The Kerala High Court has clarified a critical procedural question in arbitration law: whether a counter claim by one respondent against a co-respondent is maintainable under the Arbitration and Conciliation Act, 1996. Rejecting the petitioners' challenge to an execution order, the Court held that the scope of the arbitration agreement - not the limitations of the Code of Civil Procedure - determines the arbitrator's jurisdiction to adjudicate inter-party disputes, including counter claims between co-respondents.
Background & Facts
The Dispute
The dispute arises from a tripartite agreement dated 29.03.2019 between:
- M/s. Karthik Exports (1st petitioner, a partnership firm represented by its managing partner S. Vijayan @ Vijayan Thadathil Sadanandan)
- M/s. D. Monalisa Impex (claimant in arbitration)
- Krishna Kumar Agarwal (1st respondent, commission agent)
The agreement contained an arbitration clause (Clause 11.14) referring all disputes to sole arbitration in Kolkata. The 1st respondent alleged non-payment of commission under Clause 11.21 of the agreement and filed a counter claim against the 1st petitioner during arbitration proceedings.
Key Facts
- 22.05.2019: The 1st respondent sent a notice invoking arbitration, though the notice referred to a different legal entity than the 1st petitioner.
- 09.08.2019: The 1st petitioner filed a counter statement before the Arbitral Tribunal.
- 04.09.2021: The 1st petitioner filed an application under Section 16 of the Arbitration and Conciliation Act, 1996 challenging the Tribunal's jurisdiction to entertain the counter claim.
- 01.11.2021: The Sole Arbitrator (Mr. Swarnendu Ghosh) dismissed the Section 16 application, holding that the counter claim fell within the scope of the arbitration agreement. The Tribunal relied on Section 23(2A) of the 1996 Act, which is broader than Order VIII Rule 6A CPC, and noted that the agreement encompassed all disputes between parties.
- 23.06.2022: The Arbitral Tribunal passed an award:
- Holding the 1st respondent liable to pay ₹1,30,34,234 to M/s. D. Monalisa Impex with 8% interest from 22.05.2019 till recovery.
- Holding the 1st petitioner liable to pay ₹1,33,68,445 to the 1st respondent with 8% interest from 22.05.2019 till recovery.
- 09.11.2022: The 1st petitioner filed an application under Section 34 of the 1996 Act before the Calcutta High Court (AP No. 762 of 2022), challenging the award. The application is pending, and no interim orders have been granted.
- 15.02.2021: The Calcutta High Court passed an order in AP No. 73 of 2021 under Section 14 of the 1996 Act, substituting the Arbitrator and directing continuation of arbitration from the stage reached by the outgoing Arbitrator.
Procedural History
- EP No. 16 of 2025: The 1st respondent filed an execution petition before the Commercial Court, Pathanamthitta, seeking enforcement of the award against the petitioners and the 2nd respondent (Preetha Vijayan, wife of the 2nd petitioner).
- EA No. 2 of 2025: The petitioners filed an execution application under Section 47 read with Section 151 CPC
Case Details
Karthik Exports and Another v. Krishna Kumar Agarwal and Another
2026:KER:46677
Court
High Court of Kerala at Ernakulam
Date
30 June 2026
Case Number
CRP No. 437 of 2025
Bench
T.R. Ravi, J.
Counsel
Pet: Jacob P. Alex, Joseph P. Alex, Manu Sankar P., Amal Amir Ali
Res: Debraj Sahu (Instructed by Aamir Sohrab M. M.)
Frequently Asked Questions
Yes, if the arbitration agreement broadly refers 'all disputes' between parties to arbitration. The Kerala High Court held that Section 23(2A) of the Arbitration and Conciliation Act, 1996 empowers arbitrators to entertain such counter claims, even if Order VIII Rule 6A CPC would prohibit them in regular suits. The scope of the arbitration agreement prevails over procedural limitations under the CPC.
Yes. The Court held that under Order XXI Rule 50(1)(b) CPC, an award can be executed against a partner who participated in arbitration proceedings on behalf of the firm, even if the firm was the named party. However, the award cannot be enforced against non-participating third parties.
No. The Supreme Court in Electrosteel Steel Ltd. v. Ispath Carrier Pvt. Ltd. (2025 SCC OnLine SC 829) held that objections to execution under Section 47 CPC can be raised independently of a Section 34 application. To stay execution, parties must seek interim relief under Section 36(3) of the 1996 Act.
Lack of jurisdiction renders an award a nullity, while irregular exercise of jurisdiction does not. The Kerala High Court relied on Hriday Nath Roy v. Ram Chandra Barna Sarma (1920 SCC OnLine Cal. 85) to hold that an erroneous award is conclusive between parties unless set aside under Section 34. Only inherent lack of jurisdiction (e.g., no arbitration agreement) would void the award.
