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2000 DIGILAW 1546 (PNJ)

Bonny Sodhi v. Mrs. Sharda Dutt

2000-12-15

M.L.SINGHAL

body2000
JUDGMENT M.L. Singhal, J. - This is Civil Revision against the order dated 5.10.2000 passed by Civil Judge (Junior Division), Chandigarh whereby she has allowed the application of the respondents/defendants for referring the matter to the Arbitrator. Facts :- 2. Mrs. Bony Sodhi and Mrs. Sheila Mamik have filed suit for rendition of accounts and dissolution/winding up of the firm known as "Vivek Nursery and Preparatory School, 52, Sector 9, Chandigarh" and have prayed that after passing preliminary decree, further decree, for distribution of the assets of the said firm be passed mentioning therein the partners and also for the recovery of the amount which may be found payable by the defendants to the plaintiffs alongwith interest and costs against Mrs. Sharda Dutt and Mrs. Sunaiyna Dass, and decree for permanent injunction restraining the defendants from acting individually as Principal or as partner or from doing anything on behalf of the firm for running the school or for collecting the funds or to create any liability. It has been alleged in the plaint that in the beginning, firm was floated with five partners for running the school in the name and style of Vivek Nursery and Preparatory School. On 29.2.1972, one partner named Mrs. I. Chitambar retired from the partnership. New partnership deed was executed in the year 1972. Again, partnership was modified and on 1.7.1972, a deed of partnership was executed. There were two partners Mrs. Romola Chauhan and in her place Mrs. Sunaiyna Dass was inducted as partner in place of Mrs. Priyamvada Swift, Mrs. Sheila Mamik was inducted as partner. Partnership was modified and amended from time to time, and finally modified partnership deed was executed on 4.3.1993. According to this partnership deed all the terms and conditions which are incorporated in the deed dated 8.10.1975 were to be read as part of partnership deed dated 4.3.1993, except the terms which were inconsistent with the terms mentioned in partnership deed dated 4.3.1993 and the Clauses which are mentioned in the partnership deed dated 4.3.1993 were to prevail upon the partnership deed dated 8.10.1995. Clause 13 of the partnership deed dated 8.10.1975 reads as under :- "In the event of the dissolution of partnership by any means whatsoever, as soon as convenient, but not later than the time fixed for the annual or six- monthly accounting, a full and general account and valuation shall be taken of the property, assets and liabilities of the partnership and the same sold, the debts realised and the credits paid. The net-proceeds in each shall be ratably divided according to the share of each partner, between all the partners, provided always that if proceed as are less than the liabilities the loss shall be made good in the proportion of the shares of the partners, by the partners." 3. It is alleged in the plaint that for the past some time, Mrs. Sunaiyna Dass defendants No. 2 had been deliberately avoiding holding of meetings of the partners, and the plaintiffs were kept in dark regarding the functioning and running of the school and its accounts. Mrs. Sunaiyna Dass did not attend the meetings inspite of the fact that meetings were requisitioned and Mrs. Sunaiyna Dass instead of holding proper meetings started making false allegations against the plaintiffs and their appointed attorneys. Mrs. Sunaiyna Dass has been exercising an authority not vested in her inasmuch as she has been making appointments of certain teachers and other employees without the consent and approval of all the partners. She made irregularities in the accounts etc. Letters were also written to her, but she did not care to attend the meetings. Mrs. Sheila Mamik plaintiff No. 2 through attorney wrote letter dated 5.4.2000 to defendant No. 2 for requisitioning of the meeting of the partners for 15.4.2000 at 5 P.M. to discuss the Agenda regarding financial results, proposed increase in school fees, financial projects, increase in salaries of the teachers etc., but she is reply to that letter made false allegations and did not care to attend the meeting and did not act upon the said letter. Thereafter correspondence took place with the plaintiffs and defendant No. 2. It is apparent from that correspondence that defendant No. 2 Mrs. Sunaiyna Dass was not competent to act as Principal and therefore the plaintiffs removed her from partnership of the school through letter dated 15.5.2000. It was clearly mentioned in the letter dated 15.5.2000 written by the plaintiffs that Mrs. It is apparent from that correspondence that defendant No. 2 Mrs. Sunaiyna Dass was not competent to act as Principal and therefore the plaintiffs removed her from partnership of the school through letter dated 15.5.2000. It was clearly mentioned in the letter dated 15.5.2000 written by the plaintiffs that Mrs. Sunaiyna Dass defendant has exercised authority not vested in her, particularly in the matter of appointments of teachers, settling terms and conditions of their services as also in the manner of changing the terms of some teachers. It was mentioned in the letter dated 15.5.2000 that she had avoided holding meetings of the partners and thus kept the plaintiffs in dark regarding the affairs of the school. The acts of the Principal were not in the interest of partnership firm. 4. It is further alleged in the plaint that on account of her acts of omission and commission and also on account of the fact that she was removed from the Principalship of the school, Mrs. Sunaiyna Dass was not entitled to act as Principal any more and to run the affairs of the school. It is also mentioned in the plaint that defendants are not entitled to act or run the affairs of the school without the consent of the partners. Since no meeting has held, deadlock is created among the partners. Differences have arisen among the partners which are irreconcilable. In the face of differences persisting there is no possibility of partnership business being run. There is no possibility of running the school amicably and in an orderly manner. The plaintiffs have, therefore, decided to dissolve the Firm which may be dissolved according to the procedure incorporated in the said two partnership deeds. Defendants are maintaining the accounts and they are also in the custody of all the assets of the firm. There are certain amounts lying deposited in the Bank, which can be operated with the consent of the partners according to the partnership deed. Both the defendants are liable to render the accounts. Defendant No. 2 Mrs. Sunaiyna Dass was not entitled to act as Principal. She is not entitled to do any act on behalf of the Firm without the consent of the other partners. Plaintiffs are partners of the partnership in equal shares. They are competent to remove her from Principalship of the school. Defendant No. 2 Mrs. Sunaiyna Dass was not entitled to act as Principal. She is not entitled to do any act on behalf of the Firm without the consent of the other partners. Plaintiffs are partners of the partnership in equal shares. They are competent to remove her from Principalship of the school. Plaintiffs are also entitled to rendition of accounts and distribution of the assets and thereafter for the recovery of the amount which may be found due in terms of the said two partnership deeds. 5. After appearing before the court, Mrs. Sunaiyna Dass defendant No. 2 made an application under Section 8 of the Arbitration Act read with Section 151 CPC, praying that in view of the terms and conditions contained in partnership deeds, the suit be not proceeded with and the disputes and differences arising between the partners be referred to an Arbitrator to be nominated unanimously by the partners whose decision shall be final and binding on all the partners. In partnership deed dated 4.3.1993 it has been incorporated as under :- "16. That if any dispute arises between the partners during the period of one year with regard to any of the matters referred to above the same shall be referred to arbitration of two parents one each to be nominated by Mrs. Sharda Dutta and Mrs. Bonny Sodhi. 17. That regarding all other disputes between the partners the same shall be referred to an arbitrator mutually agreed to by all the four partners." Perusal of para Nos. 16 and 17 of the partnership deed dated 4.3.1993 together with partnership deed date 8.10.1975, makes it clear that all differences and disputes arising between the partners out of the partnership agreement cannot be taken to the Court for adjudication but to the arbitrator whose decision shall be final and biding on all the partners. 6. This application was opposed by the respondents Nos. 1 and 3. It was stated that Mrs. Sunaiyna Dass has already taken steps in the proceedings, as such she cannot ask for arbitration. She had also approached the Honble Supreme Court for the transfer of the case. From the very beginning her intention was not to approach the arbitrator. Since the institution is now dissolved after dissolution of the firm, rendition of accounts is to follow. Rendition of accounts cannot be referred to the Arbitrator. Mrs. She had also approached the Honble Supreme Court for the transfer of the case. From the very beginning her intention was not to approach the arbitrator. Since the institution is now dissolved after dissolution of the firm, rendition of accounts is to follow. Rendition of accounts cannot be referred to the Arbitrator. Mrs. Sunaiyna Dass wrote a letter dated 24.6.2000 in which among other facts it was mentioned that "since the institution now stands dissolved as per your application in the Court, I thought we could give it a semblance of dignity before we finally part." 7. Civil Judge (Junior Division), Chandigarh vide her order dated 5.10.2000 allowed the application of Mrs. Sunaiyna Dass moved under Section 8 of the Arbitration Act read with Section 151 C.P.C. and ordered that the matter be referred to the Arbitrator. It was directed that plaintiffs shall furnish the names of two arbitrators to the Court. Defendants have already given the names of the arbitrators through an application dated 31.8.2000. If the parties agree at one arbitrator the case would be referred to the Arbitrator agreed upon between the parties failing which the court would appoint one of the persons as Arbitrator from the list furnished to the Court by the parties. 8. I have heard the learned Counsel for the parties and have gone through the record. It was submitted by the learned Counsel for the petitioners that there could be no question of referring the case to the Arbitrator when the partnership was no longer subsisting among the partners, partnership having been dissolved if not from 15.5.2000 at least from 26.5.2000 i.e. when the suit was instituted. It was submitted that the matter can be referred to the Arbitrator if partnership business was going on and the disputes had arisen. In support of this submission, he drew my attention to Narinder Singh and others v. Hardial Singh Dhillon and others, AIR 1985 Punjab and Haryana 41 where it was held that question of rendition of accounts must be decided by the Court and not by the Arbitrator. Defendants application under Section 34 of the Arbitration Act must be dismissed. In support of this submission, he drew my attention to Narinder Singh and others v. Hardial Singh Dhillon and others, AIR 1985 Punjab and Haryana 41 where it was held that question of rendition of accounts must be decided by the Court and not by the Arbitrator. Defendants application under Section 34 of the Arbitration Act must be dismissed. It was also held that whenever dissolution of partnership is sought under Section 44(g) then it is for the court to decide whether it would be just and equitable to dissolve the partnership or not and such a matter cannot be left to be gone into and decided by the arbitrator in pursuance of the arbitration clause contained in partnership deed. Merely by filing civil suit for dissolution of partnership at will partnership does not stand dissolved but it will stand dissolved from a date which may be fixed in the preliminary decree passed by the Court, unless it is found in the suit on merits that the partnership had already stood dissolved as pleaded by the defendants. 9. Narinder Singh and Smt. Harpreet Randhawa filed a suit for dissolution of partnership and rendition of accounts of Messrs Janta Rice Mills, Mehta, District Amritsar. On receipt of notice of the suit, Hardial Singh Dhillon filed an application under Section 34 of the Arbitration Act for staying the suit on the pleas that the firm had already been dissolved and in the partnership deed it was agreed between the parties that they would get their disputes settled through arbitrators and hence, the dispute in the present suit should be referred to the arbitrator and the suit be stayed. Trial Court allowed this application of the defendants and stayed the suit. In appeal, the High Court dismissed the application filed by Hardial Singh Dhillon under Section 34 of the Arbitration Act in view of the finding that the question of rendition of accounts cannot be gone into by the arbitrator, it has to be decided by the Civil Court. 10. In Mangal Sain v. Manohar Lal and others, 1996 ISJ (Banking) 597 relied upon by the learned Counsel for the petitioner, it was held that if there is no evidence to prove that the firm stood dissolved by way of mutual consent or by service of notice, it has to be inferred that it stood dissolved with the institution of the suit. 11. 11. It was next submitted that the arbitration could be asked for before going to the Court, i.e. when relationship of partners inter se was subsisting. In support of his contention he drew my attention to 1996 ISJ (Banking) 597 (supra). 12. Learned Counsel for the respondents on the other hand submitted that when there is arbitration agreement, the matter has to be referred to the arbitrator for adjudication. In support of this submission he drew my attention to Parampal Singh v. Punjab State Warehousing Corporation, Chandigarh and others, 2000(1) PLR 437, Section 8 of Arbitration and Conciliation Act, 1996 deals with the power of the Court to refer the Parties to the Arbitrator where there is arbitration agreement, which reads as under : "Power to refer parties to arbitration where there is an arbitration agreement. :- (1) A judicial authority before which an action is brought in the matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made." 13. Learned Counsel for the respondents submitted that the petitioners are avoiding the matter being referred to the arbitrator because they do not want the school to be run by the respondents. Petitioner had made an application under Order 40 Rule 1 read with Section 151 of the Code of Civil Procedure for appointment of a Receiver so that the Receiver could take charge of all the assets of the partnership including the account books and other articles of the partnership and also take over the management of the School. 14. In their application made under Order 40 Rule 1 read with Section 151 CPC for the appointment of Receiver, the plaintiffs have themselves admitted that the school is being run by the defendants, who are in possession of furniture, Almirahs, Books, Computers, Bus etc. All these accounts books consisting of cash book, ledger, pass book, Vouchers, Admission registers, Employees register etc. All these accounts books consisting of cash book, ledger, pass book, Vouchers, Admission registers, Employees register etc. are in possession of the defendants. 15. There is one clause in the partnership deed dated 8.10.1975 whereby it has been provided that all differences and disputes arising between the partners (of the present group or the heirs as the case may be) out of this partnership agreement shall be referred to an arbitrator to be nominated unanimously by the partners whose decision shall be final and binding on all the partners. In partnership deed dated 4.3.1993, arbitration clause is very much there viz. that; if any dispute arises between partners during the period of one year with regard to any of the matters referred to above, the same would be referred to arbitration of two parents one each to be nominated by Mrs. Sharda Dutt and Mrs. Bonny Sodhi, that regarding all other disputes regarding the partnership, the same would be referred to the arbitrator mutually agreed to by all the four partners. Arbitration clause thus presupposes that the disputes between the partners shall not be taken to the Court, but shall be taken to the Arbitrator for adjudication. 16. Order passed by the Court below does not suffer from any material irregularity or illegality so that it could be interfered with in the exercise of its revisional jurisdiction by this court. In revision, this Court will interfere with the order passed by the Court below if while passing the impugned order, the Court below is shown to have acted with material irregularity in the exercise of its jurisdiction or has acted in excess of its jurisdiction. 17. Why is there provision in both the partnership deeds regarding adjudication of the disputes and differences between the partners that arise among them relating to running of the partnership business through arbitration ? is the delay that is known to be taking place in courts in the decision of such suits which is proverbial. According to clause 17 of the partnership deed dated 4.3.1993 all other disputes between the partners shall be referred to the Arbitrator mutually agreed to by all the four partners. 18. In this case, Court below has allowed time to the petitioners to furnish the names of the Arbitrators to it. Respondents have already furnished the names of the arbitrators through an application dated 31.8.2000. 18. In this case, Court below has allowed time to the petitioners to furnish the names of the Arbitrators to it. Respondents have already furnished the names of the arbitrators through an application dated 31.8.2000. Court has ordered that if parties arrive at consensus as to the name of one arbitrator, the matter shall be referred to that person who will act as arbitrator out of the list furnished by the parties to the Court. 19. In my opinion, the order passed by the Court below is quite, just and reasonable. It is based upon equity, justice and fair play. At the time of arguments, it was submitted by Mr. Sarin, Senior Advocate for the petitioners that the parties may not be able to arrive at consensus on the name of one person and if they furnish names for the choice of the court, the person chosen by the court may not be acceptable to one party or the other as he would be either the nominee of this party or nominee of that party. Parties are advised to try to arrive at consensus with regard to the name of one arbitrator who is to arbitrate into the matter and suggest that name which is acceptable to all the four partners of which there is no dearth at Chandigarh so that the school continues to be functional. With the above observations, the revision petition fails and is dismissed. Revision dismissed.