Karnataka High Court
Sri. Mahendra J Parekh vs Sri. Ravikumar B on 7 September, 2023
Author: B M Shyam Prasad
Bench: B M Shyam Prasad
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NC: 2023:KHC:32328
CMP No. 842 of 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 7TH DAY OF SEPTEMBER, 2023
BEFORE
THE HON'BLE MR JUSTICE B M SHYAM PRASAD
CIVIL MISC. PETITION NO. 842 OF 2022
BETWEEN:
1. SRI. MAHENDRA J PAREKH
S/O SRI JAYANTHILAL N PAREKH
AGED ABOUT 73 YRS PARTNER
M/S PRANCHARATNA FINANCE CORPORATION
NO 20, B T STREET, ANCHEPET
AVENUE ROAD CROSS
BENGALURU 560053.
2. SRI SANJAY R SHETH
S/O LATE SRI RAMNIKLAL D SHETH,
AGED ABOUT 53 YRS,
PARTNER, M/S PRANCHARATNA FINANCE
CORPORATION NO 1043,
59TH F CROSS ROAD 987
SSI INDUSTRIA AREA 2ND FLOOR
Digitally
signed by MANJUNATHA NAGAR
NARASIMHA RAJAJINAGAR, BENGALURU 560010.
MURTHY
VANAMALA
Location: ...PETITIONERS
HIGH
COURT OF (BY SRI.VIGHNESHWAR S SHASTRY, SENIOR
KARNATAKA
ADVOCATE FOR SRI. SUDEEP V C.,ADVOCATE)
AND:
1. SRI. RAVIKUMAR.B
S/O LATE SRI BANARASI DAS,
AGED ABOUT 53 YRS,
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NC: 2023:KHC:32328
CMP No. 842 of 2022
PARATNER, M/S PRANCHARATNA FINANCE
CORPORATION R/O NO 30/2
7TH CROSS 2ND FLOOR PIPELINE ROAD,
CHOLURPALYA BANGALORE 560023.
2. SRI ASIF UR. REHAMAN
S/O LATE SRI S M HUSSAIN
AGED ABOUT 59 YRS, PARATNER,
M/S PRANCHARATNA FINANCE CORPORATION
R/O NO 12, 3RD FLOOR MN MANSION
STANDAGE ROAD FRAZER TOWN
BENGALURU 560005.
3. SRI MANISH Y LATHIA
S/O LATE SRI Y K LATHIA,
AGED ABOUT 55 YRS, PARATNER,
M/S PRANCHARATNA FINANCE CORPORATION
R/O NO 20 A BHANU VILLA
OKALIPURAM, BANGALORE 560021.
...RESPONDENTS
(BY SRI. KASHYAP N NAIK.,ADVOCATE FOR R1;
SRI. A. SAMPATH, ADVOCATE FOR R2;
SRI. M. RAJASHEKAR, ADVOCATE FOR R3)
THIS CMP IS FILED UNDER SECTION 11(4) OF
THE ARBITRATION AND CONCILIATION ACT 1996
PRAYING TO APPOINT A RETIRED DISTRICT JUDGE AS
ARBITRATOR TO RESOLVE THE DISPUTES BETWEEN
THE PARTIES HERETO BY ARBITRATION IN TERMS OF
ARBITRATION CLAUSE NO. 10 OF DEED OF
DISSOLUTION DATED 31.03.2023 AS PER ANNEXURE -
B.
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NC: 2023:KHC:32328
CMP No. 842 of 2022
THIS PETITION, COMING ON FOR ADMISSION,
THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
The petitioners undisputedly were partners with the respondents in the registered Firm, M/s Pancharathna Finance Corporation [the Firm], and they rely upon the Deed of Dissolution on 31.03.2003 and the agreement for arbitration as contended therein. The petitioners have filed this petition for appointment of a sole arbitrator after issuing the legal notice dated 09.07.2022 suggesting the name of two former Judges of this Court and calling upon the respondents to convey their willingness. The first respondent has issued his reply on 17.08.2022 essentially contending that there is no dispute for adjudication.
2. The documents annexed to the petition indicate the following:
[i] The first respondent has purchased the land measuring 1 acre 12 guntas in Sy.No.87/3 of -4- NC: 2023:KHC:32328 CMP No. 842 of 2022 Thanisandra village, Bangalore East Taluk, Bengaluru on 04.01.2003, and the second respondent has purchased another parcel of land measuring 10 acres in Sy. Nos. 244, 248, 249 and 250 of Nadapanayakanahalli, Shidlaghatta Taluk, Kolar district in the year 1997. These properties are referred to as the subject properties. According to the petitioners, the Firm's funds were utilized for the purchase of the subject properties, and these properties are therefore treated as Firm's assets in the books of accounts.
[ii] The parties have agreed to dissolve the Firm and allocate shares in the different assets of the Firm including the aforesaid subject properties and as such, they have executed the Deed of Dissolution dated 31.03.2003 [the Deed of Dissolution]. This Deed of Dissolution records that the partners have agreed that they have taken over the respective shares in the Firm's assets, and they would be -5- NC: 2023:KHC:32328 CMP No. 842 of 2022 individually liable to clear the liabilities associated with such shares.
[iii] The petitioners contend that this was never done and as such, the assets continued to be the assets of the Firm. The petitioners also contend that because of certain proceedings such as the proceedings for acquisition of the land in Sy.No.87/2 and the initiation of proceedings for the resumption insofar as the land in Sy.No.250 of Nadapanayakanahalli, the parties to the proceedings/partners of the Firm did not act upon the terms of dissolution and take their respective shares.
[iv] The petitioners in the arbitration notice dated 09.07.2022 have referred to certain arrangements and allocations in favour of some of the partners. The respondents on the other hand contend that some portions of the aforesaid lands have been alienated way back in the year 2014 and -6- NC: 2023:KHC:32328 CMP No. 842 of 2022 the petitioners have also joined as consenting witnesses in the execution of these sale deeds. This they contend, amongst others, shows that the Deed of Dissolution was not only acted upon, but the consenting partners have dealt with their respective shares.
[v] The respondents object to the appointment of a sole arbitrator on the grounds that with the partners taking their respective share in the Firm's assets there is no arbitrable dispute, and even if there is, it is barred by limitation in view of the provisions of Article 5 of the Limitation Act, 1963 [the Limitation Act] as the petitioners have not commenced proceedings within three years from the date of dissolution.
3. Sri Vighneshwar. S. Shastry, the learned Senior Counsel for the petitioners, submits that the Firm's books of accounts for the year 1996-97 to 1998-99, and even for the years thereafter, show that -7- NC: 2023:KHC:32328 CMP No. 842 of 2022 the subject properties are treated as assets of the Firm and there cannot be any quarrel in this regard though it is contended that the first and the second respondents have purchased the properties under the sale deeds executed in the year 2003 and 1997 respectively. As regards the parties not acting upon the terms of the dissolution and the allocation of shares being at large, the learned Senior Counsel submits that when it is undisputed that the Firm is registered as contemplated under the provisions of the Partnership Act,1932 [for short the 'Partnership Act'] it would be incumbent upon the respondents, who contend that the Deed of Dissolution is acted upon, to place on record the details in this regard is filed with the Registrar of Firms as contemplated under Section 63 of the Partnership Act, but it is undisputed that such declaration is not filed.
4. Sri Vighneshwar S Shastry also submits that the petitioners would not contest that they may -8- NC: 2023:KHC:32328 CMP No. 842 of 2022 have signed certain sale deeds executed by either the first or the second respondent as consenting witnesses, but they have joined in execution of the sale deeds because they had a subsisting interest in those properties as partners of the Firm and because a substantial consideration is transferred to their accounts in the year 2017. The learned Senior Counsel further submits, without disputing that the land in Sy.No.87/3 of Thanisandra village, Bangalore East Taluk, Bengaluru is offered for the development of a multistoried residential apartment, the third respondent is allotted four units in such apartments because all the partners have a subsisting interest in the Firm/its assets.
5. Sri Rajashekar, the learned counsel for the third respondent, submits that this respondent sails with the petitioners and that indeed the third respondent is allotted four apartments, but he is entitled for six more apartments. As such, there is a -9- NC: 2023:KHC:32328 CMP No. 842 of 2022 dispute for arbitration. However, Sri Kashyap N Naik and Sri A. Sampath, the learned counsels for the contesting respondents, submit that it would be beyond controversy that the petitioners admit the execution of the Deed of Dissolution and in terms of this deed the Firm's assets have been distributed consequent to the dissolution, and if the petitioners contend that the subject properties are nevertheless the assets of the Firm and therefore subject to the allocation of shares therein, the limitation would be three years as contemplated under Article 5 of the Limitation Act.
6. Sri Kashyap N Naik and Sri A. Sampath canvass that the period of limitation must be reckoned as contemplated under Article 5 of the Limitation Act from the date of dissolution. As such, even if there could be a claim it stands time-barred from 1st April 2006 and therefore the claim, which is commenced with the issuance of notice dated
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NC: 2023:KHC:32328 CMP No. 842 of 2022 09.07.2022 is hopelessly time barred and a time barred claim such as in the present one, even if such dispute could have been, cannot be admitted for resolution by arbitration.
7. Sri Kashyap N Naik and Sri A. Sampath, to emphasize the respondents' defense that the subject properties are the self acquired properties of the first and the second respondents respectively, rely upon the terms of the sale deeds executed in favour of these respondents and the sale deeds executed to transfer some portions of the subject properties. The learned counsels also contend that with the admitted development of the subject properties, more specifically the land in Sy.No.87/3 of Thanisandra village, Bangalore East Taluk, Bengaluru and the sale of built-up area therein to third parties, there would be third party interests and therefore it cannot be part of arbitration.
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NC: 2023:KHC:32328 CMP No. 842 of 2022
8. This Court must refer to the settled proposition that not every reference must be refused because it is contended that dispute is time-barred, and it must be shown to the Court's satisfaction that the dispute is ex facie barred by limitation and allowing the reference for arbitration and the proceedings therein would be an exercise in futility, and this would be in consonance with the general settled proposition that when in doubt, there must be reference leaving the question of limitation open to be decided by the Arbitral Tribunal.
9. This Court must opine that in the present case it cannot be readily opined that the dispute is ex facie time-barred for the reasons, amongst others, set forth hereafter. The respondents, as of the date, have not placed on record any material to show that a list of the Firm's assets as of 31.03.2003 was prepared with allocation of share and each partner has acknowledged the same as required under the Deed
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NC: 2023:KHC:32328 CMP No. 842 of 2022 of Dissolution [one of the terms of the Deed]; that admittedly the Returns, as required under Section 63 of the Partnership Act, are not filed with the Registrar of Firms; that the petitioners have joined in execution of some of the sale deeds as confirming parties, but these deeds are silent on why they, if they did not have any subsisting interest in those properties, have joined in the execution of these Deeds; and that the petitioners also assert transfer of consideration for joining in the execution of these deeds as confirming parties.
9. As regards the existence of the dispute notwithstanding the execution of the Deed of Dissolution, this Court must observe that the petitioners' claim in the subject properties as the Firm's assets is based on the Books of Accounts for the years from 1996-97, and the details in this regard require detailed consideration in the arbitral proceedings. Therefore, the respondents cannot
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NC: 2023:KHC:32328 CMP No. 842 of 2022 successfully oppose the appointment of an arbitrator on these grounds, and as regards the third parties' rights being created and their interests being prejudiced, the same will have to be considered in the Arbitral Proceedings based on the rival pleadings.
10. In the light of the afore, and because the agreement for arbitration in the Deed of Dissolution is not disputed, and after hearing the learned Senior Counsel and the learned Counsel for the parties on who may be appointed as the sole arbitrator to enter reference of the dispute, Hon'ble Mr. Justice V.Jagannathan is appointed as the sole arbitrator. It would be needless to observe that all questions, including the question of limitation, are left open to be decided in the arbitral proceedings. In the light of the afore, the following:
ORDER [a] The petition is allowed.
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NC: 2023:KHC:32328 CMP No. 842 of 2022 [b] Hon'ble Sri. Justice V.Jagannathan, a former Judge of this Court, is appointed as the sole Arbitrator to enter reference of the dispute between the petitioner and the respondents and conduct the proceeding at the Arbitration and Conciliation Centre (Domestic and International), Bengaluru according to the Rules governing the Centre.
[c] The Registry is directed to
communicate this order [through
email] to the Arbitration and
Conciliation Centre (Domestic and
International), Bengaluru and Hon'ble Sri. Justice V.Jagannathan, a former Judge of this Court, Address: PRIDE ENCHANTA, No.003, Ground Floor, 4th Block, Opposite to BHEL Main
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NC: 2023:KHC:32328 CMP No. 842 of 2022 Gate, Mysore Road, Bengaluru - 560 026 [e-mail: [email protected]] as required under the Appointment of Arbitrators by the Chief Justice of Karnataka High Court Scheme, 1996.
Sd/-
JUDGE NV