Ganeshlal Tapadiya v. Basavaraj Patil Alias Raja Patil
2013-04-10
H.G.RAMESH
body2013
DigiLaw.ai
ORDER Huluvadi G. Ramesh, J. 1. Petitioners have sought for appointing an appropriate Arbitrator amongst the names of Arbitrators mentioned in the notice issued by them to the respondent on 19-7-2012 or any other appropriate Arbitrator as deemed fit for adjudication of dispute regarding ownership of land of M/s. Siddhaganga Enterprises and rectification of revenue records in respect of land in Sy. Nos. 95/4 and 96 measuring 5.21 acres of Oorkere Village, Tumkur. According to the petitioners, they are managing partners. Petitioners along with respondent and some other persons constituted a partnership on 25-5-1981 for the purpose of manufacturing cement products. During 20-7-1982, the partnership was reconstituted and also once again on 6-5-1989, and thereafter, three of the partners have died. Again on 10-6-1992, partnership was constituted in the name of M/s. Siddhaganga Enterprises having its head office at Gulbarga and branch at Tumkur According to them, it was to carry out the business of manufacturing of press-stressed concrete poles and other allied products and any other business mutually agreed between the parties. The share of profits of each of the partners is also defined. Clause 15 of the partnership deed provided for arbitration--if any dispute arises with regard to conduct of business or in respect of interpretation, operation or enforcement of any of the terms of the partnership, either during the continuation of partnership or on its dissolution, the same shall be referred to arbitration of a person or persons to be appointed by mutual consent and the decision of the arbitrator will be binding on the parties thereto. It is further stated, respondent had issued a notice on 22-9-2007 that he has dissolved the partnership firm with immediate effect. For the notice, reply was issued on 27-9-2007 and they have decided to assent for the dissolution resolution. As there were commitments and orders in favour of the partnership from which were subsisting, those commitments were to be honoured by the firm first and also as demanded by the respondent, accounts for the year 1991-1992 to 2005-2006 were sent to the respondent. Although according to the petitioners, accounts were continuously made available to the respondent in a routine manner, it was also filed before the income fax authorities in the regular course of business. Even after completion of audit of accounts, it was being regularly sent to all the partners including the respondent.
Although according to the petitioners, accounts were continuously made available to the respondent in a routine manner, it was also filed before the income fax authorities in the regular course of business. Even after completion of audit of accounts, it was being regularly sent to all the partners including the respondent. Since the respondent has caused notice in the newspaper stating that on 28-9-2007 he has dissolved the firm and warned the public not to deal with the firm and has also addressed letter to various banks and branches, in this regard, petitioners filed O.S. No. 323 of 2007 before the II Additional Civil Judge (Junior Division), Gulbarga for a declaration that petitioners herein had a right to continue the affairs of the partnership firm, to complete unfinished transactions and also for a perpetual injunction to restrain respondent-defendant from interfering with the day-to-day affairs of the firm in respect of bank and other authorities like KEB, Tax Department, etc. In the suit filed, respondent is said to have taken a contention that there is an arbitration clause and matter requires to be referred to the arbitrator. Even respondent filed a suit in O.S. No. 57 of 2008 before the Principal Civil Judge, Gulbarga seeking for a declaration and also for perpetual injunction and for rendition of the accounts and to declare that the partnership is dissolved on 22-9-2007. 2. In the property situate at Oorkere, Tumkur to the extent of 5.21 acres the manufacturing unit of the Firm is located. The name of the Firm is also mentioned as M/s. Siddhaganga Enterprises. It appears, according to the petitioners, the property was purchased out of partnership funds. However, according to the respondent, it is his own property and is purchased out of his own income and it does not belong to the partnership firm. The title deed was also deposited by the respondent in the State Bank of Hyderabad as equitable mortgage and also as collateral security. 3. The main grievance of the petitioners is, respondent made unjust enrichment and appropriation of the amount to himself to the tune of Rs. 7,29,587/- which was released by the National Highway Authorities towards acquisition of the said land for the purpose or road widening and the said amount was got released in the name of the respondent since his name appears in the revenue records.
7,29,587/- which was released by the National Highway Authorities towards acquisition of the said land for the purpose or road widening and the said amount was got released in the name of the respondent since his name appears in the revenue records. Also the said amount has been debited to the account of the respondent. Further, the income tax on the profits of the said amount was paid by the Firm for the assessment year 2004-2005. On these grounds, petition is filed seeking for appointment of Arbitrator amongst the list of Arbitrators stating that there are differences between the petitioners and the respondent and on various issues. 4. The matter is contested by the respondent by filing statement of objections denying all the contentions raised in the petition. According to the respondent, petitioners have filed a suit in O.S. No. 323 of 2007 against him in regard to conduct of business of the partnership firm. Although there is an arbitration clause as per Clause 15 of the agreement, he did not invoke the clause to seek a reference to the Arbitrator and when once the suit is filed by the respondent in O.S. No. 57 of 2008 before the Civil Judge, Gulbarga for declaration and for rendition of accounts, matter is purely civil in nature and the suit filed by him in O.S. No. 57 of 2008 is pending before the Civil Court and that Clause 15 is not acted upon. Even otherwise, petitioners have waived off their right seeking appointment of an Arbitrator. Accordingly, on various other grounds, it is contended that the remedy is available before the Civil Court and there is no need for appointment of an Arbitrator much less petitioners themselves violated the terms and the suit filed by the petitioners has also been dismissed for non-prosecution and during the pendency of the civil suit before the Civil Court, question of referring to arbitration under Clause 15 of the Agreement does not arise and thus sought for dismissal of the petition.
It is also his argument that as per Order 7, Rule 7 of the Civil Procedure Code, 1908 when the petitioners did not whisper anything in the suit filed by them about the arbitration clause and having taken up the matter on merit, having acquiesced by relinquishing the right to arbitration, they are not entitled to move for arbitration in exercise of Section 8 of the new Act. Counsel has also relied upon the decision of the Apex Court in the case of Booz Allen and Hamilton Inc. v. SBI Home Finance Limited and Others AIR 2011 SC 2507 : (2011) 5 SCC 532 : 2011 AIR SCW 3089, to contend that there is a delay in filing the application for reference and the suit filed by the petitioner was allowed in 2007 and respondent filed a suit in 2008. Belatedly he is seeking for referring to arbitration which cannot be accepted. The decision in the case of N. Radhakrishnan v. M/s. Maestro Engineers and Others (2010) 1 SCC 72 : 2010 AIR SCW 331 is relied upon to contend that complicated matter involving various questions and issues is beyond the purview of arbitration and it does not fall within the scope of an Arbitrator and rather it could be tried by one Court which is more competent. Counsel has also relied upon the decision of the Apex Court in Food Corporation of India and Another v. Yadav Engineer and Contractor AIR 1982 SC 1302 : (1982) 2 SCC 499 to contend that a party to a valid agreement approaches the Civil Court for adjudication and once the matter is contested, there is no question of imposing arbitration agreement by forcing the parties to resort to a forum of their choice as set out in the arbitration agreement. 5. In the case on hand, it is seen Section 8 of the Arbitration and Conciliation Act, 1996, provides a judicial authority before which an action is brought in a 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. Even Clause 3 provides that notwithstanding that an application has been made and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made. 6.
Even Clause 3 provides that notwithstanding that an application has been made and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made. 6. It appears, when the respondent had issued a notice during 2007 regarding winding up of the partnership firm, at this juncture as a preventive measure to conclude contracts which are undertaken, petitioners have moved the Civil Court. However, in the very next year i.e., 2008, respondent also has filed a suit for declaration and rendition of account. The partnership was established for manufacturing cement products. In the course of business, land was acquired for manufacturing activity. However, it is also seen that small portion of the land was acquired for widening of the road and the amount awarded has been taken by the respondent and the records also stood in the name of the respondent and reflected in the accounts of the Firm and the profits earned from that amount has been reflected in the income tax returns. However, according to the Counsel representing the respondent, no supporting documents are produced in this regard. 7. What is being noticed of course is at the first instance, petitioners filed a suit. According to them, they filed a suit to save the situation to conclude the contract undertaken for manufacturing and supplying materials. There is no such acquiescence or waiver of right to refer to arbitration. On the other hand, in the suit filed by the respondent, petitioner has filed a statement under protest. In Booz Allen and Hamilton Inc.'s case, referring to Section 8 of the Act, the Apex Court held submission of the statement on substance of dispute to Court and filing of detail objection by the defendant to an application for temporary injunction, attachment before judgment or appointment of Receiver before Civil Court, cannot be considered as a submission of statement on substance of dispute as that is done to avoid an interim order being made against him and defendant cannot be said to have submitted to the jurisdiction of the Civil Court. Even in the said judgment, the Apex Court has held that applicant contesting the said supplemental proceedings like temporary injunction cannot be said to have lost right to seek a reference to arbitration. 8.
Even in the said judgment, the Apex Court has held that applicant contesting the said supplemental proceedings like temporary injunction cannot be said to have lost right to seek a reference to arbitration. 8. With all clarity when the parties to the partnership agreement have agreed for arbitration clause and one or the other party has approached the Civil Court as an interim measure, it cannot be said that they have surrendered for Civil Court jurisdiction for adjudication. The suit filed by the petitioners for injunction of course was pending and thereafter, it was straight away dismissed for non-prosecution. In the suit filed by the respondent for declaration and rendition of accounts, although according to the petitioners, they contested the matter, they have not waived the right for the matter to be adjudicated before the Arbitrator. Clause 15 of the agreement does provide for reference of such disputes to the Arbitrator to be appointed. Petitioners have referred the matter to arbitration to one of the Arbitrators and also according to them, they have also suggested to the respondent to make a suggestion of some names to be appointed as Arbitrator as per the provisions of the Arbitration and Conciliation Act. 9. Of course all the partners are not parties to this petition except two of the managing partners and the respondent and there are some other persons too. When the petitioners, as per the terms of the arbitration agreement, have sought for referring the dispute which is also the subject-matter mentioned in the dispute as per Clause 14 of the agreement, and some matters are pending before the Civil Court for one or the other reason, it shall not be treated as parties have surrendered to Civil Court jurisdiction by waiving of their right. In that view of the matter, for any temporary measure if the petitioners have moved the Civil Court for injunction, that itself cannot be treated as surrendering themselves for Civil Court jurisdiction. Might be respondent would have approached the Civil Court for declaration and rendition of the accounts. When the very clause provides and also when the petitioners have filed statement under protest, question of surrendering to the Civil Court jurisdiction does not arise and the petition has to be allowed as per Section 15 of the arbitration clause.
Might be respondent would have approached the Civil Court for declaration and rendition of the accounts. When the very clause provides and also when the petitioners have filed statement under protest, question of surrendering to the Civil Court jurisdiction does not arise and the petition has to be allowed as per Section 15 of the arbitration clause. However, it is left to the respondent to suggest any other name other than the names in the panel suggested to him. At one stage, respondent also is shown to have suggested that the entire matter be referred to arbitration. It is for the petitioners to concede for referring the entire dispute to arbitration as suggested by the respondent, if he so desires. With the above observation, petition is allowed. It is for the respondent to suggest any other name, if not willing to consider the names suggested by the petitioners.