Bangalore District Court
Govinda Reddy C vs Harish R on 3 February, 2026
KABC010041132018
Govt. of Karnataka TITLE SHEET FOR JUDGMENT IN SUITS
Form No.9(Civil)
Title Sheet for
Judgment in suits
(R.P.91)
IN THE COURT OF THE VI ADDL. CITY CIVIL & SESSIONS JUDGE
AT BENGALURU CITY
(CCCH.11)
DATED THIS THE 3rd DAY OF FEBRUARY, 2026
PRESENT: SRI GANAPATI GURUSIDDA BADAMI,
B.A. LL.B.(Spl)
(Name of the Presiding Judge)
A.S.No.34/2018
APPLICANT/S : Sri.C.Govinda Reddy
S/o.Late Chinnappa Reddy,
Age 62 years,
Partner, M/s.Brindavan Aquasafe
R/at.No.2410, 18th Main, 2nd Stage
Kumaraswamy Layout
Bangalore - 560078.
[By Sri.P.C., Advocate]
/Vs/
RESPONDENT/S 1 Sri.R.Harish
S/o.Late Ramanna
R/a, No.3447, 68th Cross
Pipeline Road, Kumaraswamy Layout
Bangalore - 560078.
2 M/s.Brindavan Aquasafe
Represented by its Partner
R.Harish
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A.S.No.34/2018
S/o.Late Ramanna
R/a, No.2410, 18th Main, 2nd Stage
Kumarswamy Layout,
Bangalore - 560078
(R-1 By Sri.GNS Advocate)
(R-2 - Absent)
Date of Institution of the suit : 08.02.2018
Nature of the Suit : Arbitration Suit under
Sec.34 of Arbitration Act
Date of commencement of : -
recording of evidence
Date on which the Judgment : 03.02.2026
was pronounced
Total Duration Year/s Month/s Day/s
7 11 26
(GANAPATI GURUSIDDA BADAMI)
VI ADDL. CITY CIVIL & SESSIONS JUDGE
BENGALURU CITY
JUDGMENT
Appellant has preferred this appeal against an order passed by Arbitration Tribunal in Arbitration case No.65/2015 dated 01.09.2017.
2. Parties are hereinafter referred with same rank as they were before Arbitration Tribunal.
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3. Facts of the case in brief are as under:
Claimant filed petition under section 23 of Arbitration and Conciliation Act 1996 for dissolving partnership firm M/s Brindavan Aqua Safe as per Deed of Partnership dated 03.06.2013 and reconstituted firm being Deed of Partnership dated 05.06.2013. Applicant was carrying on business of packaged drinking water under the name and style of "Arogya". But due to the change of policy decision of Government of India as regards the minimum specifications required to be maintained in a water plant and there being a need for larger area for water unit, he was in search of larger premises to establish new factory and unit with modern equipment and machinery as per BIS requirements. In his course to search suitable premises, for the first time he came in contact with 1st respondent who then initially offered his property bearing No.2410 18th Main, 2nd Stage Kumaraswamy layout Bangalore on rent to the applicant. In the course of discussion with regard to business and establishment of water plant in the premises, 1st respondent showed his interest and inclination to join as partner with applicant to 4 A.S.No.34/2018 start or establish new packaged drinking water manufacturing unit. Then both of them came to broad understanding that, applicant would contribute towards putting up up requisite structure suitable for manufacture of packaged drinking water to procure brand name for the firm, ISI certification and scouting of market. 1 st respondent would procure latest new machinery for purification of water.
As per understanding, the applicant took civil construction on the first floor of said premises belonged to 1 st respondent and renovation of existing structure on the ground floor of said promises and he took upon himself the responsibility of completing the renovation of ground floor and construction on the first floor of said property, to dug borewells and establishment of laboratory. Applicant simultaneously traced a unit carrying on the business of packaged drinking water under the name and style of M/s. Brindavana Aqua Safe at Yelahanka, Bangalore run by its proprietor Mr.Pradeep. The said unit was making good business and had considerable goodwill. Therefore, he requested Mr. Pradeep to purchase goodwill and trade name of his firm. Applicant, 1 st respondent 5 A.S.No.34/2018 and Mr. Pradeep entered into partnership firm by executing partnership deed dated 03.06.2013 and partnership firm so established in the said premises is Brindavana Aqua safe. Thereafter, Mr, Pradeep wished not to continue with partnership business along with applicant and first respondent and expressed to retired from firm. On 05.06.2013 reconstitution deed was executed by the parties acknowledging the retirement of Mr.Pradeep and reconstruction of firm comprising applicant and 1 st respondent. On retirement of Mr.Pradeep as agreed, applicant settled all dues with him including purchase of goodwill, brand name, BIS certification and thereafter applicant and 1 st respondent carried forward the partnership business which came to be registered before the Registrar of Firms on 19.06.2013. Applicant made efforts to secure the registration of unit with the Directorate of Industries and Commerce on 25.06.2013 and also secured DIC certificate for the present location of business. As per reconstituted partnership, the capital contribution of each partner was pegged at ₹32,25,000 and both parties were to share the profit and 6 A.S.No.34/2018 losses in the ratio of 50:50. To obtain TIN number, for procurement of machinery and for other security purposes, since the premises of 1st respondent was used and was given as a place of business, formal lease agreement was entered into without any intention per se rent out the premises by the partnership firm with 1st respondent. It was never intended to be acted upon lease and was remain only on paper. On demand of the 1st respondent, ₹5,00,000 was paid to him formally as per the lease agreement and said amount was treated to be the capital contribution towards the firm. As per the terms of partnership firm from its inception upon formation of partnership, all original documents concerning partnership like vouchers, bills, deeds and documents were kept at the partnership premises.
4. The total expenditure incurred by applicant individually was ₹40,00,000 towards establishment of partnership firm. The premise was kept ready for installation commencing of machinery and other allied equipment necessary for manufacture of packaged drinking water for human 7 A.S.No.34/2018 consumption during October/November 2013. The machinery and equipment were installed during December 2013 and testing process began and water plant had to run full pledged by January 2014. But however since ISI certification had not come, it was delayed. On 22.05. 2014 when the applicant and 1st respondent sat for finalization of accounts for expenditure, 1st respondent claimed excess of what he has invested and he claimed the same by adding additional Rs.12,50,000/- towards rent of the premises from June 2013 at the rate of ₹70,000 per month which infact was never agreed upon or intended and said illegal claim of contribution by 1 st respondent was opposed by the applicant. 1 st respondent unauthorizedly sent the applicant out of the premises and prevented him from entering the premises and took exclusive possession of the entire property and firm and prevented its operation. The 1st respondent prevented the claimant from entering the place of business of partnership firm or participate in the affairs of the partnership which is is right as a partner of the firm having invested huge amount for its establishment. 1st respondent being in exclusive possession 8 A.S.No.34/2018 of partnership firm and premises, custody of all documents, bills, vouchers, account books, purchase and certificates pertaining to the business with ulterior motive to carry forward the business and take away any future profits which accrue by himself by trick and strategy. From 23.05.2014, 1 st respondent has kept the premises of the partnership firm locked and it has not been running since then. The said fact came to the knowledge of the applicant from new customers, distributors, old customers known to the applicant through his previous business of packaged drinking water Arogya about closure of new plant. It has caused severe set back to the partnership business due to unlawful acts of 1 st respondent. Even the applicant put to heavy pecuniary loss due to illegal actions on the part of 1 st respondent and loss sustained by the applicant due to 1 st respondent. He issued notice to 1st respondent on 16/06/2014 to pay the ₹40,00,000 towards loss sustained by him as he could not make good said invested amount by carrying on business due to illegal stoppage of partnership firm activities by 1st respondent who has given untenable reply for which 9 A.S.No.34/2018 applicant approached the Arbitral Tribunal seeking the dissolution of partnership, for settlement of accounts and damages of ₹40,00,000/- along with ₹12,00,000 for loss of potential business.
5. 1st respondent filed objections and contended that, in April 2013, applicant approached the 1st respondent for renting out partnership premises. He purchased said property and obtained vacant possession of the same from earlier owners by availing bank loan and he is paying monthly installment of ₹74,000/- approximately. After negotiations, rent was agreed at ₹70,000/- per month and security deposit of ₹5,00,000/- Applicant requested for temporary structure in the first floor for his business which was erected by 1 st respondent and he put up temporary structure on the first floor of the premises at his cost and expenses upon assurance of the applicant that he would take the premises on monthly rent of ₹70,000 and advance security deposit of ₹5,00,000/- The 1st respondent put up a temporary structure and after completion, applicant expressed that, he does not have 10 A.S.No.34/2018 sufficient finance to pay the advance and to invest the money in the said business as other persons who had agreed to invest have been backed out having no financial capacity. Therefore applicant is not entitled to claim invested amount towards business of partnership and prayed to dismiss the claim.
6. He has made counterclaim against applicant claiming ₹59,65,014 that, he is entitled for expenses incurred by him towards additional construction put up on first floor, for getting dug borewells, purchase of machinery, arrears of rent from 01.06.2015 to 31.07.2015, obtaining BBMP licence, renewal of BBMP license, electricity and other payments from July 2013 till date and water charges in the counter claim. It is further contended that, applicant started business operations from the month of October 2013 itself and he did not give accounts to the 1st respondent and he continued business till the month of March 2014. The the applicant mismanaged affairs of firm and though he was carrying on business from October 2013, he didn't pay the rent as agreed 11 A.S.No.34/2018 under the lease deed to the 1 st respondent. Even he did not pay the electricity, water bills and salaries of employees. 1 st respondent has paid for the machinery, premises and human resources. 1st respondent questioned the applicant and it was decided and agreed that, entire monetary transaction should be carried through Bank and Bank account was opened in March 2014. Applicant promised to settle the previous accounts and rents shortly, but he failed to furnish the accounts and he did not deposit the money in the Bank and failed to pay the electricity bills and water charges and salary to staff. The applicant though operated the business did not furnish the accounts to him and he collected all the amount. Due to failure of the applicant to pay electricity bills, water charges to BWSSB, both connections of the premises were disconnected. 1st respondent being owner of the property has to pay the same. Due to mismanagement of the applicant, the business was discontinued in the month of June 2014. The 1st respondent who has invested the amount has been made a scapegoat due to inducement, breach of trust and fraud played by the applicant on him. Applicant assured to pay 12 A.S.No.34/2018 monthly rent of Rs.70,000 /- and profit from the business. He started the business with the equipment in the schedule premises and he failed to honour his words and mismanaged the business. Therefore, he prayed to allow the counterclaim.
7. Applicant filed objections to the counterclaim and denied the contents of counter claim.
8. Applicant himself examined as PW-1 and also examined Sri. Vasudev Reddy and Sri. Pradeep as PW-2 and 3 and got marked ExP-1 to 123 and closed his evidence. 1 st respondent himself examined RW-1 and got marked ExP-1 to 22 and closed his evidence. After hearing the arguments, Arbitrator Tribunal is partly allowed the claim of claimant by dissolving the Brindavan Aqua Safe as prayed in Para No.19 of claim and it is also held that, until striking of accounts, the claimant is not entitled to the relief prayed in Para No.19(b) of claim statement. The prayer of claimant in Para No.19(c)(e) and (f) are held to be premature in view of accounts being yet to be settled and claimant is not entitled for said two prayers. 13
A.S.No.34/2018 Claimant is entitled to the relief sought in Para No.19(d) and Tribunal directed to the 1st respondent to furnish accounts of respondent No.2 from the date of deed of partnership and deed of reconstitution of the firm dated 03.06.2013 and 05.06.2013 till 23.05.2014 and thereafter within three months from the date of order. The counter claim of respondent No.1 is partly allowed and he is entitled to relief in Para No.9(c) of counter claim and claimant is directed to furnish before tribunal account of respondent No.2 from the date of deed of partnership and deed of reconstitution of the firm dated 03.06.2013 and 05.06.2013 respectively within three months from the date of order and until striking of accounts, respondent No.1 is not entitled to reliefs prayed in Para No.9(a) and (b) of the counter claim filed by the respondent No.1.
9. The claimant being aggrieved by said order has preferred this appeal on the various grounds urged in the appeal.
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10. Learned Arbitrator has failed to apply his mind to the facts and circumstance of the case and ignored and overlooked vital material information of claimant and failed to take minimum required application of mind in the matter of appreciating documents. The award is patently illegal on the ground of public policy since award is contrary to the substantive provision of law and against the terms of contract and mandate of section 18 about equal treatment of the parties. Learned Arbitrator has not considered pleadings, evidence and documents forming part of arbitral record and deviated from the established law. The said award is illegal due to error of law and fact. The findings of the arbitrator are completely tangent and contrary to the contract between the parties and Learned Arbitrator gone beyond the terms of contract by taking into consideration inadmissible evidence and ignoring /rejecting the evidence of binding nature. Therefore, it is prayed to allow the appeal and to set aside an award passed by the Learned Arbitrator.
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11. Respondent No.1 has appeared through counsel and filed written arguments. Even though sufficient time has been granted to the applicant/ appellant, he has not addressed the arguments. Hence appellant side arguments are taken as not addressed and appeal is taken for disposal on merits
12. Points arise for my consideration are as under:
1. Whether Learned Arbitrator has failed to apply his mind to the facts and circumstances of the case and ignored vital material information of the claimant and failed to apply mind to the documents relied by the applicant and also ignored section 18 which speaks about equal treatment of both parties?
2. Whether an award passed by Learned Arbitrator is patently illegal on the ground of public policy and it is contrary to substantive provision of law, Act and terms of contract?16
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3. Whether Learned Arbitrator has not considered the pleadings, evidence and documents and deviated from the established law and said order is illegal?
4. Whether findings of the Learned Arbitrator are completely tangent and contrary to the contract between the parties and gone beyond the terms of contract by taking into consideration of inadmissible evidence and rejecting the evidence of binding nature?
5. What order or decree?
13. My findings on the above points are as under;
Point Nos.1 to 4 : In the "Negative"
Point No.5 : As per final order
for the following:
REASONS
14. Point No.1 to 4: On appreciating the facts of the case and undisputed facts between the parties is that, property 17 A.S.No.34/2018 bearing No.2410, 18th main, 2nd Stage Kumaraswamy layout, Bangalore is the property of 1st respondent and he gave the same for partnership firm establishment and he was looking out tenants to let out the said premises. It is also undisputed fact that, applicant and 1 st respondent formed partnership firm.
15. On appreciating the findings of Learned Arbitrator, in the Para No.54 of order, it is observed that, as per order of tribunal dated 18.12.2015 and in view of memo filed by 1 st respondent dated 16.11.2015 to the effect that, he has withdrawn the claim for rent, cost of construction of building, amount spent for digging borewells and for recovery of arrears of rent as respondent No.1 desired to approach the civil Court. Hence, terms of reference No.3 and 6 are deleted.
16. Learned Arbitrator has made observations that, Learned Counsels for both parties submitted before Tribunal may grant the relief of dissolution of partnership firm M/s Brindavan Aqua Safe Bangalore and in view of submission of 18 A.S.No.34/2018 Learned Counsels for both parties, claimant is entitled to continue the relief sought in para No.19(a) of the claim statement. On appreciating the findings of Learned Arbitrator, he has observed that, claimant has prayed in the Para No.19(b) seeking direction to the 1 st respondent to return investment amount of Rs.40,00,000/- made by claimant for construction of structure on the property and for securing permissions and good will of M/s Brindavan Aqua Safe Bangalore and he has stated in his claim statement that, he has completed construction work by spending Rs.25,00,000/-. But the respondent No.1 has contended that, he has constructed temporary structure on the first floor of his schedule by spending Rs.15,00,000/-. But as per observation of Tribunal in the para No.54 of order, respondent No.1 has withdrawn claim for rent, cost of construction of building and amount spent for digging borewells and arrears of rents as he is intended to approach civil Court for the said reliefs. Since respondent No.1 has withdrawn his claim for construction of building and claim of rent, he is not entitled for the said reliefs. From the findings 19 A.S.No.34/2018 recorded by the Arbitral Tribunal, it is evident that PW1 made several material admissions during the course of his evidence.
17. PW-1 admitted that, as per the sealed market documents marked as Ex. R3, he had paid a sum of ₹2.5 lakh to Sri Pradeep. He denied the suggestion that Ex.R5 was a deed of reconstitution of the firm. He further admitted that Sri Vasudeva Reddy did not become a partner of the firm as he lacked the necessary financial capacity and that, thereafter, Sri Karthikeyan acted as a consultant to the firm.
18. The Tribunal further observed that PW-1 admitted to having taken respondent No.1 to Sri Karthikeyan after Sri Vasudeva Reddy withdrew, and that Sri Karthikeyan prepared a business note, which was marked as Ex.R6. PW-1 also admitted that the schedule property described in Ex. R7 belongs to respondent No.1 and that, as per Ex.R4 and R5, the said schedule property is not described as the property of the firm.
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19. PW-1 further admitted that Sri Pradeep was inducted as a partner in respondent No.2 firm solely for the purpose of transfer of goodwill, ISI certification, and for the purchase of the brand name.
20. In paragraph 88 of the arbitral award, the Tribunal referred to the evidence of PW-1 wherein he admitted that he neither made any payment to BESCOM nor visited the BESCOM office, and that he was unaware whether respondent No.1 had spent ₹2 lakh for obtaining an electricity connection. However, he admitted that respondent No.1 had incurred expenditure for obtaining a licence from BBMP to run the business of respondent No.2, as evidenced by Ex.P29. The Tribunal also relied upon the evidence of RW- 1, who stated that Ex.R11 to R13 are receipts evidencing payments made to BBMP for obtaining and renewing the trade licence.
21. PW-1 further admitted that a bank account in the name of M/s Brindavan Aqua Shape was opened on 13.03.2014, as 21 A.S.No.34/2018 reflected in Ex. R14, and that the said account was jointly operated by the claimant and respondent No.1. He stated that from February 2014, he stopped visiting the plant, and during April or May 2014, he, along with Sri Vasudeva Reddy, visited respondent No.1 with the accounts.
22. In paragraph 90, the Tribunal referred to the deposition of PW-1 at page 29, wherein he admitted that Sri Karthikeyan had advised the parties regarding the formation and reconstitution of the partnership firm, and that the notes prepared by Sri Karthikeyan were marked as Ex.R15. He further admitted that the firm was reconstituted within three days of its initial constitution.
23. PW-1 claimed that he had spent ₹5 lakh towards licence fees and for the purchase of goodwill and brand name. However, he denied the suggestion that, he had introduced respondent No.1 to the business through Sri Karthikeyan, who allegedly assured profits of ₹2 lakh per month and persuaded respondent No.1 to join as a partner. He stated 22 A.S.No.34/2018 that it was Sri Karthikeyan who had spoken about the prospects of profit.
24. PW-1 admitted that he had no knowledge of the number of customers or business dealings in Bengaluru relating to the supply of packaged drinking water. He was unable to state from which month water cans were supplied to customers or whether such supply commenced from October. He further stated that he spent only one to two hours per day attending to the business of respondent No.2 firm.
25. PW-1 specifically denied the suggestion that respondent No.1 was not attending to the affairs of the firm and stated that respondent No.1 was responsible for placing orders for PET bottles and cans. He admitted that in October 2013, orders were placed for PET bottles and cans and that water was supplied through cans and not PET bottles.
26. Though PW-1 was unable to provide month-wise sales details of packaged drinking water, he claimed that he used to verify the accounts on a monthly basis.
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27. The Tribunal has also referred to the cross-examination of PW-1 at page 31 of his deposition. PW-1 stated that after receipt of the ISI certificate, vouchers, bills, and letterheads of respondent No.2 firm were printed. He deposed that the ISI certificate might have been received in April 2014. He further stated that the vouchers and bill books were printed in original and duplicate copies and that all bill books contained serial numbers; however, he expressed ignorance as to whether the vouchers bore serial numbers.
28. PW-1 admitted that he was unable to remember the expenditure incurred, profit earned, or turnover of the firm for the period from October 2013 to April 2014. According to his evidence, refrigerators and air conditioners were purchased by respondent No.1 by making payments, and the bills and vouchers relating thereto ought to have been kept together. His evidence further discloses that Sri Vasudeva Reddy had not made any investment in the business. PW-1 denied the suggestion that the matter written on page 2 of Ex.P5 was inserted by him, but stated that Ex. P5 was handed over to him on 08.12.2013.
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29. PW-1 admitted that Ex.P6, P-17, P-20, and P-21 were written using the same pen. While he denied the suggestion that the said documents were written by a single person, he admitted that he did not know as to who had written those four bills. He specifically denied the suggestion that the cash vouchers produced before the Tribunal were separate loose sheets and not taken from a voucher book, and stated that he could produce the cash voucher books on the next date of hearing.
30. According to PW-1, as per Ex.P-10 and P-11, payments were made by cheque to Sri C. Kumar, and the relevant entries in Ex.P118(a) and P118(b) stood in the name of Sri Shanmugam. He denied the suggestion that the name and amount mentioned in Ex.P16 did not tally with the contents of Ex.P118(c).
31. PW-1 further admitted that Ex.P8 to P-17 were written using one pen, and that Ex.P16, P-18, P-19, and P-25 were also written using one pen, and that the handwriting appearing on the said documents was that of a single person. 25
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32. PW1 deposed with regard to several documentary exhibits relating to the purchase of caps and other materials. He stated that Ex. P51 pertains to the purchase of 3,000 caps and that each water can requires only one cap. He further stated that Ex.P52 relates to the purchase of 3,000 caps, Ex.P53 pertains to the purchase of 6,000 caps, and Ex.P83 relates to the purchase of 7,470 caps.
33. The Tribunal has reproduced the evidence of PW-1 wherein he stated that Ex.P92 pertains to sleeves used for covering the caps of the cans, and that as per Ex.P93, 8,000 caps were purchased. He further stated that Ex.P94 relates to higher transportation charges incurred for transportation of cans.
34. PW-1 admitted his signature on Ex.P98 and denied his signatures on Ex.P101 and P102. He stated that Ex. P104 pertains to payment of labour charges and admitted that Ex.P109 and P112 bear his signatures. He further admitted that Ex.R14 is the only bank account opened in the name of the partnership firm.
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35. In his chief examination,PW-1 stated that he was sent out of the premises by respondent No.1 and that the premises were locked on 23.05.2014. He further stated that after the said date, he did not visit the schedule property of respondent No.2 firm.
36. The evidence of PW-1 further discloses that he had visited the office of respondent No.1 situated at Pipeline Road, Bengaluru, for settlement of accounts in the month of March 2014. He admitted that there was a settlement between him and respondent No.1 with regard to payments and receipts relating to the business transacted through the bank account. He further stated that thereafter, the bank account as per Ex.R14 was opened to carry out business transactions by way of cash.
37. Significantly, PW-1 admitted that he was unable to furnish details regarding the claim of ₹40 lakh and could not state the basis on which he had made the said claim and also claim of Rs.12, lakhs.
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38. On appreciation of the evidence of PW-2, who was working as the Manager of respondent No.2 firm and was involved in setting up of the unit, it emerges from his testimony that the claimant and respondent No.1 had mutually agreed that the claimant would invest for construction of the building, provide necessary infrastructure, and obtain required permissions from the concerned authorities, whereas respondent No.1 would invest in the purchase of machinery and laboratory equipment. According to PW-2, both parties had made investments in the business.
39. PW-2 has deposed that he worked as the Manager of respondent No.2 firm till the end of February 2014, when the unit was closed. He has stated that during February 2014, respondent No.1 deputed his relative, Sri Ajay, who used to take care of daily cash collections and hand over the same to respondent No.1 towards the sale proceeds of purified water.
40. In the course of his cross-examination, PW-2 admitted that Haridarsini is his wife and that a cheque for ₹1,00,000/- 28
A.S.No.34/2018 was issued to Pradeep through his wife, as per Ex.R-1. He further admitted that, the said amount was given as an advance towards purchase of goodwill, which was not honoured, and that on the very next day after issuing the cheque, the concerned party backed out from making any investment.
41. He further admitted that Govind Reddy did not have sufficient funds to make investment in the business on his own and had conveyed the same. Govind Reddy therefore proposed that Harish should invest in the business, and accordingly Harish was taken to Karthikeyan to explain the nature of the business, as Harish was not familiar with it. PW-2 has admitted that Karthikeyan prepared Ex.R-15 and that a lease deed was entered into between the claimant and respondent No.1, to which PW-2 himself is an attesting witness.
42. PW-2 has further admitted that Harish made investment in the business on the assurance given by 29 A.S.No.34/2018 Karthikeyan that there was profit in the water sale business. He has also admitted that Harish had no personal interest in the business initially. However, after commencement of the business, PW-2 denied the suggestion that, Harish never visited the unit and stated that Harish used to inspect the business once in fifteen days.
43. PW-2 has also admitted that Govind Reddy was looking after the cash and sales of the business from the beginning and that all employees were appointed by Govind Reddy. His admissions further reveal that there were differences of opinion between Govind Reddy and Harish with regard to cash collection and maintenance of accounts. In order to avoid complications, it was decided to open a bank account for depositing daily cash collections and for making payments through the said bank account.
44. The evidence of PW-2 further establishes that the claimant invested money for the purchase of machinery, air conditioners, laboratory requirements, refrigerator, BBMP 30 A.S.No.34/2018 licence, additional 40 HP electrical power, etc. He has further stated that electricity bills were not paid after March 2014, resulting in disconnection of power supply, and that water bills were also not paid, due to which the water meter was removed.
45. PW-2 has also deposed that there were frequent quarrels between the claimant and respondent No.1 with regard to discrepancies in the accounts, wherein despite higher sales, respondent No.1 used to show lower sales figures, prompting Harish to demand proper accounts. He has admitted that the bills marked as Ex.R-17 and R-18 were paid by the claimant and that the water bill was also paid by the claimant, as evidenced under Ex.R-16.
46. PW-3, in his evidence, has stated that he was carrying on the business of water purification and supply of drinking water under the name and style of M/s Brindavan Aqua Safe Bengaluru. According to him, on 24-04-2013, the claimant paid a sum of ₹2,50,000/- by cheque towards royalty and 31 A.S.No.34/2018 licence fee for transfer of the firm name and brand name, as the claimant intended to set up a water purification business. PW-3 has further deposed that after discussions with respondent No.1, all three parties arrived at a common understanding to convert his proprietary concern into a partnership firm by inducting the claimant and respondent No.1 as partners. The value of the business was fixed at ₹8,00,000/-, which amount was paid by the claimant towards capital contribution. A partnership deed was entered into on 03-06-2013, which bears his signature. Subsequently, on 05- 06-2013, the firm was reconstituted, and PW-3 retired from the partnership on the same day. Thereafter, the firm was continued by the claimant and respondent No.1. PW-3 has admitted Ex.R1 to R5 during his cross-examination by the learned counsel for respondent No.1.
47. On appreciation of his evidence, it is clear that PW-3 was initially carrying on the business under the name and style of M/s Brindavan Aqua Safe, Bengaluru , that the claimant paid ₹2,50,000/- towards transfer of goodwill, and 32 A.S.No.34/2018 that a partnership was formed on 03-06-2013, followed by reconstitution of the firm on 05-06-2013, on which date PW-3 retired from the firm. It is also relevant to note that PW-3 did not turn up for further cross-examination, and the matter was thereafter posted for respondent's evidence. Respondent No.1 examined himself as RW-1 and has adduced evidence in support of his defence and counter-claim. According to RW-1, the claimant paid ₹2,50,000/- to one Sri Pradeep towards purchase of goodwill and ISI certification. RW-1 has further stated that, he invested about ₹20,00,000/- for purchase of machinery, air conditioners, refrigerators, laboratory equipment, and also made payments to BBMP for obtaining and renewing the necessary licence. According to him, the firm commenced its operations in October 2013. RW-1 has alleged that the claimant did not furnish proper accounts of the business and that although there were higher sales, the claimant was showing lesser sales. He has further stated that due to disputes regarding accounts, a bank account was opened in the name of the firm in March 2014, as per Ex. R40.
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48. However, on appreciating the evidence of PW-2, it is seen that PW-2 has categorically stated that the claimant and respondent No.1 had mutually agreed that,- the claimant would invest in construction of the building, provide infrastructure facilities, and obtain necessary permissions, whereas respondent No.1 would invest in the purchase of machinery and laboratory equipment, and that both parties had invested in the business accordingly. In the cross- examination of PW-2, he has stated that disputes used to arise between Govind Reddy and Harish regarding accounts, wherein respondent No.1 was allegedly showing lower sales despite higher actual sales.
49. Thus, the allegation made by RW-1 against the claimant that the claimant was suppressing sales stands contradicted by the evidence of PW-2.
50. In the cross-examination, RW-1 has admitted that he incurred expenses of ₹20,00,000/- towards machinery, ₹29,100/- towards BBMP licence fees, ₹28,780/- towards 34 A.S.No.34/2018 renewal of licence, ₹99,500/- towards arrears of electricity charges, and ₹51,048/- towards arrears of BWSSB water charges. On the basis of these amounts, RW-1 has made a counter-claim of ₹22,08,428/-.
51. In the cross-examination of RW-1, he has admitted that for sale of packaged drinking water to the public, ISI certification is mandatory and that the ISI certification serial number must be printed on the packaged drinking water bottles. He has further admitted that prior to applying for ISI certification, water samples are required to be sent to a government-approved laboratory for testing. He has also admitted that workers are required for running the factory and for conducting test runs of the water.
52. RW-1 has categorically admitted that he does not know at what price the packaged drinking water was allegedly sold by the claimant to the public, nor is he aware of the amount allegedly received by the claimant from the buyers. In further 35 A.S.No.34/2018 cross-examination, RW-1 has admitted that he is in exclusive possession of the partnership premises from 22-05-2020.
53. According to his oral evidence, RW-1 has stated that the original documents were in the custody of the claimant, except Ex.R5(a), which was with the auditor along with one or two other documents. He has denied the suggestion that Ex.R-5, particularly page No.4, was fabricated by him or that he deleted the clause relating to capital contribution of the partners with malafide intention.
54. So far as payment of salary to employees is concerned, RW-1 has admitted that the firm paid salaries to its employees until the business was stopped, and that such salaries were paid by the claimant as he was carrying on the business. This admission clearly indicates that the claimant bore the entire expenditure towards payment of salaries to the employees until closure of the business.
55. In further cross-examination of RW-1, at paragraph No.2 on page No.36, he has admitted that on 22-05-2014, the 36 A.S.No.34/2018 claimant and one Sri Vasudeva Reddy approached him along with the accounts, and that the claimant showed the accounts of the business carried on from October 2013 to April 2014. However, RW-1 has stated that the claimant did not properly maintain the accounts and that he returned the same to the claimant. His evidence thus discloses that there was a dispute between RW-1 and the claimant regarding the accounts of the firm. At the same time, RW-1 has clearly admitted that he is not personally aware of the volume of business transacted by the claimant and is unable to state the exact amount received by the claimant from customers towards sale of packaged drinking water.
56. On considering the findings recorded by the Tribunal, it is observed that the claimant produced Ex.P2 to P4 and P6 in respect of expenses incurred by him for construction of the first floor, amounting to ₹1,34,132/-. The Tribunal has noted that these bills are prior to 05-06-2013, the date on which the firm was reconstituted as per Ex.R-5.
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57. The Tribunal has further observed that the claimant relied upon Ex.P8, P-10, P-11, P-16, P-17 to P-22, P-25, P-27, P-31, P-33, P-48 and P-50, which relate to expenditure allegedly incurred by the claimant for construction of the building. It has also taken note of four bills issued by M/s Shiva for construction work. Ex-R-8 to R-10 were produced by respondent No.1 to substantiate borrowings availed by him.
58. The claimant has also produced Ex.P14 to P-110, contending that he had incurred a total expenditure of ₹1,56,670/- towards construction of the first floor of the property. The Tribunal has discussed the clauses of the Partnership Deed dated 03-06-2013 executed between the claimant, respondent No.1 and another, marked as Ex.R-4. Clause No.6 of Ex.R-4 pertains to maintenance of books of accounts by the firm. Clause No.15 stipulates that the duration of the firm shall be five years and thereafter the firm shall continue at will.
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59. The Tribunal has further appreciated the Deed of Reconstitution dated 05-06-2013, under which the claimant and respondent No.1 became partners of the reconstituted firm with equal sharing of profits and losses at 50:50. Clause No.9 of the said document also casts a duty upon the partners to maintain proper books of accounts, and it is stated that the duration of the firm shall be at will.
60. The claimant has produced test reports issued by SIMCO Calibration Laboratory, marked as Ex.P15, P15(a) to P15(f), and test reports issued by the Bureau of Indian Standards, Bengaluru, marked as Ex.P12 and P13, along with other related test reports of SGS India Pvt. Ltd as per ExP-28 and 28(a) in support of his contention regarding compliance with statutory requirements.
61. Ex-R-2 evidences that M/s Brindavan Aqua Safe sold its goodwill along with the requisite licence in favour of the claimant and respondent No.1 for a consideration of ₹2,50,000/-. Ex.R7- is the lease deed executed between 39 A.S.No.34/2018 respondent No.1 and respondent No.2, represented by the claimant as partner of respondent No.2 firm, which discloses that the lease was for a period of five years. Ex.R-8 to R-10 consist of bills and quotations issued by Adishakti Borewells, Bengaluru, relating to the digging of a borewell in the suit property. Ex.R-14 is the bank account extract pertaining to the partnership firm, which shows four transactions carried out between 13-03-2014 and 20-06-2014. Ex.R-16 is the BWSSB bill for ₹38,602/- paid by respondent No.1 towards arrears of water charges. Ex.R-17 and R-18 are electricity bills evidencing payment made by respondent No.1 to BESCOM. Ex.R-19 and R-20 are records issued by BBMP for obtaining the trade licence and renewal thereof. The Form-C registration and documents relating to reconstitution of the firm showing respondent No.1 and the claimant as partners were also produced.
62. The Tribunal has relied upon Section 40 of the Indian Partnership Act, 1932, which provides for dissolution of a partnership firm with the consent of all partners or in 40 A.S.No.34/2018 accordance with the contract between the partners. It has also referred to Section 43 of the Act, which deals with dissolution of a partnership firm at will by giving notice in writing to all other partners expressing the intention to dissolve the firm.
63. The Tribunal has further referred to Section 44 of the Act, which empowers the Court to dissolve a partnership firm on a suit filed by a partner. Clause (f) of Section 44 provides that the firm may be dissolved where the business of the firm cannot be carried on except at a loss. Clause (g) of Section 44 empowers the Court to dissolve the firm on any other ground which is just and equitable. Section 45 of the Act deals with the liability of partners for acts done after dissolution, and Section 48 prescribes the mode of settlement of accounts between the partners after dissolution of the firm.
64. The Tribunal has relied upon the decision of the Hon'ble High Court of Karnataka in K. Gundurao v. Sri Ramnarayana Avdhani, reported in AIR 1994 Kar 217, wherein it has been 41 A.S.No.34/2018 held that advances made by a partner do not get enhanced in proportion to the appreciation in the value of the assets of the firm, and that the capital contributed by a partner does not get augmented in proportion to the value of the assets of the firm.
65. The Tribunal has also placed reliance on the judgment of the Hon'ble Supreme Court reported in AIR 1968 SC 676, wherein it has been held that, contribution to surplus is only for the purpose of adjustment of the rights of the partners in the assets of the partnership and does not amount to transfer of assets.
66. In the present case, both parties have made rival monetary claims against each other, and respondent No.1 has also raised a counter-claim. The Tribunal has recorded that RW1 as well as PW1 have stated that respondent No.1 had custody of the books of accounts, correspondence, and records relating to the business of the firm. The Tribunal has further observed that it is the consistent oral evidence of 42 A.S.No.34/2018 respondent No.1 that the claimant misrepresented him and influenced him to invest in the business.
67. The Tribunal has also noted that the claimant alone was carrying on the day-to-day affairs of the firm, as respondent No.1 had informed the claimant that he could not devote sufficient time to manage the business. It has been observed that the claimant was experienced in the line of business and was therefore entrusted with the management and daily operations of the firm.
68. After an elaborate consideration of the oral and documentary evidence produced by both parties, the Arbitral Tribunal formed a firm opinion that the claimant and respondent No.1, being partners of the firm, failed to produce the requisite books of accounts of the firm for the period from 05.06.2013 to 23.05.2014. In the absence of such records, the Tribunal was unable to ascertain the financial position of the firm from the date of reconstitution till the said period or up to the date of recording of evidence. Consequently, the 43 A.S.No.34/2018 Tribunal could not determine the actual contributions allegedly made by the respective partners prior to or after the execution of the partnership deed.
69. Accordingly, the Tribunal held that the claimant was entitled only to the reliefs sought in paragraph 19(a) and (d) of the claim statement and was not entitled to the reliefs claimed in paragraphs 19(b), (c), (e), (f), and (g), as the accounts of the firm had not been settled. Issue No.8 was answered accordingly.
70. The Tribunal further held that respondent No.1 was entitled only to the relief claimed in paragraph 9(c) of the counter-claim and was not entitled to the reliefs claimed in paragraphs 9(a), (b), and (d), since the firm's accounts were yet to be settled under the provisions of the Indian Partnership Act. Thus, the claim statement and counter-claim were partly allowed.
71. The Tribunal observed that both the claimant and respondent No.1 failed to produce the necessary accounting 44 A.S.No.34/2018 records from 05.06.2013 onwards. As per Clause 9 of the Reconstituted Partnership Deed, the firm was required to maintain regular and proper books of accounts, recording all business transactions at its principal place of business, with all partners having free access to inspect the same. The books of accounts were required to be closed annually on 31st March, and final statements were to be prepared on that date.
72. Clause 10 of the Deed further provides that the firm shall operate bank accounts in its name, which shall be jointly operated by both partners. Both partners were working partners actively involved in the affairs of the firm. The deed also specified the manner and quantum of remuneration payable to the working partners based on book profits or losses.
73. The petitioner produced a monthly expense statement as per Ex.R-6, estimating expenses at ₹2,10,000/-. As per Ex.R-7, the lease deed, the petitioner is the absolute owner of the RCC building situated at Property No.2410, BDA layout, Kumarswamy Layout, Bengaluru. The claimant had paid 45 A.S.No.34/2018 ₹5,00,000/- in cash as an interest-free refundable security deposit. The lease commenced on 01.06.2013 for a period of five years.
74. On appreciation of the evidence of P.W.1, it is evident that he was unable to furnish details regarding his claim of ₹40,00,000/- or the basis for claiming ₹12,00,000/-. In cross-examination, he admitted that there was a settlement between him and Harish regarding business transactions being routed through bank accounts. He further admitted that electricity charges were paid by Harish.
75. Admittedly, the business was a partnership concern between the claimant and respondent No.1, and although there is a provision for dissolution, neither party was willing to render proper accounts. The partnership business has come to a standstill, with no possibility of continuation due to the absence of financial details. In such circumstances, the Tribunal rightly observed that rendition of accounts was necessary for adjudication of the claims. 46
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76. The Tribunal further observed that appointment of a Chartered Accountant by both parties for submission of accounts would assist in proper adjudication. In the absence of such accounts, the Tribunal could not reach a definitive conclusion. Therefore, the Tribunal rightly directed the parties to furnish the accounts of the firm from the date of the partnership and reconstitution deeds dated 03.06.2013 and 05.06.2013 till 23.05.2014. This Court finds no error in the said approach. Accordingly, Point Nos.1 to 4 are answered in the "Negative".
77. Point No.5: For the reasons stated above, the following order is passed:
ORDER The petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 is dismissed.
The Arbitral Award dated 01.09.2017 passed by Sri.Vishwanath V. Angadi, Retired District Judge and Sole Arbitrator, Arbitration and Conciliation Centre, Bengaluru, in AC No.65/2015, is hereby confirmed.47
A.S.No.34/2018 No order as to costs.
(Dictated to the Stenographer Grade-III, transcribed and computerized by her, transcript thereof corrected and then pronounced by me in open court, on this the 3rd day of February, 2026) (GANAPATI GURUSIDDA BADAMI) VI Addl.City Civil & Sessions Judge Bengaluru City.