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2008 DIGILAW 1139 (ORI)

SRI NARAYAN KHANDELWAL v. BARMESHWAR PANDEY

2008-12-15

SANJU PANDA

body2008
JUDGMENT : Sanju Panda, J. - Since common questions are involved in both the appeals which arise out of one order, they were heard together and are being disposed of by this common Judgment. Aggrieved by the Order Dated 18.9.2008 passed by the Learned District Judge, Balasore-Bhadrak, Balasore in Arbitration Petition No. 66 of 2008 in exercise of the powers u/s 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act"), the Appellants have filed these appeal. 2. In short, the prayer made in each of the appeals is stated below: Arbitration Appeal No. 25 of 2008 ...after hearing the parties allowed the appeal with cost by setting aside the impugned order dt. 18.9.08 passed by the Learned District Judge, Balasore in Arbitration Petition No. 66/2008. Arbitration Appeal No. 27 of 2008 ...and after hearing the parties set aside the impugned Order Dated 18.8.2008, appoint the Appellants as the receiver of the business, and in the alternative delete Clause (ix) from the Judgment. 3. The facts of the case are as follows: Pursuant to the tender call notice issued by the Orissa Bridge and Construction corporation Ltd., Bhubaneswar (in short, "OBCC") for collection of toll at Balasore, Mitrapur Baincha Road Toll Gate for a period of one year from 1.4.2008 to 31.3.2009 Barmeswar Pandey-Appellant in AREA No. 27 of 2008 offered his bid. As his bid was accepted, he deposited a total sum of Rs. 22,37,433/- including the E.M.D. and also executed an agreement with the OBCC on 31.3.2098 with a condition stipulated therein to collect toll with effect from 1.4.2008. In terms of the said agreement, he also undertook to pay the bid instalment amount specified in the agreement to the tune of a total sum of Rs. 62,90,000/- in eight instalments and his liability was to make payment of salary of the employees engaged for toll collection including contribution to the E.S.I, and E.P.F. on behalf of the employees. He also started collecting toll with effect from 1.4.2008. 62,90,000/- in eight instalments and his liability was to make payment of salary of the employees engaged for toll collection including contribution to the E.S.I, and E.P.F. on behalf of the employees. He also started collecting toll with effect from 1.4.2008. While he was continuing as such, suddenly on 3.8.2008 Narayan Khandelwal and Ram Swaroop Khandelwal (Respondents 1 and 2 in AREA No. 27 of 2008) who are no way connected or authorized in any manner with regard to collection of toll from the toll gate in question, forcibly entered inside the toll booth with the help of some anti-socials and prevented Barmeswar Pandey and his employees from collecting toll. Narayan Khandelwal (Appellant No. 1 in ARBA No. 25 of 2008 and Respondent No. 1 in ARBA No. 27 of 2008) produced a xerox copy of the Order Dated 2.8.2008 passed by the Learned District Judge Balasore in Arbitration Misc. Case No. 66 of 2008. Thereafter, Barmeswar Pandey an verification from the Court record came to know about the pendency of the said misc. case and further on verification, he found that the aforesaid Respondents 1 and 2 claiming themselves to be his partners on the basis of a partnership deed for management of the affairs of toll collection resorted to the proceeding u/s 9 of the Act. In the said application, they claimed the following reliefs: a) Receiver be appointed for management of the Balasore Mitrapur Baincha Road Toll gate and for collection of Toll Tax and for keeping proper books of accounts. b) The Opposite Party No. 1 be directed to produce all the Books of Accounts before the Court for preservation and inspection. c) The Opposite Party No. 1 be restrained from interfering in the management of the above Toll Gate by the Petitioners and collection of Toll Tax by them. d) Such other order and interim measures be passed in favour of the Petitioners which may appear to the Court to be just and convenient. c) The Opposite Party No. 1 be restrained from interfering in the management of the above Toll Gate by the Petitioners and collection of Toll Tax by them. d) Such other order and interim measures be passed in favour of the Petitioners which may appear to the Court to be just and convenient. They contended that the Respondents entered into a partnership agreement with the Appellant on 1.2.2008 and the said agreement was registered before the Registrar of Firms in the name and style of M/s. Balasore-Mitrapur Toll Tax Barrier and they claimed that Barmeswar Pandey not being in a position to manage the toll gate alone and to pay the minimum guarantee amount to the OBCC, requested the applicants to enter into a partnership agreement for management of the aforesaid toll gate. The further contented that from the time of the tender, they have paid from their accounts by issuing demand draft in favour of the OBCC on different occasions. As such, the partnership firm has already taken charge of the toll gate with effect from 1.4.2008 itself and Barmeswar Pandey has only 20 per cent share in the said partnership and they being 80 per cent share-holders, invested the money and are managing the toll gate for the first quarter with effect from 1.4.2008 by depositing money in the bank in the name of the OBCC. Suddenly, Barmeswar Pandey did not deposit the huge amount of toll collected in the bank and misappropriated the same to the tune of Rs. 10,00,000 to Rs. 12,00,000 belonging to the partnership firm. When the said fact was verified by them, Barmeswar Pandey threatened them with dire consequences and did not allow them to collect toll nor did he allow them to enter into the toll gate premises since 28.7.2008. As they are entitled to share of profit and loss as per the partnership agreement since they have invested huge amount towards instalments payment, etc., they filed the application as stated above. In the said application they filed a misc. case for ad interim injunction. As they are entitled to share of profit and loss as per the partnership agreement since they have invested huge amount towards instalments payment, etc., they filed the application as stated above. In the said application they filed a misc. case for ad interim injunction. Earlier, Barmeswar Pandey (Appellant in ARBA No. 27 of 2008) had approached this Court in AREA No. 20 of 2008 challenging the order of ad interim injunction passed by the Learned District Judge and this Court disposed of the said appeal on 18.8.2008 and remanded the matter to the Learned District Judge with a direction to hear both the parties on merits. 4. The Learned District Judge after hearing both the parties came to the conclusion that entering into the partnership agreement by Opposite Party No. 1 with the Petitioners is not amounting to letting out of the toll gate in any form and Opposite Party No. 1 therein is to honour the partnership agreement and the partnership agreement is not determinable by Opposite Party No. 1 as he disputed the partnership agreement. So far as appointment of receiver was concerned, he recorded that the Petitioners who are the Appellants in Arbitration Appeal No. 25 of 2008 have a strong case for appointment of receiver, as they contributed their money and they are the partners for which they were entitled to their share of profits and if they were kept out of business, they will be deprived of their profits. As Opposite Party No. 1 is disowning the Petitioners and Opposite Parties 2 and 3 as partners though he entered into an agreement with them, Opposite Party No. 1 is mismanaging the collection from the toll gate and as such the balance of convenience of appointment of receiver also leans in favour of Petitioners and Opposite Parties 2 and 3 who command 80% share and the said money was invested while getting the toll gate collection assignment from OBCC. So far as irreparable injury is concerned, the Learned District Judge observed that unless a receiver is appointed the actual income of the toll gate and the consequential loss sustained by the Petitioners every day cannot be assessed as there is mismanagement with regard to collection demanding immediate action. It is just and convenient for appointment of receiver in respect of management of the BMB toll gate u/s 9 of the Arbitration and Conciliation Act, 1996. It is just and convenient for appointment of receiver in respect of management of the BMB toll gate u/s 9 of the Arbitration and Conciliation Act, 1996. On the aforesaid finding, he appointed Barmeswar Pandey-Opposite Party No. 1 therein as receiver of the toll gate. As the Petitioners therein stated that they were out of management of collection of toll from BMB Road Toll Gate, the Learned District Judge while appointing the receiver, put the following conditions: (i) the business shall run under the actual management and control of the receiver-Opposite Party No. 1, (ii) the accounts are properly, truly and correctly maintained, (iii) the receipts and payments are properly vouched, (iv) the proceeds of collection are properly accounted for and no part of the proceeds is siphoned off and/or carried away unaccounted by anyone. Though the conduct of the business is being allowed to be continued by Opposite Party No. 1, he must truly and strictly perform his duties as receiver, (v) the collection shall be deposited day-to-day in a bank account to be opened in a nationalized bank in the name of Opposite Party No. 1, and any amount so deposited shall be withdrawn for the purpose of running the business, payments to the staff and shall be to the knowledge of the observer, (vi) Petitioners and Opposite Parties Nos. 2 and 3 or their representatives authorized in writing shall have right to visit toll gate and watch the activities going in and verify the accounts, but they shall not interfere with the business activities run by Opposite Party No. 1, (vii) on finalization of the accounts, it will be duly audited by the Chartered Accountant. The net profit and loss will be distributed in accordance with the order of the arbitrator or decision by any competent authority, (viii) the observer shall be paid such monthly remuneration and reimbursed such expenses, as may be considered reasonable by the Managing Director of OBCC, and (ix) the receiver shall see that the amounts payable to the OBCC as per the agreement Dt. 31.3.2008 shall be paid on due dates by withdrawing the amounts which are collected and deposited daily in the bank. If there is any shortfall for deposit, the OP 1 and other partners shall share the shortfall in the ratio indicated in the partnership agreement. 31.3.2008 shall be paid on due dates by withdrawing the amounts which are collected and deposited daily in the bank. If there is any shortfall for deposit, the OP 1 and other partners shall share the shortfall in the ratio indicated in the partnership agreement. The said shortfall if any shall be notified by the receiver to the other partners a fortnight ahead to enable them to pool their resources to deposit their share amount. (x) This arrangement shall continue till 31.3.2009 or till the adjudication of the arbitration dispute whichever is earlier. 5. The Learned Counsel for the Appellants in ARBA No. 25 of 2008 (Respondent in ARBA No. 27 of 2008) submitted that Barmeswar Pandey-Respondent No. 1 misappropriated and mismanaged the collected toll amount and did not pay the dues of OBCC regularly. The Appellants finalized the entire business initially and paid Rs. 2,73,100 by demand draft No. 257545 dated 10.3.2008 at the time when the tender was submitted by said Respondent No'. 1 to get the management of the toll collection and the amount was directly paid by the Appellants to OBCC. Thereafter, the Appellants paid Rs. 17,64,333 towards Bid instalment and differential EMD rent and interest by demand drafts dated 29.3.2008 and 31.3.2008 and further they also paid the amounts of Rs. 2,23,000, Rs. 4,36,481 and Rs. 3,88,724 towards the months of May, June and July, 2008 respectively and the said amount was paid directly to the OBCC for the instalment as per the agreement by the Appellants and after Respondent No. 1 took management of the toll gate, as he did not deposit regular instalment with the OBCC, he should not be continued as receiver. He further submitted that in view of the finding of the Learned District Judge that the Appellants have invested huge amount and paid those amounts directly to OBCC for the toll business purpose and as the partnership agreement has been executed and duly registered there is a chance of success of Appellants in the main matter, the interim arrangement of receiver should be made in their favour for protection of the property and interest of the parties and as such the impugned order is liable to be set aside. 6. 6. The Learned Counsel appearing for Respondent No. 1 -Barmeswar Pandey, who has filed Arbitration Appeal No. 27 of 2008 challenging the order of appointment of receiver, submitted that as per the arbitration clause in the agreement in the alleged partnership deed both the parties moved the Court below for appointment of arbitrator and as dispute arose between the partners are going to be referred to the arbitrator who will adjudicate the issues relating to partnership and its profit and loss etc., the finding of the Learned District Judge regarding partnership profit and loss are liable to be set aside as those findings would prejudice his interest in the arbitration proceeding as he has entered into an 'agreement with the OBCC. Therefore, the Learned District Judge should not appoint a receiver so far as collection of the toll is concerned and he is liable to give the loss and profit accounts of the same to the OBCC and in case he has failed to discharge his duties, the OBCC will take loss and profit accounts as per the agreement dated 1st April, 2008. 7. Considering the rival submissions of the parties and after going through the LCR. it appears that the Barmeswar Pandey entered into an agreement with OBCC on 31.3.2008 to collect the toll tax from 1st April, 2008 to 31st March, 2008 and he has to pay the money in eight instalments as per the agreement. In the said agreement there was a bar to sub-let or delegate any power vested with him under the contract to others in the absence of any express or implied provision thereof but there was no bar to enter into partnership with persons. Therefore, the said Respondent No. 1 entered with partnership with the Appellants in Arbitration Appeal No. 25 of 2007 and obtained money to utilize the same as earnest amount to get the contract and the Appellants have invested 80 per cent of the amount and they are also taking part in collection of the toll tax along with Respondent No. 1 till August whereafter the dispute arose. From the records it also appears that the Appellants deposited the instalment money in favour of OBCC. So they are in charge of the toll tax. From the records it also appears that the Appellants deposited the instalment money in favour of OBCC. So they are in charge of the toll tax. As per the partnership deed when a dispute arose between the partners the same has to be referred to an arbitrator and invoking the said terms the Appellants filed application u/s 9 of the Arbitration and Conciliation Act and prayed for interim relief as they are going to be affected. The Learned District Judge taking into consideration the facts and circumstances of the case and following the principle decided in the case of Firm Ashok Traders and Another etc. Vs. Gurumukh Das Saluja and Others etc., wherein the Apex Court rightly appointed Respondent No. 1 therein as the receiver and put certain conditions. Therefore, this Court relying, on the ratio of the said decision confirms the finding of the Learned District Judge as there is no illegality or infirmity so far as appointment of receiver is concerned. 8. This Court, for the interest of justice and fair-play, directs both the parties to appear before the Learned District Judge on 23.12.2008 and offer their respective amount separately in sealed covers in case they will be in charge to collect the toll tax. 9. The Learned District Judge after considering their offers, shall appoint the party offering the higher amount as the receiver of the toll gate till March, 2009 i.e. the time stipulated as per the partnership agreement dated 31.3.2008, and he will make the payment of instalment to OBCC. On production of a certified copy of this Judgment, the Learned District Judge shall act in accordance with the directions made in this Judgment. 10. With the aforesaid modification, Arbitration Appeal No. 25 of 2008 is allowed in part and Arbitration Appeal No. 27 of 2008 is dismissed. No costs. A.A. No. 25 partly allowed, and A.A. No. 27 dismissed.