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2022 DIGILAW 2609 (BOM)

Nitin Madhvani v. Nimisha Madhvani

2022-12-16

MANISH PITALE

body2022
JUDGMENT Manish Pitale, J. - The petitioner is aggrieved by award dated 6th December, 2019 passed by the learned arbitrator, whereby the claims of the respondent No.2 (original claimant) have been allowed. The partnership firm in question is dissolved and declaration is given as regards the proportion of share of the parties to the arbitration proceedings. 2. The facts leading to filing of the present petition under Section 34 of the Arbitration and Conciliation Act, 1996, are that a firm, Singara Nilgiri Plantation Company, came into existence in the years 1951-1952. It was started by members of two families i.e. Madhvani family and Suchde family. The business of the firm involved cultivation, manufacturing and processing of tea in the Nilgiri hills. The firm owns an office at Nariman Point, Mumbai. 3. In 1971, the father of the petitioner, the respondent No.1 and respondent No.3, died and his share in the firm was allotted in equal proportions to his sons i.e. petitioner and respondent No.3, who were admitted to the benefits of the firm. On 31st March, 1976, the members of the Suchde family, who were partners in the said firm, retired from the firm and consequently, the firm was continued by the remaining partners belonging to Madhvani family. The partners were Manubhai Madhvani, Pratap Madhvani, Surendra Madhvani and Mayur Madhvani, all being the uncles of the petitioner. The respondent No.3 (through his mother and natural guardian i.e. respondent No.2) alongwith the petitioner also continued as partners in the firm. 4. On 15th December, 1976, a partnership deed came to be executed, wherein partners and their shares were as follows: Sr. No. Name of partner Share of partner 1. Manubhai M. Madhvani 20% 2. Pratap M. Madhvani 20% 3. Surendra M. Madhvani 20% 4. Mayur M. Madhvani 20% 5. Nitin Jayant Madhvani 10% 6. Amit Jayant Madhvani 10% 5. According to the respondent No.1, who is the sister of the petitioner, on 1st July, 1977, a further deed of partnership was executed, whereby the firm was re-constituted and all the aforementioned uncles retired from the partnership firm. The petitioner alongwith the respondents and Sushilaben Chauhan i.e. sister of respondent No.2 became partners in the said firm. According to the respondent No.1, upon such re-constitution, the partners and their respective shares were as follows: Sr. No. Name of partner Share of partner 1. Meenaben J. Madhvani 20% 2. The petitioner alongwith the respondents and Sushilaben Chauhan i.e. sister of respondent No.2 became partners in the said firm. According to the respondent No.1, upon such re-constitution, the partners and their respective shares were as follows: Sr. No. Name of partner Share of partner 1. Meenaben J. Madhvani 20% 2. Nitin J. Madhvani 30% 3. Amit J. Madhvani 30% 4. Nimisha J. Madhvan 15% 5. Sushilaben Chauhan 5% 6. The petitioner seriously disputed the execution of the said partnership deed dated 1st July, 1977, on the basis of certain deficiencies in the deed, reference to which shall be made later in this judgment. The business of the firm continued and income tax returns and other such documents were regularly filed on behalf of the firm. On 28th May, 2016, the petitioner, through his advocate, wrote a letter to respondent No.1, inter alia, denying that she was entitled to 15% share in the firm and it was claimed that the same was only nominally vested in the said respondent, for some accommodation for respondent No.2, who is the mother of the petitioner and the respondent Nos.1 and 3. On 27th June, 2016, the respondent No.1 sent reply through her advocate, asserting that she was entitled to 15% share, as per the duly executed partnership deed dated 1st July, 1977. In the backdrop of the aforesaid dispute, on 20th April, 2017, the respondent No.1 issued a notice for dissolution of the firm. 7. The petitioner responded by a notice, disputing the partnership deed dated 1st July, 1977. In the backdrop of the aforesaid dispute between the parties, the learned arbitrator came to be appointed by order dated 4th July, 2017, passed by this Court in Commercial Arbitration Petition (Lodging) No.248 of 2017. In the said order, the contention raised on behalf of the petitioner that the partnership deed dated 1st July, 1977, was a sham and nominal document and that there was no valid arbitration agreement, was kept open to be decided by the learned arbitrator. A retired former Judge of the Supreme Court was appointed as the learned arbitrator. 8. The petitioner moved an application under Section 16 of the said Act before the learned arbitrator, contending that the partnership deed dated 1st July, 1977, never came into existence and that it was a void document, thereby rendering incompetent the reference to arbitration itself. A retired former Judge of the Supreme Court was appointed as the learned arbitrator. 8. The petitioner moved an application under Section 16 of the said Act before the learned arbitrator, contending that the partnership deed dated 1st July, 1977, never came into existence and that it was a void document, thereby rendering incompetent the reference to arbitration itself. By order dated 16th January, 2018, the learned arbitrator recorded in the minutes of meeting that it was not necessary to examine in detail all the contentions, including the said contention of the petitioner, since evidence was required to consider whether such a partnership deed was executed. 9. The parties led evidence in respect of their rival claims and the contest was really between the petitioner on one hand and his sister, respondent No.1, on the other. 10. On 6th December, 2019, the learned arbitrator passed the impugned award. The learned arbitrator considered the contentions raised by the rival parties, including the specific contention raised on behalf of the petitioner that the partnership deed dated 1st July, 1977, was a sham and bogus document. After taking into consideration the oral and documentary evidence on record, the learned arbitrator held that the document on record, including the letters signed by the petitioner himself, as also entries made in the register maintained by the Registrar of Firms indicated that there was no substance in the contention raised on behalf of the petitioner about the partnership deed dated 1st July, 1977, being a sham document. Thereupon, the learned arbitrator considered the material on record and found that the respondent No.1 had sufficiently proved that the partnership deed stood dissolved on 20th April, 2017. It was further held that the respondent No.1 i.e. the original claimant had 15% share in the firm, while the respondent Nos.1 and 3 had share of 32.5% each and respondent No.2 had 20% share in the firm. The learned arbitrator gave consequential directions. 11. Aggrieved by the impugned award, the petitioner filed the present petition, wherein the respondents were served and the contesting respondent No.1 appeared through counsel. 12. Mr. The learned arbitrator gave consequential directions. 11. Aggrieved by the impugned award, the petitioner filed the present petition, wherein the respondents were served and the contesting respondent No.1 appeared through counsel. 12. Mr. Aspi Chinoy, learned senior counsel appearing for the petitioner submitted that in the present case, the arbitration proceeding itself was still- born, for the reason that the partnership deed dated 1st July, 1977, which contained the arbitration clause on the basis of which reference was made, was a sham and bogus document. The learned senior counsel emphasized upon deficiencies in the said document to contend that a bare look at the document would show that it was sham and bogus and that it never came into existence. It was submitted that the date on the said document was not specific, the month was blank and all that was recorded was 'on the 1st day of 1977'. It was further brought to the notice of this Court that while Sushilaben Chauhan i.e. the sister of respondent No.2, was shown as a partner with 5% share in the said firm, she did not actually sign the partnership deed. As a matter of fact, only a notarized copy of the said partnership deed was placed before the learned arbitrator and the original document was never produced by the respondent i.e. the original claimant. 13. Learned senior counsel then referred to entries made in the Register of Firms by the Registrar. He emphasized that the entries in the said register pertaining to retirement of the four uncles from the partnership firm and the date of joining of the partners, including respondent No.1, did not match with the date of the aforesaid alleged partnership deed, said to have been executed on 1st July, 1977. It was emphasized that the Register of Firms recorded the notice of change of constitution of the said firm as 26th July, 1978 and not 1st July, 1977. In the same manner, retirement of the uncles from the partnership firm was recorded as from 18th June, 1978 and not 1st July, 1977. The learned senior counsel relied upon Section 68 of The Partnership Act, 1932, read with Section 63 thereof, to contend that entries made in the Register of Firms was conclusive proof of the facts stated therein. In the same manner, retirement of the uncles from the partnership firm was recorded as from 18th June, 1978 and not 1st July, 1977. The learned senior counsel relied upon Section 68 of The Partnership Act, 1932, read with Section 63 thereof, to contend that entries made in the Register of Firms was conclusive proof of the facts stated therein. It was submitted that applying the said statutory provisions, it was obvious that in the present case, the entries made in the Register of Firms did not relate to the alleged partnership deed dated 1st July, 1977, thereby showing that such a partnership deed never came into existence. In support of the aforesaid contention, the learned senior counsel relied upon the judgments of Supreme Court in the case of Cheeranthoodika Ahmmedkutty and another v/s. Parambur Mariakutty Umma and others, [(2000) Volume 2 SCC 417] and in the case of State of Kerala and another v/s. Mohammed Basheer, [ (2019) 4 SCC 260 ]. The learned senior counsel also relied upon judgment of Division Bench of this Court in the case of Smt. Rasilaben Kantilal Kansara v/s. Amratlal Babubhai Kocha and others, (1987 SCC Online Bom 339), in support of the said proposition. 14. Learned senior counsel also referred to admission given by the respondent No.1 in her cross-examination that she was guessing that the process of winding up of the original partnership and forming of the new partnership in 1977, took some time and that therefore, the earlier partners i.e. the four uncles had signed on documents on behalf of the firm even in the year 1979. Much emphasis was placed on alleged misreading of the statutory filings with the income tax department as the learned arbitrator referred to financial year 1978-1979, while such filings actually pertained to assessment year 1978-1979. On this basis, it was claimed that the findings rendered by the learned arbitrator were perverse and in the teeth of statutory provisions, thereby indicating that sufficient grounds were made out for interfering with the impugned award, within the narrow scope of jurisdiction under Section 34 of the aforesaid Act. 15. On the other hand, Mr. On this basis, it was claimed that the findings rendered by the learned arbitrator were perverse and in the teeth of statutory provisions, thereby indicating that sufficient grounds were made out for interfering with the impugned award, within the narrow scope of jurisdiction under Section 34 of the aforesaid Act. 15. On the other hand, Mr. Nikhil Sakhardande, learned senior counsel appearing for the contesting respondent No.1 submitted that the learned arbitrator had properly appreciated the material on record to reach reasonable conclusions and that none of the limited grounds under Section 34 of the said Act were made out for interference with the impugned award. 16. With regard to the specific contention of the petitioner that the partnership deed dated 1st July, 1977, was a sham and bogus document, the learned senior counsel appearing for respondent No.1 submitted that the case of the petitioner before the learned arbitrator needs to be appreciated. It was brought to the notice of this Court that according to the petitioner, only the partnership deed dated 15th December, 1976, was in existence and that the partnership deed dated 1st July, 1977, was merely a nominal document, under which, no real rights accrued to respondent No.1. It is in the backdrop of such a stand taken on behalf of the petitioner that the respondent No.1 (original claimant) produced copies of Register of Firms from the office of the Registrar to show that there were entries therein, relatable to the reconstitution of the partnership firm as per partnership deed dated 1st July, 1977 and that therefore, there was no substance in the contention raised on behalf of the petitioner. 17. By referring to the entries in the Register of Firms, it was submitted that the dates pertaining to change in constitution were under the heading 'Date of filing', thereby indicating that the change was reported to the office of Registrar on a specific date, which was subsequent to 1st July, 1977. It was submitted that none of the entries were relatable to the partnership deed dated 15th December, 1976, on which the petitioner placed reliance, thereby indicating that the only document in the context of which, the entries were made in the Register of Firms was indeed the partnership deed dated 1st July, 1977. 18. It was submitted that none of the entries were relatable to the partnership deed dated 15th December, 1976, on which the petitioner placed reliance, thereby indicating that the only document in the context of which, the entries were made in the Register of Firms was indeed the partnership deed dated 1st July, 1977. 18. The learned senior counsel further referred to admission given by the petitioner in cross-examination that Sushilaben Chauhan acquired share in the firm, under the said document of July, 1977. On this basis, it was submitted that it could not lie in the mouth of the petitioner that the very document was sham and bogus. It was further emphasized that there were number of documents to show that the petitioner alongwith respondent No.1, had signed as partners of the firm and that the petitioner himself had taken half the share of Sushilaben Chauhan i.e. 2.5%, upon her demise. On this basis, it was submitted that none of the grounds were made out for exercising jurisdiction under Section 34 of the said Act. 19. Having heard the learned counsel for the rival parties and upon perusal of the material placed on record, this Court is of the opinion that the findings rendered by the learned arbitrator in the context of the partnership deed dated 1st July, 1977, go to the very root of the matter and the initiation of the arbitration proceeding itself would stand vitiated, if the contentions of the petitioner are to be accepted. Therefore, it is necessary to refer to the said document and to examine as to whether the learned arbitrator arrived at findings, which could be said to be reasonable, in the facts and circumstances of the present case. 20. This Court perused the document in question i.e. partnership deed dated 1st July, 1977. The opening sentence indeed records that the agreement was made on 1st day of 1977', but the second paragraph specifically records that the aforementioned uncles of Madhvani family retired from the partnership firm as from the 1st day of July, 1977. Paragraph No.5 of the partnership deed clearly records that the parties declare that the partnership shall be deemed to have commenced as from first day of July, 1977. Towards the end of the document, it is also recorded that the same stood executed on the date mentioned above. Paragraph No.5 of the partnership deed clearly records that the parties declare that the partnership shall be deemed to have commenced as from first day of July, 1977. Towards the end of the document, it is also recorded that the same stood executed on the date mentioned above. The said document specifically records the respective shares of the parties to the said partnership deed. In this backdrop, this Court is of the opinion that only because the month was left blank in the first line of the partnership deed, it cannot be said that the document is rendered doubtful or suspicious. It is also an admitted position that the petitioner signed on the said document and he never denied his signature thereon. 21. On the aspect of only the notarized copy of the agreement being placed before the learned arbitrator, it was explained that the respondent No.1 had asked her mother to produce the original document, which she could not provide. In the backdrop of the fact that the affairs of the partnership firm were being run by the petitioner, he could have produced the original of the said document, but he failed to do so and, in this backdrop, the notarized copy was accepted by the learned arbitrator. This Court does not find any perversity in the approach of the learned arbitrator in that regard. 22. Insofar as the absence of signature of Sushilaben Chauhan on the partnership deed dated 1st July, 1977 is concerned, the learned arbitrator treated it as an inadvertence. The said approach also cannot be found fault with, for the reason that on various documents executed subsequently, all the partners mentioned in the said partnership deed had signed. Moreover, on the demise of Sushilaben Chauhan, her 5% share acquired under the very same partnership deed dated 1st July, 1977, equally devolved upon the petitioner and respondent No.3. In this situation, the petitioner cannot be permitted to make capital out of absence of signature of Sushilaben Chauhan on the partnership deed dated 1st July, 1977. The learned arbitrator was justified in rejecting the contention raised on behalf of the petitioner that there were glaring deficiencies in the said document. 23. In this situation, the petitioner cannot be permitted to make capital out of absence of signature of Sushilaben Chauhan on the partnership deed dated 1st July, 1977. The learned arbitrator was justified in rejecting the contention raised on behalf of the petitioner that there were glaring deficiencies in the said document. 23. As regards the aspect of violation of statutory requirements under Section 63 and 68 of The Partnership Act, there could be no quarrel that as per the proposition laid down in the judgment of this Court in the case of Smt. Rasilaben Kantilal Kansara v/s. Amratlal Babubhai Kocha and others (supra) and judgments of Supreme Court in the case of Cheeranthoodika Ahmmedkutty and another v/s. Parambur Mariakutty Umma and others (supra) as also, in the case of State of Kerala and another v/s. Mohammed Basheer (supra), the entries in the Register of Firms ought to be treated as conclusive proof. But, that in itself cannot lead to a conclusion that the findings rendered by the learned arbitrator could be said to be in the teeth of the statutory provisions or that such findings are perverse. A copy of the Register of Firms was placed on record on behalf of respondent No.1 herself, for the reason that she sought to support her contention that the partnership deed dated 1st July, 1977, was indeed executed and the reconstitution of the same by retirement of some partners and induction of others, including respondent No.1 herself, was duly reflected in the entries of the Register of Firms. A perusal of the copy of the Register of Firms shows that the notice of change regarding reconstitution of the firm is recorded alongwith the date 26th July, 1978. Much emphasis is placed on behalf of the petitioner on the fact that while the partnership deed was dated 1st July, 1977, the date recorded in the Register of Firms was 26th July, 1978. But, it is crucial that the date 26th July, 1978, pertaining to notice of change in the constitution of the firm is recorded in the column 'Date of filing'. This indicates that the filing pertaining to such change of constitution of the firm took place on 26th July, 1978 and the signature in front of the said entry is that of an authorized officer of the office of the Registrar of Firms. 24. This indicates that the filing pertaining to such change of constitution of the firm took place on 26th July, 1978 and the signature in front of the said entry is that of an authorized officer of the office of the Registrar of Firms. 24. Similarly, as regards the dates of joining of partners, it is recorded that they joined on 18th June, 1978 and that the retiring members ceased to be partners on 18th June, 1978. The petitioner claims that these entries do not match with the partnership deed in question i.e. 1st July, 1977 and that therefore, no such deed came into existence and it was for the respondent no.1 (original claimant) to produce the document on the basis of which, such entries were made in the Register of Firms. In this context, reliance was placed on Section 63 of The Partnership Act, wherein it is stated that notice of change must specify the date thereof. 25. This Court is of the opinion that as per the position of law, the entries in the Register of Firms have to be taken as conclusive proof, but that in itself cannot lead to the conclusion that the partnership deed dated 1st July, 1977, is a sham and bogus document. The entries in the Register of Firms do show that there was indeed reconstitution of the firm and that the retirement of certain partners and the induction of others stood recorded in the months of June and July, 1978. The learned arbitrator reached a reasonable conclusion that such entries, in the facts and circumstances of the present case, were relatable only to the partnership deed dated 1st July, 1977 and no other document. It is crucial that the petitioner took a stand before the learned arbitrator that only the partnership deed dated 15th December, 1976, was in existence. The said document does not pertain to retirement of the uncles from the partnership firm and therefore, the entries found in the Register of Firms are certainly not relatable to the partnership deed dated 15th December, 1976. The said document does not pertain to retirement of the uncles from the partnership firm and therefore, the entries found in the Register of Firms are certainly not relatable to the partnership deed dated 15th December, 1976. This fact, coupled with the admitted position that the petitioner himself signed the partnership deed dated 1st July, 1977, that he signed the documents after the said date as partner, wherein respondent No.1 also signed as a partner, that he accepted 2.5% share upon the demise of Sushilaben Chauhan, who had herself acquired 5% share only under the partnership deed dated 1st July, 1977 and other such circumstances, clearly demonstrate that merely by denying the said document, the case of the petitioner cannot go any further. 26. This also applies to the contention raised on behalf of the petitioner that although documents that came into existence subsequent to the year 1978 and even the statutory filings before the income tax department show the petitioner and respondent No.1 as partners, there is no contemporaneous document of the year 1977 to support the existence of the partnership deed dated 1st July, 1977. This Court is of the opinion that the learned arbitrator correctly took into consideration the entire oral and documentary evidence on record to reject the aforesaid contention of the petitioner. It is significant that under the strain of cross-examination, the petitioner himself admitted that Sushilaben Chauhan acquired the share in the partnership firm under the July, 1977 document. Therefore, the petitioner cannot turn around and deny the very existence of the said document. 27. The limited scope of interference in arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 is well-recognized in a series of judgments rendered by Supreme Court and this Court. This Court exercising jurisdiction under Section 34 of the said Act does not exercise jurisdiction of an appellate Court and interference would be warranted only if the findings rendered by the learned arbitrator are found to be based on no evidence or on the basis of such glaring misinterpretation of the material on record that it could qualify as perversity. No such case is made out by the petitioner in the present petition. No such case is made out by the petitioner in the present petition. The Supreme Court has laid down in the case of Associate Builders Vs Delhi Development Authority (2015) 3 SCC 49 , that the learned arbitrator is entitled to devise procedure, which is in consonance with the principles of natural justice and that it is within the domain of the learned arbitrator to decide upon the quantity and quality of evidence, in the facts and circumstances of a given case. 28. This Court is of the opinion that in the present case, the learned arbitrator did consider the oral and documentary evidence on record to reach reasonable findings, which do not deserve interference in the limited scope available under Section 34 of the aforesaid Act. 29. Since this Court has found that there is no substance in the contention raised on behalf of the petitioner that the reference to arbitration itself was bad because the partnership deed dated 1st July, 1977, was a sham and void document, there is no merit in the present petition and it deserves to be dismissed. 30. In view of the above, the petition is dismissed with no order as to costs. 31. Pending applications, if any, also stand disposed of.