T. Vaithilingam (Kartha) of T. Vaithilingam (HUF) v. S. Selvaraj
2015-07-24
V.M.VELUMANI
body2015
DigiLaw.ai
JUDGMENT : This Civil Miscellaneous Appeal has been filed by the appellants against the fair and decreetal order, dated 19.03.2015, made in Arbitration O.P.No.27 of 2014, on the file of the Principal District Court, Tiruchirappalli. 2. The appellants are the respondents 1 to 3 in Arbitration O.P.No.27 of 2014 on the file of the Principal District Court, Tiruchirappalli. The respondents 1 to 5 filed the said O.P. under Section 9(ii)(b) of the Arbitration and Conciliation Act, 1996 [hereinafter referred to as “the Act”], for the relief of permanent injunction, restraining the appellants 1 and 2 herein from any manner transacting the business of A.S.RM.Subbiah Pillai Firm or in any manner alienating or encumbering the properties of the Firm or destroying the accounts of the Firm or demolishing the existing structures of the Partnership Firm or operating the accounts of the Firm either by withdrawing the funds or causing encumbrances to the Firm. 3. The learned Principal District Judge, Tiruchirappalli, has granted temporary injunction restraining the appellants 1 and 2 not to alienate or encumber the properties or destroy the accounts of the Firm or demolish the existing structures of the Partnership Firm till the conclusion of the arbitration proceedings; to furnish the accounts of the business and other particulars to the respondents 1 to 5 herein, as required by them under Letter, dated 16.09.2013 (Ex.P.17) on or before 31.03.2015; and to permit the appellants 1 and 2 to transact the business of the Firm for a limited time from 01.04.2015 to 30.06.2015, the period within which either party shall appoint an Arbitrator to resolve their disputes. 4. Against the said order, dated 19.03.2015, the appellants have filed the present civil miscellaneous appeal. 5. Facts of the case: (i) According to the respondents 1 to 5, the Partnership Firm, viz., A.S.RM.Subbiah Pillai Firm, the third appellant herein is a Partnership Firm, registered on 07.05.1943. The first appellant was taken as a Trainee and was working as Cashier and Salesman. In the year 1964, he was admitted as working partner, entitled for salary and sharing profits. He did not contribute any capital. The second appellant is the son of the first appellant. Two of the partners viz., Dr. S.Pathmanathan and S.Chandrasekaran, expired on 26.03.2014 and 26.04.2014 respectively. The said S.Chandrasekaran and the first appellant were managing partners of the said Firm.
He did not contribute any capital. The second appellant is the son of the first appellant. Two of the partners viz., Dr. S.Pathmanathan and S.Chandrasekaran, expired on 26.03.2014 and 26.04.2014 respectively. The said S.Chandrasekaran and the first appellant were managing partners of the said Firm. After the death of the said S.Chandrasekaran, the first appellant was allowed to run the Firm as Managing Partner. The respondents 6 to 8 herein are their Legal heirs. (ii) As per Partnership Agreement, the Partnership is at Will and it will not be dissolved by death or retirement of any one of the partners. Their Legal heirs shall be admitted as Partners to carry on Partnership business. As per Clause 10 of the Partnership Agreement, any asset purchased, right, concession obtained in the name of one or more of the partners out of the funds of the Firm shall belong to the Firm. As per Clause 16 of the Partnership Agreement, all the disputes and differences between the partners during the partnership, will be referred to Arbitration, to resolve the disputes between them. (iii) According to the respondents 1 to 5, originally, a Partnership Firm was carried on at No.6, South Gate, Mailam, Trichy-2, which was taken on lease by the Partnership Firm. The Firm had roaring business and the actual turnover was approximately Rs.22 to Rs.25 crores per year. The Firm purchased the above said premises in the year 1967. The first appellant out of the funds of the Firm, purchased the property in his name. Therefore, the property belongs to the Firm, as the same was purchased out of the funds of the Firm. (iv) The first appellant is the owner of another piece of land, situated behind the Firm's property at Palpannai and he allowed his family members to use the Firm's property without the consent of the partners. (v) The respondents 1 to 5 demanded the first appellant to produce original documents of the properties belonging to the Firm. The first appellant did not produce the original documents and he was giving evasive reply stating that they were with his son-in-law. Therefore, he informed the respondents 1 to 5 that the documents are not available and were lost.
(v) The respondents 1 to 5 demanded the first appellant to produce original documents of the properties belonging to the Firm. The first appellant did not produce the original documents and he was giving evasive reply stating that they were with his son-in-law. Therefore, he informed the respondents 1 to 5 that the documents are not available and were lost. At later point of time, the respondents 1 to 5 came to know that the first appellant produced the said documents in the Court in a pending case between the Firm and his neighbour. (vi) The first appellant taking advantage of his position as Managing Partner, has allowed his son, the second appellant herein, to run his own business under the name and style of Suriyan Varu Kadalai and Ravindra Dhall Mill, decepting the main name of A.S.RM.Subbiah Pillai Firm in the same premises of the Firm, bearing No.6, North Gate, Mailam, Trichy, where the business of A.S.RM.Subbiah Pillai Firm, was carried on. The first appellant established his own business at the Firm's premises and grabbed the business of the Firm. Any business run by any partner in the Firm's premises, shall become the business of the Firm and is accountable to the Firm. The appellants 1 and 2 prevented the respondents 1 to 5 from having any access to the day-to-day business as well as to the accounts, which every partner is entitled to peruse. On 27.08.2013, S.Chandrasekaran, one of the then Managing Partner, requested the first appellant to furnish the records required by the partners. The first appellant did not produce any of the records and stated that due to non-cooperation of the Clerk Muthaiah, the accounts book could not be produced by him. (vii) The first appellant had permitted his son to run the business, allowed him to operate the Bank Accounts and sign the cheques. (viii) In the circumstances, the respondents 1 to 5 filed Ar.O.P.No.27 of 2014, alleging that, (a) the conduct of the appellants 1 and 2 are detrimental to the interest of the Firm; (b) the respondents 1 to 5 have lost faith and confidence upon the appellants 1 and 2; and (c) the appellants 1 and 2 have inflated loss to the Firm and are taking steps to encumber the properties and the business of the Firm. 6.
6. According to the appellants, the first appellant is a Managing Partner of the Firm from the year 1967. The second appellant is also taking active participation in the business. Considering the honesty and efficiency of the first appellant, he was allowed as Working Partner. He was given the right to operate the Bank Account of the Firm. 7. The Godown was originally taken on lease by the Firm. In the year 1987, the first appellant purchased the said property from and out of his own funds with the knowledge of all other partners. It is his personal property and it is shown as such in the income tax returns also. 8. On the northern side of the property belonging to the Firm near Palpannai, the property belonging to the first appellant, is situated. A Car Service Station is running in the said place in partnership with Ravindran and K.Palanisamy in the name and style of Vythis Mobile Park. V.Ravindra Oil Mills and Industries is the sole business of the second appellant. To reach the property of the first appellant, the access is only through the Firm's property. On 28.08.1991, the other partners granted a permanent and irrevocable easementary right of pathway to reach his property through the Firm's property. 9. The products purchased by Ravindra Dhall and Flour Mill, are high quality and with the consent and knowledge of other partners, the commodities are purchased from the said Mill. The third appellant is only a vendor of the commodities and their business is not affected. 10. The appellants 1 and 2 never prevented the other partners from having any access to the day-to-day business as well as to the accounts. The appellants 1 and 2 never engaged in fraudulent pricing activities and the said allegations are baseless and false. The appellants 1 and 2 are not running identical business in the premises of the Firm. The second appellant gave the address of the business place only with the consent of other partners, for the sake of convenience and it has been done for the past 25 years. 11. The appellants are not liable to account of their personal business. Whenever the partners demanded any account or record, it was produced by the first appellant. The second appellant was allowed to operate the bank account with the consent of other partners.
11. The appellants are not liable to account of their personal business. Whenever the partners demanded any account or record, it was produced by the first appellant. The second appellant was allowed to operate the bank account with the consent of other partners. He was operating the bank account for the past 25 years. The then Managing Partner S.Chandrasekaran, as a Managing Partner, was taking active part in the affairs of the Firm and was fully aware of the correctness of the accounts. Due to personal enmity, the respondents 1 to 5 filed the petition with an ulterior motive. The respondents 1 to 5 wanted to admit the legal heirs of living partners and the deceased partners. The appellants 1 and 2 objected to inclusion of legal heirs as partners. The respondents 1 to 5 wanted to retire from the partnership, but they demanded huge amounts for leaving the partnership firm. For these reasons only, the respondents 10 1 to 5 filed the Ar.O.P. 12. There is no basis to invoke Section 9 of the Act. There is no prima facie case made out for the respondents 1 to 5 and balance of convenience is not in their favour. The appellants 1 and 2 did not commit any breach and the relief sought in the O.P., is not sustainable. 13. Before the learned Judge, the respondents 1 to 5 marked 19 documents as Exs.P1 to P19 and the appellants marked Exs.R1 to R7. The learned Judge considering the pleadings and documents, came to the conclusion that the disputes have arisen between the partners and as per Clause 16 of the Partnership Agreement, the matter has to be resolved by Arbitration. The learned Judge recorded the undertaking given by the appellants 1 to 3, in paragraph 25 of the counter filed by the appellants 1 to 3, granted temporary injunction restraining the appellants 1 and 2 from alienating or encumbering the properties or destroying the accounts of the Firm. The learned Judge also directed the appellants 1 and 2 to furnish accounts of business and other particulars to the respondents 1 to 5 on or before 31.03.2015. The learned Judge permitted the appellants 1 and 2 to continue to transact the business of the Firm from 01.04.2015 to 30.06.2015. The present appeal is filed against said order, dated 19.03.2015. 14.
The learned Judge permitted the appellants 1 and 2 to continue to transact the business of the Firm from 01.04.2015 to 30.06.2015. The present appeal is filed against said order, dated 19.03.2015. 14. The learned Senior Counsel appearing for the appellants contended that; (a) the learned Judge has no jurisdiction to go into the question of appointment of Arbitrator in a petition filed under Section 9 of the Act; (b) the Court has power only to pass an order to preserve the subject matter/to grant interim custody of sale of any other goods; (c) when a notice for appointment of Arbitrator is issued by a party, the other party has right to take various defenses available under the Act and has right to deny the existence of Arbitral Agreement and maintainability of such request; (d) the learned Judge not correct in restraining the appellants from operating the accounts on or after 01.07.2015. By this interim injunction, the entire business of Firm is stalled; (e) the first appellant as a Managing Director is entitled to do the business and the respondents can only ask for accounts; (f) the respondents 1 to 5 did not issue any notice before filing the O.P. and did not demand accounts by sending legal notice; (g) the motive of the respondents 1 to 5 is to prevent the appellants 1 and 2 from carrying on the business; (h) the respondents 1 to 5 have filed O.P. on apprehension and the said apprehension is baseless; and (i) the learned Judge is not correct in directing the parties to appoint or nominate Arbitrator on or before 30.06.2015. For the above reasons, the learned Senior Counsel appearing for the appellants prayed for allowing the appeal. 15. The learned counsel for the respondents 1, 2, 4 and 5 filed counter affidavit and typed set of papers. 16.
For the above reasons, the learned Senior Counsel appearing for the appellants prayed for allowing the appeal. 15. The learned counsel for the respondents 1, 2, 4 and 5 filed counter affidavit and typed set of papers. 16. The learned counsel for the respondents 1, 2, 4 and 5 contended that; (a) Clause 16 of Partnership Agreement contains Arbitration Clause and the respondents 1 to 5 are entitled to invoke the said Clause to resolve the dispute that are arisen between the parties; (b) as per Section 9 of the Act, the respondents 1 to 5 are entitled to an order to preserve the property of the Firm; (c) the respondents 1 to 5 have made out a case that disputes have arisen between the partners and therefore, pending arbitration proceedings, invoking Arbitration Clause, the respondents are entitled to relief under Section 9 of the Act; and (d) the learned Judge considering the pleadings and documents, have listed out 10 disputes in paragraph 15 of the order that the disputes have arisen between the partners. Therefore, the order of the learned Judge, is valid and legal and there is no circumstance warranting interference by this Court. 17. The learned counsel appearing for the respondents 1, 2, 4 and 5 also submitted that they have already filed O.P.No.430 of 2014 for appointment of Arbitrator, before the Principal Bench of this Court and notice has been ordered by the Principal Bench of this Court, returnable by 21.08.2015. 18. For the above reasons, he prayed for dismissal of the civil miscellaneous appeal. 19. In support of his submission, he relied on the following Judgments: (i) 2007 (6) SCC 798 [Arvind Constructions Co. (P) Ltd., Vs. Kalinga Mining Corporation and others], wherein in paragraph 15, it has been held as follows: "15. The argument that the power under Section 9 of the Act is independent of the Specific Relief Act or that the restrictions placed by the Specific Relief Act cannot control the exercise of power under Section 9 of the Act cannot prima facie be accepted. The reliance placed on Firm Ashok Traders & Anr. Vs. Gurumukh Das Saluja & Ors.
The argument that the power under Section 9 of the Act is independent of the Specific Relief Act or that the restrictions placed by the Specific Relief Act cannot control the exercise of power under Section 9 of the Act cannot prima facie be accepted. The reliance placed on Firm Ashok Traders & Anr. Vs. Gurumukh Das Saluja & Ors. [ (2004) 3 S.C.C. 155 ] in that behalf does not also help much, since this Court in that case did not answer that question finally but prima facie felt that the objection based on Section 69 (3) of the Partnership Act may not stand in the way of a party to an arbitration agreement moving the court under Section 9 of the Act. The power under Section 9 is conferred on the District Court. No special procedure is prescribed by the Act in that behalf. It is also clarified that the Court entertaining an application under Section 9 of the Act shall have the same power for making orders as it has for the purpose and in relation to any proceedings before it. Prima facie, it appears that the general rules that governed the court while considering the grant of an interim injunction at the threshold are attracted even while dealing with an application under Section 9 of the Act. There is also the principle that when a power is conferred under a special statute and it is conferred on an ordinary court of the land, without laying down any special condition for exercise of that power, the general rules of procedure of that court would apply. The Act does not prima facie purport to keep out the provisions of the Specific Relief Act from consideration. No doubt, a view that exercise of power under Section 9 of the Act is not controlled by the Specific Relief Act has been taken by the Madhya Pradesh High Court. The power under Section 9 of the Act is not controlled by Order XVIII Rule 5 of the Code of Civil Procedure is a view taken by the High Court of Bombay. But, how far these decisions are correct, requires to be considered in an appropriate case. Suffice it to say that on the basis of the submissions made in this case, we are not inclined to answer that question finally.
But, how far these decisions are correct, requires to be considered in an appropriate case. Suffice it to say that on the basis of the submissions made in this case, we are not inclined to answer that question finally. But, we may indicate that we are prima facie inclined to the view that exercise of power under Section 9 of the Act must be based on well-recognized principles governing the grant of interim injunctions and other orders of interim protection or the appointment of a receiver." (ii) 2010 (1) LW 388 [P.Manthiramurthy Vs. P.Marimuthu and another], wherein in paragraphs 9 and 10, it has been held as follows: "9. The core question arises as to whether there is any valid lease created in favour of Arun Enterprises as well as the said private limited company, namely, Arun Plasto Moulders India Pvt. Ltd. Section 19(g) of the Partnership Act is extracted hereunder for ready reference. "Sec.19. Implied authority of partner as agent of the firm -(1) Subject to the provisions of Section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. The authority of a partner to bind the firm conferred by this section is called his "implied authority". (2) In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to- (a) ..... (b) ..... (g) transfer immovable property belonging to the firm, or" 10. It is clear from a bare reading of the above extract that a partnership firm cannot transfer immovable property belonging to the firm, if it is having no nexus with the business of that firm." 20. I have heard the learned Senior Counsel appearing for the appellants and the learned counsel for the respondents 1, 2, 4 and 5, and 6, and 7 and considered the arguments put forth by them and perused the materials available on record. Though notice was served on the respondents 3 and 8 and their names are printed in the cause list, they have not chosen to appear either in person or through counsel. 21.
Though notice was served on the respondents 3 and 8 and their names are printed in the cause list, they have not chosen to appear either in person or through counsel. 21. The contentions of the learned Senior Counsel appearing for the appellants that the learned Judge is not correct in passing the order of interim injunction restraining the appellants 1 and 2 to carry on the business after 30.06.2015, is not acceptable. From the pleadings, it is seen that there is an Arbitration Clause in the Partnership Agreement. Clause 16 of the Partnership Agreement, dated 25.05.1997, reads as follows: "16. All disputes or differences between the partners during the partnership will be referred to and settled according to the Indian Arbitration Act, 1940." 22. The respondents 1 to 5 have made various allegations against the appellants 1 and 2 with regard to running the business of the Firm. They have also alleged that they have lost confidence upon the appellants 1 and 2. The appellants 1 to 3 have denied various allegations made by the respondents 1 to 5. The allegations and counter allegations clearly reveal that the disputes have arisen between the partners. As per Clause 16 of the Partnership Agreement, the disputes have to be dissolved through Arbitration. The respondents 1 to 5 filed petition under Section 9 of the Act and claiming interim protection, pending arbitration proceedings. A party to Arbitration Agreement can invoke Section 9 of the Act even before invoking Arbitration Clause, for protection of assets of the Firm. Section 9 of the Act reads as follows: "9.Interim measures, etc. by Court.
The respondents 1 to 5 filed petition under Section 9 of the Act and claiming interim protection, pending arbitration proceedings. A party to Arbitration Agreement can invoke Section 9 of the Act even before invoking Arbitration Clause, for protection of assets of the Firm. Section 9 of the Act reads as follows: "9.Interim measures, etc. by Court. — 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— (i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or (ii) for an interim measure of protection in respect of any of the following matters, namely:— (a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence; (d) interim injunction or the appointment of a receiver; (e) such other interim measure of protection as may appear to the court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it." Therefore, as per Section 9 of the Act, the petition filed by the respondents 1 to 5, for interim maintenance, is maintainable. The learned counsel for the respondents 1, 2, 4 and 5 relied on paragraph 15 of the Judgment reported in 2007 (6) SCC 798 (supra). As per the said Judgment, the Court has to apply the principles of Order 39 C.P.C. in exercising power under Section 9 of the Arbitration and Conciliation Act, 1996.
The learned counsel for the respondents 1, 2, 4 and 5 relied on paragraph 15 of the Judgment reported in 2007 (6) SCC 798 (supra). As per the said Judgment, the Court has to apply the principles of Order 39 C.P.C. in exercising power under Section 9 of the Arbitration and Conciliation Act, 1996. The appellants 1 to 3, in paragraph 25 of the counter filed in Ar.O.P.No.27 of 2015, have stated that they have not alienated or encumbered the property of the Firm and they have no intention to alienate or encumber any of the properties of the Firm. Further, they have stated that they have not destroyed any account, the accounts are submitted to the Income Tax Department and they cannot be destroyed in any manner by anybody. The learned Judge recorded this fact and has granted interim injunction to that effect. The second interim relief granted by the learned Judge is, directing the appellants 1 to 3 to furnish the accounts of business and other particulars, as required by the respondents 1 to 5. The appellants 1 to 3, in the counter, have stated that all the partners were given access to the day-to-day business of the Firm as well as the accounts of the Firm. Therefore, the appellants 1 to 3 cannot have any grievance in respect of interim reliefs 1 and 2 granted by the learned Judge in the impugned order. 23. The main objection of the learned Senior Counsel appearing for the appellants is that the learned Judge is not correct in directing the parties to appoint or nominate an Arbitrator on or before 30.06.2015. The contention of the learned Senior Counsel appearing for the appellants that the learned Judge has no power to issue such direction under Section 9 of the Act, is well founded. From the order of the learned Judge, it is seen that such a direction is given, as the appellants were permitted to carry on business till 30.06.2015. Only because of such permission, the learned Judge has directed the parties to appoint or nominate an Arbitrator on or before 30.06.2015. Now, the respondents 1 to 5 have filed O.P.No.430 of 2015 before the Principal Bench of this Court, for appointment of Arbitrator. Therefore, the particular portion of the order of the learned Judge, has become infructuous. 24.
Only because of such permission, the learned Judge has directed the parties to appoint or nominate an Arbitrator on or before 30.06.2015. Now, the respondents 1 to 5 have filed O.P.No.430 of 2015 before the Principal Bench of this Court, for appointment of Arbitrator. Therefore, the particular portion of the order of the learned Judge, has become infructuous. 24. The learned Judge has exercised his power under Section 9 of the Act and considering the pleadings and documents filed in proper perspective, has passed the impugned order. The said order is as per law. There is no reason or circumstances warranting interference by this Court. 25. In the result, this Civil Miscellaneous Appeal is dismissed. No costs. Consequently, connected miscellaneous petitions are closed.