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2021 Supreme(Online)(KER) 52018
HIGH COURT OF KERALA
MARY JOSEPH, J
JOHNSON STEPHEN – Appellant
Versus
M/S.MCEES TRADING – Respondent
Arb.A.No.54 OF 2020|CMA(Arb) 766/2020
For the Appellants/Petitioners: SRI.JOHN MATHEW (THEREZHATH), SRI.N.N.SUGUNAPALAN (SR.)
For the Respondents: ADV. SRI.VIZZY GEORGE KOKKAT, ADV. SRI.C.HARIKUMAR, ADV. SRI.V.V.SADANANDAN (SREEMOOLANAGARAM), ADV. SRI.RENJITH RAJAPPAN, ADV. SRI.PREMCHAND M., ADV. SRI.BINOY DAVIS, ADV. SRI.REJI GEORGE
The court reaffirmed the prima facie validity of partnership dissolution and the existence of an arbitration agreement, necessitating protective orders for firm assets pending arbitration proceedings.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 9 - Dissolution of partnership firm - Applicant sought interim relief to preserve firm assets pending arbitration regarding the settlement of accounts - Order previously dismissing such reliefs was contested - Key issue involved whether the dissolution notice and subsequent claims for arbitration were valid and proper. (Paras 1, 2, 21)
(B) Prima Facie Case - The court must consider three elements for granting interim relief: existence of a prima facie case, irreparable injury, and balance of convenience in favor of the claimant. (Paras 12, 25)
Facts of the case:
The applicant, along with co-partners, had established a trading firm which faced internal disputes leading to claims of non-payment of dues and accusations of efforts to withdraw funds improperly. After the firm was purportedly dissolved, arbitration was sought for claims regarding unpaid amounts and firm assets.
Findings of Court:
The court found merit in the applicant's claims, affirming that the partnership was dissolved and deficiencies in accounting remained, necessitating protective measures for the firm's assets.
Issues: The central issues included the validity of the partnership dissolution and applicability of the arbitration clause amidst internal disputes among partners.
Ratio Decidendi: The court concluded that without proper evidence of formal changes to partnership registration, the initial partnership agreement and its arbitration clause remained effective. The absence of necessary entries in the registrar's records led to the reaffirmation of the applicant's rights.
Result: Appeal allowed; the previous order was set aside, and interim relief was granted to preserve assets pending arbitration.
| Table of Content |
|---|
| 1. overview of partnership and dissolution background. (Para 2 , 4 , 5) |
| 2. requests for interim relief under arbitration act. (Para 6) |
| 3. counterarguments against appellant's claims and suppression of facts. (Para 7 , 8 , 9) |
| 4. court's granting of interim relief based on prima facie evidence. (Para 10 , 26) |
| 5. legal principles and importance of registration changes. (Para 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25) |
| 6. decision on honorable order and injunction terms. (Para 27) |
JUDGMENT
Dated this the 5 th day of March, 2021
The main question to be considered in this appeal is whether the order passed by the Commercial Court (Principal Sub Court) at Ernakulam on 22.12.2020 in CMA (Arb) No.766 of 2020, dismissing the application and declining the reliefs sought by the applicant under Section 9 of the Arbitration and Conciliation Act, 1996 is legal, proper and correct. The applicant had sought for the following reliefs in CMA (Arb) No.766 of 2020:
“I. To appoint a Receiver under Section 9 (1) (II)(d) of the Arbitration and Conciliation Act, 1996 to take the possession and for the administration and management of the assets and the business of the 1 st respondent firm, to realize the income from the business of the firm, to preserve the properties of the subject firm and also to maintain its accounts for the time being till the appointment of the Arbitrator.
II. To Freeze the relevant bank accounts of the subject firm maintained with the 4 th respondent Bank of Edppally Branch as A/c No.919030046197357 of IFSC Code UTIB0003197, 5 th respondent Bank of Ernakulam By-pass Branch as A/c No.16085500000065 of IFSC Code FDRL0001608 and the 6 th respondent Bank as A/c No.37450200000025 of IFSC Code BARBOPALARI and to interdict the respondent banks 4, 5 and 6 from transferring or disbursing any amounts lying in those subject accounts by the respondents 2 and 3 and to maintain the status quo with respect to those subject bank accounts for the time being till the appointment of the arbitrator.
III. To pass an Ad interim order of Injunction restraining the respondents 2 and 3 from alienating, encumbering and from dealing with the assets of the 1 st respondent firm in any manner prejudicial to interest of the Applicant till the appointment of the Arbitrator.
IV. Pass such other orders which this Hon'ble Court may deem fit and necessary for the facts and circumstances of the case.”
2. The disputed facts of the case as disclosed from the pleadings of the parties are summarised hereinbelow:-
The appellant and respondents 2 and 3 were partners of the 1 st respondent firm. The 1 st respondent firm was originally constituted in the year 2002 with the appellant and respondents 2 and 3 and registered with the Registrar of Firms as “Partnership at Will” on 14.05.2014 with registration number 1475/2014. True copy of the relevant extract of the 1 st respondent firm maintained with the Registrar of Firms at Thiruvananthapuram as Form A dated 25.06.2020 is produced alongwith the appeal memorandum as Annexure A2. The Firm was engaged in the business of trading and servicing of generators and other allied industrial products. The Firm was constituted by virtue of partnership deed executed on 14.09.2002. True copy of the deed of partnership executed on 14.09.2002 is produced alongwith the appeal memorandum as Annexure A1. The profit and loss of the firm was agreed to be shared equally among the partners in the ratio 1:1:1 as per terms incorporated in Annexure A1 partnership deed. Since from the date of inception of the Firm itself the appellant had been actively engaged in the day to day affairs of the Firm and continued as such, till its dissolution on 01.09.2020. The 2 nd respondent had been duly authorised by the partners to perform numerous activities of the firm, to operate the relevant bank accounts of the Firm, to affix seal and signature for and on behalf of the Firm and its partners and to file the tax returns of t
