The court upheld limited access to a frozen bank account for statutory dues, ruling that broader business operations require commencement of arbitral proceedings within a specified timeframe.

JUDGMENT: (per Hon’ble Sri Justice Ravi Nath Tilhari)

Heard Sri Patanjali Pamidighantam, learned counsel for the appellant and Sri V. V.N. Narasimham, learned counsel for the respondents.

2. The present appeal has been filed under Section 13 (1) of the Commercial Courts Act, 2015 (in short ‘Act 2015’) read with Section 37 (1) (c) of the Arbitration and Conciliation Act, 1996 (in short ‘Act 1996’), challenging the Judgment/ Order, dated 31.07.2025 passed in CAOP No.49 of 2024 (in short ‘CAOP’), by the Special Judge For Trial and Disposal of Commercial Disputes, Visakhapatnam (in short ‘Special Judge’).

3. The appellants are the petitioners in CAOP No.49 of 2024. It filed the application under Section 9 of the Act 1996 seeking injunction restraining the respondents and those acting on their instructions from continuing the freeze on current account No.915020032315999 with Axis Bank, M.V.P.Colony Branch, Visakhapatnam, belonging to the petitioner firm and to direct the respondent/Axis Bank to restore the operational access to the petitioner by de- freezing the said current bank account.

4. The learned Special Judge, by the impugned Order dated 31.07.2025, allowed the application, partly, with costs and freezing of the bank account with the Axis Bank was revoked only for the limited purpose of paying taxes and statutory dues to the Central Government, the State Government and the local bodies. The learned Special Judge, however, directed that no payment shall be made to the partners of the firm in their individual capacity, vendors, third parties. It also provided that the bank account shall be operated as per terms of Clause 14 of the reconstituted partnership deed dated 10.02.2024 and that the said order shall remain in force for not more than 90 days from the date of the order. The learned Special Judge further provided that on the Arbitral Tribunal being constituted, the further continuation, modification or variation of the order shall be dealt by the Arbitral Tribunal on the application filed by either party.

A. Facts:

I. Petitioner/Appellants’ case:

5. The brief facts of the case are that, M/s.JPR Projects, a partnership firm was constituted in the year 2015 and is involved in construction related activities. The petitioners and the respondents 2 and 3 are its partners. Late Sri Janga Punna Reddy, the husband of the 2^nd respondent and father of the 3^rd respondent was the Managing Partner. The petitioner’s case is that Sri Janga Punna Reddy and the 2^nd respondent withdrew a sum of Rs.1,59,28,200/- in excess of the amounts withdrawn by the partners until 2022. Late Janga Punna Reddy withdrew an additional amount of Rs.92,00,000/- and further funds amounting to Rs.1,22,00,000/- along with the 2nd respondent without proper documentation. Late Janga Punna Reddy suffered from ill-health resulting in unsuccessful attempts at comprehensive settlement of accounts. Sufficient funds had been diverted for purchase of fixed assets in his name and in the name of 2nd respondent as a result of which the liquid capital required for ongoing projects was depleted. In order to maintain operational continuity, a Memorandum of Understanding was executed on 31.10.2023 whereunder late Sri Janga Punna Reddy and his wife the 2nd respondent agreed to retire from the firm and the petitioners were to continue the firm’s operations. Sri Janga Punna Reddy expired on 13.12.2023 and the respondents 2 and 3 made fresh demands and raised disputes. The firm was under liabilities to third parties to a tune of Rs.1,45,27,439/-.

6. The petitioner’s bank account was frozen on 18.12.2023. A fresh Memorandum of Understanding was signed under which the respondents were to receive Rs.1,30,00,000/- along with other movable assets in exchange for revoking the freeze on the bank account. The partnership was again reconstituted on 10.02.2024 after the said Memorandum of Understanding was executed and the petitioners were conferred with the exclusive authority in respect of f