This application is filed under Sections 11(5) and (6) of the Arbitration and Conciliation Act, 1996 (for short 'the Act') seeking appointment of Arbitrator to resolve the dispute between the parties.

2. The respondent filed a counter opposing the application.

3. Arguments of both sides are heard. Perused the record.

4. The respondent is engaged in the business of assembling and manufacturing of power supply systems. The applicants and respondent entered into a deed of partnership on 16-06-2006 for the purpose of carrying on the business of designing, developing, assembling, manufacturing and selling of uninterrupted power supply systems, inverters, power regulators, power controllers etc., under the name and style of 'Perfect Solutions Power Supply Subsequently, the applicants and respondent entered into a Memorandum of Understanding on 02-12-2007, where under the respondent took the responsibility for research and development and design work to be completed by April, 2008. The respondent has taken signatures of applicant No.1 on blank cheques stating that the same will be used to meet the day-to-day affairs of the business. The respondent, with a mala fide intention, used the blank cheques by putting his signatures also and withdrew huge amounts on various dates and deposited the same in his personal firm account. Thereafter, the respondent purchased a flat. As per the bank account statement, the respondent deposited a total amount of Rs.15,50,000/- in his personal account after withdrawing the same from the partnership account. The applicants issued a notice dated 18-09-2008 narrating the above facts and demanding the respondent to return the unused cheques drawn on Development Credit Bank Limited, Abids, Hyderabad. The respondent got issued the reply notice dated 27-09-2008 with false allegations. The respondent approached the applicants and handed over four post-dated cheques and one such cheque bearing No.88464 dated 29-09-2008 got dishonoured. The applicants issued another notice dated 27-09-2008 to the respondent demanding payment of the amount covered by the said cheque. The respondent got issued another notice dated 10-10-2008 denying the very execution of the four cheques. The applicants again got issued another notice dated 13-10-2008 and also issued a further notice on the same day seeking reference of the dispute to the arbitrator and requesting the respondent to name an arbitrator. As there was no response from the respondent, this application is filed. The applicants filed O.P.No.1292 of 2009 before the II-Additional Chief Judge, City Civil Court, Hyderabad under Section 9 of the Act for interim relief and the same is pending. As per Clause 22 of the partnership deed dated 16-06-2006, disputes have to be referred to Arbitrator.

5. In the counter-affidavit, the respondent contended that the applicants under the memorandum of understanding agreed to invest Rs.25 lakhs for carrying out research and development work, but they did not invest the amount as promised and the applicants invested only Rs.14,92,000/-, while the total expenditure incurred towards research and development project was about Rs.24,25,681/-. In view of the malicious and fraudulent allegations levelled by the applicants alleging malpractices, misappropriation etc., the subject matter must necessarily be tried in a court of law and Arbitrator could not be competent to deal with the same, as it involves elaborate evidence and intricate examination of questions of fact and law. The respondent has already filed a suit for dissolution of partnership and rendition of accounts of the firm in O.S.No.220 of 2010 before the learned II-Additional Chief Judge, City Civil Court, Hyderabad.

6. As seen from the affidavit filed by the applicants in support of the application and the counter-affidavit filed by the respondents, it is manifestly clear that both parties entered into a partnership deed dated 16-06-2006, which was followed by a memorandum of underst