ORDER : 1. This Application is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator for adjudication of the disputes between the parties. 2. It is the case of the applicant that applicant and the respondent are related to each other and in view of such relation, they entered into a Partnership Deed dated 29.01.1991 for carrying on business of C&F Agency of various companies and the business shall be run in the name of M/s. Enterprises. Both of them are entitled to 50% of profits each. During the course of the business, the Partnership firm corroborated itself as C&F agent of M/s. Shell India Limited and M/s. Parry's Confectionary Ltd. with its operations at Kukatpally initially, which were subsequently shifted to Nacharam in the year 2005. They had taken a godown on lease at Nacharam admeasuring 13000 sq. ft. along with an open space situated at Sy. No. 71, plot No. 8-9-16/3, situated at Nacharam. Subsequently, they purchased the said property from the partnership funds and the said property became the property of the partnership firm. As per the mutual understanding between the partners, development and day-to-day management of the business was being looked after by the applicant and finances and accounts of the partnership firm was being looked after by the respondent. The respondent had been filing income tax returns of the firm under his signature representing the partnership firm and the applicant had no occasion to doubt the veracity of such returns filed by the respondent. During the course of the business of partnership firm, some portions of the go-down at Nacharam property were let out to different tenants and the respondent has been appropriating the rents. When questioned, the respondent failed to provide any information. The respondent, having control over the records of the firm and preventing the applicant from entering into the office premises and making it difficult for him to have daily access to his office premises in respect of their business. Disputes arose between the parties, since it is found that the respondent was acting against interest of the partnership firm and also against interest of the applicant in the partnership firm. The applicant got issued notice dated 29.03.2018 invoking arbitration clause 13 in the partnership deed, dated 29.01.1991. The said notice was returned with an endorsement as not claimed. Hence, the present application is filed.
The applicant got issued notice dated 29.03.2018 invoking arbitration clause 13 in the partnership deed, dated 29.01.1991. The said notice was returned with an endorsement as not claimed. Hence, the present application is filed. 3. The applicant also filed additional affidavit dated 19.03.2019 stating that himself and the respondent had always been residing adjacent to each other at Tilak Road, since the inception of the partnership business. Thereafter, himself and the respondent shifted their residence to Ramanthapur in two adjacent plots i.e. H. Nos. 3-14-12/F and 3-14-12/E respectively. As there are several disputes between the parties and they were not on good terms with each other, the applicant was not aware of the change of residence by the respondent, as the respondent's son still resides at the same address, that is the address on which Section 11 notice was sent and that on the date of sending notice under Section 11 of the Arbitration and Conciliation Act, the respondent was very much residing at the same address to which the notice was sent to and his son is still residing at the very same address. 4. Initially, the respondent filed counter affidavit on 12.09.2018 denying the averments in the affidavit filed in support of this application stating that the application is not maintainable as no procedure was followed as contemplated under the Act. It is asserted that the applicant by showing the residential address as resident of Raheja Apartments, Nacharam sent the notice of dissolving the partnership firm and also for appointment of arbitrator to an address where he was not residing and managed the postal authorities as if the respondent has not claimed the said notice and on that ground also, the application is liable to be dismissed. Since the partnership deed is an unregistered, same cannot be relied upon for instituting the case. Though the partnership deed was executed, the same was not acted upon in letter and spirit. It is asserted that during said period, the respondent floated another firm in the name of M/s. Arun Industries, which has nothing to do with the partnership firm i.e. M/s. Arun Enterprises. The purchase of godown at Nacharam has nothing to do with the partnership firm as the same was purchased by the respondent as Managing Partner of Arun Industries with his own funds.
The purchase of godown at Nacharam has nothing to do with the partnership firm as the same was purchased by the respondent as Managing Partner of Arun Industries with his own funds. The partnership firm was dissolved long ago, as such, the applicant and the respondent are not bound by the clauses enshrined in the partnership deed dated 21.09.1991. 5. Additional counter affidavit dated 05.03.2019 is filed stating that the respondent received the summons in a suit bearing C.O.S. No. 31 of 2018 from the XIII Additional District Judge-cum-Commercial Court, Ranga Reddy District, seeking relief of declaration of dissolution of partnership firm by name “M/s. Arun Industries” and partition of an immovable property admeasuring to an extent of 2203.81 sq. yds. situated in Sy. No. 71 of I.D.A. Nacharam, Ranga Reddy District. In Para Nos. 2 and 3 of the affidavit filed by the applicant herein in C.O.S. No. 31 of 2018, it is stated as follows: “The firm had taken a godown on lease at Nacharam admeasuring 13000 sq. ft. along with an open space situated at Sy. No. 71, Plot No. 8-9-16/3, situated at Nacharam from its owner Sri. Vinay Kumar. The said property was thereafter purchased out of the partnership funds from the said Vinay Kumar and became the property of the partnership firm. The premises was totally admeasuring 2203.081 sq. yds and was purchased in pursuance of Registered Sale deed dated 30.06.2005 bearing document No. 6391/2005 in the name of a new firm M/s. Arun Industries which was also formed by the applicant and the respondent herein. The total sale consideration of the said property paid to the vendor was Rs. 49,24,000/- out of which the applicant herein contributed a sum of Rs. 18,61,000/- vide demand draft bearing No. 114883 drawn on ICICI Bank, Himayathnagar branch. The respondent herein paid a sum of Rs. 18,63,000/- balance amount of Rs. 12,00,000/- was paid through the bank account of the partnership firm M/s. Arun Industries. 3.
49,24,000/- out of which the applicant herein contributed a sum of Rs. 18,61,000/- vide demand draft bearing No. 114883 drawn on ICICI Bank, Himayathnagar branch. The respondent herein paid a sum of Rs. 18,63,000/- balance amount of Rs. 12,00,000/- was paid through the bank account of the partnership firm M/s. Arun Industries. 3. Thus the said property was purchased from the funds contributed jointly by the Applicant, Respondent and their partnership firm M/s. Arun Enterprises, thus making it an asset of the partnership firm.” It is stated that the applicant herein, contrary to the above referred admission pleaded in C.O.S. No. 31 of 2018 by referring the property as the property of M/s. Arun Industries and obtained injunction orders i.e. not to interfere with his alleged possession and not to alienate or create third party rights over the property against the respondent vide I.A. Nos. 921 and 922 of 2018 in C.O.S. No. 3.1 of 2018. To suit his convenience, the applicant is making contrary statements before different courts of law and creating litigation over the property over which he has no right, title or interest in any manner. The property purchased by the respondent is a proprietary concern, but not a partnership firm as stated by the applicant. 6. One more additional counter affidavit is filed by the respondent on 04.04.2019 to the reply affidavit dated 19.03.2019 filed by the applicant stating that in the month of July, 2017, he shifted his residence from Ramanthapur area to Flat No. 909 of Raheja Vista Apartments in Nacharam area and his son also shifted to Flat No. 901 of Raheja Apartments. The maintenance charges, handing over documents and letter issued by the vendor of the applicant to TSIICIALA for mutation of his name in respect of Flat No. 909 would clearly establish that he had been residing in Nacharam area from July, 2017 onwards and the arbitration notice dated 29.03.2018 was not received by him. 7. Heard Smt. Mansi Ganu, learned counsel appearing for Mr. Sunil B. Ganu, learned counsel for the applicant and Sri. Santhosh Kumar, learned counsel appearing for Sri. S. Sridhar, learned counsel for the respondent. 8. Learned counsel for the applicant submits that since arbitration notice dated 29.03.2018 was issued subsequent to amendment of Amendment Act, 2015, the only aspect that is required to be considered is existence of arbitration clause and invocation of the same.
Santhosh Kumar, learned counsel appearing for Sri. S. Sridhar, learned counsel for the respondent. 8. Learned counsel for the applicant submits that since arbitration notice dated 29.03.2018 was issued subsequent to amendment of Amendment Act, 2015, the only aspect that is required to be considered is existence of arbitration clause and invocation of the same. She submits that notice was served on the respondent where he was residing. In fact, he is the owner of the said premises, where notice was sent and same was returned with an endorsement as 'unclaimed'. She submits that the notice invoking arbitration clause was not returned on the ground that the respondent left from the premises or on the ground of non availability of the respondent, as such, it is deemed to be served on the respondent, even as per Section 3 r/w. Section 21 of the Act r/w. Section 27 of the General Clauses Act. In support of her contention, she relied on the judgments reported in Shabnum Gulati vs. Religare Finvest Pvt. Ltd. and also in Tata capital Financial Services Ltd., v. AG Aerovision Electronics Pvt. Limited. She also submits that the intention of the legislature for providing issuance of notice under Section 21 of the Act is only to communicate to other party of intention to arbitrate. She also submits an attempt to serve is sufficient service and that is the reason Section 3 of the Act was enacted and principles of Code of Civil Procedure has no application with regard to service of notice under the Act, as held by the Delhi High Court. She also submits that there is no bar in instituting a suit or for institution of arbitration proceedings against unregistered firm a per Section 69 of the Partnership Act and the bar contained under Section 69 has no application for enforcing the claim of dissolution against an unregistered firm, more particularly for enforcing the arbitration clause. She further submits that the bar contained under sub-sections (1) to (3) of Section 69 of the Act has no application in respect of enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realize the property of a dissolved firm.
She further submits that the bar contained under sub-sections (1) to (3) of Section 69 of the Act has no application in respect of enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realize the property of a dissolved firm. In support of her contention, she relied on the judgments reported in Premlata vs. Ishar Dass Chaman Lal, (1995) 2 SCC 145 , Prabhu Shankar Jaiswal vs. Sheo Narain Jaiswal, (1996) 11 SCC 225 : 1996 (4) ALT 37 (D.N.), V.H. Patel and Company vs. Hirubhai Himabhai Pat, 2000 (4) ALT 5 (SC) : (2000) 4 SCC 368 , Kamal Pushp Enterprises vs. D.R. Construction Co. 2000 (5) ALT 39 (SC) : 2000 (2) An. W.R. 74 (SC) : (2000) 6 SCC 659 and also in the case of Neeraj Khullar vs. Virender Kumar Khullar. She further submits that the suit filed by the applicant pertains to M/s. Arun Industries, which is a different entity and present application is different which is filed for dissolution of M/s. Arun Enterprises, which are totally different partnership firms. In the present application, the applicant is not seeking relief against any property belonging to M/s. Arun Industries. 9. On the other hand, Sri. Santhosh Kumar, learned counsel for the respondent submits that the arbitration notice was issued to Ramanthapur address, whereas this application is filed by showing the Nacharam address by the applicant and no reasons are mentioned in the application for instituting this application. That the respondent has shifted residence in the month July, 2017 and the applicant being neighbour and close relation, is aware of the same and deliberately has sent the notice to Ramanthapur address, as he was not residing there, as such, it does not amount to compliance of Section 21, therefore, this arbitration application is liable to be dismissed on this ground alone. That without issuing proper notice for invoking arbitration clause, the applicant could not have filed this application. The applicant has already filed suit in respect of the same property and he is making contradictory statements in the suit filed by him.
That without issuing proper notice for invoking arbitration clause, the applicant could not have filed this application. The applicant has already filed suit in respect of the same property and he is making contradictory statements in the suit filed by him. Since there is overlapping of claim made by the applicant in respect of the property in this present application and also in the suit filed by the applicant, there is no arbitral dispute, much less within the scope of partnership deed. The partnership was dissolved long back and there is no arbitral dispute for referring the dispute to arbitration. The partnership deed is unregistered, as such, this application is not maintainable for resolution of disputes under unregistered document. 10. In view of rival contentions of both the parties, the issues that arise for consideration in this application are: (1) Whether the arbitration notice dated 29.03.2018 is valid notice for invoking arbitration against respondent? (2) Whether the arbitration application is maintainable against respondent in respect of the claim for dissolution of partnership for rendition of accounts under an unregistered partnership deed? (3) Whether pendency of COS No. 31 of 2018 filed by applicant bars this application? 11. POINT No. 1: Admittedly, the applicant got issued notice dated 29.03.2018 to the respondent invoking arbitration Clause No. 13 contained in the partnership deed dated 29.01.1991, which reads as follows: “Clause No. 13: That in case of any dispute as to any interpretation of any clause of these presents or to any matter connected with the affairs of the firm, it should be referred to the arbitration of one or more persons appointed by mutual agreement of the partners here to and the decision of the Arbitrators shall be final and binding on all the partners.” Existence of arbitration clause is not in dispute, but only means of invocation is disputed. It is vehemently argued by the learned counsel for the respondent that the applicant issued notice dated 29.03.2018 invoking arbitration clause to the address where the respondent is not residing by the time of issuance of notice. The notice sent was returned with an endorsement ‘not claimed’ but not on the ground that the respondent shifted from the premises.
It is vehemently argued by the learned counsel for the respondent that the applicant issued notice dated 29.03.2018 invoking arbitration clause to the address where the respondent is not residing by the time of issuance of notice. The notice sent was returned with an endorsement ‘not claimed’ but not on the ground that the respondent shifted from the premises. The assertion of the applicant that he is the owner of the property to which address notice was sent is also not disputed by the respondent, which goes to show that the applicant made efforts to serve the notice. The respondent filed some documents along with additional counter on 04.4.2019 showing that he was paying maintenance charges to the Flat at Raheja Apartments, Nacharam, but that does not prove that he completely shifted to that place. Maintenance charges will be collected after taking possession of premises. If a person owns number of premises, he will be liable to pay maintenance charges to all the premises. As per Section 3 of the Act, any written communication is deemed to be served if the same is sent and delivered to the last known place of business, habitual residence or mailing address of the party. Section 3 of the Act reads as follows: Section 3: Receipt of written communication: (1) Unless otherwise agreed by the parties: (a) any written communication is deemed to have been received if it is delivered to the addressee personally or at his place of business, habitual residence or mailing address. (b) if none of the places referred to in clause (a) can be found after making a reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressee's last known place of business, habitual residence or mailing address by registered letter or by any other means which provides a record of attempt to deliver it.” A perusal of Section 3 of the Act goes to show that a written communication is deemed to have been received, if it is sent to the addressee's last known place of business, habitual address or mailing address by registered letter or by any other means which provides a record of attempt to deliver it.
The legislature thought it fit that separate provision for service of notice is to be enacted under Section 3 of the Act and has relaxed rigors of service of notice unlike sub-rule 5 of Rule 9 of Order V of CPC wherein it requires proof of acknowledgment or any other receipt of due delivery of the summons, or drawing of a presumption of due service only where the summons were properly addressed but the acknowledgment was lost or mislaid or for any other reason was not received by the Court Shabnam Gulati vs. Religare Finvest Pvt. Ltd. (supra). That apart, the Hon'ble Supreme Court in N. Prameswaran Unni vs. G. Kannani, (2017) 5 SCC 737 , held that when a notice is sent by registered post and is returned with postal endorsement ‘refused’ or not available in the ‘house’ or ‘house locked’ or ‘shop closed’ or ‘addressee not in station’ due service has to be presumed. Hence, in view of the facts and circumstances of the case and the law laid down by the Hon'ble Apex Court, the notice is deemed to be served on the respondent. In view of the same, the objection of the respondent that notice dated 29.03.2018 is not served and not followed the procedure, cannot be accepted. 12. POINT No. 2: Partnership Deed is not compulsorily registrable document under Section 17 of the Registration Act. Learned counsel for the respondent vehemently contended that the partnership firm M/s. Arun Enterprises, is not registered as per Section 69 of the Indian Partnership Act, as such the same cannot be relied upon for initiation of arbitration proceedings. For the sake of convenience. Section 69 of the Act is extracted hereunder: “Section 69: Effect of non-registration: (1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Registrar of Firms as a partner in the firm.
(2) No suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm. (3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affect: (a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realize the property of a dissolved firm.” A perusal of above section goes to show that under Section 69(1) of the Partnership Act, a suit, inter-alia, to enforce a right arising from a contract cannot be filed by a person suing as a partner in a firm against the other partners of the firm unless the firm is registered. Under sub-section (3) any other proceeding to enforce a right arising from a contract by a person suing as a partner against the other partners of an unregistered firm is also barred. Since the right to resort to arbitration flows from the contract between the parties contained in the partnership deed, a suit or any other proceeding by a partner to enforce this term in the contract against the partners would, therefore, normally be barred under the first part of sub-section (3) of Section 69. However, under sub-section (3)(a) this bar will not affect the enforcement of any right to sue for the dissolution of a firm of for accounts of a dissolved firm of any right or power to realize the property of a dissolved firm. Therefore, although the partnership firm may be unregistered, one partner cart sue other partners for dissolution of the firm and for accounts. The words ‘to sue’ used in sub-section (3)(a) cannot be construed narrowly to refer only to suits for dissolution of partnership and accounts. The exception contained in sub-section (3)(a) applies not merely to sub-sections (1) and (2) but also to the first part of sub-section (3) which deals with proceedings other than suits.
The words ‘to sue’ used in sub-section (3)(a) cannot be construed narrowly to refer only to suits for dissolution of partnership and accounts. The exception contained in sub-section (3)(a) applies not merely to sub-sections (1) and (2) but also to the first part of sub-section (3) which deals with proceedings other than suits. Therefore, in order that sub-section (3)(a) would apply to all these provisions, the words “to sue” in sub-section (3)(a) must be understood as applying to any proceedings for dissolution of partnership or for accounts of a dissolved firm or to realize the property of a dissolved firm. This proceeding may be either by way of a suit or it can even be a proceeding under the Arbitration Act to secure these rights through arbitration. Hence where arbitration is sought under the arbitration clause in a partnership deed of an unregistered firm for the purpose of dissolution arid accounts of the partnership firm, the partners can maintain all applications/petitions under the Arbitration Act for the purpose of enforcing their right to secure dissolution and accounts of the partnership firm through arbitration. [See Prabhu Shankar Jaiswal vs. Sheo Narain Jaiswal, (1996) 11 SCC 225 : 1996 (4) ALT 37 (D.N.) and Premlata vs. Ishar Dass Chaman Lal, (1995) 2 SCC 145 ]. In similar circumstances, the High Court of Delhi in the case of Neeraj Khullar vs. Virender Kumar Khullar (supra) held that when a partnership firm is unregistered and the deed contains an arbitration clause, one of the partners can seek reference of a claim of dissolution against other partner and the bar under Section 69 of the Partnership Act shall not come in the way of an entertaining Arbitration Application by this Court. The arbitration clause in such a deed may be enforced for the purpose of seeking dissolution of a partnership firm to sue under sub-section (a) of Section 3, must be understood to include arbitration as well, as such, the objection raised by the respondent in this regard has no merit, as no bar per se for initiating arbitration proceedings, though the partnership deed is unregistered. 13. Even otherwise, non-registration of the document will not come in the way of Courts for referring the dispute under the document or agreement to arbitration.
13. Even otherwise, non-registration of the document will not come in the way of Courts for referring the dispute under the document or agreement to arbitration. However, if said document is not properly stamped, Court can act upon said document or enforce arbitration clause contained therein only after deficit duty and penalty is paid and said defect is cured [See SMS Tea Estates Private Limited vs. Chandmari Tea Company Private Limited, (2011) 14 SCC 66 : 2012 (1) ALT 17.1 (DN SC)]. But in the present case, the partnership deed is not compulsorily registrable under the Registration Act, but the same is to be registered before the Registrar of Firms. Therefore, non-registration of partnership deed under Section 69 of the Partnership Act, cannot bar this Court for referring the dispute to arbitration. 14. POINT No. 3: In this case it is to be seen that C.O.S. No. 31 of 2018 is filed by the applicant for dissolution of partnership and for partition of plaint schedule properties pertaining to M/s. Arun Industries and the subject property in the said suit is a godown at Nacharam purchased in the name of M/s. Arun Industries under partnership deed between the applicant and respondent, may be out of the funds of the M/s. Arun Enterprises. But the present application is filed in respect of appointment of arbitrator to resolve the disputes between the parties arousing out of partnership firm namely M/s. Arun Enterprises. The relief in the suit is for dissolution of partnership and partition of M/s. Arun Industries and the present application is filed for appointment of arbitrator for resolving the disputes in M/s. Arun Enterprises and also for dissolution of partnership firm and to render proper accounts thereof, which aspect has to be considered by the arbitrator, since it goes to the merits of the claim. It is specifically pleaded in the present application that it is not pertaining to any immovable property, but it pertains to dissolution of M/s. Arun Enterprises. Therefore, the issue with regard to the ownership of immovable property at Nacharam is not the subject matter in the present Application, but it is the subject matter of dispute in the suit i.e. C.O.S. No. 31 of 2018.
Therefore, the issue with regard to the ownership of immovable property at Nacharam is not the subject matter in the present Application, but it is the subject matter of dispute in the suit i.e. C.O.S. No. 31 of 2018. The relief in the suit as well as relief sought in the present application is quite distinct and pertaining to different firms, as such, pendency of C.O.S. No. 31 of 2018 before the XIII Additional District Judge, Ranga Reddy District at L.B. Nagar, cannot have any bearing in the present application. Since arbitration proceedings have been invoked after Arbitration and Conciliation (Amendment) Act, 2015 came into force, the only aspect that is required to be considered whether there exists an arbitration clause and invocation of the same and nothing more and nothing less and that aspect is to be considered by the arbitrator. [See M/s. Duro Felguera S.A. vs. M/s. Gangavararti Port Limited, (2017) 9 SCC 729 and Mayavati Trading (P) Ltd. vs. Pradyuat Deb Burmari, (2019) 8 SCC 714 ]. In view of above facts and circumstances, this point is answered in favour of the applicant. 15. In view of the above facts and circumstances, this application is to be: allowed accordingly, allowed nominating Sri. G. Bhoopathi Reddy, retired District Judge, for resolving the disputes between the parties. 16. As a sequel thereto, miscellaneous applications, if any pending in this Arbitration Application, shall stand closed.