Karnataka High Court
S.K. Vijayakumar S/O Lt. S.N. ... vs S.K. Ravikumar S/O Lt. S.N. ... on 17 October, 2006
Equivalent citations: ILR2006KAR4611, 2007(1)KARLJ446, AIR 2007 (NOC) 709 (KAR.) (DB) = 2007 (1) AIR KAR R 431, 2007 (1) AIR KAR R 431, 2007 A I H C 1330, (2007) 1 CIVILCOURTC 788, (2007) 1 KANT LJ 446, (2007) 3 ICC 246, (2007) 2 CURCC 420
Author: V. Gopala Gowda
Bench: V. Gopala Gowda
JUDGMENT
1. These three Miscellaneous First Appeals and the Civil Revision Petition are filed against the order dated 12.3.2001 passed by the District Court, Bangalore Rural District, in Arbitration Case No. 1/2001. The District Court dismissed the petition filed under Section 9 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the Act) and the interlocutory applications. The applications are, I.A.I filed under Section 9(ii)(d) of the Act read with Order 39 Rules 1 & 2 C.P.C for injunction, I.A.II under Order 26 Rules 9 & 11 CPC for appointment of Commissioner, I.A.III under Order -10 Rule I CPC for appointment of Receiver and I.A.IV under Section 151 CPC to dismiss the petition as not maintainable.
2. The brief facts leading to these matters are the Appellant in the appeals and petitioner in the revision petition entered into a partnership venture under the name arid style of M/s. Srinivasa Enterprises along with respondents 1 to 6. The partnership firm was running Gopal Theatre situated in Doddaballapur, which is the Schedule property in the petition. The Appellant alleges that respondents 1 and 4 were whole time Managing Partners of the firm but they did not render accounts of the firm and the appellant was kept in dark regarding the affairs of the firm inspite of repeated requests, reminders and demands. It is further alleged that the meetings of the firm were also not convened. In those circumstances, the Appellant claims that he dissolved the partnership by issuing notice dated 5-2-2001 and the same was informed to respondents 1 to 6 and called upon them to render accounts and to distribute the assets of the firm. Xerox copies of the notice covers are produced and the postal endorsement thereon is "not claimed'. The dissolution of the firm was also notified in Udayavani newspaper dated 8-2-2001. The Appellant also invoked the arbitration clause in the partnership deed and proposed to appoint one Mr. Premchand Gupta, an Advocate as the sole Arbitrator for settlement of the dispute. It is alleged that since respondents 1 to 6 made attempts to manipulate the accounts and to dispose of the properties of the partnership firm, the appellant filed the petition 011 7-2-2001 in the District Court and the I.As I to III, the details of which are narrated in paragraph 1 above (I.A.IV was filed by respondents 1 to 3 & 6). It is further alleged that despite knowledge of dissolution of the partnership firm, respondents 1 to 6 sold the schedule property (Gopal Theatre) to the 7th respondent herein. Therefore, relying upon the decision reported in AIR 1956 SC 593, it is contended that the alienation of the schedule property during the pendancy of the petition is bad in law and Section 52 of Transfer of Property is attracted.
3. Respondents 1 to 6 entered appearance and filed objections to I.As I to III. They filed I.A.IV contending that the petition is not maintainable and liable to be dismissed in view of Section 69(3) of the Act. Consequently, they contended that I.As I to III are liable to be rejected. Reliance is placed upon the decision reported in AIR 1964 SC 1882.
4. The learned Counsel for the appellant made submission with reference to the sale deed document dated 1-1/2/2001 to show that the suit schedule immovable property of Gopal Theatre is the property of Srinivasa Enterprises and further contended relying upon the decision of the Apex Court in the case of Firm Ashok Traders and Anr. v. Gurumukh Das Saluja and Ors. that the bar indicated in Section 69 of the Partnership Act does not affect the maintainability of an application under Section 9 of the Act and also placed reliance upon the decision of the Supreme Court in Kamal Pushpa Enterprises v. D.R. Construction Company 2000(4) ICC (SC) 271 which is referred in FIRM ASHOK TRADERS case referred to supra. The Apex Court alter referring to its earlier decisions namely Haldiram Bhujiawala and Anr. v. Anand Kumar Deepak Kumar and Anr. , Raptakos Brett & Co. Ltd. v. Ganesh Property , Satish Kumar and Ors. v. Surender Kumar and Ors. and Jagdish Chandra Gupta v. Kajaria Traders (INDIA) Ltd. and J. Belli Gowder v. Joghi Gowder and Anr. has held that the non-registration of the partnership firm as provided under Section 69(3) is not attracted to the case to file a petition Under Section 9 and seek for an interim order in respect of" the property of the partnership has been extensively discussed by the Supreme Court in support of the contention that the prohibition contained in Section 69 in respect of instituting the proceedings to enforce a right, arising from a contract in any court by an unregistered firm, it had no application to the proceedings before an arbitrator and that too when the reference of the arbitrator was at the instance of the appellant itself mid further the Supreme Court has held that if the bar engrafted in Section 69 is absolute in its terms, it is destructive and every right arising under the contract itself and not confined merely to enforcement of a right arising from a contract by instituting suit or other proceedings in Court only. The aforesaid decision has been referred to by the later judgment of the Supreme Court in FIRM ASHOK TRADERS while dealing with the maintainability of the proceedings at paragraph 14 after referring to the constitution bench decision in Jagadish Chandra GUPTA's case and also Sundaram Finance Ltd. v. NEPC India Ltd. and M/s. Sriram Finance Corporation LTD., with reference to Section 20 of the Arbitration Act 1940 which is now repealed. The Apex Court in this case preferred to take the view as has been expressed in Kamal Pushpa Enterprises that the bar under Section 69 of the Partnership Act is not applicable at the stage of enforcement of award whereby the rights of the parties crystalize and what is now being enforced is not any right arising from an objectionable contract. Therefore, the learned Counsel for the appellant submits that the evidence and reasons recorded placing reliance upon the decision of the Supreme Court in the case of JAGADISHCHANDRA GUPTA'S case holding that petition under Section 9 is not maintainable in view of the bar contained in Section 69(3) of the Partnership Act applicable to Section 20 of the repealed Arbitration Act is vitiated on account of error in law. Therefore, the learned Counsel requested this Court to set aside the order impugned in the appeal and allow the petition and grant interim reliefs as prayed in the applications.
5. The learned senior counsel appearing on behalf of the respondents 1 to 7 Sri. Tarakaram contends that Section 9 is not attracted in view of the fact that 110 arbitration proceedings either pending or an application is filed to get the arbitrators appointed for resolution of the dispute of the Partnership firm of the appellant. Therefore, the order passed impugned in the appeal need not be interfered with as the party can apply only for an interim order. If the petition is allowed, it amounts to granting permanent injunction against the respondents in favour of the appellant. In support of his submission, he has placed reliance upon the decision of the Supreme Court reported in Sundaram Finance Ltd. v. NEPC India Ltd. and the decision of this Court, in Dr. Anand David Saldanha v. Dr. K. Rathnaraj Ballal 1998 (2) KM 383 and Allahabad High Court decision reported in Deepak Mitra v. District Judge, Allahabad and Ors. AIR 2000 Allahabad 9.
6. By way of reply it was submitted that the reliance placed upon the sale deed by the appellant counsel are not the terms and conditions but they are all the recitals which would disclose that the vendors 1 & 2 mentioned in the sale deed are described as the owners and the other recitals would disclose the fact that there is no absolute sale deed was got executed in favour of Srinivas Enterprises and other partners of Srinivas Enterprises as described are not the owners. Therefore, it is not the property of Srinivasa Enterprises and further submission that the impugned order may be set aside and the matter can be remitted back to the trial Court for reconsideration of this aspect of the matter. The learned senior counsel also made submission that no proceedings are initiated for appointment of arbitrator in terms of the deed of partnership the observation made to take appropriate steps for getting appointed the arbitrators.
7. After hearing the learned Counsel for the parties, we have carefully examined the documents which are available in the original record for the purpose of finding out whether the dismissal order of the petition applying the decision of the Supreme Court repotted in AIR 1964 SC 1882 is legal and valid and whether interlocutory applications seeking interim orders Under Section 9 r/w relevant provisions of C.P.C as referred to in the first paragraph of this order is permissible in law or not and what order the parties are entitled to.
8. All the aforesaid questions are required to be answered in favour of the appellant for the following reasons.
9. The appellant and respondents 1 to 6 formed the partnership in the name of Srinivasa Enterprises by instrument of partnership dated 21/8/1995 is not in dispute. There is a clause regarding arbitration clause No. 19 which reads thus:
19. SAVINGS: THAT, in all matters not herein specifically provided for the partners shall be governed by the provisions of the Indian Partnership Act, 1932 and lilies thereunder as amended from time to time.
10. It is also on record that notice dated 5/2/2001 issued under registered post acknowledgement due to respondents 1 to 6 seeking dissolution of Partnership Finn and rendition of accounts of the firm. We have perused the Xerox copy of the documents and returned unserved notice covers sent to the respondents 1 to 6. An endorsement is made "Not Claimed". Issuance of notice for filing a. petition under Section 9 of the Act is not a condition precedent in view of Section 21 of the Act. It is also not in dispute that the petition was filed Under Section 9 of the Act along with interlocutory applications referred to supra before the Principal District Judge, Bangalore District on 7/2/2001. It is not in dispute that the sale deed is executed by respondents 1 to 6 along with other vendors 1 & 2 namely N.A. Venugopol s/o N.M. Annoiah and N.A. Ravigopal s/o N.M. Annaiah. The sale deed dated 14/2/2001 is registered before the Sub-Registrar of Doddaballapur 011 20/2/2001 during the pendency of the petition. Section 52 of the T P Act is attracted to the facts of the case as it also proceedings in relation to the seeking interim order as provided under Section 9 by filing an interlocutory applications and also filed objection for grant of interim order in respect of the preservation of the property in respect of which dispute is sought to 1be raised by issuing notice regarding dissolution of partnership and rendition of accounts. The reliance placed upon the decision reported in AIR 1964 SC 1882 referred to supra is not applicable to the facts situation in view of the decision of the Supreme Court in the case of the Firm Ashok Traders wherein the similar view taken that Section 69(3) is a bar in respect of the proceedings under Section 20 under the repealed Act is held to be not the correct view in view of the observations made in KAMAL PUSHPA ENTERPRISES' case. Therefore, the finding recorded by the Principal Civil Judge applying the decision of the Apex Court that petition not maintainable is erroneous in law in view of the decision FIRM ASHOK TRADERS AND KAMAL PUSHPA ENTERPRISES' case in which case the Apex Court after referring to the earlier decisions has made an observation with regard to the maintainability of petition in respect of the dispute between the parties in relation to an unregistered partnership firm and further held that Section 69(3) is not a bar. The said view taken by the Supreme Court with all force is applicable to the facts situation of the present case. The provisions of Sub section (3) of Section 69 of the Partnership Act clearly states that provisions of Sub section (1) and (2) shall apply also to claim setoff or other proceedings to enforce a right arising from a contract but SHALL NOT affect (a) enforcement of any right to sue for dissolution of a firm or for accounts of the dissolved firm or any right or power to release the property of a dissolved firm. In view of the aforesaid clause and the demand made in the notice dated 5/2/2001 for dissolution of the firm and also rendition of accounts is a matter for arbitration in view of the partnership deed. This aspect of the matter has not been considered by the learned Principal District Judge. For this reason also, the order rejecting the petition is vitiated in law.
11. We have carefully perused the petition and objections filed to the main petition. In the petition one of the item in respect of the immovable property of Gopal Theatre is one of the schedule items in respect of which interim order of temporary injunction and appointment of receiver is sought for claiming that it is the property of the partnership firm. There is no specific averment regarding denial. In the absence of denial though neither Principal District Judge nor this Court is required to record a finding whether the property belongs to Srinivas Enterprises is a matter for adjudication of the arbitrators which are required to be appointed by initiating proceedings under the provisions of Section 11. For the limited purpose in the absence of denial and on the basis of the recitals referred in the sale deed dated 14/2/2001/20/2/2001 it is prima facie sufficient for us to hold having regard to the undisputed fact that Rs. 23,000/- lakhs consideration amount though there was a civil dispute between the vendors 1 & 2 against the respondents 1 & 6 from 1980 which suit was dismissed for default, Misc. Case No. 10/93 was filed in which case also, the matter was settled by receiving certain consideration amount by the vendors 1 and 2 which is not commensurate with the consideration amount, it is the property of the Srinvas Enterprises and apprehension of the appellant that they are trying to alienate the Gopal Theatre property, which is one of the petition schedule properties therefore the petition is rightly filed by the appellant. That application is opposed by filing objections by the respondents No. 1-6. The same came to be disposed of during the pendency of the petition registered on 20/2/2001 as we have already held Section 52 of the Transfer of Property Act is attracted to the facts of this case. Therefore, this is a fit case for allowing a petition Under Section 9 of the Arbitration and Conciliation Act and also interlocutory applications. I A No. 2 restraining the 7th respondent herein who got impleaded in these proceedings is allowed directing him not to crate either chaise or further alienate the schedule property of Gopal theatre at Doddaballapur town until the arbitration proceedings between the parties in respect of the property is determined. I A No. 1 also required to be allowed. The theatre has been sold as a running concern in favour of respondent No. 7. The movables mentioned though details are not there. Having regard to the conduct of the respondents 1 to 6 when the notice issued on 5/2/2001 to them was not claimed, subsequently the property was sold by a sale deed referred to supra in favour of respondent. No. 7, therefore, the case warrants appointment of Commissioner to inspect the Gopal Theatre and prepare an inventory regarding the movables which are in the theatre and submit a report to this Court and after appointment of arbitrator, the parties can seek to forward the said report submitted by the Commissioner to the arbitrators. For this purpose, Sri Vijayakumar L. Paradeshi, learned Counsel is appointed as Court Commissioner. His professional fee is fixed at Rs. 3000/- which amount shall be paid by appellant apart from conveyance charges to visit the theatre for preparing an inventory.
12. I A No. 3 is also required to be allowed since the interest of the appellant in the property is involved to safeguard his interest it would be just and proper for this Court to maintain the accounts by the 7th respondent periodically before the arbitrator regarding receipt and expenditure that would be derived from the immovable property.
13. For the aforesaid reasons, the appeal is allowed, impugned order is set aside. Petition filed under Section 9 filed is allowed. I A Nos. 1 to 3 are also allowed in the aforesaid terms.
14. Alter dictating the above order, the learned Counsel for respondent Nos. 1-7 had prayed for grant of stay of this order. Since we are satisfied after going through the original record and in view of the law laid down by the Supreme Court and the documents produced in the cases referred to supra, it is not a fit case for us to stay this order passed by us on the petition and interlocutory applications. Oral application for stay of the order is wholly untenable and the said request is rejected.