Karnataka High Court
Pedda Rangappa S/O Nagappa, vs Kanthilal D. Gandhi, on 16 November, 2017
Author: H.B.Prabhakara Sastry
Bench: H.B.Prabhakara Sastry
M.F.A.No.24247/2012 (AA)
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IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 16TH DAY OF NOVEMBER, 2017
BEFORE
THE HON'BLE DR.JUSTICE H.B.PRABHAKARA SASTRY
MISCELLANEOUS FIRST APPEAL NO.24247/2012 (AA)
BETWEEN:
SRI. PEDDA RANGAPPA, S/O NAGAPPA,
OCC: MERCHANT, R/O. MULLANGAI SANJEEVAPPA
STREET, BALLARI
SINCE DECEASED AND REPRESENTED BY HIS
LEGAL REPRESENTATIVES,
1. K. SHANTHAMMA
W/O. LATE SRI PEDDA RANGAPPA
AGE: 64 YEARS, CASTE: HINDU,
OCC: DOMESTIC WORK,
R/O: MULLANGAI SANJEEVAPPA STREET,
BALLARI.
2. K. MARESWAMY S/O LATE SRI PEDDA RANGAPPA,
AGE: 33 YEARS, CASTE: HINDU,
OCC: MERCHANT,
R/O: MULLANGAI SANJEEVAPPA STREET,
BALLARI.
3. UMADEVI D/O LATE SRI PEDDA RANGAPPA,
W/O SHIVA KUMAR,
AGE: 44 YEARS, CASTE: HINDU,
OCC: DOMESTIC WORK,
R/O: GOWLIPET, ADONI TOWN,
ANDAPRADESH.
M.F.A.No.24247/2012 (AA)
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4. LAKSHMI D/O LATE SRI PEDDA RANGAPPA,
W/O MALLIKARJUNA,
AGE: 42 YEARS, CASTE: HINDU,
OCC: DOMESTIC WORK,
R/O: GOWLIPET, ADONI TOWN,
ANDRAPRADESH.
5. RADHA D/O LATE PEDDA RANGAPPA
W/O NAGARAJ,
AGE: 40 YEARS, CASTE: HINDU,
OCC: DOMESTIC WORK,
R/O: SPINNING MILLS QUARTERS,
HINDUPUR, ANANTHAPUR DISTRICT,
ANDRAPRADESH.
6. MANJULA LAKSHMI D/O LATE SRI PEDDA RANGAPPA
W/O RAVI KUMAR,
AGE: 36 YEARS, CASTE: HINDU,
OCC: DOMESTIC WORK,
R/O: HIRIYUR TOWN,
DIST: CHITRADURGA.
... APPELLANTS
(BY SRI. M. AMARE GOUDA, ADVOCATE)
AND:
KANTHILAL D. GANDHI,
S/O DEVICHAND GANDHI,
AGE: 61 YRS, CASTE: HINDU,
OCC: MERCHANT,
R/O: BENGALURU ROAD,
BALLARI.
... RESPONDENT
(BY SMT. V. VIDYA IYER & SRI.K RAGHAVENDRA RAO,
ADVOCATES)
---
M.F.A.No.24247/2012 (AA)
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THIS MFA IS FILED UNDER SECTION 37(1) OF THE
ARBITRATION AND CONCILIATION ACT, 1996 PRAYING TO
SET ASIDE THE ORDER DATED 30.01.2012 PASSED BY THE
LEARNED PRINCIPLE DISTRICT JUDGE AT BALLARI IN
A.C.NO.2/2006 AND ALSO SET ASIDE THE AWARD PASSED
BY THE ARBITRATOR BALLARI DATED 13.07.2006.
THIS APPEAL COMING ON FOR ADMISSION THIS DAY,
THE COURT DELIVERED THE FOLLOWING:
JUDGMENT
Though this appeal is coming on for admission, with the consent of counsel for both sides, the matter is taken up for final disposal.
The present appellants were the petitioners before the Court of Principal District Judge at Bellari (henceforth referred to as 'the Court below', for brevity), in Arbitration Case No.2/2006, which was filed under Section 34 of the Arbitration and Conciliation Act, 1996 (henceforth referred to as 'the Arbitration Act', for brevity), praying to set aside the award dated 13.07.2006 passed by the Sole Arbitrator. The Court below by its judgment dated 30.01.2012 dismissed the petition filed by the appellants herein.
M.F.A.No.24247/2012 (AA) :4: Being aggrieved by the said judgment, the appellants have preferred this appeal.
2. In their memorandum of appeal, the appellants have taken a contention that there was no specific reference of dispute to the Arbitrator, as such, the Arbitrator did not have jurisdiction to proceed in the matter. It is further contended that Section 44 of the Indian Partnership Act, 1932 (hereinafter referred to as 'the Partnership Act', for brevity) ought not to have been invoked by the Authority, since the said provision is about exclusive jurisdiction of the Civil Court. As such, the dissolution of the firm could not have been ordered by the Court below. Further, narrating few things about the alleged facts of the case, the appellants have prayed for setting aside the impugned judgment by allowing the appeal. In response to the notice, the respondent is being represented by his counsel.
M.F.A.No.24247/2012 (AA) :5:
3. Heard the arguments from both sides on main appeal in its entirety. Perused the memorandum of appeal, the impugned order and the materials placed before the Court.
4. The only point that arises for my consideration is:
"Whether the judgment under appeal warrants any interference at the hands of this Court?
5. The summary of the case of the appellants herein was that, one Sri. Pedda Rangappa, the father of the present appellants had entered into a partnership agreement with the respondent Sri. Kanthilal D. Gandhi on 05.02.1980. Subsequently a codicil dated 19.06.1985 came into existence, according to which the dissolution of the firm could only be after expiry of 20 years. On the basis of the partnership agreement and the codicil, the said Pedda Rangappa and the present respondent were running a Rice Mill under the name and style of M/s. Maruthi Modern Rice Mill. In due course of the time, M.F.A.No.24247/2012 (AA) :6: a dispute arises between them and the said Kanthilal D. Gandhi, the respondent herein, filed a suit in O.S.No.290/1986 before the Civil Judge Court at Ballari, against another partner Pedda Rangappa for dissolution of the firm M/s. Maruthi Modern Rice Mill and for rendition of accounts and also for the interest. Pedda Rangappa contested the said suit and took up a contention that the Civil Court had no jurisdiction to entertain the suit, as there was an arbitration clause in the agreement between the parties. Accordingly, the said suit came to be dismissed.
Thereafter, the said Kanthilal D. Gandhi got issued a notice to Pedda Rangappa calling upon him to suggest a name of an Arbitrator of his choice. Since Pedda Rangappa did not accept the name proposed by Kanthilal D. Gandhi, he preferred a Civil Miscellaneous Petition No.3/1998 before the High Court of Karnataka, seeking appointment of an Arbitrator under Section 11 of the Arbitration Act. Pedda Rangappa appeared in the matter M.F.A.No.24247/2012 (AA) :7: through his counsel and contested the same. However, one Sri. Ganesh Rao, retired District Judge was appointed as a sole Arbitrator vide order dated 03.04.1998.
Both the parties appeared before the Arbitrator and presented their case. The Arbitrator by his award dated 13.07.2006 declared that the respondent Kanthilal D. Gandhi had half share in the assets belonging to the partnership firm and also directed Pedda Rangappa to pay Kanthilal a sum of `1,42,383/- with interest at the rate of 6% p.a. from 28.03.1985 till the date of award and from the date of award at 12% p.a. till payment. A cost of a sum of `12,000/- was also awarded by the Arbitrator in favour of Kanthilal D. Gandhi.
Aggrieved by the said award passed by the Sole Arbitrator, the legal representatives of Pedda Rangappa, who was the second party/respondent before the Arbitrator, filed a case in the Court below under Section 34 of the Arbitration Act, seeking to set aside the award passed by the Arbitrator. As observed above, the Court M.F.A.No.24247/2012 (AA) :8: below by its judgment dated 13.01.2012 dismissed the said case. The said legal representatives of Pedda Rangappa have challenged the said judgment in this appeal.
6. The learned counsel for the appellants in his very brief argument submitted that the Court below has committed an error by holding that no grounds under Section 34(2) of the Arbitration Act was made out and that the Court also ignored that by virtue of Section 44 of the Partnership Act, the Arbitrator should not have entertained the dispute for rendition of accounts.
7. The learned counsel for the respondent in her argument vehemently submitted that the argument now being submitted to the Court has not been raised as a ground in the memorandum of appeal. Further, it is at the instance of the present appellants only, the Original Suit came to be dismissed with a finding that the partnership agreement had an arbitration clause and the M.F.A.No.24247/2012 (AA) :9: dispute among the partners for dissolution of the firm and rendition of the accounts were required to be referred to an Arbitrator for adjudication. She further submitted that Section 44 of the Partnership Act nowhere prohibits an Arbitrator to decide the dispute among the partners including rendition of account and dissolution of firm.
8. Section 34 (2) of the Arbitration Act reads as below:
"34. Application for setting aside arbitral award.
--
(1) xxxxxxxxxxxxx (2) An arbitral award may be set aside by the Court only if--
(a) the party making the application furnishes proof that--
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an M.F.A.No.24247/2012 (AA) : 10 : arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or M.F.A.No.24247/2012 (AA) : 11 :
(ii) the arbitral award is in conflict with the public policy of India.
Explanation. --Without prejudice to the generality of sub-clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81.
(3) xxxxxxxxxxxxxxxxx (4) xxxxxxxxxxxxxxxxx"
A reading of the above Section go to show that in the guise of an arbitration clause filed under Section 34(2) of the Arbitration Act, a party to the litigation cannot challenge the jurisdiction of the Arbitrator. A party to the dispute, if is decided to object about the jurisdiction of the Arbitral Tribunal, he has to raise that dispute before the Arbitral Tribunal itself under Section 16 of the Arbitration Act. Section 16(2) of the Arbitration Act specifically mentions that, a plea that the Arbitral Tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely M.F.A.No.24247/2012 (AA) : 12 : because he has appointed or participated in the appointment of an Arbitrator.
9. In the instant case, admittedly, the appellants have not objected the appointment of Sri. Ganesh Rao, retired District Judge as a sole Arbitrator in the matter by the Hon'ble High Court of Karnataka under section 11 of the Arbitration Act. In addition to that, Pedda Rangappa also participated in the proceedings before the sole Arbitrator and contested the matter. At no point of time he disputed the jurisdiction of the Arbitrator. Even otherwise, according to Section 16(2) of the Arbitration Act, if presumed that he is not precluded from raising such a plea, still it cannot be ignored that originally the present respondent as a plaintiff had instituted a civil litigation in O.S.No.290/1986 against the respondent partner Pedda Rangappa before the Civil Judge Court at Ballari for rendition of accounts and for the interest. Admittedly, it is at the contest and the objection of the said Pedda Rangappa himself, the said Original Suit came M.F.A.No.24247/2012 (AA) : 13 : to be dismissed on the finding that, the partnership agreement involves arbitration clause, as such, the parties are to be relegated to arbitration. It is only thereafter and at the interference of the High Court of Karnataka under Section 11 of the Arbitration Act, in Civil Miscellaneous Petition No.3/1998, a sole Arbitrator came to be appointed. Thus, the said Pedda Rangappa having himself being cause for referring the dispute to arbitration and having participated and contested the matter before the Arbitrator on merit, now cannot say that the said Arbitrator had no jurisdiction to decide the matter.
10. The second contention of the learned counsel for the appellants was that, in view of Section 44 of the Partnership Act, the Arbitrator ought not to have taken up the matter for rendition of the accounts. Chapter VI of the Partnership Act deals with dissolution of a firm, apart from defining under Section 39 as to what is the dissolution of a firm, through subsequent Sections at Sections 40 to 44, which deals with various modes of M.F.A.No.24247/2012 (AA) : 14 : dissolutions like Dissolution by agreement (Section 40), Compulsory dissolution (Section 41), Dissolution on the happening of certain contingencies (Section 42), Dissolution by notice of partnership at will (Section 43), Dissolution by the Court (Section 44).
Section 44 of the Indian Partnership Act, 1932 reads as below:
"44. Dissolution by the Court.--At the suit of a partner, the Court may dissolve a firm on any of the following grounds, namely:--
(a) that a partner has become of unsound mind, in which case the suit may be brought as well by the next friend of the partner who has become of unsound mind as by any other partner;
(b) that a partner, other than the partner suing, has become in any way permanently incapable of performing his duties as partner;
(c) that a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of the business, regard being had to the nature of the business;
(d) that a partner, other than the partner suing, wilfully or persistently commits breach of agreements relating to the management of the affairs of the firm or the conduct M.F.A.No.24247/2012 (AA) : 15 : of its business, or otherwise so conducts himself in matters relating to the business that it is not reasonably practicable for the other partners to carry on the business in partnership with him;
(e) that a partner, other than the partner suing, has in any way transferred the whole of his interest in the firm to a third party, or has allowed his share to be charged under the provisions of rule 49 of Order XXI of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908) or has allowed it to be sold in the recovery of arrears of land revenue or of any dues recoverable as arrears of land revenue due by the partner;
(f) that the business of the firm cannot be carried on save at a loss; or
(g) on any other ground which renders it just and equitable that the firm should be dissolved."
A reading of the above Section nowhere gives an impression that it is only the Court and a Civil Court alone which can order for rendition of accounts. The operative portion of the award passed by the Arbitrator vide his award dared 13.07.2006 which is at page 52 of the lower Court records reads as below:
" i. I party Kantilal Gandhi has half share in the partnership firm asset consisting of the land M.F.A.No.24247/2012 (AA) : 16 : bearing S.No.774 C measuring 3 Acres and 41½ cents situate at Bapuji Nagar Bellary with buildings and machinery thereon. ii. II party Pedda Rangappa do pay to I Party Kantilal Gandhi a sum of `1,42,383/- with interest at 6% per annum from 28-03-1985 till this day of award, that is, 13-07-2006 and further interest at 12% per annum from this day, that is, 13-07-2006 till payment. iii. II Party Pedda Rangappa do pay I Party Kantilal Gandhi a sum of `12,000/- (Rupees Twelve thousand) towards costs of this Arbitration and bear his own.
iv. I Party Kantilal Gandhi to pay necessary Stamp Duty on this Award within 15 days from receipt of this Award or within such time as this Arbitral Tribunal may extent. This Award shall become effective from the date of furnishing such stamp duty".
In the case of Navin Kumar & Another Vs. Standard Restaurant & Ors. reported in 2003 (68) DRJ 702, while dealing with Section 44 of the Partnership Act, 1932, High Court of Delhi was pleased to observe that, for the dissolution of a firm, objection of the plaintiff to the effect that dissolution under Section 44 of the Partnership M.F.A.No.24247/2012 (AA) : 17 : Act is a statutory right and to be necessarily performed by the Court only and not to be adjudicated upon by the Arbitrator, does not prima facie appear to be the correct proposition of law.
In the instant case, as observed above, the Arbitrator has passed the award apportioning the property of the firm and determining the entitlements of the petitioner before him. In view of the same, the said award of the Arbitrator cannot be called as violative of the provisions under Section 44 of the Partnership Act. As such, the other argument canvassed by the learned counsel for the appellants is also not acceptable.
11. Barring the above, there are no other points of arguments addressed by the learned counsel for the appellants worth consideration. However, in their memorandum of appeal, the appellants have also taken a contention regarding awarding the interest by the Arbitrator in his award. Section 31(7)(a) of the Arbitration M.F.A.No.24247/2012 (AA) : 18 : Act empowers the Arbitrator to award interest at such rate as it deems reasonable. As such, the arbitrator after giving the reasons has awarded the interest, which order of the arbitrator cannot be called as perverse or illegal.
12. In view of these reasoning, I do not find any ground to allow the appeal.
As such, the appeal stands dismissed at the stage of admission itself.
Sd/-
JUDGE gab