availed a loan of Rs.2,93,000/- from the applicant company,

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with the 2^nd and 3^rd respondents as guarantors, after executing the necessary agreements in favour of the applicant company. The aforesaid agreements provided for the appointment of an Arbitrator at the instance of the applicant company in the event of any disputes with the

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A.R.No.74/2024

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company in connection with the repayment of the loan. Alleging that the respondents committed default in the repayment of the loan, the matter was referred to an Arbitrator unilaterally appointed by the applicant. The Arbitrator so appointed passed Annexure-A8 award directing the respondents 1 to 3 to pay an amount of Rs.2,54,136/with interest @ 18% per annum along with costs to the tune of Rs.7,150/- to the applicant. But Annexure-A9 execution petition filed by the applicant before the District Court, Pathanamthitta, was dismissed by the learned Additional District Judge-II, Pathanamthitta vide Annexure-A10 order stating the reason that the unilateral appointment of the Arbitrator was against the relevant provisions of law and the dictum laid down by the Apex Court in Bharat Broadband Network Limited v. United Telecom Limited [(2019) 5 SCC 755] . It is under the above circumstances that the applicant has approached this Court with the present application.

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The notice of this application has been duly served on the respondents. They have not chosen to appear before

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A.R.No.74/2024

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this Court or to file any counter.

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Heard the learned counsel for the applicant.

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Annexures A2 and A3 agreements executed by the

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respondents in favour of the applicant would reveal that there are arbitration clauses incorporated thereunder enabling the resolution of the disputes between the parties by an Arbitrator appointed by the applicant. However, as rightly observed by the learned Additional District Judge-II, Pathanamthitta in Annexure-A10 order, it is not possible to have such unilateral appointment of Arbitrator in view of the proviso to Section 12(5) of the Arbitration and Conciliation Act, 1996 and the law laid down by the Apex Court and this Court in Bharat Broadband Network Limited v. United Telecom Limited [(2019) 5 SCC 755] , Perkins Eastman Architects DPC and Another v. H.S.C.C (India) Limited [AIR 2020 Supreme Court 59] and Hedge Finance Private Limited, Ernakulam v. Bijish Joseph [ILR 2022

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(3) KER 947] .

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Though the relevant clauses of arbitration in Annexures A2 and A3 agreements are not in tune with the

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A.R.No.74/2024

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law which forbids the unilateral appointment of arbitrators, it is not possible to eschew the aforesaid clauses in toto for the

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said defect. The said clauses are to be considered as valid arbitration clauses except for those portions which confer the authority upon the applicant to unilaterally appoint arbitrators. The records of the case would also reveal that the applicant had issued notice to the respondents conveying their intention to have the issue resolved by an Arbitrator. Therefore, the request of the applicant for the appointment of a sole Arbitrator for the resolution of the dispute regarding the default in repayment of the loan availed by the respondents, has to be necessarily allowed.

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In the result, the application stands allowed, and orders are passed as follows:

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(i) Annexure-A8 award dated 09.02.2018 stands set aside.

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(ii) Adv.Mr.Biju B.k, Azad Complex, KSRTC Road, Pathanamthitta-689 645 is nominated as the sole Arbitrator to adjudicate and resolve the disputes and differences between the parties to

A.R.No.74/2024

this case.

(iii) The Registry is directed to communicate a copy of this order to the learned Arbitrator, within a period of two weeks from today and to obtain a Statement of Disclosure from him under Section 11(8) read with Section 12(1) of the Arbitration

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and Conciliation Act, 1996.

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(iv) Once the Disclosure Statement is obtained from the learned Arbitrator, the Registry shall release the certified copy of this order, with a copy of the said statement appended to it, retaining the original of the same on the files of this case.

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(v) The fees of the Arbitrator shall be governed by the Fourth schedule to the Arbitration and Conciliation Act, 1996.

(sd/-)

G.GIRISH, JUDGE

jsr/

A.R.No.74/2024

APPENDIX OF AR 74/2024

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PETITIONER ANNEXURES

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Annexure TRUE EXTRACT OF THE MINUTES OF THE SECOND BOARD OF
A1DIRECTORS MEETING OF THE COMPANY DATED 02.01.2005
Annexure COPY OF THE AGREEMENTS DATED 18-07-2016
A2
Annexure COPY OF THE AGREEMENTS DATED 09-11-2016
A3
Annexure TRUE COPY OF THE NOTICES ISSUED DATED 02-08-2017
A4
Annexure TRUE COPY OF THE NOTICES ISSUED DATED 02-08-2017
A5
Annexure TRUE COPY OF THE NOTICES ISSUED DATED 10-11-2017
A6
Annexure TRUE OF THE LETTER OF APPOINTMENT DATED 17-11-2017
A7
Annexure COPY OF THE AWARD DATED ON 09-02-2018
A8
Annexure COPY OF THE EP
A9
Annexure CERTIFIED COPY OF THE ORDER DATED 30-09-2023
A10

Travancore Rural Development Producer Company Ltd. v. Divya Lekshmi Sanal

Case brief

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Travancore Rural Development Producer Company Ltd. v. Divya Lekshmi Sanal

Case brief

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