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2023 Supreme(Bom) 2116
IN THE HIGH COURT OF BOMBAY
Bharati Dangre, J.
Rajesh Sharma - Appellant
Versus
Uma Constructions - Respondent
Comm. Arbitration Petition No. 264 of 2022
Decided On : 06-06-2023
Rohan Cama, Advocate, Piyush Raheja, Advocate, Akash Menon, Advocate, Vishal Pattabiraman, Advocate, Bency Ramkrishanan, Advocate, Mutahhar Khan, Advocate, Veer Kantariya, Advocate, Sharan Jagtiani, Advocate, Minal Jaiwant Chandnani, Advocate, Birendra Saraf, Advocate, Naira Jeejeebhoy, Advocate, Pooja Gera, Advocate, Pratik Jani, Advocate, Princee Vaishnav, Advocate
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 9 and 17 - Commercial disputes within partnership firm - Dispute arose regarding redevelopment, interim orders passed by the sole Arbitrator restraining partners from transferring firm assets - Court addressed breaches of these orders and appointment of Receiver for asset protection. (Paras 1-64)
(B) Principles of partnership and agreements - Partnership terms established entitlements to profit-sharing and responsibilities regarding existing liabilities; obligations to maintain accounting transparency were emphasized. (Paras 2-11)
(C) Enforcement of Collaborations in Partnership - Undue interference by one partner in decision-making outcomes; restrictions on asset management necessitated appointment of Receiver to preserve firm assets amidst conflicts. (Paras 52-59)
Facts of the case:
The parties comprised a partnership firm involved in redeveloping a building while facing disputes regarding profit-sharing and the management of assets, leading to arbitration terms defining roles, liabilities, and asset control.
Findings of Court:
The court upheld the Arbitrator's direction to maintain the status quo regarding firm assets while disallowing the Receiver's appointment, emphasizing the need for cooperation in accounting processes.
Issues: The court examined the legality of asset transfers, compliance with interim orders regarding asset management, and responsibilities for tax liabilities among partners.
Ratio Decidendi: The court concluded that the appointment of a Receiver was unwarranted; breaches cited did not justify such intervention, underscoring that only irreversible actions warrant such appointive remedies.
Result: The impugned order appointing the Receiver was set aside; the existing restraining orders were upheld.
| Table of Content |
|---|
| 1. disputes about the partnership's operations. (Para 1 , 2 , 3) |
| 2. alleged breaches and motions for relief. (Para 4 , 5 , 18 , 19) |
| 3. recognizing partnership terms and clauses. (Para 6 , 7 , 8 , 9) |
| 4. disputes regarding asset allocation and ownership. (Para 10 , 21 , 29) |
| 5. agreements about development and rights assigned. (Para 11 , 12 , 13) |
| 6. implications of financial liabilities for partners. (Para 20 , 22 , 25) |
| 7. status quo measures regarding the assets. (Para 28 , 30 , 36) |
| 8. standards governing emergency receiver appointment. (Para 52 , 53 , 54) |
| 9. judicial discretion concerning asset management. (Para 55 , 56 , 57) |
| 10. conclusion drawn from the totality of arguments. (Para 59 , 60 , 63) |
JUDGMENT/ORDER
1. The dispute involved in the three Commercial Arbitration Petitions being fled as petition numbers CARBP No.264/2022, CARBP No.185/2022 and CARBP No.16341/2022, revolve around the affairs and assets of the partnership frm M/s. Uma Constructions (hereinafter referred to as 'the frm'). The frm presently comprises of three partners, Mr Rajesh Sharma, Mr Sunil Sharma and Mr Sunny Ramani. Mr Rajesh Sharma and Mr Sunil Sharma (hereinafter referred to as Sharmas/Sharma brothers) stake interest to the tune of 25% in the said frm whereas Mr Sunny Ramani (hereinafter referred to as 'Ramani') claim to have 50% share in the profts and loss of the frm.
The frm is a single venture partnership constituted to redevelop a building - Hamrahi Co-operative Housing Society Limited (Hamrahi) located at 15th Road, Khar Pali Road, Khar (West), Mumbai.
2. The dispute between the partners arises out of the redevelopment of the said building and the three distinct petitions cumulatively challenge two orders passed by the sole Arbitrator in form of interim orders, pending the arbitration proceedings, which was made over to the Arbitrator by order dtd. 6/11/2020, while dealing with the counter petitions fled by the petitioners, i.e. the two Sharma brothers on one hand and Mr Ramani on the other, which was alleged to be a counterblast to the petitions fled under Sec. 9 of the Arbitration and Conciliation Act, 1996. By order dtd. 6/11/2020, this Court directed the Arbitral Tribunal to adjudicate the disputes between the petitioners on one hand and the respondent no.2, Ramani, on the other.
3. Pursuant to the said order appointing the arbitral Tribunal the Commercial Arbitration Petition fled by the Sharma brothers and that by the respondent no.2 were converted into application under Sec. 17 of the Arbitration and Conciliation Act, 1996 and the interim orders came to be passed in sequence, the frst being passed on 31/3/2021 by which the learned Arbitrator issued certain directions to the Sharmas and Ramani, which included a direction to disclose certain information on oath and extend their cooperation to the Chartered Accountant in drawing of accounts for a particular period. A restraint order was imposed, which restrained both parties from dealing with selling, transferring, alienating, disposing of, encumbering and/or creating third-party rights in respect of the assets of the frm and particularly in respect of certain fats including fat no.1301 in Hamrahi Building. A further direction restrained the respective wives of the Sharma brothers from using, occupying, carrying out any ftout work or selling, transferring, alienating, disposing of, encumbering or creating third-party rights in fat no.1301.
The Sharmas were cast with the income tax liability as refected in the income tax notice to be discharged within a period of four weeks and they were directed to fle an affdavit to that effect.
The application of Ramani, for appointment of Receiver and in the alternative relief for attachment of the frm's assets came to be rejected.
4. The second order which is subject to challenge through two petitions is the order dtd. 17/5/2022, which comes by way of a subsequent development and its genesis lies in the alleged breach of the order dtd. 31/3/2021 by
