SOMURI RAVALI Vs. SOMURI PURNACHANDRA RAO AND OTHERS

JUDGEMENT

(1.) This arbitration application is filed under Sec. 11(5) & (6) of the Arbitration & Conciliation Act, 1996 (for short, "the Act") seeking to appoint sole Arbitrator to resolve the disputes between the parties arising under the Partnership Deed dtd. 27/10/2011 and the amended Partnership Deed dated 18-09- 2014 of the dissolved firm M/s. Reliance Developers.

(2.) The facts of the case briefly stated are:- The parties in this arbitration application are members of one family. The applicant is the daughter-in-law and respondents 1 and 2 are her father-in-law and mother-in-law, the 3rd respondent is her sister-in-law, respectively. All four family members established partnership firm in the name and style of M/s. Reliance Developers (for short, "the firm") to do business in construction activity viz., construction of roads and highways, bridges, buildings, commercial and residential complexes etc. It was agreed in the registered partnership deed, dtd. 27/10/2011, that 1st respondent would function as managing partner, applicant as working partner and respondents 2 and 3 as partners of the firm. That as per clause 9 of the partnership deed, after tallying the profit and loss accounts of the firm, less the charge of interest, remuneration and expenses of the firm, remaining proceeds of the firm was agreed to be shared at 25 % by the applicant, 10% by the 1st respondent, 40% by the 2nd respondent and 25% by the 3rd respondent. The remuneration to be paid to the partners was also stipulated under clause 7 of the deed. That with the active support of the applicant's father (Sajja Prabhakar), they have undertaken construction of 14 projects at various places. In the year 2014, all the partners intended to amend the partnership deed dtd. 27/10/2011, and reallocate the share in the firm and accordingly vide the amended partnership deed dtd. 18/9/2014, the share of the applicant was at 65%, the shares of respondents 1 and 2 at 5% each and the share of 3rd respondent at 25%, without altering any other terms and conditions of the partnership deed dtd. 27/11/2011. That due to the unfruitful acts of the 1st respondent, being the managing partner of the firm, the other projects at Hyderabad and Vijayawada were half completed and the construction of those projects could not proceed and on that count the firm incurred losses. Purportedly for these reasons, the applicant got issued legal notice dtd. 6/5/2020 to the partners seeking their consent to refer the inter-se disputes to arbitrator by invoking the arbitration clause under clause 12 of the partnership deed dtd. 27/10/2011 by naming a retired Judge of this Court. The respondents 1 and 2 having received notices got issued reply notice dtd. 26/5/2020 denying the allegations made against them and also refused to give consent for appointment of the named arbitrator suggested by the applicant. That the applicant having coming to know from the official website of the registration department, that the 1st respondent, being the managing partner of the firm, clandestinely executing registered documents with the connivance of some land owners in the name of be-nami persons, she addressed letters to the banks to stop all transactions of the firm and based on the letters of the applicant, all accounts of the firm were freezed by the respective banks. That to protect her interest, she got issued notice dtd. 9/6/2020 to the respondents informing them of her decision to dissolve the firm, as per clause 10 of the partnership deed dtd. 27/10/2011 and the amended partnership deed dtd. 18/9/2014 since the partnership is at will. This notice was replied to by the respondents 1 and 2 vide reply notice dtd. 20/6/2020. The 3rd respondent also issued reply notice to the notice issued by the applicant dissolving the firm. Respondents in their reply notices once again refuted the allegations made by the applicant and refused to give consent to appoint the named arbitrator, suggested by the applicant on the ground that there is no arbitrable dispute.

(3.) Counter affidavit is filed by 1st respondent wherein inter alia it is stated that he is a retired Government officer and having worked as the executive engineer gained good experience in construction line. That he established the firm by investing his life savings and also raised personal loans. His wife, the 2nd respondent also invested money in the firm by selling immovable property and also availed mortgage loan of Rs.100.00 lacs against her villa at Mokila. That his daughter, the 3rd respondent also invested money in the firm by sale of immovable property. The applicant or her husband have not invested a single rupee in the firm and in- spite of the same, the 1st respondent for the prosperity of his son and at the request of his son, joined the applicant as partner of the firm and made her working partner and allotted share. That the applicant operated bank accounts and the transactions are done by her and she utilised the firm's monies for her personal purposes and to meet their family luxuries. That his signature on the amended partnership deed dtd. 18/9/2014 was obtained by fraud. The amended partnership deed dated 18- 09-2014 has not been signed by the respondents 2 and 3 and they refuse to sign the same and, therefore, the said deed never came into existence and the alleged amended partnership deed, if any exists, it is only a forged document. That under Sec. 43 of the Partnership Act, even after the dissolution of the firm there is a duty cast on the partners to complete the transactions which are already commenced and pending and discharge the firm's liability. That the applicant and her husband misused the firm's funds for their and for the applicant's parents luxuries and have diverted the funds and raised loans from the banks for purchase of luxury cars and went on foreign trips by business class and stayed in luxury hotels by spending money from the firm's account. That as the criminal activities of the applicant and her husband went on unabated, respondents were compelled to initiate criminal proceedings against them and the same are pending with different Police stations. That the applicant having dissolved the firm, could not have filed this application for appointment of arbitrator as by virtue of Sec. 43 of the Partnership Act, once the firm is dissolved, the contract of partnership between the partners come to an end. That the firm was not added as party respondent, therefore application is liable to be dismissed for non-joinder of necessary party. That the applicant did not specify the disputes that are to be referred to the arbitrator and, therefore, the application is also liable to be dismissed on this count.