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2026 DIGILAW 213 (TS)

K. Paramananda Reddy & Co. , Rep. By Its Managing Partner Sri K. Srinvas Reddy v. Vijaya Bank, Rep. By Its Branch Manager

2026-01-30

NAGESH BHEEMAPAKA

body2026
ORDER : NAGESH BHEEMAPAKA, J. 1. This Writ Petition is filed questioning the action of the 1st respondent bank in freezing the account of the 1st petitioner firm as unilateral and without notice. 2. The case of petitioners is that the 1 st petitioner is a registered partnership firm represented by the 2 nd petitioner as Managing Partner and petitioners 3 and 4 are his sons and partners and 2 nd respondent is one another partner. All the partners have 25% share in the petitioner firm and petitioners 2 to 4 put together have 75% share. Petitioner firm was reconstituted on 25-09-2014 and through the reconstitution, the 2 nd petitioner became the managing partner of the firm and he has been overseeing the business affairs of the firm and petitioners 3 and 4 and the 2 nd respondent are continuing as partners; the 1st petitioner has current account as well as over draft account with the 1st respondent bank which extended over draft facility. It is stated, the firm is using over draft account as and when there is necessity and the firm is depositing the amounts in the OD account and that reconstitution of firm was duly intimated to the 1 st respondent bank. 2.1. It is stated, the 1st respondent bank has abruptly freeze the OD account on the complaint made by the 2nd respondent and that there is balance of Rs. 52,26,384/- lying in OD account belonging to petitioner firm. According to petitioners, bank has no right to freeze the account at the instance of the 2 nd respondent who is having only 25% share and that bank can only act to freeze the account by the decision of the majority partners and bank allowed the 2nd respondent to withdraw his personal guarantee without the knowledge of other partners and the sudden freeze of OD account is resulting in grave loss, therefore, prayed for a direction to allow petitioner to operate OD account and current account. During the pendency of Writ Petition, the 2nd respondent died and in his place, Respondents 3 to 7 came on record. 3. The 1 st respondent bank filed counter admitting the OD account as well as current account opened by the 1 st petitioner firm. During the pendency of Writ Petition, the 2nd respondent died and in his place, Respondents 3 to 7 came on record. 3. The 1 st respondent bank filed counter admitting the OD account as well as current account opened by the 1 st petitioner firm. It is stated, originally, partnership firm is a partnership firm consisting of the 2nd respondent and petitioner No.2 and others from 1987 and it was reconstituted on 25-09-2014. In the reconstituted firm on 01-04-2010, Clause No. 14 states that bank accounts in operation shall be operated in future by all the partners severally and as per Clause No. 17, all partners are working partners with remuneration and as per the reconstituted firm on 25-09-2019, the 2nd petitioner and the 2nd respondent are continuing partners and the 3rd petitioner as incoming partner and the 2 nd petitioner is vested with all the powers to manage the petitioner firm. It is further stated, on 16-11-2016, the 2 nd respondent issued letter through his advocate how he was cheated by the 2 nd petitioner and how he is conducting the affairs to the detriment of other partners and there is exchange of notices and serious disputes among the partners. In view of the same, the bank was forced to freeze the operations in the overdraft account. Subsequently, they have frozen the current account though only small credit balance is there. Apart from issuing notice on 16.11.2026, the 2ndrespdnent got issued a legal notice claiming that this respondent bank has to not only freeze the account but also keep the amounts in fixed deposits in the name of the firm so that credit balances would get higher rate of interest. 3.1. It is further stated, every partner of the firm is liable personally for the debts of the firm, so the question of permitting withdrawal of guarantee by the 2 nd respondent does not arise. The 2 nd respondent as well as the 2 nd petitioner have duty to sort out their differences or by way of arbitration as provided in the partnership deed itself and it is not open to petitioners to blame the respondent bank for any loss in business or image as this respondent bank is in a position of trustee to take care of the amounts in the credit of the firm till the disputes are sorted out. It is finally stated that allowing the 2 nd petitioner to operate overdraft account so as to enable him draw the amount will amount to acting against the firm’s interest in view of the serious allegations of fraud and cheating made by another partner who is his own father; therefore, the action of the respondent bank in freezing the account is neither illegal nor improper but compulsively necessary in the circumstances of the case. 4. The 2 nd respondent filed counter stating that Writ Petition is not maintainable as there are disputes inter-se the 2 nd petitioner and this respondent and the same are pending adjudication before the nominated Arbitrator namely Sri Justice C.V. Ramulu, Retired A.P. High Court Judge who initiated proceedings and the matter is pending for filing the claim statement as well as written version on the part of this respondent. When there is alternative and effective remedy available, petitioner cannot approach this Court. It is stated, this respondent has right to address the letter dated 16.11.2016 to its bankers when there is fraud played by the 2 nd petitioner on the family/partnership firm. Apart from the above, petitioner also filed O.S. No. 148 of 2016 before the II Additional Chief Judge, City Civil Courts, Hyderabad praying the same relief. 4.1. It is further stated, the 2 nd respondent is the founder of petitioner firm and originally it was registered in 1971 along with various partners; thereafter, when the partnership firm was reconstituted, the outgoing partners are K. Goverdhan Reddy and Sri K. Chandrapal Reddy who were none other than his other two sons and they retired from the firm because of the fraud played by the 2 nd petitioner. The 2 nd petitioner taking advantage of the faith reposed in him, had clandestinely mislead and mismanaged the wealth of the family as well as the partnership business only to gain personal benefits. While reconstituting the firm, the 2nd petitioner reduced the share of the 2 nd respondent and he had not made payments to his other sons in accordance with the understanding. 4.2. While reconstituting the firm, the 2nd petitioner reduced the share of the 2 nd respondent and he had not made payments to his other sons in accordance with the understanding. 4.2. The 2nd respondent states that Rs.52,26,384/- available with the respondent bank under OD Account pertains to the original partnership firm but not the 1 st petitioner firm, hence, the said amount has to be appropriated to the partners of the original firm but not the 1 st petitioner firm as contended by the 2 nd petitioner. 5. The 4th respondent who was brought on record as legal heir of the 2nd respondent had stated on similar lines as that of the 2 nd respondent. 6. Heard Sri G. Shashidhar Reddy, learned counsel for petitioners, Sri K. Mallikarjuna Rao, learned Standing Counsel for the 1 st respondent bank, Sri K. Prabhakar, learned counsel for Respondents 3 and 5, Sri S. Amarendar Reddy, learned counsel for Respondent No.4, Sri Srinivas Chitturu, learned Standing Counsel for Bank of Baroda. 7. Clause No. 9 of the partnership reconstitution deed makes it clear that the retiring partners do hereby agree and undertake to share any liabilities that may arise in connection with business done till their retirement date and the continuing partners hereby state that the retiring partners are not liable to for any future liabilities that may arise after the date of the retirement of the retiring partners. But, as per Clause No.4, the retiring partners do hereby confirm that as a result of accounts they have received the entire amount due and payable to them in lieu of their shares, rights, title and interest in the partnership business including its assets and good-will and they have no other claim against the continuing partners. In view of the same and in view of the serious disputes, the 1 st respondent bank had frozen the account and as it is an OD account they acted upon the 2nd respondent communication. 8. According to the 2nd respondent, fraud was played on him and there are family disputes, resultantly, he filed OS No. 148 of 2017 on the file of II Additional Chief Judge, City Civil Courts, Hyderabad for settlement of accounts. 8. According to the 2nd respondent, fraud was played on him and there are family disputes, resultantly, he filed OS No. 148 of 2017 on the file of II Additional Chief Judge, City Civil Courts, Hyderabad for settlement of accounts. The 4 th respondent filed counter, according to him, there are serious disputes with the 2nd petitioner; in view of the arbitration clause in the partnership deed, sole arbitrator Hon'ble Sri Justice C.V. Ramulu was nominated by the parties to resolve their disputes with regard to original partnership firm and reconstituted firm and the learned Arbitrator, after through enquiry, passed Award dated 11-03-2019 and additional Award dated 17-06-2019 regarding the original partnership firm and as per the said Award, the firm is liable to pay more than Rs.6 crores to Respondents 2, 4 and 5 and the said Award was confirmed by the Chief Judge, City Civil Courts in AOP No. 118 of 2019. Challenging the said order, CMA No. 635 of 2024 was filed by the 2nd petitioner and the same is pending before this Court. Therefore, pursuant to the Award, there is a decision against petitioners to pay Rs. 6 crores; accordingly, a complaint was made on 16-11-2016 to the 1 st respondent bank about the Award of the Arbitrator which was confirmed by the Chief Judge and in view of the arbitration clause, the suit filed for settlement of accounts was terminated. 9. In this backdrop, the point for consideration is whether the 1 st respondent bank is justified in freezing the account. 10. Admittedly, partners of the 1 st petitioner firm are father, sons and grandsons and it is a family dispute. Unfortunately, the 2nd respondent who is the father of the 2nd petitioner and grandfather of petitioners 3 and 4 is making serious allegations of fraud and cheating. No doubt, initially notices were issued directly by the 2 nd respondent and through their counsel to the bank on 16-11-2016 making allegations of fraud and cheating. Though there is no mention about the Award passed in the said communications, this Court cannot lose sight of the factum of the 2 nd respondent filing suit for settlement of accounts against the firm and the Award passed by the Hon'ble Arbitrator on 11-03-2019 holding that a sum of Rs. 90,72,758/- shall be distributed among partners of old firm and the same is worked to Rs. 90,72,758/- shall be distributed among partners of old firm and the same is worked to Rs. 22,68,189/- each and a table is given in the Award how each partner is entitled to the given amounts; the said Award was challenged and the same is dismissed without costs by the Chief Judge, City Civil Court. Therefore, in view of the peculiar facts and circumstances of the case, particularly when there are disputes and matter was referred to Arbitrator and an Award was passed holding each partner entitled to a specific sum, petitioners are not entitled to operate the accounts simply because they are majority in the firm. This Court has to see not only the interest of the partners but also the interest of the bank. Admittedly, it is an over draft account and if petitioners are allowed to operate, the account in spite of the Award of the Arbitrator, serious prejudice will be caused to other partners. 11. Learned counsel for petitioners relied on the judgments of the High Court of Calcutta in Dr. Sunip Banerjee v. State Bank of India , 2024 SCC on line Cal 4755 and M/s Modello Ventures LLP v. The Indian Overseas Bank , W.P.A.No. 8041 of 2023 but they are not applicable as they are on different set of facts. 12. Therefore, in view of the Award passed by the learned Arbitrator on 11-03-2019 holding that each partner is entitled to a specific sum, which petitioners are bound to comply with and have not complied with and the matter is pending in CMA No. 635 of 2024, this Court cannot give a relief to petitioners enabling them operate the bank account with the 1 st respondent. 13. Taking into account the overall disputes among the partners, this Court does not find any justification in the prayer sought by petitioners, hence, the same is rejected. 14. The Writ Petition is accordingly, dismissed. No costs. 15. Consequently, the miscellaneous Applications, if any shall stand closed.