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IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH
DATED THIS THE 31ST DAY OF JANUARY, 2018 BEFORE THE HON’BLE MRS. JUSTICE S.SUJATHA
CIVIL MISCELLANEOUS PETITION No.100021/2015
BETWEEN:
RAMAKRISHNA VENKATESH SHANBHAG AGE: 48 YEARS, OCC: BUSINESS, R/O. RAMNAGARA, TQ: KUMTA, DIST: KARWAR.
RAMANAND VENKATESH SHANBHAG AGE: 45 YEARS, OCC: BUSINESS, R/O. RAMNAGARA, TQ: KUMTA, DIST: KARWAR.
KRISHNANND VENKATESH SHANBHAG AGE: 43 YEARS, OCC: BUSINESS, R/O. RAMNAGARA, TQ: KUMTA, DIST: KARWAR .
...PETITIONERS (BY SRI. G A BHAT, ADV.)
AND:
ASHOK NARAYAN KAMAT AGE: 53 YEARS, OCC: BUSINESS, PARTNER OF KAMAT CLAY PRODUCTS, VENKATAPUR, BHATKAL TALUK, DIST: KARWAR.
SHIVANAND NARAYAN KAMAT AGE: 49 YEARS,OCC: BUSINESS,
2 PARTNER OF KAMAT CLAY PRODUCTS, VENKATAPUR, BHATKAL TALUK, DIST: KARWAR.
SHRI. GANAPATHI NARAYAN KAMAT, SINCE DECEASED BY HIS L.R.S.,
3A. SMT. PADMA W/O. GANAPATI KAMAT, AGE: 60 YEARS, OCC: HOUSEHOLD,
3B. DEEPAK S/O. GANAPATI KAMAT, AGE: 36 YEARS, OCC: BUSINESS,
3C. PRADEEP GANAPATI KAMAT, AGE: 34 YEARS, OCC: BUSINESS,
3D. PRASHANTH. G. KAMATH, AGE: 32 YEARS, OCC: BUSINESS,
(ALL ARE R/O: KAMATH ELAY PRODUCT, VENKATAPUR, BHATKAL TALUK.
... RESPONDENTS
(BY SRI. NAGAPRASAD S KINI, ADV. FOR R1 & R2) (R3A & D-SERVED, R3B & C-HELD SUFFICIENT)
THIS CIVIL MISCELLANEOUS PETITION FILED UNDER SEC. 11(6) OF THE ARBITRATION AND CONCILIATION ACT 1996, PRAYING TO APPOINT THE ARBITRATOR TO RESOLVE THE DISPUTE IN BETWEEN THE PETITIONERS AND THE RESPONDENT HEREIN, AS PER ANNEXURE-B DATED 1.7.1996 WITHIN THE TIME TO BE STIPULATED BY THIS HON'BLE COURT.
THIS PETITION COMING ON FOR ADMISSION THIS DAY, THE COURT DELIVERED THE FOLLOWING:
3 ORDER
This petition is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 praying to nominate and appoint sole arbitrator to resolve the dispute between the parties.
The respondents herein initially entered into partnership business for the purpose of carrying on business in clay products under the name and style of “Kamat Clay Products”, subsequently, the petitioners joined with the partnership business with the respondents dissolving the earlier partnership firm and creating a new partnership firm vide Partnership Deed dated 1.7.1996.
It transpires that the partnership firm was functioning smoothly till 31.3.2010, thereafter, it is the allegations of the petitioners that their names are not found in the income tax returns filed by the partnership firm. There is no dissolution of the firm nor the petitioners are retired from the firm. The conduct of the
4 respondents in not considering these petitioners of the registered firm in taking major decision and carrying on business is contrary to the terms of the partnership deed.
A legal notice dated 13.11.2014 was issued to the respondents to appoint arbitrator to resolve the dispute between the parties, in terms of clause-18 of the partnership deed. However, the respondents by way of reply notice, denied the factum of dispute and appointment of arbitrator. Hence, this civil miscellaneous petition is filed by the petitioners seeking for the direction to nominate and appoint sole arbitrator to settle the dispute between the partners of the registered partnership firm.
Learned counsel Sri. G.A. Bhat, appearing for the petitioners reiterating the grounds urged in the petition would contend that the clause-18 of the registered Partnership Deed specifies that all disputes and claims arising out of or relating to the construction or
5 interpretation of this Deed of Partnership or its dissolution shall be settled by arbitration in accordance with the Indian Arbitration Act, 1940 or any modification thereof. As such, the respondents ought to have considered the proposal made by the petitioners to appoint Sri. Murulidhar S/o Vittal Prabhu, Partner of ‘Sahyadri Cashew Processor’, Hosaherawatta, Kumta-581332, as sole arbitrator to resolve the dispute between the partners of the registered partnership firm. The legal notice issued by the petitioners was not properly appreciated by the respondents in giving reply notice.
Learned counsel Sri.N.S.Kini, appearing for the respondents has filed statement of objections contending that Canara Bank had filed OS No.16/2003 against the petitioners as well as the respondents for recovery of money. In the said suit proceedings, the petitioner had filed written statement contending that, since from the year 1998, defendant Nos.5, 6 and 7 (petitioners herein)
6 had separated themselves from the partnership business, thereafter, these defendants/petitioners herein, have not executed any documents pertaining to the partnership and they have severed their relationship with the partners, as the other partners of the partnership business did not show any progress in the business and on the other hand, went on accumulating loans without repaying the same. Under the circumstances, the defendants/petitioners are not liable to pay any amount much less the alleged outstanding amount claimed by the plaintiff bank. Further, learned counsel would point out that KSFC had settled the matter inasmuch as the loan amount of M/s. Kamat Clay Products, by way of one time settlement with the partners namely, Respondent Nos.1 to 3 herein and executed a reconveyance deed in their favour. It was further argued that the petitioners herein have given a letter styled as ‘To Whomsover it may concern’ stating that they intend to retire from the firm after the repayment of loan of KSFC, further confirming that there is no objection
7 on their part to the remaining partners of the firm raising finance by pledging/charge of property of the firm for the repayment of KSFC loan.
Placing reliance on these documents marked at Annexure-R1 to R4, learned counsel submitted that the petitioners had severed the partnership status from the registered partnership firm, thus, there is no further dispute subsisting between the parties to be referred to the arbitrator. However, learned counsel for the respondents has no objections to nominate and appoint Sri. Murulidhar S/o Vittal Prabhu, Partner of ‘Sahyadri Cashew Processor’, Hosaherawatta, Kumta-581332, as arbitrator, in the event, this Court comes to a conclusion that the appointment of an arbitrator is necessary to resolve the dispute between the parties.
Having heard the learned counsel for the parties and perusing the material on record, it is apparent that the clause-18 of the registered partnership deed dated
8 1.7.1996 provides that in case any disputes and claims arising out of or relating to the construction or interpretation of this Deed of Partnership or its dissolution shall be settled by arbitration in accordance with the Indian Arbitration Act, 1940 or any modification thereof.
Dispute now subsisting between the parties is relating to the status of the partners. According to the petitioners, they are the partners of the registered partnership firm, since neither the partnership firm is dissolved nor the petitioners have resigned, whereas it is the stance of the respondents that the respondents have severed their relationship with the partnership firm, as per document relied upon by the learned counsel for the respondents. This issue itself is the dispute, which requires to be adjudicated by an arbitrator, irrespective of the stand taken by the parties in any of the proceedings before the Court of law or KSFC, while deciding the liability of the partnership firm or one time settlement
9 arrived at, between the respondents and KSFC. The dispute originating from this issue has to be resolved in terms of the registered deed of the partnership. Accordingly, this Court finds it appropriate to refer the matter to the sole arbitrator, in terms of the deed of partnership as both the parties are agreeable to nominate and appoint Sri. Murulidhar S/o Vittal Prabhu, Partner of ‘Sahyadri Cashew Processor’, Hosaherawatta, Kumta- 581332, as arbitrator to be appointed by this Court.
Hence, the following order: i) Civil Miscellaneous Petition stands allowed. ii) Sri. Murulidhar S/o Vittal Prabhu, Partner of ‘Sahyadri Cashew Processor’, Hosaherawatta, Kumta-581332, is appointed as sole arbitrator to resolve the dispute between the parties and is requested to adjudicate the proceedings, in terms of the Arbitration and Conciliation Act, 1996.
10 iii) The sole Arbitrator shall enter reference and cause notice to the parties. iv) Registry shall forward copy of this order to the arbitrator along with addresses of the parties and their respective counsel. v) Ordered accordingly.
Sd/- JUDGE
JTR