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2021 Supreme(Telangana) 217

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
A. RAJASHEKER REDDY, J.
P. Rajesh Babu – Appellant
Versus
Somuri Purnachandra Rao and Others – Respondents
Arbitration Application No. 46 of 2020
Decided On : 08-06-2021

Headnote:

Arbitration and Conciliation Act, 1996 - Section 11(5) and (6) - Partnership Deed – Disputes - Seeking to appoint sole Arbitrator - Parties in this arbitration application are members of one family - Applicant is daughter-in-law and respondents 1 and 2 are her father-in-law and mother-in-law, the 3rd respondent is her sister-in-law, respectively - All four family members established partnership firm in name and style of M/s. Reliance Developers to do business in construction activity viz. construction of roads and highways, bridges, buildings, commercial and residential complexes etc - It was agreed in the registered partnership deed, dated, that 1st respondent would function as managing partner, applicant as working partner and respondents 2 and 3 as partners of firm - That as per clause 9 of partnership deed, after tallying profit and loss accounts of firm, less charge of interest, remuneration and expenses of firm, remaining proceeds of firm was agreed to be shared at 25 % by applicant, 10% by 1st respondent, 40% by 2nd respondent and 25% by the 3rd respondent - Remuneration to be paid to partners was also stipulated under clause 7 of deed - That with active support of applicant’s father they have undertaken construction of 14 projects at various places - Whether it is compulsorily registrable document need not be examined as original partnership deed dated being a registered one under Partnership Act, subsequent amended partnership deed being a consequential document its registration – Held, applicant and the respondents are only four partners of firm and they entered into partnership deed and they are only parties to arbitration agreement - Firm, which is dissolved, not being a party and cannot be called as party as such arbitration application is not bad for non-joinder of firm as party - It was pleaded by respondents that the husband of the applicant was the key person and he is alter-ego of the applicant. But, admittedly the husband of applicant is employee of firm and he cannot be related to claims made in arbitration - Moreover he is neither a partner nor a party to the arbitration agreement and till date he did not make any claim against firm or partners - He is no way concerned with affairs of firm except in capacity of an employee - Cogent perusal of Arbitration clause would reveal that clause is widely worded and not just limited to the disputes amongst partners during subsistence of partnership firm. Courts should, if circumstances allow, lean in favour of giving effect to arbitration clause to which parties have agreed - Issues (ii) and (iii) are answered accordingly - Arbitration application is allowed.

ORDER :

1. This arbitration application is filed under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 (for short “the Act”) seeking to appoint sole Arbitrator to resolve the disputes between the parties arising under the Partnership Deed dated 27-10-2011 and the amended Partnership Deed dated 18-09-2014 of the dissolved firm M/s. Reliance Developers.

2. The facts of the case briefly stated are:

    The parties in this arbitration application are members of one family. The applicant is the daughter-in-law and respondents 1 and 2 are her father-in-law and mother-in-law, the 3rd respondent is her sister-in-law, respectively. All four family members established partnership firm in the name and style of M/s. Reliance Developers (for short “the firm”) to do business in construction activity viz. construction of roads and highways, bridges, buildings, commercial and residential complexes etc. It was agreed in the registered partnership deed, dated 27-10-2011, that 1st respondent would function as managing partner, applicant as working partner and respondents 2 and 3 as partners of the firm. That as per clause 9 of the partnership deed, after tallying the profit and loss accounts of the firm, less the charge of interest, remuneration and expenses of the firm, remaining proceeds of the firm was agreed to be shared at 25 % by the applicant, 10% by the 1st respondent, 40% by the 2nd respondent and 25% by the 3rd respondent. The remuneration to be paid to the partners was also stipulated under clause 7 of the deed. That with the active support of the applicant’s father (Sajja Prabhakar), they have undertaken construction of 14 projects at various places. In the year 2014, all the partners intended to amend the partnership deed dated 27-10-2011 and reallocate the share in the firm and accordingly vide the amended partnership deed dated 18-09-2014, the share of the applicant was at 65% the shares of respondents 1 and 2 at 5% each and the share of 3rd respondent at 25% without altering any other terms and conditions of the partnership deed dated 27-11-2011. That due to the unfruitful acts of the 1st respondent, being the managing partner of the firm, the other projects at Hyderabad and Vijayawada were half completed and the construction of those projects could not proceed and on that count the firm incurred losses. Purportedly for these reasons, the applicant got issued legal notice dated 06-05-2020 to the partners seeking their consent to refer the inter-se disputes to arbitrator by invoking the arbitration clause under clause 12 of the partnership deed dated 27-10-2011 by naming a retired Judge of this Court. The respondents 1 and 2 having received notices got issued reply notice dated 26-05-2020 denying the allegations made against them and also refused to give consent for appointment of the named arbitrator suggested by the applicant. That the applicant having coming to know from the official website of the registration department, that the 1st respondent, being the managing partner of the firm, clandestinely executing registered documents with the connivance of some land owners in the name of be-nami persons, she addressed letters to the banks to stop all transactions of the firm and based on the letters of the applicant, all accounts of the firm were freezed by the respective banks. That to protect her interest, she got issued notice dated 09-06-2020 to the respondents informing them of her decision to dissolve the firm, as per clause 10 of the partnership deed dated 27-10-2011 and the amended partnership deed dated 18-09-2014 since the partnership is at will. This notice was replied to by the respondents 1 and 2 vide reply notice dated 20-06-2020. The 3rd respondent also issued reply notice to the notice issued by the applicant dissolving the firm. Respondents in their reply notices once again refuted the allegations made by the applicant and refused to give consent to appoint the named arbitrator, suggested by the appli

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