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2013 DIGILAW 606 (CAL)

Master Stores v. Ramchandra Parolia

2013-08-22

TARUN KUMAR GUPTA

body2013
JUDGMENT Tarun Kumar Gupta, J. This is an application under Article 227 of the Constitution of India praying for setting aside order No.22 dated 3rd May, 2010 passed by learned Civil Judge (Junior Division), 2nd Court at Howrah in Title Suit No.121 of 2009. The facts of the case may be summarized as follows:- O. P. Ramchandra Parolia filed said suit being No.121 of 2009 alleging that he purchased the suit property comprised in municipal holding Nos. 41, 42, 43 and 56 Kaji Sabihal Alam Lan, P. S. Shibpur, District- Howrah as duly described in schedule of the plaint from its original owners through a kobala dated 7th February, 1956. The petitioner defendant No.1 was a partnership firm and defendant Nos. 2 and 3 were partners of defendant No.1’s firm. The plaintiff was also one of the senior partners of said firm having 40% share. The factory of the defendant No.1 firm was situated adjacent to the plaintiff’s ‘A’ schedule property. At the prayer of the plaintiff’s father plaintiff allowed said firm to run its flour mill in a portion of the suit property after plaintiff made construction thereupon on obtaining sanction plan from the municipality. The business activities of the flour mill deteriorated and ultimately almost stopped since April, 2007. The plaintiff used to display different banners and hoardings by publication on the outer faces and roof of the constructions made on ‘A’ schedule property since 2001. The defendant Nos. 2 and 3 are trying to obstruct said display of hoardings out of an ill motive. A strained relation cropped up between the parties. Plaintiff has accordingly filed said suit for declaring his ownership in ‘A’ schedule property, for permanent injunction restraining the defendants and their men and agents from creating any obstruction in the matter of displaying of hoardings etc. and for other consequential reliefs with leave under Order 2 Rule 2 of the Code of Civil Procedure. The O. P. plaintiff filed an application for temporary injunction under order 39 rule 1 and 2. O. P. plaintiff initially obtained an ex parte order of ad interim injunction against defendant Nos. 2 and 3. Later on after contested hearing it was modified to maintaining status quo in respect of the suit property. The O. P. plaintiff filed an application for temporary injunction under order 39 rule 1 and 2. O. P. plaintiff initially obtained an ex parte order of ad interim injunction against defendant Nos. 2 and 3. Later on after contested hearing it was modified to maintaining status quo in respect of the suit property. The petitioner defendants appeared in said suit and filed an application under order 7 rule 11 of the Code of Civil Procedure read with Section 8 of Arbitration and Conciliation Act, 1996 (hereafter to be referred as the Act of 1996) for rejection of the plaint as the suit property is part and parcel of the property of defendant No.1 partnership firm and there was an agreement between the partners that all disputes relating to business of said partnership firm shall be referred to an arbitrator to settle the disputes. After contested hearing learned Trial Court rejected said application filed by the defendants under Order 7 Rule 11 of the Code of Civil Procedure read with Section 8 of the Act of 1996 by the order impugned. Hence is this application at the instance of the defendants. Mr. Aniruddha Chatterjee appearing for the petitioner defendant submits that admittedly both O. P. plaintiff and petitioner defendant Nos. 2 and 3 were partners of the petitioner defendant No.1 firm which was reconstituted and reorganized lastly on 3rd of July, 1980 having a fresh deed of partnership. According to him, in terms of clause 15(a) and 15(b) no partner shall be entitled to take up any matter concerning partnership and / or its working to any court of law without first taking recourse under Arbitration Act and that all disputes arising between the partners or their representatives in respect of the conduct of the business of the partnership or in respect of the construction, meaning, applicability, interpretation or otherwise of the terms and conditions of the deed of partnership or in respect of any matter, case or thing whatsoever not herein otherwise provided shall be referred to an arbitrator for determination. He further submits that after initiation of the suit the O. P. plaintiff sent a registered letter dated 22.06.2009 addressed to the petitioner defendant Nos. 2 and 3 for dissolution of said partnership firm and that the matter has already been referred to an arbitrator for adjudication. He further submits that after initiation of the suit the O. P. plaintiff sent a registered letter dated 22.06.2009 addressed to the petitioner defendant Nos. 2 and 3 for dissolution of said partnership firm and that the matter has already been referred to an arbitrator for adjudication. He further submits that the suit property being part and parcel of the property of the petitioner defendant No.1 firm which was admitted by the O.P. plaintiff in various documents executed by him, the instant suit in the court of law was not maintainable in terms of the arbitration clause appearing in the partnership deed. Mr. Chatterjee further submits that as per deed of partnership dated 3rd July, 1980 it was specifically mentioned in Clause 4 under the heading “place of business” that the factory is situated at 41–44 Kaji Sabihal Alam Lane, Shibpur, District – Howrah. According to him, as per schedule ‘A’ of the plaint the suit property comprises of holding Nos. 41, 42, 43 and 56 of Kaji Sabihal Alam Lane. He submits that as the premises on which the factory of the petitioner defendant No.1 partnership firm is situated, have been claimed by the O. P. plaintiff being one of the partners, as his absolute property, it was a dispute between the partners concerning partnership business and that the same was referable to the arbitrator as per arbitration clause No.15 appearing in the deed of partnership. In support of his contention he has referred case laws reported in (2011) 5 SCC 532 (Booz Allen and Hamilton Inc. vs. SBI Home Finance Limited and others) and (2009) 10 SCC 103 (Branch Manager, Magma Leasing and Finance Limited and another vs. Potluri Madhavilata and another). Mr. Rabindra Nath Mahata appearing for O. P. plaintiff, on the other hand, submits that the copy of the deed of partnership delivered to the O. P. plaintiff along with the application under Order 7 Rule 11 of the Code of Civil Procedure read with Section 8 of the Act of 1996 showed that the factory of the partnership firm was situated at premises No.44 Kaji Sabihal Alam Lane and not on holding Nos. 41, 42, 43 which have since been amalgamated with holding No.56 to be one holding being No.41 Kaji Sabihal Alam Lane. He submits that when the petitioner defendant filed the partnership deed incorporating premises Nos. 41, 42, 43 which have since been amalgamated with holding No.56 to be one holding being No.41 Kaji Sabihal Alam Lane. He submits that when the petitioner defendant filed the partnership deed incorporating premises Nos. 41, 42 and 43 together with 44 as the factory premises, the O. P. plaintiff took the plea that it was a forged document. He further submits that on that score O. P. plaintiff amended its plaint making specific allegations that petitioner defendants practised fraud upon the court by forging the deed of partnership dated 3rd July, 1980 by illegally including the premises Nos. 41, 42 and 43 as also the premises having factory of the partnership firm. According to him, when a question of fraud has arisen then it can only be decided in a civil court and not in a proceeding before an arbitrator. In support of his contention he has referred a case reported in (2010) 1 SCC page 72 (N. Radhakrishnan vs. Maestro Engineers and others) wherein it was held that in case of serious allegation as to fraud the matter should not be decided by the arbitrator and that for furtherance of justice it should be tried in a court of law which would be more competent having the means to decide such a complicated matter. His next leg of contention is that in this case the petitioner defendants after appearance and after rejection of the application under order 7 rule 11 read with Section 8 of the Act of 1996 filed written statement to contest the suit. He further submits that after amendment of the plaint they also filed additional written statement. According to him, this shows that they willingly participated in the proceedings of the suit and that at this stage they cannot turn around and say that the parties should be referred to arbitration in view of the existence of an arbitration agreement. In support of his contention he has referred a case law reported in (2011) 5 SCC page 532 (Booz Allen and Hamilton Inc. vs. SBI Home Finance Limited and others). I have considered the submissions made by learned counsels of the parties. Perused the materials lying in the case record. I have also considered the case laws referred by learned counsels of the parties. There is no denial that the parties of the suit were partners of defendant No.1 partnership firm. vs. SBI Home Finance Limited and others). I have considered the submissions made by learned counsels of the parties. Perused the materials lying in the case record. I have also considered the case laws referred by learned counsels of the parties. There is no denial that the parties of the suit were partners of defendant No.1 partnership firm. There is also no dispute that in the partnership agreement dated 3rd of July, 1980 there was a clause of arbitration under clause 15 which runs as follows:- (a) No partner shall be entitled to take up any matter concerning partnership and / or its working to any court of law without first taking recourse under arbitration act. (b) All disputes which arise between the partners or their representatives in respect of the conduct of the business the partnership or in respect of the construction, meaning, applicability, interpretation or otherwise of the terms and conditions of this deed or in respect of any matter, case or thing whatsoever not herein otherwise provided or whether during or after the determination of the partners shall be referred to an arbitrator selected unanimously. If unanimous selection is not possible then each partner will nominate one arbitrator and group of arbitrators so nominated will arbitrate the matter. The O. P. plaintiff filed the title suit being No.121 of 2009 claiming the suit property appertaining to municipal holding Nos.41, 42, 43 and 56 of Kaji Sabihal Alam Lane since being amalgamated as one holding being No.41 Kaji Sabihal Alam Lane as his personal property whereupon neither defendant No.1’s partnership firm nor other defendants of said partnership firm had any right, title and interest. The petitioner defendants tried to make out a case by referring clause 4 of the partnership deed that the factory of the partnership firm was situated on holding Nos. 41 – 44 Kaji Sabihal Alam Lane and that as plaintiff raised a dispute about the ownership of the some of the properties of the partnership firm the matter should have been referred to the arbitrator in terms of arbitration clause (clause No.15) appearing in said deed of partnership. It appears that the O. P. plaintiff took the specific plea that the factory of the partnership firm was situated only on holding No.44 of Kaji Sabihal Alam Lane and that by practising fraud the petitioner defendant Nos. It appears that the O. P. plaintiff took the specific plea that the factory of the partnership firm was situated only on holding No.44 of Kaji Sabihal Alam Lane and that by practising fraud the petitioner defendant Nos. 2 and 3 incorporated the terms “at 41 – 44 Kaji Sabihal Alam Lane” under the heading “place of business” in clause 4 of said deed of partnership. It appears that the O. P. plaintiff has already amended his plaint to allege that the petitioner defendant Nos. 2 and 3 fraudulently made said insertion “41 – 44” in place of “44” in clause 4 of the partnership deed. It is thus obvious that the serious allegation of fraud has been raised by the plaintiff by way of amendment of his plaint. In the case of N. Radhakrishan (supra) it was held by the Hon’ble Apex Court that when a serious allegation of fraud is raised then it is advisable that the matter be decided in a court of law and not by an arbitrator even though there was an arbitration clause in agreement between the parties. Mr. Chatterjee tried to distinguish the present case from the facts of the case of Radhakrishnan by submitting that in that case the fraud was alleged to be committed in accounts books and regarding finance of the partnership firm, but in this case there was no such allegation. Unfortunately, I do not agree with Mr. Chatterjee on this issue. In the case in hand, there is an allegation of fraud and malpractice by incorporating premises Nos. 41, 42, and 43 as also factory premises of the partnership firm in addition to premises No.44 by practising fraud and manipulation. This is no less a serious allegation. As such, the ratio of the case law of N. Radhakrishnan (supra) is squarely applicable in the facts of the present case also. The propositions of law as laid down in Magma Leasing and Finance Limited’s case (supra) and Booz Allen & Hamilton Inc.’s case (supra) are not disputed. If there is an arbitration clause, and the dispute between the partners is covered by said arbitration clause then the courts should refer the matter to the arbitration for adjudication as per the Arbitration and Conciliation Act, 1996 and should not encourage the continuation of the civil suit. If there is an arbitration clause, and the dispute between the partners is covered by said arbitration clause then the courts should refer the matter to the arbitration for adjudication as per the Arbitration and Conciliation Act, 1996 and should not encourage the continuation of the civil suit. But when a serious allegation of fraud is raised by one of the partners regarding inclusion of some personal properties of one of the partners in the partnership deed as property of the partnership firm then the matter should have been left to be decided by a court of law in preference to adjudication by an arbitrator in terms of the ratio of the case of N. Radhakrishnan (supra). It appears that after rejection of the petitioner defendants’ application under order 7 rule 11 read with Section 8 of the Arbitration Act they subjected themselves to the jurisdiction of the civil court by filing written statement followed by additional written statement. Said conduct of the petitioner defendants may seriously question as to whether they have waived their right to seek arbitration as they subjected themselves to the jurisdiction of the civil court. However, I do not want to make any further comment on this issue as it is submitted that Mr. Mahato’s objection of waiver of right was not taken in the written objection filed by the O.P. plaintiff. Be that as it may, as the serious allegation of fraud has been raised by the O.P. plaintiff followed by amendment of his plaint I am of the opinion that this is not a fit case for referring the matter to the arbitrator for arbitration in view of the ratio of the case law of N. Radhakrishnan (supra). In view of the discussions made above I do not find any infirmity in the order impugned rejecting the petition dated 14.07.2009 under order 7 rule 11 of the Code of Civil Procedure read with Section 8 of the Arbitration and Conciliation Act, 1996. Accordingly, this application under Section 227 of the Constitution of India is hereby dismissed on contest. However, I pass no order as to costs. Urgent photostat certified copy of this judgment be supplied to the learned counsels of the parties, if applied for.