Bangalore District Court
G.Santhoshkumar vs M/S. Lifestyle Properties on 30 August, 2022
IN THE COURT OF THE LXXXVI ADDL. CITY CIVIL JUDGE
AT BANGALORE [CCH.No.87]
Present:
Sri.SUNIL ANDANEPPA SHETTAR, B.Sc., LLB., (SPL)
LXXXVI ADDL. CITY CIVIL JUDGE
Dated this the 30th day of August, 2022
Com.A.A.No.46/2019
Plaintiff/s : G.Santhoshkumar
S/o Gopalakrishna Pillai,
Aged about 45 years,
R/o C-205, Raheja Park,
Magadi Main Road,
Vijayanagar,
Bangalore 560 040.
(By M.T, Advocate)
- Vs -
Defendant/s : 1. M/s. Lifestyle Properties,
A registered Partnership firm
Having its office at No.GF-4,
Ground Floor, Life Style Terraces,
12th Main Road, Vinayaka Layout,
Nagarabhavi II Stage,
Bangalore 560 072.
2. Sri Ajit Rao,
S/o. Late I.R.Rao,
Aged about 58 years,
R/o TF-5, Top Floor,
Life Style Terraces,
2th Main Road, Vinayaka Layout,
Nagarabhavi II Stage,
Bangalore 560 072.
(By R.1 & R.2 by S.N., Advocate)
2 Com.A.A.No.46/2019
3. Sri. P.V.Sivakumar,
S/o. P.Venkidsamy,
Aged about 44 years,
4. Smt.S.Gayathri,
W/o. Sri. P.Sivakumar
Aged about 44 years,
Both are residents of
R/o No.14, First Floor,
2nd Main, 3rd Cross,
Kirloskar Colony, 1st Stage,
Basaveshwara Nagar,
Bangalore-560 079.
5. Sri Viral V. Kotak,
Aged about 27 years,
"Hotel Sagar", Sagar A/C Restaurant,
Dr.Raj Road, 2nd Stage,
Rajajinagar,
Bangalore-560 010.
(R.3,4,5-Absent)
6. Sri.Abhay P.Kotak,
Aged about 52 years,
No.3, Ground Floor,
Moti Mahal, Plot No.39,
Near Gurukrupa Hotel,Sion (W),
Mumbai 400 022.
7. Sri. G Shankar,
S/o. Late Gangadharsa,
Aged about 53 years,
R/o No.1673/2, 1st Floor,
3rd Stage, Prakashnagar,
Bangalore 560 021.
(By S.G.K., Advocate)
3 Com.A.A.No.46/2019
8. Sri.Yash P.Jain,
S/o. Sri. Praveen Kumar Jain,
Aged about 27 years,
R/o No.6, Flat No.203,
Pranavas Seetaram Residency,
Puttanna Road, Basavanagudi,
Bangalore 560 004.
9. Sri. S.L.Venkatachala,
S/o. Lakshmi Narayan Shastry,
Aged about 55 years.
10. Smt.G.R.Padma,
W/o. Sri. S.L.Venkatachala
Aged about 52 years,
Both are residents of
No.20, "A" 5th Main, 5th Cross,
Behind Balaji Kalyana Mantapa,
Lakshmanappa Garden,
Banashankari III Stage,
Bangalore 560 035.
(R.8 to 10 placed Exparte)
JUDGMENT
This is the petition filed by the petitioners against the respondents under section 9 of the Arbitration & Conciliation Act, 1996 seeking an order of interim measure of protection by way of injunction restraining the respondents No.1 and 2 form alienating the apartments mentioned in the schedule of the petition by way of sale gift or mortgage till resolving the disputes by way of arbitration.
4 Com.A.A.No.46/2019
2. The brief facts of the case of the petitioner as narrated in the petition are as under:-
That the respondent No.1 is a registered partnership firm constituted under the partnership deed dated 07.05.2012 of which the petitioner and the respondent No.2 are its partners having 50% share each. The business of the respondent No.1 firm is to engage in all types of real estates including construction of apartments and development of properties. As per clause No.11 of the partnership deed, no partner shall without the consent of the other partner in writing, transfer or sell or encumber his interest in the firm and also the respondent No.2 is not entitled to receive money from the prospective buyers without the consent of the petitioner.
3. The respondent No.1 firm has entered into a registered joint development agreement with one Smt.Nirmala.A.Patil for development of the property described in schedule 'A' of the plaint and as per the terms of the JDA, the owner of the property has got 50% of share of undivided interest and super built up area and the respondent No.1 has got 50% of share of undivided interest and super built up area. In pursuance of the JDA, the respondent No.1 undertook to construct the apartments and completed the construction of 5 Com.A.A.No.46/2019 thirteen apartments. As per the terms of the JDA, the respondent No.1 is entitled for six apartments along with car parking area being developers share. The respondent No.2 who is one of the partner of respondent No.1 cannot deal with the property of the firm by himself and all transactions should be done with the consent of the petitioners.
4. It is the allegation of the petitioner that the respondent No.2 representing the respondent No.1 has sold apartment No.1 in the first floor for Rs.65,75,000/- by executing absolute sale deed on 06.02.2017 in favour of respondents No.3 & 4 without his consent.
5. It is also the case of the petitioner that the respondent No.2 representing the respondent No.1 has entered into an agreement of sale of the apartments with respondents No.5 to 10 without his consent and the particulars of the said agreements are as under:
a) Agreement of sale dated 25.07.2014 in favour of respondent No.5 in respect of flat No.301 for Rs.51,00,000/-.
b) Agreement of sale dated 25.07.2014 in favour of respondent No.6 in respect of flat No.301 for Rs.51,00,000/-
c) Agreement of sale dated 28.07.2014 in favour of respondent No.7 in respect of flat No.102 for Rs.55,00,000/- 6 Com.A.A.No.46/2019
d) Agreement of sale dated 26.08.2017 in favour of respondent No.8 in respect of flat No.502 for Rs.16,00,000/-
e) Agreement of sale dated 24.05.2017 in favour of respondents No.9 & 10 in respect of flat No.503 for Rs.28,35,000/-
f) Encumbrance certificates for the period from 01.04.2010 to 28.11.2018 and 01.04.2018 to 08.03.2019.
6. It is further contended that the respondent No.2 has no authorization to execute any deeds on behalf of respondent No.1. The petitioner has approached the respondent No.2 in the first week of December 2018 and questioned him with respect to the alienation and at that time the respondent No.2 had promised that he will not sell the apartments without his consent. It is further contended that the respondent No.2 has not shown any inclination to settle the dues of the petitioner and now the respondent No.2 intends to execute the absolute sale deeds in favour of the agreement holders.
7. It is further contended in the petition that clause 15 of the partnership deed provides for appointment of an arbitrator in case of dispute arising between the partners in respect of the partnership. The petitioner is under the apprehension that the respondent No.2 may dispose of the 7 Com.A.A.No.46/2019 remaining apartments unilaterally without his consent and in that event he will put to irreparable loss and hardship and will not be able to realize the money from respondent No.2. The petitioner as a partner of respondent No.1 has invested huge amount. Hence, a dispute has arisen between the petitioner and respondent No.2 in respect of the partnership and the petitioner by invoking the clause of arbitration agreement is seeking an interim measure of protection by way of injunction till disposal of the arbitral proceedings.
8. It is also the case of the petitioner that he being the partner of respondent No.1 has got 50% share in the respondent No.1. In the real estate market normally the entire consideration amount will not be shown in the conveyance deeds, but only the guidance value will be shown for registration and the remaining sale consideration amount will be taken in cash or in any other manner. Therefore, the petitioner will not have any hold over the amount to be realized by selling the apartments allotted to the share of respondent No.1 as per JDA. The petitioner is ready and willing to get the matter settled amicably through the process of arbitration. Hence, on these grounds the petitioner has sought an interim measure of protection and injunction.
8 Com.A.A.No.46/2019
9. In pursuance to the notice of the petition, the respondents No.1, 2 and respondent No.7 have appeared through their respective counsels and it is the respondents No.1 and 2 who have resisted the petition by filing their common statement of objections. Inspite of service of notice of the petition upon the respondents No.3 to 5 and respondents No.8 to 10, they have failed to appear and contest the petition. The respondents No.8 to 10 have been placed exparte.
10. The respondents No.1 and 2 have filed their common statement of objections and denied the allegations made by the petitioner. The existence of the partnership firm i.e., respondent No.1 is admitted.
11. It is the case of the respondents No.1 and 2 that as per clause No.4 of the partnership deed, the partners shall bring in such amounts as required by the firm from time to time as capital of the firm and the profit and loss shall be shared in the proportion of 50% each, but the petitioner has never invested any money towards capital of respondent No.1. The petitioner has not placed any materials to show his investments towards the capital of respondent No.1. The very purpose of constituting the respondent No.1 firm was to bring the monetary contribution for the project of construction of 9 Com.A.A.No.46/2019 residential apartments, but the petitioner after entering into partnership has remained elusive and ignorant and failed to make any investment. It is the respondent No.2 who has borrowed money from the market and invested in the firm and are facing series of litigation and cheque bounce cases as partner of the firm.
12. As per clause 11 of the partnership deed, the petitioner has to devote time, attention and money for the conduct of the business of the firm the petitioner having failed to do so is estopped from seeking any relief under the partnership deed. The act of the petitioner goes to show that the partnership deed was made only for the purpose of project of construction of residential apartments in the suit schedule 'A' property and the petitioner has no right to seek any share in the profits of the firm till the firm is dissolved.
13. It is also the contention of respondents No.1 and 2 that partners shall work out his remedy by seeking dissolution of firm or for rendition of accounts and settlement of his share/contribution which he has invested at the time of entering into the partnership deed. Unless and until the share of the respondent is determined in the profits as well as loss, there is no question of petitioner claiming the reliefs. Till the completion of the execution of the sale deeds and 10 Com.A.A.No.46/2019 discharge of liabilities of the firm, the question of sharing the profit will not arise. The act of the petitioner is only to exert criminal pressure on the respondents for illegal gain, which amounts to abuse of process of law. The respondent No.2 has maintained all the relevant documents and after execution of the sale deeds in favour of intending purchasers and until the final audit of the accounts of the firm is done, there is no question of sharing the profits. It is the respondent No.2 who has struggled and suffered at the hands of the lenders with whom he has raised money for the completion of the project. The respondent No.2 is still facing court cases at various places and the petitioner without involving in any of the liabilities of the firm is not eligible to claim the reliefs. The petition is filed only to harass the respondent. The petitioner is guilty of suppression of material facts and non disclosure of true facts amounts to perjury and contempt. The cause of action for the petition and the rest of averments of the petition are denied.
14. The execution of the sale deed dated 06.06.2017 in favor of respondents No.3 and 4 and the execution of agreements of sale as averred in the petition are admitted. Hence, on these grounds the respondent No.1 and 2 have prayed to dismiss the petition.
11 Com.A.A.No.46/2019
15. Based on the contentions of the respective parties and the materials available on record, the following points arise for my consideration:-
(1) Whether the petitioner has made out sufficient grounds for grant of an interim measure of protection of injunction as claimed in the petition as per Sec.9 of the Arbitration and Conciliation Act, 1996 ? (2) What Order ?
16. Having heard the arguments of both the counsels and considering the entire materials available on record, I answer the above points as under:
Point No. 1 : - In the Affirmative
Point No. 2 : - As per my final orders for
the following reasons.
REASONS
17. Point No.1:- Before proceeding my discussion with respect to the allegations and counter allegations made by the parties to the proceedings, it is necessary to take note of the admitted facts. The fact that the respondent No.1 is a registered partnership firm by virtue of the partnership dated 07.05.2012 and the petitioner and respondent being the partners are entitled for 50% of the share each is not disputed. It is also not in dispute that the respondent No.1 firm has entered into a JDA in respect of schedule 'A' property 12 Com.A.A.No.46/2019 with the owner of the property and the respondent No.1 has got 50% of share in the super built up area. The construction work done by the respondent No.1 in terms of JDA is also not disputed. The fact that the respondent No.2 representing the respondent No.1 has sold apartment No.1 by virtue of sale deed dated 06.02.2017 in favour of respondent No.3 and 4 and also entered into agreements as stated in para No.6 of petition is an undisputed fact.
18. On the one hand the petitioner claims that as per the partnership deed the respondent No.2 is not permitted to deal with the property of the firm without the consent of the petitioner and alleged that the respondent No.2 has illegally executed the sale deeds and agreements without his consent. The petitioner also claims that he is entitled for 50% share in the firm and he is deprived of the same by the act of the respondent No.2. On the other hand it is the contention of the respondents No.1 and 2 that the petitioner has not at all invested any money towards the capital of respondent No.1 and it is the respondent No.2 who has borrowed money from the market and invested the same in the firm and is facing series of litigation as a partner of the firm. It is also the contention of the respondents No.1 and 2 that the petitioner without making any investment and without devoting his 13 Com.A.A.No.46/2019 time to the affairs of business of respondent No.1 is not entitled for the reliefs and he has to workout his remedy by seeking dissolution of the firm or for rendition of accounts. Unless and until the share of the petitioner and respondent No.2 in the firm is determined, the petitioner is not entitled for any reliefs.
19. The averments of the petition and the materials available on record disclose that the nature of dispute between the parties is a 'commercial dispute' as defined U/s 2 (1) (c) of the commercial courts act, 2015 and the specified value of the subject matter of the dispute between the parties is more than Rs.3,00,000/- as prescribed U/s 2 (1) (i) of the said act and hence, this court has jurisdiction to entertain the suit.
20. In order to appreciate the rival contentions of the respective parties it is necessary to go through the provisions of the Sec.9 of the Arbitration and Conciliation Act 1996.
9. Interim measures, etc. by Court.--A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court
--
(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or 14 Com.A.A.No.46/2019
(ii) for an interim measure of protection in respect of any of the following matters, namely:--
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.
21. As per Sec.9 of the Arbitration and Conciliation Act, 1996, the parties are permitted to seek interim measure in order to safeguard their interest if the other party violates the terms and conditions of the agreements. Any contracting party is at liberty to file an application U/s 9 of the said act for interim measure during or before the arbitration proceedings. Merely because there is an arbitration agreement between the parties to the suit is not sufficient to grant an interim relief. The party who has no intention to 15 Com.A.A.No.46/2019 ultimately refer the dispute to arbitration and seek final relief cannot be permitted to seek interim relief. 16 Com.A.A.No.46/2019
22. The petitioner along with the petition has furnished the original partnership deed dated 07.05.2012, which is not at all disputed. On going through the said partnership deed the petitioner and the respondent No.2 have formed the partnership firm of respondent No.1 and the firm shall engage in the real estate business. The place of business and all the particulars of the petitioner and respondent as well as the terms and conditions on the basis of which the firm shall run have been mentioned. The terms of the partnership also discloses that the partnership is at will and the petitioner and the respondent are having 50% share each in the profit and loss of the firm. The petitioner has also furnished the JDA agreement dated 10.06.2014, under which the respondent No.1 has entered into a JDA in respect of schedule 'A' property with the owner of the property by name Smt. Nirmala. A. Patil. The petitioner has furnished the copy of the sale deed and various agreements of sale in respect of the apartments constructed under the JDA. Now it is the allegation of the petitioner that the respondent No.2 is alienating the apartments without his consent which affects his share in the firm. When such being the allegations of the petitioner, it clearly goes to show that a dispute has arisen 17 Com.A.A.No.46/2019 between the petitioner and the respondent No.2 in respect of the business of the respondent No.1 firm.
23. On the one hand the petitioner claims that he has invested money in the respondent No.1 firm and on the other hand the respondent No.2 claims that it is he who has invested the money in the respondent No.1 firm and no investment has been made by petitioner. On going through the partnership deed as per clause 4, the partners shall bring in such amounts as required by the firm from time to time towards the capital of firm and as per clause 8 the ratio of sharing between the petitioner and respondent No.1 in profit and loss is 50% each. On the basis of the materials available on record the percentage of investments made by the respective parties cannot be ascertained at this stage. Even the respondent No.2 has not placed any materials to show the actual investment made by him. Hence looking to the allegations of the petitioner and the counter allegations of the respondent No.2, a dispute arisen between the petitioner and the respondent No.2.
24. As per clause 15 of the partnership deed deals with the resolution of dispute through the process of arbitration. As per the said clause any dispute in connection with the partnership or deed of agreement arising between the 18 Com.A.A.No.46/2019 partners or anyone of them or their legal representatives whether during or after the partnership shall be referred to an arbitrator to be appointed under the provisions of Indian Arbitration Act, 1940.
25. At this stage it is necessary to go through the judgment of the Hon'ble High Court of Orissa reported in 2006 SCC online Orissa 68, wherein the Hon'ble High Court has discussed the requirement of Sec.9 of the Arbitration and Conciliation Act, 1996. In the said judgment the Hon'ble High Court at para No.29 has discussed that :
" The order U/s.9 can be passed by way of an interim measure of protection before or during the arbitral proceeding or at any time after making of arbitral award but before it is enforced in accordance with Sec.36 of the Act. So, it is an interim measure of protection. The act is implicit that the dispute must have arisen, it si referable to arbitration tribunal and when an application U/s.9 is filed before commencement of the arbitral proceeding, there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceeding, if at the time when application U/s.9 is filed, the proceeding has not commenced U/s.21 of the Act. While 19 Com.A.A.No.46/2019 exercising the jurisdiction U/s.9, the court should satisfy itself that effective steps have been taken to commence the arbitral proceeding. The court could also pass a conditional order to put the applicant to such term as it may deem fit with a view to see that steps".20 Com.A.A.No.46/2019
"The party having succeeded in securing an interim measure of protection before arbitral proceedings cannot afford to sit and sleep over the relief, conveniently forgetting the 'proximately contemplated' or 'manifestly intended' arbitral proceedings itself. If arbitral proceedings are not commenced within a reasonable time of an order U/s.9, the relationship between the order U/s.9 and the arbitral proceedings would stand snapped and the relief allowed to the party shall cease to be an order made 'before' i.e., in contemplation or arbitral proceedings. The court, approached by a party with an application U/s.9, is justified in asking the party and being told how and when the party approaching the court proposes to commence the arbitral proceedings. Rather, the scheme in which Sec.9 is placed obligates the court to do so. The court may also while passing an order U/s.9 put the party on".
26. The petition came to be filed on 04.04.2019 seeking an interim measure of protection. The petitioner has furnished the copy of the order of Hon'ble High Court of Karnataka dated 17.11.2020 passed in civil Mis.No.156/2020 along with the memo dated 11.07.2022. On going through 21 Com.A.A.No.46/2019 the said order the petitioner herein had filed a petition under section 11 (5) of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator and the said petition came to be allowed on 17.11.2020 by appointing the arbitrator. The petitioner herein has initiated the process of arbitration.
27. It is an established principle of law that in order to get the relief of injunction the petitioner has to make out prima-facie case and the balance of convenience should lean in favour of petitioner. The prima-facie case means that there are issues to be tried and points and pleas to be decided and determined by the court.
28. On going through the materials available on record, it reveals that the petitioner has already invoked arbitration as per the orders passed by the Hon'ble High Court of Karnataka in civil Mis.No.156/2020. A dispute has arisen between the parties to the partnership deed in respect of schedule properties. When such being the facts of the case the properties of the respondent No.1 firm should be kept intact. Under the facts and circumstances of the case, the petitioner is entitled for injunction as claimed in the petition as an interim measure of protection till disposal of the arbitration proceedings constituted as per the order of the Hon'ble High Court or further orders of the learned arbitrator. 22 Com.A.A.No.46/2019 The contention of the respondent No.2 that unless and until the petitioner seeks for dissolution of firm or rendition of accounts, the petitioner cannot seek any relief is not acceptable.
29. It is also the contention of the respondent No.2 that the petitioner had approached the Hon'ble High Court by filing a CMP in which the arbitrator has been nominated the arbitral tribunal has been constituted and once the tribunal is constituted, this court losses its jurisdiction. On bare reading of Sec.9 of the act a party may, before or during arbitral proceedings or at any time after the making of arbitral award, but before it is enforced in accordance with Sec.36 of the act applied to the court seeking interim measure of protection. It is a fact to be noted that the present petition seeking interim measure of protection has been filed on 04.04.2019 and the petitioner has filed the civil Mis.Petition No.156/2020 under section 11 for appointment of the arbitration in the year 2020 and the final order came to be passed on 17.11.2020. according to the petitioner the respondent No.2 is yet to appear before the aribtral tribunal. Hence under the facts and circumstances of the case the court is empowered to grant an interim measure of protection during the course of 23 Com.A.A.No.46/2019 the arbitral proceedings that is to protect the subject matter of property of the arbitral agreement.
30. On going through the averments of the petition and the entire materials available on record the petitioner has made out sufficient grounds for grant of an injunction as prayed in the petition. In otherwords the petitioner has made out a prima-facie case. The balance of convenience also leans in favour of the petitioner. If the interim measure of protection as prayed in the petition is not granted, it is the petitioner who will be put to irreparable injury. Hence, under the facts and circumstances of the case the petitioner is entitled for interim measure of protection as prayed in the petition. Hence, I answer the above point in the 'Affirmative' and proceed to pass the following;
ORDER
The petition filed by the
applicant/petitioner U/s 9 of the Arbitration and Conciliation Act, 1996 is hereby allowed.
It is hereby ordered that the respondents No.1 and 2 are restrained by an order of injunction from alienating the 24 Com.A.A.No.46/2019 apartments Nos.102, 301, 302, 502 and 503 described in the schedule of petition either by way of sale, gift, mortgage etc., till further orders of the learned arbitrator in arbitration proceedings commenced as per the order of the Hon'ble High Court passed in CMP.No.156/2020.
[Dictated to the stenographer online, transcribed & computerized by her, corrected on computer and signed by me then pronounced in the Open Court, dated this the 30th day of August, 2022] (SUNIL.A.SHETTAR) LXXXVI Addl. City Civil Judge Bangalore.