PETER JOHN URALIL Vs. BABU THOMAS

JUDGEMENT

(1.) SCOPE of Sec. 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the 1996 Act') and power of the court to issue interim orders especially with reference to appointment of a receiver as an interim measure of protection pending arbitration proceedings are considered in this case. We may refer to the brief facts of this case.

(2.) APPELLANT in this case is a partner of a firm called 'dahlia Tourist Home'. The above partnership firm is carrying on business of running a bar attached hotel at Pampady near Kottayam under the name and style as 'dahlia Tourist Home'. After the reconstitution of the partnership on 3-11-199 8 , petitioner/appellant was holding 20% of the shares. First Respondent is the brother-in-law of the petitioner who is holding 20% shares. He is the joint Managing Partner of the firm. Second respondent is holding 40% shares and he is also a joint Managing Partner of the firm. Third respondent like the petitioner is holding 20% of the shares. Investment of the petitioner as well as third respondents in the firm is Rs. 3, 21,700/ -. There is overdraft facility of Rs. 15 lakhs for the firm. For facilitating the same, properties of respondents 1 to 3 are hypothecated. Contention of the petitioner is that accounts are not properly maintained in the firm for the year 2000-2001 and actual income and express reflected in the accounts books are not correct. Funds of the firm are misappropriated by respondents 1 to 3. So petitioner wants to ascertain his share of profit for the for period 2000-2001. It is not disputed that petitioner has requested for arbitration of the above dispute and that was accepted by the respondents. According to him Rs. 45 lakhs is due to him as his share of profit for the year 2000-2001. He also stated that there is loss of trust reposed on the managing partners and, therefore a Receiver should be appointed. He further stated that as his share of profit for the year 2000-2001, he was given only Rs. 50,000/-for the full year. If he is appointed as the Receiver, he is willing to pay Rs. 50,000/- per month to the persona who is having 40% shares and Rs. 25,000/- each to the other respondents irrespective of the profits earned by the petitioner. He also pointed out that the accounts of the year 2000-2001 forwarded to him show that the firm purchased liquor costing Rs. 16,487,667-89 whereas income from the sale of liquor is Rs. 19,656,733/- and the purchase price from the bewerages Corporation and the bills issued by the hotel during the relevant period would show that much more amount would have been received under this account alone and, therefore, there is a prima facie case that there is misappropriation. Therefore, in the interest of justice, a Receiver should be appointed. The prayer portion is as follows: "therefore, it is most respectfully prayed that this hon'ble Court may be pleased to appoint a Receiver for the conduct and management of the business of the firm 'dahlia Tourist Home' at Pampady in kottayam district till the dispute is resolved by arbitral proceedings. "

(3.) THE first question to be considered is whether Sec. 9 can be invoked as arbitration proceedings were not started in this case. It was held by the Apex Court in Sundaram Finance ltd. V. NEPC Ltd. (AIR 1999 SC 565)that an interim order under Sec. 9 can be passed even before the commencement of arbitration proceedings. If it is after receipt of notice under Sec. 21 of the act provided there is an agreement for arbitration. Apex Court held as follows: "14. Under the 1996 Act the Court can pass interim orders under Sec. 9 Arbitral proceedings, as we have seen, commence only when the request to refer the dispute is received by the respondent as per Sec. 21 of the Act. THE material words occurring in Sec. 9 are "before or during the arbitral proceedings. " This clearly contemplates two stages when the Court can pass interim orders, i. e. , during the arbitral proceedings or before the arbitral proceedings. THEre is no reason as to why Sec. 9 of the 1996 Act should not be literally construed. Meaning has to be given to the word "before" is occurring in the said section. THE only interpretation that can be given is that the Court can pass interim orders before the commencement of arbitral proceedings. Any other interpretation, like the one given by the High Court, will have the effect of rendering the word "before" in Sec. 9 as redundant. This is clearly not permissible. Not only does the language warrants such an interpretation by it was necessary have such a provision in the interest of justice. But for such a provision no party would have a right to apply for interim measure before notice under Sec. 21 is received by the respondent. It is not unknown when it becomes difficult to serve the respondents. It was therefore, necessary that provision was made in the Act which could enable a party to get interim relief urgently in order to protect it's interest. Reading the section as a whole it appears to us that the court has jurisdiction to entertain an application under Sec. 9 either before arbitral proceedings or during arbitral proceedings or after the making of the arbitral award but before it is enforced in accordance with Sec. 36 of the act. " In this case, arbitrators were appointed and both parties have agreed for arbitration. THErefore, Sec. 9 is applicable.