Bangalore District Court
Vikram A Sreerama vs U. Galeppa Reddy on 19 August, 2022
IN THE COURT OF THE LXXXIII ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE AT BENGALURU CITY [CCH-84]
:Present:
Ravindra Hegde,
M.A., LL.M.,
LXXXIII Addl. City Civil & Sessions Judge,
Bengaluru
Dated on this the 19th day of August 2022
COM.A.S.No.148/2019
Plaintiff: Vikram A Sreerama
Aged about 38 years,
S/o S.N.Arjuna,
R/at No.7-7-48/95, Savitri Colony,
Old Johnson Road, Raichur.
Karnataka-584 101.
(By Sri.S.V, Advocate)
// versus //
Defendant: U. Galeppa Reddy,
Aged 66 years,
S/o Chinna Galeppa,
R/at No.470, 1st Stage, 6th Main,
5th Block, H.B.R Layout,
Kalyannagar, Bengaluru-560043.
(By Sri.M.V, Advocate)
Date of Institution of the : 03/10/2019
suit
Nature of the suit : Arbitration Suit
Date of commencement of :
recording of the evidence
Date on which the : 19/08/2022
Judgment was pronounced.
: Year Month/ Day/s
Total duration /s s
02 10 16
2
CT 1390_Com.A.S.148-2019_Judgment.doc
JUDGMENT
This Arbitration Suit under Section 34 of the Arbitration & Conciliation Act is filed by the plaintiff challenging the arbitral award dated 11/7/2019 passed by the learned Arbitrator in AC No.150/2018.
2. The plaintiff was the respondent before the learned Arbitrator and defendant of the present case was the claimant.
3. The case of the plaintiff in brief is as under:
The plaintiff is a qualified Industrial Engineer and entered into rice mill industry in 2009 and is having indepth understanding of the Rice mill industry and a well established network and reputation in the rice mill industry. The plaintiff identified the need to develop a mechanism to identify broken rice grains from full rice grains without removing husk and developed a machine to manually detect broken rice through the husk by way of a light passing through the husk and reflecting broken rice and then to develop a software to automate this mechanism. The plaintiff identified Amarnath Somalapuram who is son of the defendant to carry out the task of developing software and automate the mechanism already developed by the plaintiff. On the instructions of plaintiff, Amarnath commenced work on the automation of the machines already developed by the plaintiff. The entire investment for the research and development for the machine has been made by the plaintiff. The plaintiff invested around Rs.1,50,500/- for forming partnership firm to develop and 3 CT 1390_Com.A.S.148-2019_Judgment.doc make the automated machine and the defendant was made as partner. The plaintiff has invested Rs.25,000/- on behalf of defendant in the firm. Two entities in which the plaintiff is a partner invested for the development of Amvicube PA 2.0 and for the working capital of the Firm. The firm had complete ownership of the intellectual property rights and all other rights with respect to Amvicube PA 2.0 and the firm began to market and sell the machine and sold 7 machines and the firm was also awarded Rs.30 lakhs and Rs.5 lakh in the competition. Out of the award of Rs.30 lakhs only Rs.15 lakhs was received. In February 2018 the plaintiff came to know that the defendant and Amarnath were in talks with Milltec Machine Private Limited to form a new company and invest amounts for the marketing and sales of Amvicube PA 2.0 to compete with the firm. The plaintiff also learnt that the defendant and Amarnath have also formed the entity Nextron. The son of the defendant has even unauthorizedly and illegally transferred all the data including Software source code. The defendant is hand in glove with Amarnath and is guilty of preventing the firm from recovering its assets.
On 17/4/2018 plaintiff issued notice to the defendant calling upon the defendant to explain his illegal activities and complaint was also filed. Thereafter the defendant addressed letter to the Bank Manager of Corporation Bank and withdrew the authorization given by the defendant to the plaintiff to operate the firm's account. This has caused loss to the firm and grave hardship to the plaintiff. The defendant has only 4 CT 1390_Com.A.S.148-2019_Judgment.doc acted against the interest of the firm and has never contributed to the operation or development of the firm and the defendant has not even invested in the firm. The plaintiff has incurred amount on behalf of the plaintiff. The defendant is liable to pay 40% of the expenses and investment of the firm. The defendant by filing CMP No.157/2018 initiated arbitration and the learned Arbitrator was appointed to decide the dispute between the parties. The defendant filed claim statement praying to direct the plaintiff to furnish true and accurate accounts of the partnership firm and to return the misappropriated amounts restraining the plaintiff from manufacturing, developing and marketing Amvicube PA 2.0 etc. The plaintiff filed objection to the claim statement and also made counter claim praying to direct the claimant to hand over software source code Amvicube PA 2.0 to the plaintiff and direct the claimant to pay 40% of all the expenses incurred by the plaintiff on behalf of the firm. The learned Arbitrator framed Issues and after recording evidence and hearing has passed the award and partly allowed the claim of the claimant and rejected the counter claim. The learned Arbitrator directed the respondent who is the plaintiff in the present case to render true and accurate account of the partnership firm and directed to get the account of the firm audited and directed the plaintiff to pay the amount which is illegally utilized from the account of the firm and directed him to pay 40% of the profit of the firm to the claimant and if the firm incurred loss, direct the claimant to deposit 40% of his 5 CT 1390_Com.A.S.148-2019_Judgment.doc share in such loss. The learned Arbitrator has also restrained the plaintiff from manufacturing, developing or marketing Amvicube PA 2.0 or in such other names and restrained the plaintiff from using the name Emvicube and directed the plaintiff to furnish account of the firm within 3 months.
4. Being aggrieved by this award, plaintiff has filed this arbitration suit and challenged the award on various grounds. It is stated that the award is contrary to the terms of the partnership deed and the arbitration agreement and award is in contravention to the provisions of law and is against public policy and is patently illegal and is liable to be set aside. It is stated that the learned Arbitrator has travelled outside the scope of reference and hence the award is perverse and it is stated that the learned Arbitrator has failed to apply his mind and appreciate the evidence and it resulted in patent illegality and the award is wrong and the conclusion arrived are perverse and the award is against the principles of justice, equity, law and fair play. It is stated that the contention of the plaintiff are not taken into account by the learned Arbitrator and the learned Arbitrator has grossly erred in concluding that the firm and the claimant are not liable to repay the loan taken by the firm from third party. It is stated that the learned Arbitrator has not given any finding as to why Ex.R.32 to Ex.R.35 cannot be relied. It is stated that the learned Arbitrator has rightly answered issue No.1 in the negative and thereafter, learned Arbitrator ought not to have answered issues No.2 and 3 in the affirmative. It is 6 CT 1390_Com.A.S.148-2019_Judgment.doc stated that there is no contractual agreement to show that the plaintiff owes a duty to the defendant to furnish accounts of the firm. It is stated that the clear evidence is not considered by the learned Arbitrator and inspite of admission the learned Arbitrator has erroneously proceeded and answered issue No.2 and 5 in the negative. It is also stated that the finding of the learned Arbitrator on other issues are not correct. It is stated that the finding of the learned Arbitrator by relying of Section 13, 14, 15, 16 and 53 of the Indian Partnership Act is erroneous as none of these sections impose an obligation on a partner to voluntarily or mandatorily furnish account on the other partners. It is stated that though the document produced show that the loan amounts have come from bank account of the firm was Shriya Rice Mills and Shriya Rice Traders and the defendant is liable to repay the loan, the learned Arbitrator held that those loans are not binding. It is stated that it was the duty of the claimant to inspect the account and there is no duty on the respondent to furnish account to another partner and the learned Arbitrator without giving any reasons in support of his finding has answered issue N0.9. It is staed that answer on issue No.9 and 10 are contradictory. It is contended by the plaintiff that the finding of the learned Arbitrator even on other issues are erroneous and is against the evidence given by the parties and is against the document produced. It is stated that the learned Arbitrator rejected the plaintiff's prayer seeking direction to the defendant to hand over the software source code inspite of 7 CT 1390_Com.A.S.148-2019_Judgment.doc clear admission of the defendant that software source code was in possession of defendant's son and the learned Arbitrator failed to appreciate that the defendant and his son are hand in glove. It is stated that the evidence before the learned Arbitrator clearly show that Amvicube was born prior to the formation of firm and name was owned by plaintiff and not by the firm. On all these grounds plaintiff has prayed to set aside the award and prayed to dismiss the claim of the defendant and to allow the counter claim.
5. The defendant who was the claimant before the learned Arbitrator has filed objection stating that the petition is filed to protract the dispute and is abuse of process of law. It is stated that it is baseless and frivolous litigation and the petition deserves to be dismissed summarily. The defendant has stated that the award is well reasoned award passed in accordance with law and none of the grounds under Section 34(2) of the Arbitration & Conciliation Act are attracted to the present case. It is stated that the ground urged by the plaintiff are not within the purview of arbitration mentioned under Section 34. It is stated that this court can interfere with the award only when plaintiff established, on the basis of the record that he was under some incapacity or that the arbitration agreement was not valid under law or that he was not given notice of appointment, award is outside the scope of submission to arbitration or composition of the arbitrator was not in accordance with the agreement. It is stated that none of the grounds are urged by the plaintiff in the present 8 CT 1390_Com.A.S.148-2019_Judgment.doc proceedings. It is also stated that the plaintiff has not alleged that award is in conflict with public policy, fraud, contravention of fundamental policy and conflict with morality or justice etc. It is stated that the plaintiff has not specified as to what part of the arbitral award is in contravention of the provisions. It is stated that the present suit has been filed like an appeal on merits of the case. It is stated that the plaintiff is seeking this court to reconsider the evidence of record and set aside the award which is not permitted. The defendant has also stated his version of the facts of the case which lead to the dispute and he initiating arbitration by filing CMP. The defendant has stated that he has sought for accounts of firm and 40% share in profit and to restrain the plaintiff from using the name Emvicube till statement of the accounts of the firm are finalised. It is stated that during pendency of the arbitration plaintiff has started a company in the name of Amvicube Private Limited and the same was incorporated on 10/10/2018 and the plaintiff continued to market and advertise the product of the firm as the product of the company and the suit also filed by the son of the defendant. The defendant has also stated that plaintiff was the Managing partner of the firm and has fiduciary duty to maintain accounts of the firm in lawful manner and as the account is to be audited and same must be shared with all the partners. It is stated that plaintiff has failed to share the accounts of the firm from the date of its inspection with the defendant. It is stated that the plaintiff 9 CT 1390_Com.A.S.148-2019_Judgment.doc has admitted in his evidence that he has not shared the copy of balance sheet and profit and loss account of the firm with the defendant. It is stated that the order of the learned Arbitrator is based on evidence on record. It is stated that the plaintiff was running the firm as though it is his proprietorship concern and has admitted receiving of salary of Rs.10,000/- per month and also reimbursement of travelling expenses, out of pocket expenses etc and it is clear that the plaintiff ran the firm without consent or considering the defendant as a partner and the defendant has proved the key fact of non payment of his share of the profit. It is stated that the plaintiff run Shriya Rice Mills and Shriya Traders are the two firms in which plaintiff is partner. It is stated that the plaintiff has incorporated a company in the name of Amvicube Private Limited under which the plaintiff utilized the goodwill of the firm and sold the product of the firm and as the product was sold as that of the firm to customers and third parties and therefore the learned Arbitrator has rightly restrained the plaintiff from using the name Amvicube for carrying on any other similar business in the name of the firm and from using any of the properties of the firm, in accordance with Section 14 and 53 of the Partnership Act. On these grounds the arbitration suit is prayed to be dismissed with exemplary costs.
6. Now the points that arise for consideration of this court are:
1) Whether the plaintiff has made out any grounds under Section 34 of the Arbitration & 10 CT 1390_Com.A.S.148-2019_Judgment.doc Conciliation Act to set aside the award passed by the learned Arbitrator in AC No.150/2018 in the dispute between the parties on 11/7/2019?
2) What order?
7. Heard both the counsels. Perused records.
8. My answer to the above points are :
POINT No.1 : In the Negative.
POINT No.2 : As per final order for the following:
REASONS
9. POINT No.1 : Present arbitration suit is filed challenging the award passed by the learned Arbitrator in AC No.150/2018. As per the case of the parties, partnership firm between the plaintiff and defendant came into existence as per the partnership deed dated 3/8/2016 by name Amvicube. Paddy analizer machine by name Amvicube PA 2.0 was manufactured, developed and marketed by the firm and as the dispute has arisen between the two partners, arbitration provided in the partnership deed was invoked and the learned Arbitrator was appointed, Before the learned Arbitrator, claimant who is the defendant in this case, has filed the claim statement and plaintiff has filed objection and also made a counter claim. Learned Arbitrator after recording the evidence has passed the award and partly allowed the claim and rejected the counter claim. Against this award present arbitration suit is filed.
11CT 1390_Com.A.S.148-2019_Judgment.doc
10. In Associate Builders v. Delhi Development Authority reported in AIR 2015 SC 620, relied for the defendant, in para 12, Hon'ble Supreme Court has held, "...when a court is applying the "public Policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score...."
It is also held in this paragraph that "...It is with this very important caveat that the two fundamental principles which form part of the fundamental policy of Indian law (that the arbitrator must have a judicial approach and that he must not act perversely) are to be understood..."
It is also held under the heading patent illegality that, "...This last contravention must be understood with a caveat. An arbitral tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable r reasonable person could do..."
11. In another decision reported in AIR 2021 SC 4661 (PSA Sical Terminals Pvt. Ltd., v. The Board of Trustees of V.O.Chidambranar Port Trust, Tuticorin and others), 12 CT 1390_Com.A.S.148-2019_Judgment.doc Hon'ble Supreme Court in para 40, the referred to the decision in MMTC Limited and held that "...the position is well-settled by now that the court does not sit in appeal over the arbitral award and may interfered on merits on the limited ground provided under Section 34(2)(b)(ii) I.e if the award is against the public policy of India..."
In para 42 the Hon'ble Supreme Court has held as under:
"It will thus appear to be a more than settled legal position, that in an application under Section 34, the court is not expected to act as an appellate court and re- appreciate the evidence. The scope of interference would be limited to grounds provided under Section 34 of the Arbitration Act. The inference would be so warranted when the award is in violation of "public policy of India", which has been held to mean "the fundamental policy of Indian law". A judicial intervention on account of interfering on the merits of the award would not be permissible. However, the principles of natural justice as contained in Section 18 and 34(2)(a)(iii) of the Arbitration Act would continue to be the grounds of challenge of an award. The ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the "most basic notions of morality or justice". It is only such arbitral awards that shock the conscience of the court, that can be set aside on the said ground. An award would be set aside on the ground of patent illegality appearing on the face of the award and as such, which goes to the roots of the matter. However, an illegality with regard to a mere erroneous application of law would not be a ground for interference. Equally, re-appreciation of evidence would not be permissible on the ground of patent illegality appearing on the face of the award."
12. These decisions also highlight the scope of interference under section 34 of the Act in the Award. In the presence of the ratio laid down in above decisions, case of the 13 CT 1390_Com.A.S.148-2019_Judgment.doc plaintiff is to be considered. Though the plaintiff has shown himself as appellant, as held in the above decisions, the arbitration suit under Section 34 is not an appeal. The ground under which award can be set aside is clearly provided in Section 34(2) and Section 34(2A) of the Act. Since there is no dispute raised with regard to arbitration agreement, arbitrability of the dispute etc., grounds of challenge would be under Section 34(2)(ii)(b) and 34(2A) of the Act. Therefore the plaintiff have to establish that the award is in conflict with public policy of India. An award which is in contravention of fundamental policy of Indian law or is in conflict with most basic notion of morality or justice, would be in conflict with public policy of India. As per section 34(2A) of the Act, if award is vitiated by patent illegality appearing on the face of the record, award could be set aside. It is well established principle that even if a contrary view based on the facts before the Arbitral Tribunal is possible, in the absence of any compelling reasons, court cannot interfere with the view taken by the learned Arbitrator. It is also well established principle that the court sitting U/S.34 of the Act is not supposed to go for re-appreciation of evidence or impose its view as against the view of learned Arbitrator and the power of the court is only to set aside the award, if it is coming under any of the grounds mentioned in the said section
13. On looking to the award, learned Arbitrator has considered the evidence given by PW.1 for the defendant and evidence given by the plaintiff as RW.1 before the learned 14 CT 1390_Com.A.S.148-2019_Judgment.doc Arbitrator in detail. The learned Arbitrator has referred to the entire evidence given by the parties and also referred to the documents produced and also considered the arguments addressed in detail. After appreciating the evidence lead by both the parties, learned Arbitrator has found that as per Ex.P.1, this plaintiff was Managing partner of the firm and was to maintain the affairs of the firm and was entitle for payment of Rs.10,000/- per month and was also entitle for the expenses incurred for traveling etc. Learned arbitrator has also found that as Managing partner this plaintiff was required to furnish accounts. Another partner i.e. the defendant of this case, has stated in he is a sleeping partner and has not even visited the office of the firm. The learned Arbitrator has considered the evidence of both the parties and found that it was obligatory on the part of the present plaintiff to furnish account statement to another partner and the plaintiff has failed to render account of the firm to the claimant, since 3/8/2016. The learned Arbitrator by considering Ex.P.1, which states that plaintiff is the Managing partner and is permitted to managing affairs, has held that there is no need to take consent of the claimant for selling the product to third parties and therefore the contention of the claimant present defendant that plaintiff has started to sell the product without his consent was not accepted and issue No.1 is answered in the negative.
14. The learned Arbitrator by considering that the defendant had not received any profit from the date of 15 CT 1390_Com.A.S.148-2019_Judgment.doc entering into partnership, answeredd issue No.3 in the affirmative. It is not contended even by the present plaintiff that profit was shared among partners of the firm. Similarly on issue No,4 which was with regard to contention of the claimant that 25 machines have been sold and Rs.1.25 crores is received by the plaintiff, learned Arbitrator has found that there is no such evidence and the same is not valid. Regarding issue No.5 that, the respondent refused to render accounts of the firm and share details of stock inventory, by considering oral evidence, learned Arbitrator has answered issue No.5 in the affirmative, as inspite of receipt of Ex.P.5 notice, plaintiff has not furnished account to the claimant. Regarding issue No.6, contention of the claimant that the respondent has mismanaged the firm and abuse his position as Managing partner of the firm and also that the plaintiff has siphoned substantial amount from the account of the firm and is liable to pay 40% share in profit to the claimant, learned arbitrator has answered as accordingly. Learned arbitrator found that alleged loan obtained by plaintiff from Shriya Rice Mill and Shriya Traders is without permission of the claimant and is against clause 10 of the partnership deed and firm is not liable to repay the amount. Aror held that upon settlement of account plaintiff is due and liable to pay 40% share of the defendant. Therefore issue No.6 which was having 2-3 aspects has been answered as accordingly. The contention of the claimant that counter claim of the respondent is belatedly filed is answered in the negative.
16CT 1390_Com.A.S.148-2019_Judgment.doc
15. The learned Arbitrator has considered the contention of the respondent in issue No.8 to 15 on the basis of the evidence that has been discussed and considered in the award. Learned Arbitrator has negatived the contention of the respondent that it was the joint decision of the claimant and respondent to sell the product and claimant was aware of the details of the sales as contended by the respondent and answered the issue in the negative. Regarding issue No.9 with regard to the contention of the respondent that there was no obligation on the respondent plaintiff to furnish account to the claimant, the learned Arbitrator has held it in the negative and observed that as per Ex.P.1 this plaintiff was having right to market the product of the firm and therefore claimant cannot be said to be aware of the sale transaction made by the firm and accordingly answered issue No.9 in the negative. Regarding issue No.10 that the firm commenced sale of the product in October 2017 and there was revenue generation only from October 2017 and also the contention that machine is sold for the different amount mentioned in the counter claim of the respondent as mentioned in issue No.11 are answered by the learned Arbitrator in the negative as by holding that the respondent No.1 who is the present plaintiff has failed to prove its contention that the sale of the product started only in October 2017. Regarding issue No.12 the contention of the respondent that stock inventory account available in the office of the firm and was accessible by the 17 CT 1390_Com.A.S.148-2019_Judgment.doc claimant, but claimant has not visited the office and not verified the records etc is also answered in the negative on the ground that the respondent has failed to prove that stock, infrastructure and account was available for inspection by the claimant in the office. Regarding issue No.13 which is the contention of the respondent that he did not withhold any payment lawfully due to the claimant is also answered in the negative. The contention of the respondent that the claimant did not invest any amount in the firm and he is not entitle for profit is answered as accordingly by stating that the respondent has not produced documentary evidence of the capital investment, however, as per the partnership deed claimant is entitle for 40% of the profit. In issue No.15 which is with regard to the contention of the respondent plaintiff that the firm did not make profit since sales began recently and firm incurred substantial expenses the issue is answered in the negative as the account of the firm are not produced by the plaintiff.
16. On the basis of finding on issue No.9 to 15 the learned Arbitrator has considered issue No.17 wherein the respondent has claimed software source code of Amvicube PA 2.0 of the claimant and the learned Arbitrator by considering the evidence of PW.1, that Software source code is with the son of the claimant has answered this issue No.17 in the negative and while answering has also found that the direction to the claimant to pay 40% of the expenses incurred by the respondent on behalf of the firm has also cannot be 18 CT 1390_Com.A.S.148-2019_Judgment.doc ordered. Regarding additional issue No.1 which is based on the subsequent event of the present plaintiff starting, incorporating a new company called Amvicube Private Limited on 10/10/2018, the learned Arbitrator has held that the company is illegally, unlawfully incorporated and used the good will of the firm and this is in violation of the terms of Ex.P.1 and held that Amvicube being the name of the firm, plaintiff is to be restrained from using the name Amvicube for carrying on any other similar business in the name of the firm and from using any of the property of the firm and additional issue is answered in the affirmative.
17. In issue No.16 regarding the entitlement of the claimant for the relief prayed, the learned Arbitrator has answered the issue as accordingly by holding that the claimant is entitle for many of the reliefs like accounts and 40% of the profit of the firm and for injunction against the respondent etc. After answering all these issues the learned Arbitrator has passed the award. In the award the learned Arbitrator has directed the present plaintiff to render true and accurate account of the partnership firm from 3/8/2016 till 5/10/2018 and directed the respondent to get the account of the firm audited from Chartered Accountant acceptable to both parties and plaintiff is held liable and directed to pay amount which he has illegally utilized from the account of the firm and aslo held that the claimant is entitle for 40% in the profit of the firm together with share of asset and profit of the firm and the learned Arbitrator has also held that if the firm 19 CT 1390_Com.A.S.148-2019_Judgment.doc incurred loss, the claimant shall deposit 40% of his share and pay the same to the respondent. Further the learned Arbitrator has held that the respondent, present plaintiff is restrained from manufacturing, developing, marketing and distributing, Amvicube PA 2.0 and permanently restrained the respondent from using the name Amvicube and from carrying on any similar business in the name of the firm etc and directed the respondent to furnish account of the firm within 3 months from the date of the award and also to furnish copy of the records within 90 days.
18. On looking to the award, learned Arbitrator has considered the oral and documentary evidence led by the parties exhaustively and every admission of the witnesses has been considered and given due weight by the learned Arbitrator in arriving at the conclusion. The learned counsel for the plaintiff while challenging the award has drawn the attention of the court to the finding of the learned Arbitrator on issue No.6, 14 and 16, wherein the issues are answered as 'accordingly'. On looking to these issues as considered above, these issues contains 2-3 parts and the issue could not be answered in one word affirmative or negative. As such the learned Arbitrator has properly gave a finding and answered it accordingly. In Issue No.6 regarding the contention of the claimant that the respondent mismanaged the firm and abused the post as managing partner, learned Arbitrator in para 119 of the award has observed that availing loan from the firm in which the respondent himself is a partner and 20 CT 1390_Com.A.S.148-2019_Judgment.doc availing such loan without permission of the claimant would be against the partnership deed and the firm and also the claimant are not liable for those loans and thereby this part of the issue is answered by the learned Arbitrator. Regarding the next part that the respondent is liable to pay 40% of the share in profit, the learned Arbitrator has held that on settlement of account if there is profit the claimant is entitle for 40% in terms of Ex.P.1. No fault could be found by the learned Arbitrator in giving this finding on issue No.6. Similarly in issue No.14 the learned Arbitrator has held that the parties have not produced any documents showing their investment made in the firm, but the claimant is entitle for the profit of 40% as clearly appearing in Ex.P.1 itself and Ex.P.1 also show that there is investment of Rs.25,000/- by the claimant. Similarly in issue No.16 which is entitlement of the claimant for several reliefs by finding the relief to which the claimant is entitle, the learned Arbitrator has answered it as accordingly. Therefore the entire finding on these issues would be answers to the said issue. Therefore, no technical fault could be found with the Arbitrator in answering those issues as accordingly. In fact, Arbitrator is not even bound to frame issues. As such, technical objection raised by the plaintiff is unacceptable and is devoid of merits. So long as the award and the finding could be reasonably understood, on technical aspect like style of writing, answering of issues etc objection to the award cannot be raised.
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19. One of the contentions of the plaintiff is that on answering Issue No.1 in the Negative, which is about the plaintiff selling the product Amvicube PA 2.0 to the third party without consent of the defendant, Issue No.2 and 3 ought not to have been answered in Affirmative. On the basis of Ex.P.1, as Managing partner can sell the product on behalf of the firm it is held that consent of other partners for each sale is not necessary. This finding is based on Ex.P.1. Answering issue No.1 in the Negative will not affect the answers on other issues, as admittedly, plaintiff was the managing partner of the firm. In fact, plaintiff goes to the extent that the defendant has not even invested Rs.25,000/- as the investment mentioned in Ex.P.1. Even it is elicited from PW.1 that this defendant is only a sleeping partner and has not even visited the office and has not inspected account statement. These answers which are elicited from PW.1 and even contention of the plaintiff itself show that the plaintiff was managing the firm and was selling the product and was also doing day today transactions of the firm. As a Managing partner the plaintiff has certain duties. When the defendant is a sleeping partner, it is required from the plaintiff to furnish information about the account of the firm to the other partner though not every day, but minimum once in a year. It is not the case of the plaintiff that he has furnished such account statement to the defendant. Though the plaintiff has stated that the account statement of the firm is prepared and is available in office etc., admittedly, plaintiff has not 22 CT 1390_Com.A.S.148-2019_Judgment.doc furnished the statement of account to the defendant. When defendant is a sleeping partner even according to plaintiff and has not even visited the office of the firm, plaintiff cannot expect this defendant to see and verify the account statement which according to plaintiff is readily available in the office of the firm. Plaintiff has not produced those accounts of the firm even before learned Arbitrator.
20. Admittedly there is clause for sharing profit between the parties in the ratio provided in Ex.P.1. Plaintiff contends that the firm has never made profit and there is no question of sharing profit, but, to show that the firm has not made profit, plaintiff is required to prepare the account statement and send it to the defendant and take his approval. Admittedly no such attempts are made by the defendant. These all things are elicited in the evidence of the parties. On the basis of those evidence, learned Arbitrator has held that the plaintiff has not furnished the accounts to the defendant who is the another partner and held that the plaintiff is required to furnish account to the defendant.
21. Plaintiff has contended that he was not having any obligation to furnish the account to the defendant as there was no difficulty for defendant to inspect the records and see the account statement of the firm. As per the partnership Act Section 9 partners are bound to carry on the 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 to any partner.
23CT 1390_Com.A.S.148-2019_Judgment.doc Therefore as per Section 9 it is the duty of the partner to render true account and to provide information of all the things which affect the firm to any partner. Since plaintiff is Managing partner and defendant was not actively participating in the partnership affairs and was the sleeping partner, it was the duty of the plaintiff to furnish account and also information. Even as per Section 11 of the Partnership Act, mutual rights and duties of the partners of a firm may be determined by contract between the partners. In the present case Ex.P.1 partnership deed clearly states that plaintiff is managing partner and plaintiff is managing the firm. When plaintiff is managing the firm, it is his duty to furnish the account to other partner. In view of Section 9 and 11 it is the duty of the plaintiff to maintain the affairs of the firm and it is his duty to furnish accounts. Therefore the finding of the learned Arbitrator that the plaintiff is entitle for account of the firm cannot be found fault with.
22. One more contention of the plaintiff is that plaintiff is the inventor of the product Amvicube PA 2.0 and for the marketing purpose, partnership firm is formed and therefore, plaintiff is the owner of the product and the defendant cannot restrain the plaintiff from using the Amvicube PA 2.0. Admittedly after initiating arbitration the plaintiff has started a company by name Amvicube Private Limited. The partnership firm of the plaintiff and defendant is also Amvicube. The machine which is the business of the firm is Amvicube PA 2.0. When this Amvicube PA 2.0 is the product 24 CT 1390_Com.A.S.148-2019_Judgment.doc of the firm and the name Amvicube is the Good will of the partnership firm, the plaintiff is not expected to use the same for his business for the same product and even competitive product.
23. The learned Arbitrator has restrained the present plaintiff from using the name Amvicube and from using any of the property of the firm including stock, infrastructure, software etc. This finding is seriously disputed. The learned Arbitrator by considering the evidence has held that the plaintiff has started a new company by name Amvicube Private Limited and is also selling the same product. As per Section 14 of the partnership Act the property of the firm include all property rights and interests in property originally brought into the stock of the firm or acquired by purchase or otherwise, by or for the firm and includes Good will of the business. Therefore Good will of the firm is also the property of the firm.
24. In the statement of objection filed before the learned Arbitrator, in his evidence given before learned arbitrator and also in present arbitration suit, present plaintiff has specifically stated that, Firm had complete ownership of the internal property rights and all other rights with respect to Amvicube PA 2.0. Therefore it is the consistent stand of the present plaintiff who was the respondent before the learned Arbitrator that Amvicube PA 2.0 is under complete ownership of the firm and firm is complete owner of the internal property rights and all other 25 CT 1390_Com.A.S.148-2019_Judgment.doc rights with respect to this product. Hence though it is the contention of the present plaintiff that he is the inventor of the machine, this machine is brought into the stock of the firm and this Amvicube PA 2.0 is belongs to the firm as clearly admitted by the plaintiff. Similarly Amvicube is Good will of the Firm. When this is property of the firm, as per Section 14 and also as per the admission of the present plaintiff, referred above, as per Section 36 even outgoing partner can not use the firm name. Therefore, plaintiff starting company by name Amvicube Private Limited is clear violation of Section 36 of the Indian Partnership Act. Similarly as per Section 53 even after firm is dissolved, the partner can restrain another partner from carrying on similar business in the firm name or from using any of the property of the firm for his own benefit until affairs of the firm has been completely wound up. Therefore even after dissolution of the firm, partner can restrain other partners from carrying on similar business in the firm name. As such the defendant has every right to restrain the plaintiff from running business in the name of Amvicube. As per Section 55 of the Partnership Act, while settling account of the firm after dissolution, Good will shall be included in the asset and it may be sold separately or along with other property of the firm. As such. Good will of the firm is also an asset which can be sold at the time of dissolution of the firm.
25. In a decision relied by defendant, reported in (2006) 13 SCC 481 (Shreedhar Govind Kamerkar v.
26CT 1390_Com.A.S.148-2019_Judgment.doc Yewsahwant Govind Kamerkar and another), Hon'ble Supreme Court in para 38 has held as under:
"...Sections 50 and 53 of the Act indicate to the said effect. The partner of a dissolved firm can not only exercise his right under Section 50, he may also restrain the use of the firm's name and firm's property in terms of Section 53 of the Partnership Act. Section 37 of the Partnership Act determines the rights of the outgoing partner in certain cases to avoid shares to subsequent profits. If the tenancy right was being subjected to any profit by one of the partners, the cause of action arose..."
26. In another judgment reported in 2012 SCC Online Delhi 246 (Shree Ganesha Enterprises v. Sandeep Gullah) the Hon'ble High Court of Delhi in para 26 has held as under:
"...As per settled law, once the property / mark is invested in the partnership business, the same becomes the asset of the joint business. In the present case, undisputedly the defendant has brought the said name in the partnership business between them which was a joint business of the plaintiff and the defendant, therefore, the said name "CITY BANQUETS" became an asset of the partnership business. The defendant was only entitled to his shares of profits from time to time and after the dissolution of the partnership or his retirement from the partnership of the value of his share..."
27. On looking to all these provisions of the Partnership Act, decisions and on considering the facts of the present case, Amvicube PA 2.0 is the property of the firm, as even admitted by the present plaintiff in his evidence and also pleading. This product is the property of the firm and the name 'Amvicube' is Good will of the firm. Even outgoing partner or a partner on dissolution of the firm cannot use the name of the firm and the good will unless firm is finally 27 CT 1390_Com.A.S.148-2019_Judgment.doc wound up. Similarly the good will of the firm can be sold at the time of dissolution of the firm. As such, plaintiff though contends that he is inventor of the machine, he cannot sell the machine and cannot use the name of the firm Amvicube. As such the finding of the learned Arbitrator that the present plaintiff is to be restrained from using the name Amvicube and carrying on any similar business in the name of the firm and using any of the property of the firm is well founded and is in conformity with the evidence and the provisions of law. As such the learned Arbitrator by properly interpreting the terms of partnership deed and on proper appreciation of evidence and also considering provisions of law has rightly decided this point.
28. The learned Arbitrator has held that the account of the firm are to be audited and then claimant is entitle for 40% in the profit of the firm together with share of asset and property of the firm. This is in conformity with Ex.P.1 Partnership Deed. Since plaintiff and defendant are partners in the ratio of 60% and 40%, present defendant is entitle for 40% share in the profit. In the counter claim, present plaintiff had prayed for a direction to the defendant to pay 40% of the expenses of the plaintiff. Though the counter claim has been rejected, in the award in para (v), the learned Arbitrator has held that if the firm incurred loss the claimant shall deposit 40% of the share and pay the same to the respondent. Therefore in this award, learned Arbitrator has clearly held that the present defendant who was the claimant 28 CT 1390_Com.A.S.148-2019_Judgment.doc before the learned Arbitrator is entitle for 40% of the profit and is having obligation to pay 40% of the loss in terms of Ex.P.1 partnership deed and this finding is just and proper and cannot be said to be perverse, patently illegal or against the principles of law. Therefore though the counter claim regarding 40% expenses is dismissed, in fact the claim of the plaintiff asking the defendant to share 40% of the expenses is allowed subject to the condition that if the firm had suffered loss, the defendant is liable for 40%. Whether the firm has made loss or profit could be ascertained only after account of the firm are prepared and audited. Therefore the learned Arbitrator has rightly passed order directing the present plaintiff to furnish account and then audit the same and then share either profit or loss. This finding is just and proper.
29. Regarding the amount taken from Shreya Rice Mill and Shreya Traders, the learned Arbitrator after considering that the partnership deed permit the Firm to take financial help from, bank and financial institution only and the alleged loans taken from these two firms which are belonging to the plaintiff, are not bonafide and without permission of the other partner and are not valid and these transactions do not bind the firm and also the present defendant. This finding is based on facts and by considering the evidence placed before the learned Arbitrator. Finding given based on facts cannot be interfered under section 34 of the Act.
29CT 1390_Com.A.S.148-2019_Judgment.doc
30. On considering all these aspects, findings of the learned Arbitrator is just and proper. These findings given by the learned Arbitrator are based on facts, application of law, interpretation of documents and appreciation of evidence. There are absolutely no grounds to interfere with this award under Section 34(2) and Section 34(2A) of Arbitration & Conciliation Act. Accordingly, this arbitration suit is devoid of merits and is to be dismissed. Hence point No.1 is answered in the negative.
31. POINT No.2 : For the discussion made on above point, following order is passed:
ORDER Arbitration suit filed under Section 34 of the Arbitration & Conciliation Act challenging the award passed by the learned Arbitrator in the dispute between the parties in AC No.150/2018 dated 11/7/2019 is dismissed.
[Dictated to the Judgment Writer; transcript thereof corrected, signed and then pronounced by me, in the Open Court on this the 19th day of August 2022] [Ravindra Hegde] LXXXIII Additional City Civil Judge.
BENGALURU.
Digitally signed byRAVINDRA RAVINDRA
SANTHARAMA ***
SANTHARAMA HEGDE
HEGDE Date: 2022.08.19
08:28:13 -0400