Suresh Agarwal vs Madan Mohan - 1995 Supreme(MP) 1250

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

Advocates Appeared:
For the Applicant : A.S. Usmani.
For the Respondent: R.P. Agarwal.

Headnote:Arbitration Act, 1940 – S. 41 – Civil Procedure Code, 1908 – O. 40 R. 1 – appointment of receiver – applicant being expelled from partnership firm seeking appointment of receiver to check mismanagement of business – applicant failing to show his contribution to capital of the firm – mismanagement of business also not proved – no case of appointment of receiver made out.
        Short Note
       1. This application in revision is directed against the order of refusal by the District Judge, Jabalpur dated 7.3.1995 passed in MJC No. 24/95 to appoint a receiver for the partnership firm M/s. Chaturbhuj Das Ballabh Das.
       2. The facts giving rise to this revision – application are that a partnership firm consisting of Chaturbhuj Das and his two sons Ballabh Das and Madan Mohan was constituted by a registered deed of partnership, in the year, 1961, named and styled as M/s. Chaturbhuj Das Ballabh Das. Chaturbhuj Das died in the year 1968 and on the demise of Ballabh Das, his widow Rampyari was inducted as a partner of the firm and when Rampyari expired, applicant No. 1 Suresh Agarwal, husband of her daughter Smt. Prabhat Agarwal joined the firm, as a new partner of the firm. The newly constituted partnership firm carried on its business of Iron and Steel and Hardware's smoothly till 31.12.1994, when a dispute arose between the partners, applicant Suresh Agarwal and non – applicant Madan Mohan.
       3. The two partners, as per partnership deed, appointed Shri K. Kumar and B.K. Jain, as arbitrators to resolve the dispute and settle their claim.
       4. Apprehending biased approach, non – applicant through his lawyer communicated to the arbitrators that the reference made to them stood revoked. The notice however made no impact and the arbitrators gave the award on 1.12.1994.
       5. On 11.1.1995, the applicants moved an application under section 14 of the Arbitration Act 1940 before the District Judge, being MJC No. 24/95 for a direction to the arbitrators to file award in the Court.
       6. Pursuant to the notice the non – applicant appeared before the Court and objected to making the award a rule of the Court on the ground that Smt. Prabhat Agarwal was not a partner of the firm. Therefore, in absence of any dispute with regard to the claim of Smt. Prabhat Agarwal, the arbitrators had no right to give the award, more so when the reference to them had been revoked. The award made and signed on 1.12.1994 by the arbitrators and filed in the Court on 28.4.1995 was without jurisdiction.
       7. The applicants, then moved an application under section 41 of the Arbitration Act, read with section 151 of the Code of Civil Procedure for appointment of a receiver of the partnership firm, which was seriously objected by the non – applicant.
       8. The prayer for appointment of a receiver of the firm, did not find favour with the District Judge and he rejected the application by the impugned order.
       9. Shri A.S. Usmani, learned counsel appearing for the applicants, has contended that the learned District Judge has not considered the case in its proper legal perspective and has wrongly rejected the application for appointment of receiver of the firm. The non – applicant has illegally and unilaterally expelled the applicant No. 1 from the partnership firm and has taken control of all the assets and properties of the firm. He is mismanaging the business of the firm and has unauthorisedly sold the property of the firm for his own benefit and convenience and has wrongfully gained without making any entry in the books of account of the firm. The applicant No. 1 had invested about 22 lacs in the business of the firm, despite that he has been thrown out of the partnership of the firm and from enjoying the benefits of the business of the firm. The applicants, therefore, crave indulgence of this Court with the impugned order.
       10. Shri R.P. Agarwal, learned counsel appearing for the non – applicant, on the other hand, has contended that the applicants have miserably failed to make out a strong case for appointment of a receiver. The applicant No. 1 is himself to be blamed for his expulsion from the partnership of the firm. The applicant No. 1 by his gross misconduct has shattered the faith and confidence of the non – applicant. The applicant No. 1 has set up his own parallel business in the name of his wife which is causing serious loss to the business and reputation of the firm. The applicant No. 1 has been found guilty of misconduct by Assistant Commissioner, Sales Tax in his order dated 25.2.1994. The status of the applicant No. 1 was that of a commission agent and dealer of a fair price shop. He has no means to contribute to the capital of the partnership firm. The State Bank of India has clarified the position with regard to the allegation made against the non – applicant and has said that no bank draft was prepared by the Bank, likewise re – rolling mill at Maneri has also denied the sale of any Iron materials to the non – applicant. The non – applicant has not invested any amount in share and stock market. The allegations made by the applicants against the non – applicant in this regard are false and imaginary. Therefore, no interference is called for in the impugned order. There is force in the contention of Shri Agarwal.
       11. It is well settled that a partner seeking appointment of a receiver must make out a strong case in his favour and claim asserted by him must be free from doubt.
       12. It is equally settled, that the Court should not appoint a receiver for property in possession of the defendant who claims it by a legal title, unless the plaintiff can prima – facie show that he has a strong case and a good title to the property.
       13. In the instant case, admittedly, the applicant No. 1 has been expelled from the partnership firm on account of his misconduct for promoting his own parallel business at the cost of the partnership firm. The applicants have not been able to show that they have contributed to the capital of the business of the partnership firm. They also have not been able to cite any specific instance with reliable document that the non – applicant is mismanaging the business of the partnership firm. Therefore, no case for appointment of a receiver is made out in this case.
       14. For the reasons mentioned aforesaid, I do not find any reason to interfere with the impugned order. There is no merit in this revision – application. It is dismissed accordingly.