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2006 Supreme(Bom) 938
IN THE HIGH COURT OF BOMBAY
(A.M Khanwilkar.J.)
PRAKASH BOOLU KUNDAR Appellant.
vs.
SHANKAR AITHU POOJARI Respondent.
Advocates Appeared
For appellant: R. D. Soni instructed by Ram and Co .
For respondent: A. V. Anturkar
Headnote:Arbitration and Conciliation Act, 1996 - Section 9 Jurisdiction of Arbitrator To pass interim measure Power under Section 9 of Act Exercised for prevention of property Not to oust any party of its legitimate entitlement. The drastic order passed by the lower Court cannot be sustained on probabilities. Besides, the issue which has been resoled by the lower Court, as is rightly contended by the counsel for the appellant, in terms of Section 9 of the Act, the Court has power to pass interim order for matters provided therein (Section 9). Essentially, such power is exercised for preservation of the property and not to oust and party of its legitimate entitlement. Counsel for the appellant has rightly relied on Section 12 of the Indian Partnership Act, 1932 which provides that every partner has right to take part in the business, subject however to the contract between the parties. It is possible to argue that the arrangement arrived at on 1st August, 2004 is a contract between the parties. But for the reasons already recorded earlier, I am not inclined to accept that the negotiations held in that meeting were translated into a concluded contract. So long as there was no concluded contract, the terms referred to in the Memorandum of Understanding cannot be the basis to denude the appellant of his legal right to participate in the affairs of the partnership business.
Arbitration and Conciliation Act, 1996 - Section 9 Jurisdiction of Arbitrator To pass interim order Partnership deed dated 25.06.2001 containing arbitration clause Fact of execution of MOU not established Arbitration clause superseded in MOU no provision for resolving dispute through arbitration Appeal allowed Impugned order restraining appellant from interferring with business of respondent and from withdrawing amount set aside Court, Receiver, High Court, Bombay appointed in report of management of business of firm of respondent.
Arbitration and Conciliation Act, 1996 - Section 9 Power of Court to pass interim order in an application under Section 9 Must be exercised for preservation of the property and not to oust any party of its legitimate entitlement. Appellant and respondent started partnership firm in the name and style as Durga Restaurant and Bar in terms of Partnership Deed executed between them. A consequence of disputes the respondent in terms of the arbitration clause approached the District Court, Pune which passed an order restraining the appellant to interfere in the day-to-day management of the business and also put other restrictions. The Court has power in terms of Section 9 of the Act, to pass interim order for matters provided therein. Essentially, such power is to be exercised for preservation of the property and not to oust any party of its legitimate entitlement. The appellant has right to take part in the conduct of the business and to share the profits till the partnership is continuing. The nature of order that has been passed by the lower Court restrains the appellant from participating in the day-to-day management of the business of the firm. The management of the business of the firm on the other hand will rest with the respondent to the exclusion of the appellant. Moreover, no provision has been made even in the impugned order for reasonable withdrawal to be made by the appellant to avail of share in the profit of the firm. Therefore, the impugned order is set aside and although there is no specific relief is claimed for appointment of Court Receiver, in the interest of justice and to protect the hotel business which is the subject-matter of the dispute in arbitration, it will be appropriate if the management of the business is taken over by the Court Receiver forthwith. The Court Receiver shall then permit both the parties to bid and appoint person who offers the highest bid as agent of the Court Receiver to conduct day-to-day hotel business. The Court Receiver shall appoint the highest bidder as his agent on such other terms and conditions as may be found necessary to ensure that the agent so appointed maintains proper books of accounts and also provides inspection of such accounts at all times to the other partner. Such order will meet the ends of justice.
1. The opponent is restrained from interfering in the day to day management of the business of the firm and shall not withdraw amount from account of the firm, until the decision of the dispute before arbitrator and till award is put up for execution.
2. The opponent is permitted to visit the Durga Restaurant Bar which is the place of business of the firm.
3. The applicant shall maintain accounts of the business of the firm and extract of such accounts of the firm.
4. Opponent is also at liberty to check accounts of the firm.
5. The application is disposed off. No order as to costs."
5. Briefly stated, the appellant and respondent started partnership firm in the name and style as Durga Restaurant and Bar. The partnership came into existence in terms of the Partnership Deed dated 25th June, 2001. The Partnership Deed contains arbitration clause. I shall make reference to the relevant clauses at the appropriate places a little later.
6. It is the case of the respondent that the Partnership Deed executed between the parties was not acted upon and the terms were modified. According to the respondent, as per the understanding between the parties, the appellant was carrying on business for three and a half years and the respondent did not interfere in the conduct of the business of the firm during the relevant period. It is the case of the respondent that proposal was given to the appellant that the respondent will take over management of the business of partnership on 1st August, 2004 and would carry on the same for next three and a half years and that the appellant should not interfere in the Management during such time. According to the respondent, the appellant agreed for that arrangement, for which Memorandum of Understanding was also prepared and signed by the parties on 1st August, 2004. This document was executed in the presence of Vinod Shetty, Balkrishna Suvarna, Jaya Poojari, Rajesh Rai and Dayanand Shetty - Chartered Accountant of the firm. It is the case of the respondent that in spite of such understanding arrived at between the parties, the appellant threatened to interfere with the management of the hotel. Besides, the appellant immediately withdrew sum of Rs. 50,000/ - (Rupees Fifty Thousand) from the account of the firm which information was received from the Bank. In this backdrop, the dispute arose between the parties.
7. As mentioned earlier, the Partnership Deed contains arbitration clause, for which, the dispute will have to be adjudicated in arbitration proceedings. The respondent, however, filed application under section 9 of the Act, 1996, on which Application, the order which is impugned in the present Appeal from Order came to be passed. So far as appellant is concerned, the appellant stoutly denies execution of any Memorandum of Understanding. According to the appellant, there was no concluded contract in relation to the negotiations which took place on 1st August, 2004. The case of the appellant, however, is that the appellant being partner of the firm having 50% share therein was entitled to manage the affairs of the firm along with the respondent. The appellant denied execution of the Memorandum of Understanding dated 1st August, 2004. Besides, according to ,the appellant, no specific clause has been made in the Memorandum of Understanding about the tenure when the respondent will hand over the management of the hotel to the appellant. Besides, the terms in the Memorandum of Understanding are so onerous so far as the appellant is concerned that the inevitable conclusion will be that the said Memorandum of Understanding is unjust and will not accepted by any prudent person. According to the appellant, the relief claimed by the respondent in the Application was exceeding the scope of order to be passed by the trial Court under section 9 of the Act. On the above basis, the appellant resisted the Application. However, the lower Court has allowed the Application preferred by the resp
