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IN THE HIGH COURT OF KERALA AT ERNAKULAM
MARY JOSEPH, J.
JOHNSON STEPHEN, S/O.LATE P.A.STEPHEN - APPELLANT
Versus
M/S.MCEES TRADING - RESPONDENTS:
Arb.A.No.54 OF 2020
Decided On : 05-03-2021
Section 9 - Dissolution of Partnership Firm - Indian Partnership Act, 1932 - Arbitration and Conciliation Act, 1996
Fact of the Case:
The appellant sought reliefs under Section 9 of the Arbitration and Conciliation Act, 1996, including the appointment of a Receiver, freezing of bank accounts, and an interim injunction, following the dissolution of a partnership firm. The respondents disputed the appellant's claims and argued that the reconstitution deeds had altered the original partnership deed, rendering the Section 9 application not maintainable.
Finding of the Court:
The court found that the partnership firm had been dissolved by the appellant and that the accounts had not been settled. It also noted that the reconstitution deeds were disputed by the appellant and that the respondents had failed to provide conclusive proof of the changes in the firm's constitution. The court held that the appellant had made out a prima facie case and was entitled to interim reliefs.
Issues: The main issues revolved around the dissolution of the partnership firm, the settlement of accounts, and the applicability of the reconstitution deeds in altering the original partnership deed.
Ratio Decidendi: The court held that the dissolution of the partnership firm by the appellant entitled him to seek settlement of accounts and interim reliefs under Section 9 of the Arbitration and Conciliation Act, 1996. It also found that the disputed reconstitution deeds did not conclusively alter the original partnership deed, and therefore, the Section 9 application was maintainable.
Final Decision: The Arbitration Appeal was allowed, the impugned order was set aside, and an ad-interim order of injunction was passed in favor of the appellant.
JUDGMENT :
1. The main question to be considered in this appeal is whether the order passed by the Commercial Court (Principal Sub Court) at Ernakulam on 22.12.2020 in CMA (Arb) No.766 of 2020, dismissing the application and declining the reliefs sought by the applicant under Section 9 of the Arbitration and Conciliation Act, 1996 is legal, proper and correct. The applicant had sought for the following reliefs in CMA (Arb) No.766 of 2020:
II. To Freeze the relevant bank accounts of the subject firm maintained with the 4th respondent Bank of Edppally Branch as A/c No.919030046197357 of IFSC Code UTIB0003197, 5th respondent Bank of Ernakulam By-pass Branch as A/c No.16085500000065 of IFSC Code FDRL0001608 and the 6th respondent Bank as A/c No.37450200000025 of IFSC Code BARBOPALARI and to interdict the respondent banks 4, 5 and 6 from transferring or disbursing any amounts lying in those subject accounts by the respondents 2 and 3 and to maintain the status quo with respect to those subject bank accounts for the time being till the appointment of the arbitrator.
III. To pass an Ad interim order of Injunction restraining the respondents 2 and 3 from alienating, encumbering and from dealing with the assets of the 1st respondent firm in any manner prejudicial to interest of the Applicant till the appointment of the Arbitrator.
IV. Pass such other orders which this Hon'ble Court may deem fit and necessary for the facts and circumstances of the case.”
2. The disputed facts of the case as disclosed from the pleadings of the parties are summarised hereinbelow:-
The appellant and respondents 2 and 3 were partners of the 1st respondent firm. The 1st respondent firm was originally constituted in the year 2002 with the appellant and respondents 2 and 3 and registered with the Registrar of Firms as “Partnership at Will” on 14.05.2014 with registration number 1475/2014. True copy of the relevant extract of the 1st respondent firm maintained with the Registrar of Firms at Thiruvananthapuram as Form A dated 25.06.2020 is produced alongwith the appeal memorandum as Annexure A2. The Firm was engaged in the business of trading and servicing of generators and other allied industrial products. The Firm was constituted by virtue of partnership deed executed on 14.09.2002. True copy of the deed of partnership executed on 14.09.2002 is produced alongwith the appeal memorandum as Annexure A1. The profit and loss of the firm was agreed to be shared equally among the partners in the ratio 1:1:1 as per terms incorporated in Annexure A1 partnership deed. Since from the date of inception of the Firm itself the appellant had been actively engaged in the day to day affairs of the Firm and continued as such, till its dissolution on 01.09.2020. The 2nd respondent had been duly authorised by the partners to perform numerous activities of the firm, to operate the relevant bank accounts of the Firm, to affix seal and signature for and on behalf of the Firm and its partners and to file the tax returns of the Firm. Originally each partners had contributed Rs.5,00,000/-towards capital. Thereafter various sums have been advanced by the appellant to the Firm towards capital contribution.
3. The 1st respondent Firm made remarkable progress in its business from the date of its inception itself and since the appellant had been actively involved in the marketing and promotion of the Firm and its products, he had been paid a monthly remuneration by the firm, since its inception. The shares in the profits accrued from the business carried out by the Firm were not re
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