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2025 Supreme(Kar) 1732

IN THE HIGH COURT OF KARNATAKA AT BENGALURU
N.V. ANJARIA, CJ., K. V. ARAVIND, J.
N.H. Gowda, S/o. Nagalingappa – Appellant
Versus
Mr. Rangarama, S/o. Gangappa and Ors. – Respondents
Commercial Appeal No. 192 of 2025 C/W Commercial Appeal No. 193 of 2025, Commercial Appeal No. 199 of 2025
Decided On : 09-04-2025

Advocates Appeared:
For the Appellant :Sri K.N. Phanindra, Senior Advocate A/W Sri Prashanth Kumar D., Advocate
For the Respondents:Sri N. Basavaraju, Senior Advocate A/W Sri Vijay B. K., Advocate.

Partnership disputes regarding dissolution and management are arbitrable, and interim arrangements must balance interests until arbitration resolves the issues.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 9 - Partnership Act, 1932 - Section 43 - Dispute between partners regarding maintenance of accounts and affairs of the partnership firm - Appellant contended that partnership was 'at will' and sought dissolution - Respondents argued against this claim, emphasizing the contributions made - Court appointed an arbitrator and receiver to manage the partnership's accounts. (Paras 12, 20, 21)

(B) Arbitration - Scope of arbitration in partnership disputes - Court held that the nature of partnership and dissolution issues are arbitrable and should be resolved through mutual agreement. (Paras 13, 21)

Facts of the case:
The appellant and respondents are partners in a firm, with disputes arising over the management of partnership assets and accounts, leading to applications under the Arbitration Act.

Findings of Court:
The court appointed an arbitrator and receiver to manage the partnership's accounts and ensure fair operation of business during arbitration.

Issues: Whether the partnership is 'at will' and the implications for the ongoing business operations.

Ratio Decidendi: The court determined that the issues of partnership nature and dissolution are subject to arbitration, leaving the merits for the arbitrator to decide.

Result: Appeals allowed in part; interim arrangements modified.

Table of Content
1. parties are partners in a firm with disputes over management and accounts. (Para 2 , 5 , 6)
2. appellant claims dissolution; respondents assert their contributions justify their roles. (Para 9)
3. court determined the partnership's nature and dissolution issues are subject to arbitration. (Para 12 , 13 , 20)
4. interim arrangements modified to ensure smooth operations until arbitration concludes. (Para 21)

JUDGMENT :

K.V. ARAVIND, J.

Heard learned Senior Advocate Mr. K.N. Phanindra along with learned advocate Mr. D. Prashanth Kumar for the appellant and learned Senior advocate Mr. N. Basavaraju along with learned advocate Mr. B.K. Vijay for respondent No.1 in COMAP Nos.192 and 193 of 2025 and learned advocate Mr. B.K. Vijay for the appellant and learned Senior Advocate Mr. K.N. Phanindra along with learned advocate Mr. D. Prashanth Kumar for the respondent in COMAP No.199 of 2025.

2. The appellant in COMAP No.192 of 2025 preferred Com.A.A. No.8 of 2025 under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') against the respondents, on the file of the Principal District and Sessions Judge, Bengaluru Rural. Respondent Nos.1 and 2 also filed Com.A.A. No.7 of 2025 under Section 9 of the Act before the Principal District and Sessions Judge, Bengaluru Rural. The Commercial Court passed separate orders in all the matters; however, they arise out of the same dispute between the same parties. Common arguments were addressed by the learned advocates for the parties. Hence, all the appeals are heard together and are disposed of by this common order.

3. COMAP No.192 of 2025 is preferred by the appellant and COMAP No.199 of 2025 is preferred by respondent Nos.1 and 2 against the order in Com.A.A. No.8 of 2025, dated 29.03.2025 passed by X Additional District and Sessions Judge, Bengaluru. COMAP No.193 of 2025 is preferred by the appellant against Com.A.A.No.7 of 2025, dated 24.03.2025 on I.A.No.2 passed by X Additional District and Sessions Judge, Bengaluru.

4. The ranks of the parties are referred to as they stand in COMAP No.192 of 2025.

5. The appellant and respondent Nos.1 and 2 are partners in appellant No.3 firm. As per the pleadings, the lands bearing Sy.No.62 measuring 2 acres 2 guntas, Sy.No.9/2 measuring 1 acre 31 guntas, and Sy.No.65/1 measuring 1 acre, situated at K.G. Lakkenahalli, Dasanapura Hobli, Bengaluru North, are owned by the appellant and his family members. The appellant developed the said family properties and constructed a wedding destination by name “Kalyani Vasti and De Destino”, suitable for traditional weddings and theme-based events.

6. The partnership firm was incorporated by the appellant along with respondent Nos.1 and 2 under the Partnership Deed dated 22.08.2022. As per the partnership deed, respondent Nos.1 and 2 held 30% share, and the appellant and one Girish M held 20% each in the partnership firm. The partnership firm was reconstituted on 23 August 2024, whereunder Girish M retired from the firm and the appellant and respondent Nos.1 and 2 continued as partners. The share in the reconstituted partnership firm was determined as 36.67% each to respondent Nos.1 and 2, and 26.66% to the appellant. Disputes arose between the partners with regard to maintenance of accounts and affairs of the firm. The appellant issued a notice purportedly under Section 43 of the Partnership Act, 1932, expressing intention to dissolve the firm contending that the partnership was “at will.” The legal notice also invoked the arbitration clause contained in the partnership deed by calling upon the respondents to resolve the dispute in accordance with the provisions of the Act. Respondent Nos.1 and 2 similarly expressed willingness to resolve the dispute under the Act. The appellant and respondent Nos.1 and 2 preferred separate applications under Section 9 of the Act. The application filed by respondent Nos.1 and 2 was numbered as Com.A.A.No.7 of 2025, and that filed by the ap

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