Indian Kanoon - Search engine for Indian Law

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 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 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 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 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 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.

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 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.