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2020 Supreme(Mad) 1097

IN THE HIGH COURT OF JUDICATURE AT MADRAS
S.M.SUBRAMANIAM, J.
Mr.V.G.Santhosam – Appellant
Versus
Mrs.Shanthi Gnanasekaran – Respondent
C.M.A.Nos.4465, 4467 to 4469 of 2019 And C.M.P.Nos.25291, 25293, 25294 and 25295 of 2019
Decided on : 24-02-2020

Advocates:
Advocate Appeared:
For the Appellants : Mr.S.R.Rajagopal for M/s.Ojas Law Firm.
For the Respondent: Mr.AL.Somayaji, for Mr.B.Nedunchezhiyan, Mr.H.Karthik Seshadri, Mr.R.Saravanakumar

Headnote:

Arbitration and Conciliation Act – Section 9 – Participate in the adjudicative process in Arbitration Claim – Sole Arbitrator passed orders, impleading the first respondent to participate in the adjudicative process in Arbitration Claim – Challenging the said impleadments, the Civil Miscellaneous Appeals are filed both on factual and on legal grounds – Appellants state that the partnership firm Beach Housing was originally formed by and between late the partnership firm was reconstituted with the induction of two new partners, namely and thereby every partner was entitled to 1/7th of the net profits in accordance with the Clause 9 of the Partnership Deed –Held, Taking a simple example, where two parties entered into an agreement and there is a dispute arose and the two parties have agreed to place the dispute before a neutral person and pay remuneration to him and the said neutral person adjudicate the disputes between those two parties and resolve the same in accordance with certain procedures – In such a scenario, if such a neutral person is allowed to exercise the power to decide the civil rights of other legal heirs or persons, who all are not party to the Arbitration Agreement, then he would be exercising the powers of the Civil Court, which is not only impermissible but an infringement into the constitutional structure of Judicial System, as well as the principles laid down in the Constitution – Findings of the Arbitrator that the first respondent has established a semblance of right, which is sufficient for impleading the first respondent in the arbitral adjudication – This Court is of the considered opinion that this itself amounts to expanding the scope of the arbitration proceedings – Stands allowed.

JUDGMENT :

The lis on hand arose in result of the orders passed by the sole Arbitrator on 02.11.2019 in M.A.No.4 of 2019. The sole Arbitrator passed orders, impleading the first respondent Mrs.Shanthi Gnanasekaran to participate in the adjudicative process in Arbitration Claim Nos.1, 3, 2 and 4 of 2019. Challenging the said impleadments, the Civil Miscellaneous Appeals are filed both on factual and on legal grounds.

2. THE COMMON FACTS IN BRIEF:

The appellants state that the partnership firm M/s.V.G.P. Beach Housing was originally formed on 27.03.1979 by and between late Mr.V.G.Panneerdas, Mr.V.G.Santhosam, Mr.V.G.Selvaraj, Mr.V.G.P.Ravidas and Mr.V.G.P.Rajadas. On 16.12.1982, the partnership firm was reconstituted with the induction of two new partners, namely, Mr.V.G.P.Babudas and Mr.V.G.S.Rajesh and thereby every partner was entitled to 1/7th of the net profits in accordance with the Clause 9 of the Partnership Deed dated 16.12.1982.

3. The abovesaid Partnership Deed states that upon the death of one of the partners, the nominees of the deceased partner would be entitled to absolute rights of that partner. Therefore, upon Mr.V.G.Panneerdas's death on 07.05.1988, his nominee (and wife) late Mrs.Parijatham became the sole successor of his share in the profits as in accordance with Clause 13 of the Partnership Deed dated 16.12.1982. However, vide Partnership Deed, dated 07.05.1988, late Mrs.P.Parijatham along with the original six partners of the partnership firm M/s.V.G.P. Beach Housing, reconstituted the partnership firm in accordance with the existing partners along with the induction of two more new members i.e., Mr.V.G.P.Prasaddas and V.G.P.Murphydas, therefore, leaving every partner entitled for 1/9th share in the partnership firm.

4. On 25.08.1992 late Mrs.Parijatham died nominating Mr.V.G.P.Ravidas as her nominee of her 1/9th share in net profit as specified in Clause 13 of the Partnership Deed dated 07.05.1988. However, upon the demise of late Mrs.Parijatham with the concurrence of all the partners, they had reconstituted the Partnership Deed dated 27.08.1993 and inducted Mr.V.G.S.Vinodhraj as a partner in the firm. The partners thereby decided to retain the shares of every partner to 1/9th share in the net profit. It is pertinent to note that the sons of late Mr.V.G.Panneerdas are not entitled to anything more than 1/9th of the share in the net profit and it is Mr.Vinodhraj who became the sole beneficiary of 1/9th share of late Mrs.Parijatham.

5. The share of late Mr.V.G.Panneerdas was transferred to late Mrs.Parijatham after which, Mr.V.G.Vinodhraj became the sole beneficiary of the 1/9th share as the partnership firm which was unanimously reconstituted vide Partnership Deed dated 27.08.1993. The contractual agreement between the parties extensively pave way to Clause 13, wherein the partners had to nominate their beneficiaries. Thus, only the nominees are entitled to net profits and the first respondent Mrs.Shanthi Gnanasekaran is not entitled to any rights or claim as the legal heir of late Mr.V.G.Panneerdas.

6. Late Mr.V.G.Panneerdas decided to include all the male members of the partnership firm and other businesses when he was alive, his daughters were married and were settled sufficiently to live lavishly in their matrimonial homes. Late Mr.V.G.Panneerdas decided to leave his legacy of business with his sons who have been contributing to the revenue and net profit of the partnership firm for the past 37 years.

7. Mr.V.G.Selvaraj, Mr.V.G.S.Vinodhraj and Mr.V.G.S. Rajeshbegan to illegally deal with the partnership firms' property and alienated and created encumbrances over several properties belonging to the partnership firms in dispute. Therefore, the appellants in the present Civil Miscellaneous Appeals approached this Court and filed an application under Section 9 of the Arbitration and Conciliation Act in Original Application Nos.81, 82 and 84 of 2018, prayed for an order of interim injunction restraining the aforem

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