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2023 Supreme(Mad) 2599

IN THE HIGH COURT OF JUDICATURE AT MADRAS
KRISHNAN RAMASAMY, J.
R. Subbulakshmi & Others – Appellants
Versus
R. Venkitapathy & Others – Respondents
O.P. Nos. 40 of 2019, 863 & 864 of 2018, 350 & 391 of 2017 & 122 & 269 of 2014 & A. No. 1364 & 1365 of 2023, 7719 of 2018, 2062, 333, 37 & 38 of 2017, 4253 of 2016 & 3288 of 2014 & O.A. No. 924 of 2018 & 1120, 727 & 728 of 2016 & C.S. No. 600 & 939 of 2016
Decided On : 10-08-2023

Advocates appeared:
For the Petitioner:Chitra Sampath, Senior counsel, for T.S. Baskaran, Advocate. For the Respondents:R1, R10 to R12, Vijay Narayan, Senior counsel, for Prasad Vijayakumar, Advocate. R2, R5, R6 & R9, AL. Somayaji, Senior counsel, for S. Elambarathi, Advocate. R3, Abdul Saleem, Senior counsel, for Vijay Mehanath, Advocate. R4, P.S. Raman, Senior counsel, for P. Giridharan, Advocate.

The Arbitral Tribunal has the authority to declare the dissolution of a partnership but lacks jurisdiction to conduct winding up activities that involve third-party interests.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Dissolution and winding up of partnership firm - Original petitions filed to set aside three interim awards by Arbitral Tribunal declaring dissolution effective from 27.02.2012 and dealing with asset distribution - Tribunal held jurisdiction to decide dissolution but not the winding up as third-party interests are involved - Tribunal's actions as liquidator deemed unauthorized; hence awards liable to be set aside. (Paras 6.1 - 6.10)

Facts of the case:
Disputes arose regarding the dissolution of a partnership firm operating a Tamil Daily Newspaper, 'Dinamalar'. After multiple arbitration proceedings and interim awards, parties contested the validity of the Tribunal's decision on asset distribution post-dissolution. Claimants 2 and 3 contended the Tribunal lacked jurisdiction to wind up the firm and adjudicate based on equity. (Paras 3.1 - 3.12)

Findings of Court:
Tribunal declared the firm dissolved, allowed distribution of editions post-dissolution but failed to call for claims from third parties, thereby lacking authority to act as a liquidator. Awards did not adhere to statutory requirements regarding third-party claims and equitable asset distribution, warranting their annulment. (Paras 6.10, 6.11)

Issues: 1. Jurisdiction of Arbitral Tribunal regarding dissolution and winding up. 2. Proper method concerning winding up in the absence of partner consensus on asset distribution (Para 6.4)

Ratio Decidendi: Court upheld the Tribunal's authority to declare dissolution but prohibited adjudication on winding up due to third-party stakeholder interests; jurisdiction limited to rights in personam. Defines distinction between dissolution (internal partner relations) and winding up (external public interests). (Paras 6.3 - 6.4)

Result: Awards set aside with direction for statutory winding up procedures as per the Indian Partnership Act; parties to manage respective editions until formal winding up concludes. (Paras 6.10)

JUDGMENT

Prayer: Original Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award dated 29.09.2018 passed by the Arbitral Tribunal which had arisen out of the dispute between the petitioners and the respondents herein and direct the respondents to pay the costs of the proceedings.)

1. These Original Petitions are filed challenging the three interim awards passed by the Arbitral Tribunal (hereinafter called as the Tribunal) dated 28.11.2013, 15.03.2014 and 29.09.2018.

2. The parties shall hereinafter be referred to by their respective ranks in the award passed by the Tribunal.

3. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS:

3.1 The business of the Firm is the publication of a Tamil Daily Newspaper called “Dinamalar”. The said Tamil Daily was started by Late T.V.Ramasubbiyer at Trivandrum in 1951. The said T.V.Ramasubbiyer was blessed with five male issues, who were the claimants before the Tribunal. In the year 1957, T.V.Ramasubbiyer had shifted the operations of Dinamalar from Trivandrum to Tirunelveli. In the year 1960, all the 5 claimants were added as partners of business by T.V.Ramasubbiyer. Thereafter, in the year 1972, the firm was reconstituted and the eldest son/R.Venkitapathy/first claimant was retired and his wife V.Saroja was inducted into the partnership. The following editions were subsequently started in the respective years:

Trichy Edition – 1966

Chennai Edition – 1979

Madurai Edition – 1980

Erode Edition – 1984

Pondicherry Edition – 1991

Coimbatore Edition – 1992

Vellore Edition – 1993

Nagarkoil Edition – 1996

Salem Edition – 2000

3.2 Further, it appears that, T.V.Ramasubbiyer was the editor, printer and publisher of Tirunelveli and Tiruchirappalli Editions till 05.11.1975. After the said date, the second claimant/R.Krishnamoorthy became the editor, printer and publisher for Tirunelveli, Tiruchirappalli, Chennai, Madurai and Erode editions. The said T.V.Ramasubbiyer died on 21.07.1984 and on his demise, the firm was reconstituted. At that time, the first claimant was not inducted as a partner. After 1985, the third claimant became the publisher for Tirunelveli, Tiruchirappalli, Chennai, Madurai and Erode editions. Thereafter, on demise of V.Saroja/wife of first claimant, the firm was again reconstituted and the first claimant was inducted as a partner.

3.3 There were disputes between the partners of the firm after the demise of T.V.Ramasubbiyer and with regard to the same, several suits were filed between the partners before various Courts.

3.4 In the year 1999, the litigation was started by the first, fourth and fifth claimants against the second claimant and sons and daughters-in-law of third claimant alleging that they have started a newspaper “Kaalai Malar”.

3.5 In a suit filed by the first, fourth and fifth respondents, they had sought for appointment of a Receiver. Accordingly, a Receiver was appointed, against which an appeal was filed and by order dated 23.01.2007, the said appointment was stayed. Further, as per the direction of this Court, conciliations were held between the partners and a memo of compromise was filed by the parties, in which they had agreed to refer all the disputes, which arises out of partnership deed dated 23.03.1997, to the Arbitral Tribunal constituted by three Arbitrators.

3.6 All the 5 claimants had filed their claims and counter claims before the Arbitral Tribunal and completed their pleadings. Based on the said pleadings, the Tribunal had framed 45 issues on 18.07.2007.

3.7 At this juncture, on the demise of the presiding Arbitrator/K.Venkatasamy, Mr.Justice T.Somasundaram, r

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