A&C Act| Commercial Court Order 'Closing' Application U/S. 9 Not Appealable U/S. 37: Kerala High Court

A Single Bench of Justice Harisankar V. Menon observed, “The order at Ext.P8 cannot be considered to be one “refusing to grant” the relief under Section 9. I am of the opinion that the Commercial Court was proceeding on a wrong notion that the Arbitrator had already started to function and it is for the petitioner to seek its remedy under the provisions of Section 17 of the Act. Therefore, insofar as the order at Ext.P8, cannot be said to be one “refusing” the relief under Section 9, I am of the opinion that the same is not appealable under the provisions of Section 37 of the Act…In such circumstances, I hold that the petitioner was justified in preferring W.P(C) No.24021 of 2023 in the peculiar facts and circumstances of the case.”

The Court explained, “…an appeal against an order under Section 9 is provided under Section 37, when the order either: (i) grants a relief under Section 9 of the Act…(ii) refuses the reliefs under Section 9 of the Act.”

Advocate G. Harikumar (Gopinathan Nair) represented the Petitioner, while Advocate V. Santharam appeared for the Airports Authority of India.

Brief Facts

The Petitioner operated duty-free shops at Trivandrum and Calicut International Airports under licence agreements with Airports Authority of India (AAI) until 2017. Two bank guarantees were issued in favour of AAI, one for Rs. 1,29,60,406/- and the other for Rs. 2,66,93,694/-Disputes arose between the parties regarding licence fee, and thereafter an arbitrator was appointed by the Court, however, the Court proceedings were not completed within time. A request for substitution of the arbitrator and extension of time was rejected.

The Petitioner approached the Court again under Section 11(6) of the Arbitration Act for appointment of a new arbitrator. While the petition was pending, AAI demanded 8.8 crores. Fearing encashment of the guarantees, the Petitioner approached the Commercial Court under Section 9 of the Arbitration Act, which granted an injunction for 90 days.

The Petitioner filed a writ petition in the High Court and obtained interim relief, which was extended intermittently but finally lapsed two weeks after the last extension. Meanwhile, the High Court appointed a new arbitrator, but that order was stayed by the Supreme Court. AAI invoked and encashed the bank guarantees during this period. Aggrieved, the Petitioner approached the High Court by way of a second writ petition seeking a declaration that the invocation was illegal and sought directions to keep the funds in a fixed deposit.

Reasoning of the Court

The Court noted that the Commercial Court had not refused to extend the measure under Section 9 of the Act and explained, “The Commercial Court has only “closed” the petition in view of the submission made by the learned counsel for the petitioner before the court that the arbitration proceedings have already been initiated. The order at Ext.P8 cannot be considered to be one “refusing to grant” the relief under Section 9. I am of the opinion that the Commercial Court was proceeding on a wrong notion that the Arbitrator had already started to function and it is for the petitioner to seek its remedy under the provisions of Section 17 of the Act.”

The court observed that it could not be said that the Commercial Court had not refused the relief under Section 9, and the same was not an appealable provision under Section 37 of the Arbitration Act, and that the Petitioner was justified in seeking to file the writ petition.

Regarding the issue of whether AAI was justified in invoking the bank guarantees, the Court noted their argument that AAI should not be penalized for the Petitioner’s lack of diligence. However, the court also recognized that AAI was a state entity under the Airports Authority of India Act, 1994.

The Bench referred to the decision of the Apex Court in ABL International Ltd v. Export Credit Guarantee Corporation of India Ltd. and Others (2004) wherein it was held that once the State or an instrumentality of the State was a party to a contract, it had an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India.

The Court noted that the AAI was aware that a sole Arbitrator had already been appointed, and although they challenged the appointment through an SLP and got a stay, the matter was still pending. “In my opinion, the action of the respondent authority in seeking to encash the bank guarantee, in the afore circumstances, cannot be said to be a “fair action”, it added.

The Court noted that the stay was extended for only two weeks, as the matter had been previously avoided. While the petitioner was expected to act with greater diligence in seeking a listing during that period, the Court observed that the subsequent appointment of the sole Arbitrator would show that the Petitioner could not be held solely responsible for the lapse of the stay.

Consequently, the Court disposed of the petition and directed AAI to deposit the amounts realized from the invocation of the bank guarantees in an interest-bearing fixed deposit.

Cause Title: Flemingo (Dfs) Private Limited v. Airports Authority of India (Neutral Citation 2025:KER:31609)

Appearance:

Petitioner: Advocates G. Harikumar (Gopinathan Nair), Akhil Suresh, Santhosh Mathew

Respondent: Advocates V Santharam, Shahier Singh M., Sharan Shahier

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