Loading judgment…
No AI summary yet for this case.
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 27TH DAY OF FEBRUARY, 2020
BEFORE THE HON’BLE MR. JUSTICE B. VEERAPPA
CIVIL MISCELLANEOUS PETITION NO.227 OF 2019
BETWEEN: 1. S.L. Venkatesh,
S/o.late Lingaiah,
Partner M/s Allwin Estates,
R/at No.203, SLV Akash Jeevan Apartment,
SLV Layout, Nayundhalli South,
Mysore Main Road,
Bengaluru – 560 039.
S.Rajendran,
S/o. late Sethuraman,
Partner M/s Allwin Estates,
R/at No.5/2, “Kubera Sampath”,
18th Cross Road, Malleshwaram,
Bengaluru – 560 055. ... Petitioners (By Sri Aravind Basappa Reddy, Advocate)
AND: 1. M/s Allwin Estates,
Represented by its partners,
Having office at:
Shop No.2231, (Old No.16), 2nd Floor, 11th Main,
2 Jayanagar 3rd Block East, Bengaluru – 560 011.
K.S.Narasimhamurthy,
Partner M/s Allwin Estates,
S/o. K.R.Srinivas,
R/at No.17, 4th Cross, 2nd Main,
Kengeri Satellite Town,
Bengaluru – 560 060.
Harish B.,
Partner M/s Allwin Estates,
S/o. D.M. Byrappa,
R/at No.189/1, 5th Main, DMM Garden,
Vidya Nagar, T.Dasarahalli,
Bengaluru – 560 057.
D.M.Byrappa,
Partner M/s Allwin Estates,
S/o. Mariswamappa,
R/at No.189/1, 5th Main, DMM Garden,
Vidya Nagar, T.Dasarahalli,
Bengaluru – 560 057.
G.T. Venkatesh Murthy,
S/o. Thimappa,
Partner M/s Allwin Estates,
R/at No.43, 1st Phase, 4th Main,
Ashtagrama Layout, Magadi Main Road,
Bengaluru – 560 079.
N.Nagaraju,
Partner M/s Allwin Estates,
R/at No.201, Flat No.3, 2nd Floor,
“Skandasri Apartments”,
SLV Layout, Mysore Main Road,
Bengaluru – 560 039.
... Respondents (By Sri B.O.Chandrashekar, Advocate for R1 to R6)
This Civil Miscellaneous Petition is filed under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996, praying to appoint independent neutral arbitrator to adjudicate the dispute between the petitioner and respondents in terms of clause-19 vide Annexure-B of the General conditions of the Deed of Reconstitution dated 10th August 2015 in the interest of justice. This Civil Miscellaneous Petition coming on for Admission, this day the Court made the following:
ORDER
The present Civil Miscellaneous Petition is filed under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 for appointment of sole arbitrator to adjudicate the dispute in terms of clause 19 of the Deed of Re-constitution dated 10.08.2015 as per Annexure- B entered into between the parties.
It is the case of the petitioner that respondent Nos.2, 3 and 4 along with Sri Praveen Kumar and Sri Shivanna K. had executed a Partnership Deed under the name and style of ‘M/s. Allwin Estates’ (respondent No.1) dated 21.01.2013 for the purpose of starting the business of land developing, constructions
4 and other connected activities. Subsequently, on 06.02.2014, the said partnership firm was reconstituted, wherein the then partner of the firm, Sri Praveen Kumar was retired as a ‘partner’ and others viz., 1) Nagraju, S/o. late Narasaiah, 2) Ramanatha Setty S/o. T.V.Venkatachala Setty and the petitioner No.1- S.L.Venkatesh was inducted as ‘New partners’ to the said firm. On 25.09.2014, the said partnership was once again reconstituted, wherein the then partner of the firm namely Sri T.V.Ramnath Setty retired as a ‘partner’ and one Sri D.V. Rajendra Prasad was inducted as a ‘New partner’. Once again, on 06.04.2015, the said partnership was reconstituted wherein, Sri D.V. Rajendra Prasad retired as a ‘partner’ and in his place the petitieonr No.2 namely S.Rajendran was inducted as a new partner. Subsequently on 10.08.2015, the said partnership was once again reconstituted, wherein Shivanna K. retired as a partner and in his place Sri G.T. Venkateshmurthy (respondent No.5) was inducted as a ‘New partner’ as per
5 Annexure-B. On 28.10.2015, the said partnership firm purchased 14 acres 15 guntas of residentially converted land in Sy.Nos.1/3, 2, ¾, situated at Kolur Village, Tavrekere Hobli, Bengaluru South Taluk under the registered Sale Deed vide document No.6269/2015-16, registered in the office of the Sub-registrar at Jayanagar, Bengaluru. The said land was purchased out of the funds invested by all the partners of the firm according to their sharing pattern. The schedule property was purchased for a total sale consideration of Rs.12,00,00,000/- (Rupees Twelve Crores only). The Schedule Property was purchased for the purpose of forming a residential layout and to sell the plots to various members of the public and to share the profits as per the sharing pattern mentioned in the Deed of Reconstitution dated 10.08.2015.
It is further contended that the respondents without the knowledge of the petitioners have illegally and fraudulently pledged the Sale Deed of the schedule
6 property which belongs to the partnership firm with private financiers and collected huge amount of money without the consent of clients of the petitioners which is in violation of clause 8 of the Partnership Deed. In view of the dispute, the petitioners terminated the partnership firm including the arbitral clause 19 of the Deed of Reconstitution by sending a legal notice dated 23.3.2019 to the respondents for appointment of an arbitrator mutually. Notices have served upon the respondents, but the respondents failed to reply to the said notice. Hence, the present Civil Miscellaneous Petition is filed for the relief sought for.
The respondents have filed objections denying the averments made by the petitioners in the present Civil Miscellaneous Petition and contended in para 4 of their objection that since there were differences among the partners including the petitioners, all decided to sell the schedule property and to distribute the sale proceeds in proportion to the
7 percentage of investment made by each of the partners. The said fact is indicated in the letter dated 19.03.2019 written by petitioner No.2 to the Charted Accountant of respondent No.1- firm. In the said letter it is clearly stated by petitioner No.2 that the partnership firm is about to be dissolved. The same would indicate that all the partners of respondent No.1- firm have deiced by mutual consent not to proceed with the proposed project relating to the Schedule Property. Such being the position, there is no question of any dispute to be adjudicated by an arbitrator under the provisions of the Arbitration and Conciliation Act.
It is further contended that the petitioners have alleged discrepancy in the audited Balance Sheet of respondent No.1- firm for the assessment year 2016- 17. Relating to the said assessment, the Income Tax department had issued a notice to respondent No.1- firm seeking several clarifications regarding the audited Balance Sheet of the respondent No.1. After receipt of
8 notice, the respondent No.1 has furnished all the relevant information and documents as sought by the IT department and thereafter, the IT department has completely scrutinized the documents and issued a ‘computation sheet’ and ‘Assessment order’. 6. In view of the fact that the partners have decided to sell the schedule property and dissolve the 1st respondent partnership firm, absolutely there is no need or necessity for appointment of an arbitrator. Therefore, sought to dismiss the Civil Miscellaneous Petition.
I have heard the learned Counsel for the parties to the lis.
Sri Aravind Basappa Reddy, learned Counsel for the petitioners reiterating the averments made in the civil miscellaneous petition has contended that there is no dispute with regard to the existence of Deed of Reconstitution – Retirement of one partner and Admission of new partner dated 10.8.2015 entered into
9 between the parties. Since there is no dispute between the parties with regard to the terms and conditions of the Deed, the petitioner had to invoke the Arbitration Clause-19 of the said Deed. Accordingly, a legal notice dated 23.3.2019 was issued to the respondents which was though received by the respondents, have not replied. He would further contended in view of the admitted facts, the petitioner has made out a case for appointment of Arbitrator. Therefore, he sought to allow the civil miscellaneous petition.
Per contra, Sri B.O. Chandrashekar, learned Counsel for respondent Nos.1 to 6 contended that the very civil miscellaneous petition is not maintainable as the company has already dissolved as per the legal notice issued by the petitioners themselves and as such, question of appointment of arbitrator in the dissolved company would not arise. He would further contend that there were several differences among the partners of the 1st respondent-Firm and all the partners
10 including the petitioners have decided to sell the schedule property and distribute the sale proceeds in proportion to the percentage of investment made by each of the partners. The said fact was indicated in the letter dated 19.3.2019 written by the 2nd petitioner to the chartered accountant of 1st respondent-Firm. Therefore, the same would indicate that all the partners of 1st respondent - firm have decided by mutual consent that not to proceed with the proposed project relating to the schedule property. When such being the position, there is no question of any dispute to be adjudicated by the arbitrator under the provisions of the Act. Therefore, he sought to dismiss the Civil Miscellaneous Petition. 10. Having heard the learned Counsel for the parties, there is no dispute with regard to the existence of Deed of Reconstitution – Retirement of one partner and Admission of new partner dated 10.8.2015 entered into between the parties; Both the parties have duly
11 signed on each and every page of the said Deed knowing the contents as contemplated under the provision of Section 7 of the Arbitration and Conciliation Act. It is also not in dispute that the petitioners have issued legal notice dated 23rd March, 2019 to the respondents for appointment of sole arbitrator to adjudicate the dispute between the parties. Though the learned Counsel for the respondents brought to the notice of this Court that at paragraph-8 of the legal notice stated that the said Partnership firm i.e., ‘M/s.Allwin Estates’ stands dissolved and hence the question of appointment of Arbitrator would not arise, cannot be accepted, in the absence of any clause to that effect in the Deed entered into between the parties.
Though the objections are filed, the existence of Deed of Reconstitution – Retirement of one partner and Admission of new partner dated 10.8.2015 is not disputed by the learned Counsel for the respondents,
12 and Clause-19 of the said Deed entered into between the parties reads as under: “19. ARBITRATION: That if any dispute arise among the partners in respect of conduct of business of the partnership or in of the terms and conditions of the deed or in respect of any other matter cause or thing whatsoever set out herein or otherwise provided for the same shall be referred to the single arbitrator appointed by the partners with mutual consent whose decision shall be final and binding on the parties and their legal representatives.
In view of the aforesaid admitted facts, the petitioners have complied with the provisions of Section 11(5) of the Act and therefore, there is no impediment for this Court to appoint the Sole Arbitrator to adjudicate the dispute between the parties.
For the reasons stated above, the Civil Miscellaneous Petition is allowed. The Hon’ble Sri Justice Ashok B. Hinchigeri, Former Judge of this Court is appointed as the sole Arbitrator to adjudicate the dispute in terms of Clause–19 of the Deed of
13 Reconstitution – Retirement of one partner and Admission of new partner dated 10.8.2015 entered into between the parties as per Annexure-B, in accordance with law.
The Registry is directed to send a copy of this order to the Hon’ble Sri Justice Ashok B. Hinchigeri, Former Judge of this Court, respondents as well as to the Arbitration Centre forthwith for reference.
Sd/-
JUDGE
PN/ Nsu/-