Arbitral Tribunals Competent To Decide Inter Se Claims Between Co-Respondents Under Tripartite Agreements: Kerala High Court
The Court clarified that strict civil procedure restrictions on co-defendant counter-claims do not bind arbitral tribunals under the Arbitration Act.
Justice T.R. Ravi, Kerala High Court
The Kerala High Court has held that an arbitral tribunal has jurisdiction to adjudicate inter se disputes or counter-claims between co-respondents in a multiparty arbitration, provided they arise out of a tripartite agreement featuring an all-encompassing arbitration clause. The court held that such claims are fully maintainable when the underlying contract creates independent obligations among all three executing parties.
The court clarified that the statutory embargo under Order VIII Rule 6A of the Code of Civil Procedure (CPC), which generally restricts civil court defendants from filing counter-claims solely against co-defendants, does not apply to arbitral proceedings. Under Section 19 of the Arbitration and Conciliation Act, 1996, arbitral tribunals are explicitly exempted from being bound by the technical rules of the CPC.
Justice T.R. Ravi observed, “There can hence be no doubt that the parties had agreed to refer all disputes and differences arising out of the contract for arbitration. Claim of the 1st respondent against the 1st petitioner is one arising from the contract and hence is arbitrable. After having agreed before the High Court of Calcutta for reference to arbitration in an application in which all the parties to the contract were parties either as petitioner or respondents, it is not open to the petitioners to submit that the claim of the 1st respondent as against the 1st petitioner cannot be subject matter of the arbitration. Though it has been referred to as a counter claim, it is in effect a claim between the said parties”.
Advocate Jacob P. Alex appeared for the petitioners, while Advocate Debraj Sahu appeared for the respondents.
In the matter, a tripartite contract was executed between M/s. Karthik Exports, M/s. D. Monalisa Impex, and Krishna Kumar Agarwal. During the arbitration proceedings, Agarwal raised a counter-claim against co-respondent Karthik Exports for an outstanding commission under the contract. The sole arbitrator eventually passed an award directing Karthik Exports to pay ₹1,33,68,445 with interest to Agarwal, who subsequently initiated execution proceedings before the Sub Court.
Karthik Exports challenged the execution petition under Section 47 of the CPC, arguing that the award was a nullity because an arbitral tribunal lacks inherent jurisdiction to entertain an inter se counter-claim between co-respondents. The Commercial Court rejected this objection and held the decree executable, prompting the judgment debtors to approach the High Court.
However, the Court considering the facts and circumstances and the judgments referred to, held, “…the decisions referred to CRP above which lay down that there cannot be a counter claim against a co-defendant under Order VIII Rule 6A of the Code of Civil Procedure, 1908 cannot apply to these proceedings. This is all the more so since Section 19 of the Arbitration and Conciliation Act, 1996 specifically says that arbitral Tribunal shall not be bound by the Code of Civil Procedure, 1908. I do not find any reason to interfere with the well-considered order of the execution court”.
“…I am also of the view that Section 23 (2A) of the Arbitration and Conciliation Act, 1996 is more expansive by nature than that of the Order 8, Rule 6A of the Code of Civil Procedure.. The Order 8, Rule 6A specifically mentions about a counter claim against the claim of the plaintiff, accruing to the defendant against the plaintiff, whereas Section 23 ( 2A ) does not specifically say so…”, the Bench further noted.
Affirming the lower court's view, the Court observed that though styled as a counter-claim, the dispute was essentially a substantive contractual claim between the parties.
Since the tripartite agreement explicitly referred "all disputes and differences" to arbitration, the parties could not object to the tribunal's jurisdiction over their inter se disputes after submitting to the proceedings.
The Court dismissed the civil revision petition, upholding the execution court’s order without prejudice to the petitioners' pending Section 34 challenge before the Calcutta High Court.
Cause Title: M/s. Karthik Exports & Anr. v. Krishna Kumar Agarwal & Anr. (Neutral Citation: 2026:KER:46677)
Appearances:
Petitioners: Jacob P. Alex and Joseph P. Alex, Advocates.
Respondents: Debraj Sahu and Aamir Sohrab M. M., Advocates.