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2001 DIGILAW 1430 (RAJ)

Ratan Singh and 1 another v. Singari

2001-09-10

SUNIL KUMAR GARG

body2001
JUDGMENT 1. - This misc. appeal has been filed by the appellants (hereinafter referred to as the petitioners) against the order dated 11.4.2000 passed by the learned Addl. District Judge No. 1. Jodhpur in Civil Misc. (A) Case No. 2/99, by which he rejected the application filed by the petitioners Under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act of 1996') for appointment of Receiver. 2. The facts giving rise to this appeal, in short, are as follows: The petitioners filed an application Under Section 11(5) of the Act of 1996 bearing No. 3/99 on 20.11.1999 in the Court of District Judge, Jodhur against the respondents (hereinafter referred to as the non-petitioners) stating inter-alia that a partnership deed was executed between the petitioners and non-petitioners on 1.4.1996 and by that partnership deed, a firm came into existence known as "M/s Hotel Marudhar" having its principal place of business at Jodhpur and Branch at Mount Abut District Sirohi. The said partnership was at Will, as it is evident from the condition No. 4 of that partnership deed. The petitioners through notice dated 26.11.1998 purported to have been given under the provisions of Section 43 of the Indian Partnership Act, 1932 dissolved the firm with effect from 30.11.1998 and according to the petitioners, that notice was served on the non-petitioners. Since in the partnership deed there was clause No. 11 to the effect that in case of any dispute between the partners or their legal representatives as to the interpretation of this deed or anything arising out of the business of the firm, the matter shall be referred to arbitration under the provisions of the Indian Arbitration Act, 1940 or any statutory substitution or modification thereof for the time being in force, therefore, this application was filed by the petitioners Under Section 11(5) of the Act of 1996 in order to settle all the disputes pertaining to the firm in question and it was prayed that Arbitrator be appointed. In that application, the learned District Judge, Jodhpur vide order dated 13.4.2000 appointed Shri Vasu Deo Vyas as Arbitrator and later on, appointment of Shri Vasu Deo Vyas as Arbitrator was challenged in the lower court and that matter is still pending. In that application, the learned District Judge, Jodhpur vide order dated 13.4.2000 appointed Shri Vasu Deo Vyas as Arbitrator and later on, appointment of Shri Vasu Deo Vyas as Arbitrator was challenged in the lower court and that matter is still pending. This is one of the aspects of the matter.Simultaneously, the petitioners filed an application Under Section 9 of the Act of 1996 stating inter-alia that even after the dissolution of the firm with effect from 30.11.1998, the non-petitioners are still carrying on business, though they should have stopped the business and all the accounts books pertaining to the firm in question should have been sealed and they should have been made available before the Arbitrator so that he could decide the matter rightly. It was further stated in the application that not only this, the non-petitioners are not ready even to prepare the list of all the properties whether movable and immovable belonging to the firm and are using the properties of the firm for their personal interest and benefits and thus, causing loss to the properties of the firm and besides this, they have not even filed reply to the proceedings pertaining to appointment of Arbitrator and thus, they are not cooperating. In these circumstances, there is apprehension that non-petitioners would misuse the properties of the firm and would cause loss to the firm and, therefore, it was prayed that a Receiver be appointed and all the properties including accounts books belonging to M/s Hotel Marudhar, Jodhpur and its Branch at Mount Abu be handed over to the Receiver and whole management of the business pertaining to the firm be also handed over to the Receiver and the Receiver be asked to prepare inventory lists and produce the same in the Court.This application which was filed by the petitioners Under Section 9 of the Act of 1996 was contested by the non-petitioners by filing a detailed reply. In the said reply, it was submitted by the non-petitioners that though there was clause No. 4 in the partnership deed that duration of the partnership shall be at Will, but the intention of the partners was not like that. In the said reply, it was submitted by the non-petitioners that though there was clause No. 4 in the partnership deed that duration of the partnership shall be at Will, but the intention of the partners was not like that. It was further stated in the reply that the notice of dissolution of firm should have been given by the petitioners to all the partners of the firm, but the petitioners have not given the notice to all the partners of the firm and thus, the firm was not dissolved by the impugned notice. All the allegations pertaining to mismanagement of the business of the firm and misuse of the properties of the firm have been denied by the non-petitioners. It was further stated by the non-petitioners that the notice dated 26.11.1998 by which the firm was dissolved with effect from 30.11.1998 is also not valid and not according to law and it is wrong to say that the firm stands dissolved. It was further alleged in the reply that if the business of the firm is stopped, it would result in causing more loss to the firm. It was further submitted by the non-petitioners that the apprehension of the petitioners that properties of the firm are being misused is based on conjectures and surmises and the petitioners have no right to close the business of the firm and that the non-petitioners are ready to fulfil their duties and obligations, according to law. Hence, it was prayed by the non-petitioners that the application filed by the petitioners for appointment of Receiver be rejected.After hearing both the parties, the learned Addl. District Judge No. 1, Jodhpur through order dated 11.4.2000 rejected the prayer of the petitioners for appointment of Receiver and disposed of the application in the following manner: (1) That the objection of the non-petitioners that the impugned notice was not served on each of the partners is wrong. (2) That so far as the case of minor partners of the firm is concerned, they have been made partners for the purpose of gaining profit and not for loss. (3) That any of the partners of the firm has a right to move under the provisions of Act of 1996. (2) That so far as the case of minor partners of the firm is concerned, they have been made partners for the purpose of gaining profit and not for loss. (3) That any of the partners of the firm has a right to move under the provisions of Act of 1996. (4) That the grounds, which have been taken by the petitioners for appointment of Receiver, are vague and uncertain, as it has not been established prima facie that the properties of the firm are in danger or are going to be transferred to some other person. (5) That as per the orders of the Hon'ble High Court, copies of accounts books upto the date of dissolution of the firm have been supplied to the petitioners. (6) That in case the Receiver is appointed, the business of the firm would certainly be affected and there is no prima facie case showing that if business of the firm is carried out, there will be danger to the properties of the firm. (7) That in these circumstances, the learned Addl. District Judge No. 1, Jodhpur found no prima facie case for appointment of Receiver. (8) But, the learned Addl. District Judge No. 1, Jodhpur came to the conclusion that it is also proper that in the proceedings pertaining to appointment of Arbitrator, a list of all the properties whether movable or immovable belonging to the firm in question be prepared so that nobody could make changes etc. in that and for that the learned Addl. District Judge No. 1, Jodhpur by the same impugned order, which is under challenge before this Court, appointed Shri Kishan Lal Prajapat as Commissioner and he was directed to prepare the list of all the properties belonging to the firm upto 14.4.2000 of both places at Mount Abu and Jodhpur in presence of both parties and to produce the same in the Court. The non-petitioners were further directed to maintain the accounts of the firm regularly and correctly and they would also submit information in the court quarterly. Aggrieved from the said order dated 11.4.2000 passed by the learned Addl. District Judge No. 1, Jodhpur, this appeal has been filed by the petitioners. 3. The non-petitioners were further directed to maintain the accounts of the firm regularly and correctly and they would also submit information in the court quarterly. Aggrieved from the said order dated 11.4.2000 passed by the learned Addl. District Judge No. 1, Jodhpur, this appeal has been filed by the petitioners. 3. In this appeal, the main contention made by the learned Counsel appearing for the petitioners is that accounts of the firm show that the firm is incurring loss and non-petitioners are putting the firm into loss intentionally and purposely with ulterior motive and, therefore, looking to the entire facts and circumstances of the present case, appointment of Receiver is must and thus, Receiver be appointed otherwise it would result in loss to the properties of the firm. 4. On the other hand, the learned Counsel appearing for the non-petitioners suppoorted the impugned order passed by the learned Addl. District Judge No. 1, Jodhpur. 5. I have heard the learned Counsel appearing for the petitioners and the learned Counsel appearing for the non-petitioners and perused the materials available on record. 6. In this case, the petitioners are seeking remedy of appointment of Receiver Under Clause (d) of Sub-section (ii) of Section 9 of the Act of 1996. The starting words of Section 9 of the Act of 1996 are that a party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a Court for interim injunction or the appointment of a Receiver. 7. It may be stated here that jurisdiction of the court to appoint a receiver is not ousted by an arbitration clause providing for a reference to arbitration of all matters in dispute between the parties. 8. The Hon'ble Supreme Court in Sundaram Finance Ltd. v. M/s. NEPC India Ltd., AIR 1999 SC 565 has clearly held that Section 9 of the Act of 1996 empowers the Court to pass interim orders even before the commencement of arbitral proceedings. 9. Thus, so far as the maintainability of the present application is concerned, there is no dispute on this point and the present application filed by the petitioners is maintainable. This is one of the aspects of the matter.Condition precedent for appointment of Receiver 10. The appointment of a Receiver is in the discretion of the court. 9. Thus, so far as the maintainability of the present application is concerned, there is no dispute on this point and the present application filed by the petitioners is maintainable. This is one of the aspects of the matter.Condition precedent for appointment of Receiver 10. The appointment of a Receiver is in the discretion of the court. The power to appoint a receiver is not to be exercised as a matter of course or for the reason that it can do no harm to appoint one. A receiver should not be appointed in supersession of a bona fide possessor of the property in dispute unless there is some substantial ground for interference. The Court has to consider whether special interference with the possession of the defendant is required, there being a well founded fear that the property in question will be dissipated or that other irreparable mischief may be done unless the court given its protection. 11. The parent authority which guides the court in the appointment of Receiver in Muniammal v. P.M. Ranganatha Nayagar and Anr., AIR 1955 Madras 571 , where three principles have been laid down by the Madras High Court for appointment of Receiver and they are as follows: "First of all, a plaintiff applying for the appointment of a Receiver must show prima facie that he has a strong case and good title to the property or a special equity in his favour and that the property in the hands of the defendant is in danger of being wasted. Secondly, where the property is in medio that is to say, in the possession of no one, a Receiver can readily be appointed. But, where any one is in possession under a legal claim, strong and compelling reasons are necessary for interfering with such possession. Thus, the bona fide purchaser of the property- bonafides have to be presumed unless and until the contrary can be inferred in dispute should not be disturbed by the appointment of a Receiver unless there is some substantial and compelling ground for such interference. Violently stated vague allegations constitute no substitute for vacuum of facts. Thirdly, an application for the appointment of a Receiver should always be made promptly and delay in making it is a circumstance unfavourable to such an appointment. Violently stated vague allegations constitute no substitute for vacuum of facts. Thirdly, an application for the appointment of a Receiver should always be made promptly and delay in making it is a circumstance unfavourable to such an appointment. Of course the matter should be considered judicially in all its aspects before being disposed of as there may be legitimate reasons for preferring an application after delay." 12. Apart from this, a receiver should be appointed where it is just and convenient. The appointment of a receiver is recognised as one of the harshest remedies which the law provides for the enforcement of rights and is allowable only in extreme cases and in circumstances where the interest of the person seeking the appointment of a receiver is exposed to manifest peril. A receiver should not be appointed unless the party has an excellent chance of suceeding in the suit; the plaintiff himself has shown that there was some emergency or danger or loss that may be caused to the right involved in the suit; that an order appointing a receiver should not be made if it has the effect of depriving a defendant of de facto possession. However, the position would be different if the property is shown to be in medio that is to say in the enjoyment of no one and that the Court should always look into the conduct of the parties who seek for the appointment of a receiver. 13. The discretion to appoint a receiver is not arbitrary or unregulated but is to be exercised cautiously, judicially and according to legal principles, after consideration of the whole of the circumstances of the case. A receiver cannot be appointed merely because it is expedient or convenient to one of the parties to do so or because it will do no harm to do so. A bonafide possessor of property should not be dispossessed pending suit unless there is some substantial reason, such as, well founded fear that the property in question being dissipated or that some other irreparable mischief may occur unless the Court gives its protection. The application for appointment of receiver should not be disposed of summarily. A bonafide possessor of property should not be dispossessed pending suit unless there is some substantial reason, such as, well founded fear that the property in question being dissipated or that some other irreparable mischief may occur unless the Court gives its protection. The application for appointment of receiver should not be disposed of summarily. The plaintiff must show prima facie that he has strong case i.e. either a good title to the property or a special equity in his favour requiring immediate dispossession of the defendant or that the property in the hands of the defendant is in danger of being wasted. 14. In Dilman Rai v. Srinarayan Sharma and Anr., AIR 1983 Sikkim 11 , it was observed as under: "An order appointing a receiver will not be made where it has the effect of depriving the defendant of a 'de facto' possession since that might cause irreparable wrong. The appointment of receiver pendente lite is a harsh, drastic and peremptory measure, its effect being to deprive, atleast temporarily, a defendant of his possession before final judgment or decree is reached on evidence at the trial. The Court will not act on possible 'danger only' and 'remote or part damage will not suffice as a ground', 'but there must be a well grounded apprehension of immediate injury' and 'danger of suffering irreparable loss'. Further the charges must be specific. specific acts capable of being tested should be alleged", for "violently stated vague allegations constitute no substitute for vacuum of facts." And above all, the general and almost overriding principle is that an application for appointment of the receiver should always be promptly made and delay in making it is a circumstance unfavourable to such an appointment." 15. In the light of the above principles, the present appeal is being decided. 16. In my considered opinion, looking to the entire facts and circumstancess of the case, there is no force in this appeal and the same is liable to be dismissed for the following reasons: (1) That the learned Addl. In the light of the above principles, the present appeal is being decided. 16. In my considered opinion, looking to the entire facts and circumstancess of the case, there is no force in this appeal and the same is liable to be dismissed for the following reasons: (1) That the learned Addl. District Judge No. 1, Jodhpur has given cogent reasons for rejecting the prayer of the petitioners for appointment of Receiver and furthermore, to safe-guard the properties of the firm, he has appointed Shri Kishan Lal Prajapat as Commissioner, who has been asked to prepare the invetory list of all the properties whether movable or immovable belonging to the firm and to submit the same in the Court. Not only this, the learned Addl. District Judge No. 1 has further directed the non-petitioners to maintain the accounts of the firm properly and correctly and to submit the report in the Court quarterly. (2) That allegations, which have been levelled by the petitioners, that the non-petitioners, who are partners of the firm, are misusing the properties of the firm are certainly vague and not substantiated by any documentary or other evidence at this stage and that is why, the learned Addl. District Judge No. 1 rightly observed that the petitioners have no prima facie case in their favour so far as the appointment of Receiver is concerned. (3) That so far as the argument that firm is going in loss, as according to the learned Counsel for the petitioners, it is evident from the accounts books is concerned, this itself is not sufficient for making appointment of receiver and from this point of view, it cannot be reasonably inferred that the property of the firm is being misused or in danger at the hands of the non-petitioners. (4) That profit as well as loss are natural incidence of any business. (4) That profit as well as loss are natural incidence of any business. (5) That argument that since the firm as per the notice of the petitioners stands dissolved, therefore, non-petitioners cannot carry on business of the firm after 30.11.1998, is not to be appreciated because dissolution of partnership and stoppage of its business, in my considered opinion, are distinct matters and carrying on business is, no doubt, the purpose of partnership, and discontinuance of business ordinarily puts an end to the main partnership activity, but it does not by itself, end the legal relationship between the partners and, therefore, there are cases where even after dissolution, the business may be carried on and from this point of view also, if the business of the firm is being carried on by the non-petitioners who are partners of the firm, it does not mean that it is without authority. (6) That all the ingredients, which are necessary for appointment of receiver, are lacking in the present case and thus, the relief as sought for by the petitioners for appointment of receiver was rightly rejected by the learned Addl. District Judge No. 1, Jodhpur. (7) That order appointing receiver or refusing to appoint receiver is a discretionary matter and of discretionary character and in such circumstances, ordinarily the Court of Appeal will not interfere with the discretion exercised by the trial court and substitute its own discretion. The interference with the discretionary order, however, may be justified if the lower court act arbitrarily or perversely or capriciously or indisregard of sound legal principles or without considering the relevant materials on record. Applying these principles even in the present case, it does not appear that the impugned order passed by the learned Addl. District Judge No. 1 is affected by any of the infirmities. Hence, from this point of view also, the discretion exercised by the learned Addl. District Judge No. 1 is not going to be interfered with by this Court. (8) That main purpose of appointment of receiver is to protect the property and interest of the affected persons and the same has been preserved by the learned Addl. District Judge No. 1, Jodhpur by appointing Shri Kishan Lal Prajapat as Commissioner and from this point of view also, there is no need to appoint Receiver. (8) That main purpose of appointment of receiver is to protect the property and interest of the affected persons and the same has been preserved by the learned Addl. District Judge No. 1, Jodhpur by appointing Shri Kishan Lal Prajapat as Commissioner and from this point of view also, there is no need to appoint Receiver. For the reasons stated above, the appeal filed by the appellants fails and the same is hereby dismissed after confirming the order dated 11.4.2000 passed by the learned Addl. District Judge No. 1, Jodhpur. Appeal Dismissed. *******