Bangalore District Court
Geetha K vs Iftekar Ahmed on 17 January, 2024
47
Com.A.A.No.186/2023
KABC170010772023
IN THE COURT OF LXXXII ADDL. CITY CIVIL & SESSIONS
JUDGE, AT BENGALURU (CCH. 83)
THIS THE 17th DAY OF JANUARY 2024
PRESENT:
SUMANGALA S. BASAVANNOUR., B.COM, LL.M.,
LXXXII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com. A.A. No. 186/2023
BETWEEN:
1. Ms. K Geetha
Partner at M/s Spektrum
Having its registered
office at: 104/2,
Tavarakare Main Road, SG
Palya, DRC Post
Bangalore-560 029
2. Ms. Bilquees Bilal
Partner at M/s Spektrum
Having its registered
office at: 104/2,
Tavarakare Main Road, SG
Palya, DRC Post
Bangalore-560 029
3. Mr. S.K. Ramesh
Partner at M/s Spektrum
Having its registered
office at: 104/2,
47
Com.A.A.No.186/2023
Tavarakare Main Road, SG
Palya, DRC Post
Bangalore-560 029
: APPLICANT
(Represented by Sri.Shujath
Ahmed, Advocate)
AND
1. Mr.Iftekar A. Ahmed
#61, 3rd Cross, 16th 'A'
Main, Koramangala 4th
Block, Bangalore-560034
Also at:
No.38, Xavier Layout
Vivek Nagar Post Office
Bangalore-560047
2. Mrs. Tabassum Tayab
#61, 3rd Cross, 16th 'A'
Main Koramangala 4th
Block Bangalore-560034
3. Federal Bank Limited
Represented by its Branch
Manager, No.104/2,
Ground Floor, Chocolate
Factory Road, 1st Main
Road, Tavarekere,
Bengaluru-560029.
: RESPONDENTS
(R1 and R2 are represented by
Sri.M.R.Narayanan, Advocate).
Date of Institution 19.04.2023
47
Com.A.A.No.186/2023
Sec.9 of Arbitration and
Nature of the petition
Conciliation Act, 1996
Date on which the judgment 17.01.2024
was pronounced
Total Duration Years Months Days
00 08 29
LXXXII Addl. City Civil & Sessions Judge,
Bengaluru.
ORDERS
This Petition is filed by the applicants U/s 9 of the
Arbitration & Conciliation Act 1996 for the following reliefs -
(a) To direct respondent No.3 bank to resume the
banking operations of the Firm's Current Account
bearing No.16590200003129.
(b) To direct respondent No.1 to furnish and render
all KYC documents to respondent No.3 bank and
cooperate with the applicants for the timely
resumption of banking operations of the Firm's
Current Account bearing No.16590200003129.
(c) To restrain respondent No.1, his servants, agents,
affiliates, henchmen or any person/s claiming
through him from interfering with the affairs of
47
Com.A.A.No.186/2023
M/s.Spektrum and causing any hindrance
whatsoever to the operation of the Firm.
(d) To restrain respondent No.1 from entering the
premises of the partnership firm located at 104/2
Tavarakare Main Road, DRC Post, Bangalore 560029.
(e) To restrain respondent No.1, his servants, agents,
affiliates, henchmen or any person/s claiming
through him from soliciting, directly or indirectly, any
clients of M/s.Spektrum in any manner whatsoever.
(f) To restrain respondent No.1, his servants, agents,
affiliates, henchmen or any person/s claiming
through him from operating the competing business
under the name and style "M/s.Grafitek" or such
other similar businesses which are in the same line
of business as that of M/s.Spektrum.
(g) To direct the respondent No.1 to provide true and
faithful books of accounts pertaining but not limited
to invoices, purchases, job cards, delivery challans,
bank statements, etc. of M/s. Spektrum from FY 2017
to 2021 and cooperate with the firm's
comprehensive audit of accounts.
2. The Brief facts as narrated in the Petition are as under:-
(a) The applicants are the partners of the Partnership Firm
by the name and style "M/s Spektrum" registered under the
Partnership Act. Applicants No.1 and 2 have authorized the
47
Com.A.A.No.186/2023
applicant No.3 to duly represent them before this court.
Respondent No.1 while being a partner at Spektrum, has
maliciously commenced a competing business as that of the
firm under the name and style "Grafitek" and has been carrying
activities that are antithetical to the interests of the firm. The
respondent No.2 is the wife of respondent No.1 and is also a
partner at Spektrum. The respondent No.2 has not contributed
to the affairs of the firm from several years. The respondent
No.3 is a scheduled commercial bank that provides retails and
corporate banking services to the partnership firm.
(b) Pursuant to the reconstitution of the firm, with a larger
interest to increase the profitability of the firm and keeping in
mind applicant No.3 and respondent No.1's expertise in running
a printing business, both applicant No.3 and respondent No.1
were given the entire authority and responsibility to manage all
the affairs of the firm. While applicant No.3 and respondent
No.1 oversaw all operations of the firm, applicant No.3 was
specifically taking care of production and respondent No.1 was
mainly in charge of the firm's sales and marketing. The
applicants have time and again made substantial capital
investments in the best interest of the firm. However, despite
being fully aware of the firm's critical requirements and despite
multiple requests made by the applicants to infuse funds, to the
47
Com.A.A.No.186/2023
detriment of the other partners and the firm, at no point in time
were any investments/contributions made either by the
respondents No.1 or 2; thereby crippling the financial stability
and growth of the firm. During the course of the firm's
operations, more so pursuant to applicant No.3 also taking up
the task of sales and marketing for the firm, it was observed
that respondent No.1 was reluctant to share details of the
clients serviced by him. While the respondent No.1 continued to
service his clients through the firm, there was a conscious effort
by respondent No.1 not to reveal full details of the clients,
purchase orders, invoices, procurement, printing, delivery,
collections, etc. and a certain amount of secrecy was
maintained by him with regards to all dealings with clients
serviced by him.
(c) When the respondent No.1 was confronted regarding this
unexplained veil of secrecy, the respondent No.1 emphatically
informed the applicants that it was his responsibility to bring
business for the firm and that he would not appreciate being
questioned for the same. Further, respondent No.1 made it clear
that he will not tolerate applicant No.3's interference in his
affairs, especially with regard to inquiring about the details of
the clients being serviced exclusively by respondent No.1. From
the year 2017, a drastic change in respondent No.1's approach
47
Com.A.A.No.186/2023
towards the firm was noticed, whereby, respondent No.1 was
not regular in attending the affairs of the firm. When confronted
regarding the respondent No.1's absence, he maintained
utmost secrecy and refused to divulge any details regarding the
clients serviced by him. That during this time, the applicants
observed that there was a gradual decrease in the inventory of
the firm, while the printing costs of the firm was increasing
which was not co-relating to the revenue generated through
clients serviced by the respondent No.1. It was gradually also
observed that clients who used to do regular business with the
firm through the respondent No.1, started diminishing. This
gradual slowdown in respondent No.1's contribution to the
firm's revenue was portrayed by the respondent No.1 to be
associated with market contingencies and he assured the
applicants that the business will improve over a period of time.
(d) Despite there being significantly less contribution from
the respondent No.1 towards business operations since 2017,
there was a steep increase in respondent No.1's salary
withdrawals and loans availed from the firm's account. Further,
applicant No.3, in addition to observing certain pilferage in the
printing costs of the firm, also noticed the advent of respondent
No.1's "new client" by the name and style M/s Grafitek doing
business with the firm. That a lot of material was being supplied
47
Com.A.A.No.186/2023
by the firm to the said M/s Grafitek. The applicants trusting
respondent No.1's judgment to be in the best interest of the
firm, did not question any of his actions.
(e) Respondent No.1's absence in the firm was rampant from
2017 to 2020; pursuant to the pandemic, since May 2020, the
respondent No.1 has not attended office, nor has taken any part
in the affairs of the firm. When the applicants attempted to
contact respondent No.1, evasive replies were given, he
expressed his sheer lack of interest in any further participation
with the affairs of the firm. Having been left stranded, due to
respondent No.1's absence, the business of the firm continued
to get affected and applicant No.3 had to step in to take charge
of the entire affairs of the firm. During a routine check on the
inventory and accounts of the firm in August 2022 conducted by
the applicants, it was observed that there were several invoices
raised by the firm on M/s Grafitek that were drastically under-
billed. Products that were generally billed to other clients at a
certain standard price, were substantially/grossly under-billed to
M/s Grafitek. Upon a closer review it was observed that since
April 2017 to December 2019, there were various transactions
with M/s Grafitek, and much to the surprise and dismay of the
applicants it was noticed that there was rampant under-billing
and products were sold to M/s Grafitek much below cost and at
47
Com.A.A.No.186/2023
a throwaway price. On a careful review of the job cards, it was
noticed that only the ultimate customer's name was mentioned,
but all these job cards were towards invoices that were
eventually raised by the firm on M/s Grafitek at a substantially
under-billed price.
(f) However, the applicants were not provided with any
acceptable reasons for under-billing but were instead faced with
evasive replies from respondent No.1. Upon conducting a
background check on the credentials of M/s Grafitek, much to
the shock and dismay of the applicants, it was observed that
Ms/ Grafitek was an entity incorporated by the respondent No.1
in 2017, having its registered office at No.61, 3 rd Cross, 16th A
Main Koramangala, Bangalore, which happens to be the
residential address of respondent No.1's father-in-law. Hence, it
became clear to the applicants that the modus operandi
adopted by the respondent No.1 was to make illegal gains to
maliciously cater to the ultimate customers through M/s
Grafitek, by getting all products printed at the firm and under-
billing M/s Grafitek at a throwaway price and thereafter billing
the ultimate customers through M/s Grafitek at a substantially
higher price. Printout of Ms/ Grafitek's GST details clearly
demonstrating that the respondent No.1 is the proprietor of M/s
Grafitek. In addition to under-billing the products sold to M/s
47
Com.A.A.No.186/2023
Grafitek, the respondent No.1 has also resorted to clandestinely
using the firm's printing unit to print unaccounted products at
the cost of the firm.
(g) On further review of the job cards raised by the
respondent No.1 at his instance, there were multiple printing
activities/jobs carried on in the firm's printing unit, but the same
were never accounted for or billed to the firm. These printing
activities were carried on at the firm and the entire printing cost
was attributed to the firm without any revenue, while the
products were delivered unbilled to M/s Grafitek. The applicants
were also surprised to note that not only was the firm supplying
products to M/s Grafitek at a throwaway price, but the firm was
also purchasing fictitious products/services from M/s Grafitek at
an exorbitant cost. It is apposite to note that although the firm
has its own vendors who sell these products at a competitive
price, yet the respondent No.1 to unjustly enrich himself has
created fictitious orders and made payments to M/s Grafitek for
products that were never actually supplied by M/s Grafitek.
Despite the firm having its own comprehensive printing unit,
supported by its own in-house dedicated designing team, the
respondent No.1 has clandestinely made payments to M/s
Grafitek on the alleged pretext of outsourcing the printing and
designing work to the respondent No.1's entity i.e. M/s Grafitek.
47
Com.A.A.No.186/2023
The respondent No.1 has fraudulently diverted funds from the
firm to M/s. Grafitek under the garb of M/s. Grafitek supplying/
rendering services to the firm. It is clear that the respondent
No.1 has misappropriated funds from the firm towards making
illegal payments to M/s Grafitek.
(h) All the clients who were doing business with the firm
have been gradually and strategically diverted by respondent
No.1 to M/s.Grafitek, to the detriment of the firm. During
respondent No.1's tenure at the firm, the respondent No.1 in
collusion with the firm's accountant Mr.Muqthiar Ahmed,
strategically/systematically diluted funds from the firm and
deliberately took away several records of the firm only with an
intention to try and hide the financial irregularities and serious
frauds committed by them. As per the preliminary audit of
accounts, the applicants have tabulated a tentative list of
claims against respondent No.1 in addition to his liability to
indemnify the applicants for all the losses caused to the firm.
Sl.No. Heads of Claim Amounts (Rs.)
1 Towards under billed sales by the 59,46,947/-
Firm to M/s Grafitek
2 Towards cost incurred by the Firm 27,71,759/-
in unbilled sales to M/s Grafitek
3 Towards illegal payments made
from the Firm's account to 8,17,658/-
47
Com.A.A.No.186/2023
purchase fictitious products /
services from M/s Grafitek
4 Towards amount officially due 2,97,908/-
from M/s Grafitek to the firm
5 Towards loan availed by the Firm
through Mr.Rehman Baig in 13,79,840/-
servicing your client Flipkart and
Instakart
6 Towards excess salary drawn from 8,02,912/-
2017 to 2021
7 Towards loans availed from the 9,63,217/-
Firm
8 Towards unexplained credit notes 18,67,830/-
raised on Instakart
9 Towards receivables from various
clients serviced by the 47,76,564/-
Respondent No.1 through the Firm
TOTAL 1,96,24,635/-
(i) Having met with evasive replies from the respondent No.1
on the various financial irregularities committed by him, the
applicants were compelled to get a legal notice dated 19 th
October 2022, issued to the respondent No.1. Apart from calling
upon the respondent No.1 to pay the above mentioned heads of
claims, the legal notice also called upon the respondent No.1 to
cease and desist all operations of M/s Grafitek and provide
accounts of profits made by Grafitek, refrain from soliciting any
clients of the firm, along with other heads of claims as detained
in the legal notice dated 19.10.2022. Vide the said legal notice,
the applicants also called upon the respondent No.1 to come
47
Com.A.A.No.186/2023
forward and participate in a comprehensive audit by providing a
full and faithful rendition of the books of accounts pertaining
but not limited to invoices, purchases, job cards, delivery
challans, bank statements, etc. of M/s Spektrum from FY 2017
to FY 2021.
(j) Pursuant to the receipt of the legal notice dated 19 th
October 2022, instead of sending a reply to the counsels,
respondent No.1 sought to address an untenable reply to the
applicants vide his reply dated 7th November 2022. The
respondent No.1's reply was deafeningly silent on Grafitek and
all the fraudulent activities detailed in the legal notice. The
respondent No.1, vide the above mentioned reply, had also
threatened the applicants that he will not hesitate to write to
the bankers to stop the operation of the firm's bank accounts
and also threatened to write to other authorities to cancel the
firm's registrations. Based on respondent No.1's advice and his
vexatious threat of ceasing the banking operations of the firm,
with a profound anticipation that all differences would be
amicably resolved, the applicants made sincere efforts to
arrange for a meeting. However, as a prerequisite to even come
forward for the meeting that was proposed by the respondent
No.1 himself, the respondent No.1 insisted that the applicants
instruct their counsels to withdrawal the legal notice dated 19 th
47
Com.A.A.No.186/2023
October 2022. In view of the respondent No.1's offer to explore
settlement, the applicants in good faith had instructed their
legal counsels to keep in abeyance the operation of the legal
notice , till such time the negotiations were ongoing. However,
the applicants' gesture in coming forward for the meeting,
based on respondent No.1's advice, was wrongly perceived by
respondent No.1 to be the applicants' weakness and the
respondent No.1 started putting forth unreasonable and
untenable demands even before coming forward for the
meeting that was proposed by respondent No.1 himself.
(k) Despite suspension of the operation of the legal notice,
respondent No.1 did not come forward for the purported
meeting that was suggested by the respondent No.1 himself. On
the contrary, respondent No.1 issued a letter dated March 09,
2023, whereby various bald, frivolous and vexatious allegations
were raised against the applicants and with an intention to
further arm-twist and coerce the applicants into heeding to the
respondent No.1's unconscionable demands, the respondent
No.1 insisted that the applicants unconditionally withdraw the
legal notice. Apart from having threatened the applicants to get
the firm's bank accounts stopped, actually proceeded to inform
the respondent No.3 i.e., Federal Bank to cease the banking
operations of the firm under the pretext that the respondent
47
Com.A.A.No.186/2023
No.1 was no longer a partner of the firm. Acting upon the
instructions of the respondent No.1, the respondent No.3 Bank
has requisitioned the KYC documents of all the partners of the
firm and since the KYC details of respondent No.1 were
deliberately not furnished, the respondent No.3 Bank proceeded
to suspend the banking operations of the firm's current account
bearing No.16590200003129, thereby bringing a complete
standstill to all operations of the firm.
(l) Further, respondent No.1 was also called upon to forthwith
render all his KYC documents to the respondent No.3 bank and
cooperate to resume the operations of the firm's suspended
bank account. As things stood thus, with a view to protract the
matter, the respondent No.1, instead of complying with the
legal notices, issued another frivolous response vide his letter
dated April 12, 2023, trying to trivialize the serious issues
detailed in the legal notices. Due to the vengeful conduct of
respondent No.1, the entire business operations of the firm
have come to a complete standstill. Suspension of the firm's
bank account has crippled the firm and the applicants are hard
pressed for cash even to pay its employees and vendors. It is
apposite to mention that the applicants employ about 41
employees in its printing press and owing to the antithetical
acts of respondent No.1, the livelihoods of the partners, their
47
Com.A.A.No.186/2023
employees, vendors are seriously and irreparably affected.
Furthermore, due to the suspended bank account, the firm is
not even in a position to file its GST returns, pay rentals,
electricity bills etc. for the premises. The virtual shutdown of
operations of the firm has crippled the firm and has caused
irreparable injury to its reputation and threatens the very
existence of the firm. From the conduct of the respondent No.1
in leaving no stone un-turned to cause prejudice and harm to
the firm, clearly demonstrates that if respondent No.1 is not
refrained from interfering with the business of the firm, the
applicants will suffer irreparably injury and extreme hardship,
thereby threatening the very existence of the firm.
(m) In view of clause 14 of the partnership deed dated
19.06.1995 wherein the parties have agreed to refer disputes to
be adjudicated by a sole arbitrator. Under the circumstances
pleaded herein above and considering the conduct of the
respondent No.1 in thwarting the operations of the firm and
acting against the common interests of the firm, the applicants
have demonstrated a prima facie case against the respondent
No.1. The applicants have a just and valid claim against
respondent No.1 and that there is a likelihood that the
applicants shall succeed in their claims against the said
respondent No.1. Hence, this petition.
47
Com.A.A.No.186/2023
3. The 1st respondent has filed statement of objection
contending that the disputes between parties started in the
year 2017. This fact is forthcoming in para 9 to 15 and para 14.
Despite this fact, the above referred application was filed on
19.04.2023 i.e., one day earlier to summer vacation of the
courts. Furthermore, the applicant moved the Hon'ble High
Court of Karnataka, during vacation when this court granted
partial relief on I.A.No.2 and obtained an order to make certain
payments from the third respondent's bank. However still
today, applicant has not bothered to take any steps to refer the
dispute to arbitration. What is more important is that none of
the prayers are by way of interim measures to protect the
applicant's interest but are made with an ulterior motive to
keep the respondents away from the business activities of the
firm but without severing the respondent's liabilities as a
partner of the firm. As per the financial statements submitted to
the High Court of Karnataka, the firm has incurred a loss of
Rs.22,51,218.22 for the year ending 31.03.2022. Another
admitted fact emanating from paragraph 14 is the first
respondent is prevented by force from participating in business
of the firm since 2017. Hence, the respondent No.1 prays to
dismiss the application.
47
Com.A.A.No.186/2023
4. The respondent No.3 Bank is a formal party and has not filed
any objections. Respondent No.3's Senior Manager present
before this court on 21.06.2023 and stated that the bank will
act as per the order of this court.
5. Heard arguments.
6. Based on the contentions of the respective parties, and the
materials available on record, the following point arises for my
consideration:-
(1) Whether the petitioners are entitled for the
relief sought in the petition?
(2) What Order?
7. My findings are as follows:-
Point No. 1 : - In the Partly Affirmative.
Point No. 2 : - As per my final orders for
the following reasons.
REASONS
8. Point No.1: Section 9 of the Arbitration and Conciliation
47
Com.A.A.No.186/2023
Act, 1996 reads as under :
"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 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
47
Com.A.A.No.186/2023
before it."
9. It is pertinent to note that this court has passed an exparte
ad interim order of temporary injunction restraining the
respondents No.1 and 2 from interfering with the affairs of M/s
Spektrum and causing any hindrance whatsoever to the
operation of the firm, till next date of hearing and this court has
rejected the prayer of the applicant for directing the respondent
No.1 to furnish and render all KYC documents to respondent
No.3 bank. It is also evidenced from the records that the
petitioner challenged this order before the Hon'ble High Court.
The Hon'ble High Court of Karnataka has passed the following
order in Com.A.P.No.169/2023 dated 16.06.2023:
"The parties undertake to appear before the
Commercial Court on 21.06.2023. The Commercial
Court is directed to deal with the prayer of the
appellants for permitting it to operate the accounts
of the firm expeditiously."
10. Advocate for respondent No.1 and 2 submitted no
objections to I.A.No.2 to an extent of Rs.28,02,585/- as per the
order of Hon'ble High Court and also submitted that no
objection for operating the firm account bearing
No.16590200003129 by the applicant in respect to salary and
day to day expenses. In view of the submission of the
47
Com.A.A.No.186/2023
respondent I.A.No.2 allowed. Respondent No.3 directed to
resume the banking operations of firms. Applicant is permitted
to operate the firm account only in respect of the salary and
day to day expenses till the disposal of this petition.
11. It is the case of the petitioner that the respondent No.1
and petitioner No.3 are the managing partners of the of M/s
Spektrum firm. The respondent No.1 was looking after the sales
and marketing. From the year 2017, a drastic change in
respondent No.1's approach towards the firm was noticed,
whereby, respondent No.1 was not regular in attending the
affairs of the firm. during this time, the applicants observed that
there was a gradual decrease in the inventory of the firm, while
the printing costs of the firm was increasing which was not co-
relating to the revenue generated through clients serviced by
the respondent No.1. It was gradually also observed that clients
who used to do regular business with the firm through the
respondent No.1, started diminishing. The applicant No.3
noticed the advent of respondent No.1's "new client" by the
name and style M/s Grafitek doing business with the firm. That
a lot of material was being supplied by the firm to the said M/s
Grafitek. During a routine check on the inventory and accounts
of the firm in August 2022 conducted by the applicants, it was
observed that there were several invoices raised by the firm on
47
Com.A.A.No.186/2023
M/s Grafitek that were drastically under-billed. Products that
were generally billed to other clients at a certain standard price,
were substantially/grossly under-billed to M/s Grafitek. These
printing activities were carried on at the firm and the entire
printing cost was attributed to the firm without any revenue,
while the products were delivered unbilled to M/s Grafitek. the
firm was also purchasing fictitious products/services from M/s
Grafitek at an exorbitant cost. The respondent No.1 has
clandestinely made payments to M/s Grafitek on the alleged
pretext of outsourcing the printing and designing work to the
respondent No.1's entity i.e. M/s Grafitek. The petitioners have
categorically stated that as per the preliminary audit of
accounts, the petitioners have tabulated a tentative list of
claims against the respondent No.1 in addition to his liability to
indemnify the petitioners for the losses caused to the firm:
Sl.No. Heads of Claim Amounts (Rs.)
1 Towards under billed sales by the 59,46,947/-
Firm to M/s Grafitek
2 Towards cost incurred by the Firm 27,71,759/-
in unbilled sales to M/s Grafitek
3 Towards illegal payments made
from the Firm's account to 8,17,658/-
purchase fictitious products /
services from M/s Grafitek
4 Towards amount officially due 2,97,908/-
from M/s Grafitek to the firm
5 Towards loan availed by the Firm
through Mr.Rehman Baig in 13,79,840/-
47
Com.A.A.No.186/2023
servicing your client Flipkart and
Instakart
6 Towards excess salary drawn from 8,02,912/-
2017 to 2021
7 Towards loans availed from the 9,63,217/-
Firm
8 Towards unexplained credit notes 18,67,830/-
raised on Instakart
9 Towards receivables from various
clients serviced by the 47,76,564/-
Respondent No.1 through the Firm
TOTAL 1,96,24,635/-
12. The respondent No.1 has contended that none of the
prayers are by way of interim measures to protect the
applicant's interest but are made with an ulterior motive to
keep the respondents away from the business activities. But the
respondent No.1 has not specifically denied the allegations of
the petitioner and only contended that the petitioner has not
bothered to take any steps to refer the dispute to arbitration.
13. The learned counsel for the respondent vehemently
argued that the petitioner has stated that the total amount of
Rs.1,96,24,635/- was claimed against the respondent in
addition to his liability to indemnify the petitioners for all the
losses caused to the firm. But the applicant has not produced a
details of under billed sales, unbilled sales, purchase orders for
47
Com.A.A.No.186/2023
fictitious products/services, ledger accounts to shows the
amounts officially due for M/s Grafitek, loan availed by the Firm
through Mr.Rehman Baig in servicing client Flipkart and
Instakart, excess salary drawn from 2017 to 2021, unexplained
credit notes raised on Instakart.
14. In this case, the petitioner has produced original
registration certificate of the petitioner's firm issued by the
Registrar of Firm, original reconstitution deed of the Partnership
firm of the petitioner firm, office copy of the legal notice, reply
notice, letter issued to the legal notice. Except these letters, the
petitioner has not produced any document to shows that total
amount of Rs.1,96,24,635/- is due and liable to pay by the
respondent No.1 for all losses caused to the firm. However, the
respondent No.1 has not denied regarding running the M/s
Grafitek firm. The respondents have not specifically denied the
allegations of the petitioner. So at this stage, whether the
respondents have caused loss to the firm a sum of
Rs.1,96,24,635/-. It is a matter of adjudication before the
arbitration. However, as above discussed, the respondents have
not specifically denied the allegations of the petitioner. At this
stage, on perusal of the correspondences between the
petitioner and respondent and prima facie I hold that the
respondent No.1 has running M/s Grafitek firm and printing
47
Com.A.A.No.186/2023
activities were carried out by the Grafitek.
15. The respondent has also produced reply letter dated
01.08.2023 submitted by the respondent No.1 objecting to the
proposal to appoint Mr.Javed Pasha as Arbitrator instead of
proposing Mr.Vijay Nemichand Sankala, Financial statement of
M/s Spetrum for years ending 31.03.2017 to 31.03.2023, Sales
Invoice of the applicant in favour of M/s Grafitek for the years
2017 to 2020, GSTR2A filed by Spektrum in respect of sales
made to M/s Grafitek, GSTR1 of Grafitek indicating sales made
to Spektrum.
16. Section 9, 10 and 16 of the Partnership Act reads
as under:
Section-9 : GENERAL DUTIES OF PARTNERS : Partners are
bound to carry on the business of the firm to greatest common
advantage, to be just and faithful to each other, and to render
true accounts and full information of all things affecting the firm
to any partner, his heir or legal representative.
Section -10 : DUTY TO INDEMNIFY FOR LOSS CAUSED BY
FRAUD Every partner shall indemnify the firm for any loss
caused to it by his fraud in the conduct of the business of the
firm
Section-16 : PERSONAL PROFITS EARNED BY PARTNERS :
47
Com.A.A.No.186/2023
Subject to the contract between the partners, - (a) if a partner
derives any profits for himself from any transaction of the firm, or
from the use of the property or business connection of the firm or
the firm-name, he shall account for that profit and pay it to the
firm; (b) if a partner carries on any business of the same nature
as and competing with that of the firm, he shall account for and
pay to the firm all profits made by him in that business
17. The Applicant have relied upon the following decisions:
(a) Modern Metal Industries & Ors. Vs Shanti
Parolia & Ors. reported in AIR 2004 All 249
wherein it is held that -
"Case Note : (1) Arbitration and Conciliation Act,
1996 - Sec.9 - Partnership Act, 1932 - Sec.9, 11 and
12 - Interim measure / temporary injunction pending
arbitration - Firm of three partners - Disputes
between two sleeping partners on one hand and one
partner (managing partner - appellant No.2) on other
- Two partners issuing letter to bank for stopping
payment of cheques issued by appellant No.2
whereas appellant No.2 has been solely operating
bank account at Kanpur as two partners are ladies
residing at Calcutta - Two sleeping partners doing so
without any notice to appellant No.2 - Very grave
situation has arisen when business of firm itself
facing imminent danger of being paralysed - Even
majority of partners cannot take decision on behalf of
firm except by inviting view of minority and
consulting minority - not so done but respondent
Nos.1 and 2 acted for malafide and extraneous
reasons - Arbitral dispute is there - prima facie case
47
Com.A.A.No.186/2023
and balance of convenience in favour of appellant
No.2 - Irreparable loss to be caused to firm and
appellant No.2 if temporary injunction pending
arbitration not granted - impugned order of District
Judge set aside - Appellant No.2 permitted to operate
firm's bank account in SBI solely - and respondent
Nos.1 and 2 restrained from interfering with
management of business of firm by appellant No.2.
19. It may be noted that in this letter dated
3.10.2003 it is specifically mentioned that some
disputes and differences have arisen among the
three partners. On the basis of this letter the Bank
issued a letter dated 3.10.2003 stopping payments
from the account of the firm. Copy of that letter is
also part of Annexure-4 to the affidavit filed in
support of the stay application. This letter states that
in view of the letter of respondent Nos. 1 and 2 the
bank has stopped payments due to the disputes
between the partners.
50. In our opinion the Court below has failed to
exercise its discretion reasonably and legally by not
granting interim relief against the respondents. It has
failed to appreciate that while, on the one hand, the
agreement and business among the partners as per
the partnership deed is continuing intact and,
therefore, all partners, both contractually and legally,
stand Still mutually bound to one another and
committed to the welfare of the partnership concern,
on the other hand, respondent Nos. 1 and 2 are
continuing to commit breach of the partnership deed
and agreement by their wholly reckless,
irresponsible, high-handed and non-co-operative acts,
47
Com.A.A.No.186/2023
including the act of getting the payment from the
bank account stopped.
51. In our opinion the said act of the respondent Nos.
1 and 2 amounts to stabbing the appellant No. 2 in
the back inasmuch as he is the managing partner and
is accountable to all the purchasers as well as labour
and workmen and the different Government
departments for the due delivery of products and
payments of salaries, dues, taxes, etc. Knowing this
fully well respondent Nos. 1 and 2 have only adopted
arm twisting tactics upon appellant No. 2 in order to
extract from him a highly exaggerated and exorbitant
price for their shares in the firm. In our opinion the
Court has power coupled with duty to restrain them
from doing so.
52. In our opinion the Court below has failed to
appreciate that the sole bank account of the firm is
the very lifeline of the firm and unless the moneys
deposited therein are allowed to be withdrawn, at
least, for business expenditure purposes, it would be
impossible to run and manage the business of the
firm and to keep its contractual commitments with
the customers within the stipulated periods of time.
53. On the uncontroverted facts of the case, a very
grave and sudden situation has arisen when the
business of the firm itself is facing imminent danger
of being paralysed and, hence we are of the opinion
that an interim injunction under Sec.9 of the Act
should be granted for protection of the firm from
severe crises and imminent danger of its business
coming to a grinding halt resulting in huge and
irreparable loss."
47
Com.A.A.No.186/2023
(b) Novartis Vaccines and Diagnostics Inc. Vs
Aventis Pharma Ltd. reported in (2010) 6
Comp.L.J. 1599 (Bom) wherein it is held that -
"40. The parties have made their respective
interpretation of these various terms and clauses
from their points of view in support of their
submissions. The Court need to take into
consideration all but within the frame of law. The
contract/agreements need to be read as a whole
considering the nature & the purpose of the business.
The clause and the contract as a whole even if is
clear and unambiguous, the court needs to consider
the same in the facts and circumstances of the case.
It is necessary to see relationship between words;
sentences; clauses; chapters and the whole
document. It cannot be read in isolation. The aspect
of faith, trust, fiduciary relationship and
understanding between the parties, just cannot be
overlooked, while interpreting any such private
commercial documents.
41. Admittedly, there is no negative and/or positive
covenant/clause in the agreement in question. The
submission that it is the policy of the law not to
restrain any of the partner or person or Director from
carrying on rival or competing business specially in
the absence of an express negative covenant which
is based upon the policy of the law as provided under
Sec.11(2) of the Partnership Act read with Sec.27 of
the Contract Act, is not acceptable.
42. Considering the scope and purpose and object of
Partnership and/or of Joint Ventures, in my view,
there is equitable duty of a partner or other person
47
Com.A.A.No.186/2023
not to compete with the business of the
Partnership/Company. Merely because there is no
negative covenant, that itself is not sufficient to
permit other partners to do rival or competing
business of the same nature. Sec.9 of the Partnership
Act provides that the partners are bound to carry on
business of the firm to the greatest common
advantage, to be just and faithful to each other, and
to render true accounts and full information of all
things affecting the firm. It is partner's general duty
to be just and faithful to the firm/company. The
mutual rights and duties of the partners of the firm or
the company need to be determined by the contract
between the partners. Such contract may be express
or may be implied by a course of dealing as
contemplated under Sec.11 of the Partnership Act.
Sec.11(2) of the Partnership Act specifies and permit
that such contracts may be providing that a partner
shall not carry on any business other than that of the
firm while he is a partner. This itself means knowing
fully the effect and the purpose of Sec.27 of the
Indian Contract Act, it is permitted to such partners
to agree by express or by implication not to permit
other partners to do any business other than that of
the firm while he is a partner. This does not,
according to me, entitle the other partners to say and
submit that in the absence of any negative covenant
of this nature he is entitled to do competing business
or any other rival business. The party may be agree
that a partner shall not carry on any other business
than that of the firm while he is a partner. This itself
does not mean that in the absence of any agreement/
negative covenant, he is free to do any competing
business, unless agrees specifically by the
47
Com.A.A.No.186/2023
partners/parties, as contemplated under Sec.16, 17,
34, 54 of the Partnership Act and/or even otherwise
as it is always subject contract between the parties. If
both the parties/partners agree and allow other
partners to do the rival or competing business then
only such partner is free to do such permissive rival
business. Such contract between the partners may be
expressly provided and/or may be implied by a
course of dealing, but the submission that in the
absence of negative covenant, they are free to do
rival and competitive business, in my view, affects
the whole purpose and object of the Partnership and/
or Joint Venture. It creates confusion and disturbs the
company's management, structure and the business
and creates all sorts of bad impression and
complications in the market for the supporting
Groups and this internal fight supports the rival
groups. Such competing business cannot be said to
be permissible, unless agreed specifically by the
parties/partners. In absence of specific contract
between the parties, such rival competing business
by one of the Directors and/or the partner creates
more complication than solving and doing the good
business of the company.
43. Both the parties have relied upon the various
Commentaries of Indian, as well as, of the English
Authors and also relied upon various Foreign/Indian
Judgments/Citations. Lindley & Banks on the Law
Partnership (18th Edition), Para 10-91 states as
follows:
"1091 Each partner will normally agree not
only that he will devote his whole time to the
partnership business but also that he will not
47
Com.A.A.No.186/2023
engage in any other business, whether or not
competing with the firm's business"
44. The purpose and object of Partnership and/or
Joint Venture is quite clear and as elaborated in the
following words:
1. A Joint Venture to produce and market a
particular product is in the nature of
partnership. New Horizons Ltd. Vs Union of
India MANU/SC/0564/1995: 1995 (1) SCC 478
at page 494.
2. A Joint Venture partner cannot engage in
any operation harmful to the business in which
partners are engaged as the relationship of
joint venture partner is a relationship of trust
and confidence and subject to the duty of
good faith and loyalty from partners. Corpus
Juris Secundum paragraph 22.
(c) Yasmin Khalique & Ors. Vs Mukhtar Alam
reported in (2019) 1 Callt 263 (HC) wherein it is
held that -
"14. In the facts of the present case already
discussed above, it is evident that the respondent is
involved in the business of M/S M. S. Industries and
he is not carrying on the business of the petitioner
no.3 firm to the greatest common advantage nor is
he just and faithful to the petitioner nos. 1 and 2, the
remaining partners of the petitioner no. 3. The
respondent has entered into the said license
agreement dated April 1, 2017 on behalf of the
petitioner no. 3 with M/S M. S. Industries without the
knowledge or consent of the petitioner no. 1 and 2.
47
Com.A.A.No.186/2023
He is running a business of manufacturing and sale of
Gul which is similar to the business of the petitioner
no. 3 without obtaining any consent from the
respondent nos. 1 and 2 and without their
knowledge.
15. For the reasons as aforesaid, I find that the
petitioners have made out a prima facie case and the
balance of convenience and inconvenience also lies
in their favour for obtaining interim production. The
petitioners have fulfilled the tests laid down by the
Supreme Court in the case of Adhunik Steels Ltd.
(supra). Accordingly, there shall be a order of
injunction restraining the respondent whether by
himself or through his agents or assignees or
nominees or otherwise however from running a
parallel business of manufacturing or dealing with or
selling " Musa Ka Gul" or "Tobaco Gul", by the name
of M/S M. S. Industries or in any manner whatsoever
until the publication of the arbitral award. The
respondent is also restrained from making any false
allegation or writing any frivolous letter to any
statutory authority or to any person whosoever
affecting the business of the petitioner no.3 firm,
until publication of the arbitral award.
18. From the records, it is clear that the petitioner has invoked
the arbitration clause as stipulated under the reconstitution of
Partnership Deed dated 19.06.1995 vide their legal notice dated
07.07.2023. The petitioners have also preferred a petition U/s
11 of the Arbitration and Conciliation Act, 1996 seeking
appointment of the arbitrator before the Hon'ble High Court.
47
Com.A.A.No.186/2023
The learned counsel for the petitioner argued that as per the
financial statesmen, the firm has incurred a loss of
Rs.22,51,218/- for the year ending 31.03.2022. Due to the
fraudulent activities of the respondent No.1 in not only
misappropriating funds, but also due to clandestinely soliciting
clients of Spektrum and moving them to Grafitek. Hence, the
respondent No.1 alone is to be held accountable for the losses
suffered by the firm. Further argued that not only are all the
replies to the legal notices issued by the respondent No.1 silent
on Grafitek, but even the objections filed before this court are
deafeningly silent on Grafitek. The respondent No.1 has not
even made a passing reference to Grafitek in its objections.
19. The learned counsel for the petitioner stated that all
arguments canvased by the counsel for the respondent No.1 are
made in thin air that are not at all part of the respondent No.1's
pleadings made in his objections filed on 04.07.2023. Hence,
none of the arguments canvassed either orally or in writing
have any legal sanctity under law. It is well settled position of
law that parties cannot be permitted to go beyond their
pleadings. Further, the petitioner argued that the applicants
employ more than 40 employees in its printing press and owing
to the fraudulent acts of respondent No.1, the livelihoods of the
partners, their employees, vendors are seriously and irreparably
47
Com.A.A.No.186/2023
affected. The virtual shutdown of operations of the firm has
crippled the firm and has caused irreparable injury to its
reputation and threatens the very existence of the firm.
20. The learned counsel for the respondent in the written
arguments para No.7 stated that this court can take a judicial
note of the fact that in any commercial activity, some of the
activities will be against the provisions of law but are ethical or
inevitable. Therefore, the respondent No.1 refrained from
disclosing the circumstances under which, and the purpose for
which Ms/ Grafitek was started by him and the real beneficiaries
of the firm. It is for the same reason the respondent refrained
from the said reasons in his objection statement also. It is
another matter the facts as stated by the applicants reveal that
they were aware of the starting of Grafitek by respondent No.1
from the first day of registration of the said concern under the
GST Act. The same will be demonstrated at the appropriate
places. The respondent also stated in the written statement
that when admittedly M/s Grafitek is a shadow company of
spectrum, the transactions at throwaway prices and services at
exorbitant prices, such a billing is possible. It is affirmed in
reality no such under billing was done.
21. The Applicant had relied upon the following
decisions:-
47
Com.A.A.No.186/2023
(d) Ponnayal Vs Karuppannan (D) through LR
Sengoda Gounder & Ors. reported in AIR 2018
SC 4317 wherein it is held that -
"11. We have perused the written submissions filed
by the Appellant in-person. The Appellant has relied
upon the Partition Deed dated 6th December, 1937
and the Deed of Settlement dated 6th August 1942.
According to the Appellant, the Deed of Partition
dated 6th December, 1937 was entered into
between her grandfather late Shri Appavu Gounder
and his two sons late Shri Karunappanan Gounder
(Defendant No.1) and late Shri Athappa Gounder.
The Deed of Settlement dated 6th August 1942
executed by her father Athappa Gounder in favour of
her grandfather Appavu Gounder showed the
inability of Athappa Gounder to cultivate his land.
According to the said Settlement Deed dated
6.8.1942, the property should be handed over to the
legal heirs of Athappa Gounder. As the said two
documents were neither part of the pleadings in the
Suit nor was an issue framed regarding the said
documents, we are afraid that we cannot adjudicate
on the issues pertaining to the said documents. Civil
Suits are decided on the basis of pleadings and the
issues framed and the parties to the Suit cannot be
permitted to travel beyond the pleadings.
(e) Kalyan Singh Chouhan Vs C.P.Joshi reported
in AIR 2011 SC 1127 wherein it is held that -
"15. In Gajanan Krishnaji Bapat & Anr. Vs Dattaji
Raghobaji Meghe & Ors., AIR 1995 SC 2284; this
Court held that the court cannot consider any fact
which is beyond the pleadings of the parties. The
47
Com.A.A.No.186/2023
parties have to take proper pleadings and establish
by adducing evidence that by a particular
irregularity/illegality the result of the election has
been materially affected.
16. Pleadings and particulars are required to enable
the court to decide the rights of the parties in the
trial. Thus, the pleadings are more to help the court
in narrowing the controversy involved and to inform
the parties concerned to the question in issue, so that
the parties may adduce appropriate evidence on the
said issue. It is settled legal proposition that "as a
rule relief not founded on the pleadings should not be
granted." Therefore, a decision of a case cannot be
based on grounds outside the pleadings of the
parties. The pleadings and issues are to ascertain the
real dispute between the parties to narrow the area
of conflict and to see just where the two sides differ.
17. This Court in Ram Sarup Gupta (dead) by L.Rs. v.
Bishun Narain Inter College & Ors., AIR 1987 SC 1242
held as under:
"It is well settled that in the absence of pleading,
evidence, if any, produced by the parties cannot
be considered. It is also equally settled that no
party should be permitted to travel beyond its
pleading and that all necessary and material facts
should be pleaded by the party in support of the
case set up by it. The object and purpose of
pleading is to enable the adversary party to know
the case it has to meet........ In such a case it is the
duty of the court to ascertain the substance of the
pleadings to determine the question."
17. This Court in Bachhaj Nahar Vs Nilima Mandal &
Ors., AIR 2009 SC 1103, held as under:
47
Com.A.A.No.186/2023
"The object and purpose of pleadings and issues is
to ensure that the litigants come to trial with all
issues clearly defined and to prevent cases being
expanded or grounds being shifted during trial. Its
object is also to ensure that each side is fully alive
to the questions that are likely to be raised or
considered so that they may have an opportunity
of placing the relevant evidence appropriate to the
issues before the court for its consideration. The
object of issues is to identify from the pleadings
the questions or points required to be decided by
the courts so as to enable parties to let in
evidence thereon. When the facts necessary to
make out a particular claim, or to seek a particular
relief, are not found in the plaint, the court cannot
focus the attention of the parties, or its own
attention on that claim or relief, by framing an
appropriate issue........ Thus it is said that no
amount of evidence, on a plea that is not put
forward in the pleadings, can be looked into to
grant any relief. The jurisdiction to grant relief in a
civil suit necessarily depends on the pleadings,
prayer, court fee paid, evidence let in, etc."
22. On the other hand, the respondents have relied upon the
following decisions:
M/s Nikitha Build Tech (P) Ltd. Vs M/s Natural
Textiles Pvt. Ltd. in MFA No.4130/2010 wherein it
is held that -
"9. The petition under Sec.9 of the Act itself is by way
of an interim measure. We are of the opinion that
there cannot be further interim application in a
47
Com.A.A.No.186/2023
petition of this nature. It is for the parties to get their
application under Sec.9 of the Act ordered at the
earliest. We are of the opinion that neither the
interim application was tenable in a petition under
Sec.9 of the Act nor the present appeal."
23 Relying upon these documents, the learned counsel for the
respondent submitted that there is no decrease in the sales and
the question of occurring loss to the petitioner does not arise.
However, in the objection the respondent has not taken any
contention regarding profit or loss occurred to the firm.
24. The learned counsel for the petitioner rightly argued that
the respondent No.1 has not given any explanation regarding
the Grafitek, whether they are running the printing activities
through Grafitek.
25. From the above facts, it is clearly shows that the
petitioners have clearly demonstrated the requirements of the
transactions and the prima facie case and balance of
convenience lies in their favour.
26. Hence, the petitioner is entitled to the relief of equity U/s 9
of the Arbitration and Conciliation Act, i.e. resuming of banking
operations of the firm's current account and respondent No.1 is
liable to furnish and render all KYC documents to respondent
47
Com.A.A.No.186/2023
No.3 bank and cooperate with the applicants for the timely
resumption of banking operations of the firm's current account
No.16590200003129 as also restrained the respondent No.1,
his servants, affiliates, henchmen or any person claiming
through him from interfering with the affairs of M/s Spektrum
and causing any hindrance whatsoever to the operations of the
firm.
27. The Applicant has sought a relief to restrain respondent
No.1 from entering the premises of the partnership firm located
at 104/2 Tavarakare Main Road, DRC Post, Bangalore 560029.
To restrain respondent No.1, his servants, agents, affiliates,
henchmen or any person/s claiming through him from soliciting,
directly or indirectly, any clients of M/s.Spektrum in any manner
whatsoever. To restrain respondent No.1, his servants, agents,
affiliates, henchmen or any person/s claiming through him from
operating the competing business under the name and style
"M/s.Grafitek" or such other similar businesses which are in the
same line of business as that of M/s.Spektrum.
28. Admittedly, the Petitioner No.3 and Respondent No.1 are
the manager partners of the M/s Spektrum firm and still today
the Respondent No.1 is the partner of the M/s Spektrum firm.
Under such being the case, we cannot restrain the Respondent
entering the premises of the partnership firm. Whether M/s
47
Com.A.A.No.186/2023
Grafitek was started by the Respondent No.1 for the real
beneficial of the firm and Grafitek company is a shadow
company of the spektrum are subject matter of the arbitration.
However, the M/s Grafitek is having a separate entity if the
Respondent NO.1 carried on business and same nature of
applicant as competating with firm then he shall account for
and pay to the firm all the profits made by him in that business
as per Section 16 of the Partnership Act. Hence, there is a
alternative remedy of damage the applicant is not entitle relief
claimed D to F.
29. With the above discussions, I pass the following:
ORDER
Application filed U/S. 9 of Arbitration and Conciliation Act is allowed with part.
It is hereby directed respondent No.3 bank to resume the banking operations of the firm's current account;
The respondent No.1 is liable to furnish and render all KYC documents to respondent No.3 bank and cooperate with the applicants for the timely resumption of banking operations of the firm's current account 47 Com.A.A.No.186/2023 No.16590200003129;
It is hereby restrained the respondent No.1, his servants, affiliates, henchmen or any person claiming through him from interfering with the affairs of M/s Spektrum and causing any hindrance whatsoever to the operations of the firm.
The relief claimed in prayers (D) to (G) are rejected.
[Dictated to the Stenographer, transcript thereof corrected, signed and then pronounced by me, in the Open Court on this the 17th day of January 2024] (SUMANGALA S BASAVANNOUR), LXXXII Addl. City Civil & Sessions Judge, Bengaluru.