Calcutta High Court
Md. Rashid vs Md. Arif & Anr on 7 July, 2020
Equivalent citations: AIR 2020 CALCUTTA 290, AIRONLINE 2020 CAL 416
Author: Shivakant Prasad
Bench: Shivakant Prasad
ORDER SHEET
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
A.P. No. 192 OF 2020
GA 845 of 2020
MD. RASHID
Versus
MD. ARIF & ANR.
A.P. No. 193 OF 2020
GA 846 of 2020
MD. RASHID
Versus
MD. ARIF & ANR.
BEFORE:
The Hon'ble JUSTICE SHIVAKANT PRASAD
Date : 7th July, 2020.
Appearance:
Mr. Raja Basu Chowdhury, Adv.
... for petitioner.
Mr. Arijit Bardhan, Adv.
Mr. Sayan Sinha, Adv.
Mr. Mainak Swarnokar, Adv.
... for respondent.
The Court : Both the matters are taken up together and heard analogously and decided by a common judgment and order in view of the fact that the parties herein are same and same issues are involved in both the matters.
This is an application under Section 9 of the Arbitration and Conciliation Act, 1996 relating to arbitration agreement dated 14th July, 2008. These two 2 applications are the outcome of souring relationship developed amongst three brothers who are the partners of a family partnership business in the name and style of Aqua Flow Polymers and IMP Irrigation Engineers. Partnership firm run under the said name and style of IMP Irrigation Engineers was originally a sole proprietorship firm of the petitioner commenced in the year 1994 when the petitioner was barely 18 years old. The petitioner's parents wanted that their other two sons and the brother of the petitioner, being the respondents be also gainfully employed and be opted as partners in the business. Accordingly, the business was reconstituted on 11th July, 2000. Notwithstanding inducting the respondents as partners, both the brothers of the petitioner no.1 contributed very little and the respondent no.2 did not complete his studies by then and the respondent had little interest in the business as alleged by the petitioner.
The dispute and differences amongst the partners prompted one of the partners to apply for appointment of Arbitrator. Pursuant to the order dated 11th February, 2020 Mr. Swarnendu Ghosh, Advocate of Bar Library Club was appointed as the sole Arbitrator to adjudicate the disputes between the parties. Obviously there was an agreement of arbitration arrived at by and between the parties which is evident from clause 23 of the Arbitration agreement dated 14th July, 2008 which provides that if there is any dispute or difference arisen out of the partnership or regarding management of it, or the accounts or touching the same, such dispute or difference shall be referred to the arbitration of any independent person to be appointed by the partners by mutual consent. If the partners are unable to appoint such person mutually, each partner shall appoint 3 one Arbitrator and in case of difference of opinion between the Arbitrators the matter shall be referred to an Umpire to be nominated by the Arbitrators before entering into the arbitration. The provisions of the Indian Arbitration Act has to be applied to such arbitration. Pursuant to clause of arbitration, all disputes and differences shall be referred to the arbitral tribunal. The said order was passed by the Hon'ble Justice Ashis Kumar Chakraborty in AP 672 of 2019. Ergo, the Arbitrator was supposedly entered upon reference on communication so made as per the order passed by the Hon'ble Court.
Mr. Raja Basu Chawdhury Advocate for the petitioner has drawn my attention to the averments made in the application under section 9 of the Act, 1996 to contend that immediately after the order was passed appointing the arbitrator, the petitioner had instructed his advocate to take steps in the matter so that learned Arbitrator could enter into the reference. However, before the petitioner could take further steps the respondents, in order to frustrate the reference, had instructed his banker, Union Bank of India, Howrah Branch to freeze the bank accounts of the partnership firms morefully mentioned in paragraph 33 of the application.
It is further contended that in interregnum, wages/salary of the workers both at the factory premises as also in the office had fallen due which are required to be paid and if such freezing of the accounts continue in the case, it will cause hardship to the petitioner to meet the requirement. It is also submitted that by a letter dated 5th March, 2020 the petitioner requested the respondents to ensure that the salaries of the workers working at the factory and the office of the 4 aforesaid two partnerships are cleared by issuing appropriate instruction to the banker but despite the said request, the respondents have not taken any steps. So, faced with such situation, the petitioner had to take loan of Rs.1,05,000/- from the market in order to make basic payment of the salary of the staff and the workers of the aforesaid partnership firms. The particulars of the payment made by the petitioner to the staff and workers of the aforesaid two partnerships firms are reflected from the Annexure "J" to the application. With all these contentions, the petitioner has prayed for an order directing the respondents to forthwith instruct Union Bank of India, Howrah Branch to permit the petitioner to operate three bank accounts noted in the prayer (a) of the petition on the petitioner's undertaking that the petitioner shall maintain true and faithful account.
On the contrary, Mr. Arijit Bardhan, learned Advocate for the respondents submits that the respondent Md. Arif had requested his two brothers namely, , Md. Rashid, Md. Arif and Md. Danish, the partners of the aforesaid partnership firms for settlement of the dispute and differences arising from the partnership agreement dated 14th July, 2008, executed by and between them and adverted to the facts mentioned in paragraph VII to submit that his client had access to the accounts of the said partnership firms which reflects that the partnership business was flourishing by making immense profits but for last few years, the partners namely, Md. Rashid and Md. Danish have not allowed him to go through the accounts of the said partnership business and from reliable sources he had come to know that in the said accounts of the business, they have been showing that the business is going through huge loss whereas in reality the 5 business is still growing and flourishing like before and it was observed that there was siphoning of a huge portion of the profits from the partnership business and are manipulating the said accounts of the business to show huge loss in the said accounts of the said partnership business. It is also revealed from the said communication that despite all the above mentioned violations of the terms of the said partnership business done by the other two partners, he had tried to mutually resolve such disputes and differences in respect of the business instead of going for legal action as they are full brothers and the said partnership business is their family business.
Bearing in mind rival contentions of the parties, it transpires that the disputes and differences have cropped up amongst three brothers and right action has been taken by referring the disputes to the arbitrator on appointment of the arbitrator by a coordinate bench of this Hon'ble Court. Since the arbitrator has entered upon reference with the passing of the order and communication of the same, learned Advocate for the respondents rightly submits that the relief of interim injunction as sought for by the petitioner may be ventilated before the arbitral tribunal as per the provisions of Section 17 of the Act, 1996.
To counter that, learned Advocate for the petitioner submits that the dispute presently arisen with regard to freezing of three accounts of the partnership firms which is not the dispute and differences within the domain of arbitral tribunal.
I am in disagreement with such contention of learned Advocate for the petitioner in view of arbitration clause 23 of the arbitration agreement which 6 clearly provides for referring all the disputes and differences arising out of the partnership firm to be adjudicated by the Arbitral Tribunal. It would be apt to note the provision of sub-section 3 of Section 9 of the Arbitration and Conciliation Act, 1996 now clearly spells out that once the arbitral tribunal has been constituted, the court shall not entertain an application under sub-section (1), unless the court finds that circumstances exist which may not render the remedy provided under Section 17 efficaciously. In my considered view, interim relief as sought for by the petitioner in the instant petition may be entertained by the sole arbitrator as the dispute and differences between the parties have already been referred to the arbitrator. Secondly, the arbitral tribunal has the jurisdiction to grant interim relief in terms of Section 17 of the Arbitration and Conciliation Act, 1996, as amended. In this regard reliance can be placed on the decision rendered by the Hon'ble Supreme Court in the case of State of Gujarat through Chief Secretary & Anr. vs. Amber Builders dated January 8, 2020 wherein it has been held that the appropriate remedy for the person aggrieved is to approach the arbitral tribunal constituted under the Act. In the context of what has been discussed above, I am unable to agree with the submissions made by the learned Advocate for the petitioner that it requires immediate protection. It is well understood that if the petitioner requires such protection, other two partners also have to be protected because the relationship between the partners in a partnership firm is that of a spouse relation, if one is insured, other is also insured equally. The liability to pay the wages/salary to the workers and staff is the liability of the partnership firm partner is equally 7 responsible for the payment and discharge of their duties as partners. Therefore, the petitioner should not feel that it is he who is only at the stake rather all the partners are at the stake. Since the arbitral tribunal is well in seisin of the moot issues in dispute, any partner aggrieved is entitled to interim measure before arbitral tribunal in view of Section 17 of the Act, 1996.
On conjoint reading of the provisions of Sections 9(3) & section 17 of the said Act, this Court is of the opinion that interim measure can be granted by the arbitral tribunal and this application under Section 9 of the Arbitration and Conciliation Act is liable to be dismissed.
It is made clear that the Arbitral Tribunal, if approached by either of the parties, shall decide the contentions raised by the parties without being influenced by any observations made herein.
Accordingly, the AP 192 of 2020 and AP 193 of 2020 are both dismissed by this common judgment and order. Consequently, applications being GA845 of 2020 & GA846 of 2020 stand disposed of with further liberty to the petitioner to correct the prayer (b) by inserting word 'directing' instead of 'restraining' without any order as to cost.
Website copy of this Judgment, if applied for, be supplied to the parties upon compliance with all requisite formalities.
(SHIVAKANT PRASAD, J.) mg/SN 8