IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 31ST DAY OF OCTOBER 2019 BEFORE THE HON'BLE Mr. JUSTICE B.VEERAPPA CIVIL MISCELLANEOUS PETITION No.185/2016 BETWEEN:
K N RAJESH, AGE:46 YEARS, S/O K.N. NARASIMHAIAH, RESIDING AT No.11, 10TH CROSS, JNANAJYOTHI NAGAR, JNANA BHARATHI, BENGALURU-560 072.
.... PETITIONER (BY SRI SHRIHARI K. ADVOCATE) AND:
1. K.N. MAHESH, AGE:43 YEARS, S/O K.N. NARASIMHAIAH, RESIDING AT No.1, SRI LAKSHMI, BLOCK No.2, BESIDES KHB OFFICE, RAJENDRA NAGAR, SHIVAMOGGA-577 201.
2. MR. K.N. DINESH, S/O MR. K. N. NARASIMHAIAH, AGED ABOUT 48 YEARS, RESIDING AT No.1, SRI LAKSHMI, BLOCK 2, BESIDE KHB OFFICE, RAJENDRA NAGARA, SHIVAMOGGA – 577 201.
3. MR. A.D. AMBAREESH, S/O MR. DATTATREYA BHAT, AGED ABOUT 50 YEARS, RESIDING AT No.155, 2ND CROSS, CANARA BANK COLONY, NAGARBHAVI MAIN ROAD, BENGALURU-560 072.
4. MR. B.R. JADAV, S/O LATE MR. SUBBOJIRAO, AGED ABOUT 57 YEARS, RESIDING AT No.40/301, RAGAVENDRA RESIDENCY, 1ST CROSS, 12TH MAIN, 5TH PHASE, J.P. NAGARA, BENGALURU-560 078. …RESPONDENTS (BY SRI PAVAN, ADVOCATE FOR SRI B.S. PRASAD, ADVOCATE FOR RESPONDENT No.1 NOTICE TO RESPONDENT NOs.2 TO 4 IS HELD SUFFICIENT VIDE ORDER DATED 06.06.2019) THIS CIVIL MISCELLANEOUS PETITION IS FILED UNDER SECTION 11 (5 AND 6) OF THE ARBITRATION AND CONCILIATION ACT, 1996, PRAYING TO APPOINT AN ARBITRATOR TO RESOLVE THE DISPUTE BETWEEN THE PETITIONER AND RESPONDENTS INSOFAR AS THE PARTNERSHIP FIRM, NAMELY, M/s. PANCHAM ASSOCIATES, SHIVAMOGGA AND ETC.
THIS CIVIL MISCELLANEOUS PETITION COMING ON FOR ADMISSION, THIS DAY, THE COURT MADE THE FOLLOWING:-
O R D E R The petitioner filed the present Civil Miscellaneous Petition under the provisions of Section 11 (6) of the Arbitration and Conciliation Act, 1996, for appointment of sole Arbitrator to adjudicate the dispute in terms of clause No.18 of the reconstituted deed of partnership dated 31.03.2012 entered into between the parties.
2. It is the case of the petitioner that the petitioner and the respondents have entered into partnership deed and had started a partnership Firm known as M/s.Pancham Associates. The erstwhile partnership agreement was dated 01.08.2010. As per the said deed of partnership, there were five partners to the Firm. Later, on 31.03.2012, the partnership Firm was reconstituted and three partners had gone out of the Firm. The petitioner and respondent No.1 continued in the Firm. On 26.12.2010, the partnership was again made with some alterations and with an Addendum deed of partnership. As per the said Addendum deed of partnership, the petitioner would be having 98% share in the profits and respondent No.1 would be having only 2% share in the profits in terms of the reconstituted partnership deed dated 31.03.2012.
3. It is the further case of the petitioner that he is residing at Bengaluru and he was not in a position to attend the office of the partnership Firm at Shivamogga on day-to-day basis. In those circumstances, the petitioner had authorized respondent No.1 to carry out the day-to-day business of the Firm as per the reconstituted Partnership Deed dated 31.03.2012. The petitioner had noticed in December 2012 that respondent No.1 had misused his position and the funds of the Firm. In view of the same, Addendum deed of partnership was entered into on 26.12.2012, wherein the petitioner had become the Managing Partner of the Firm with 98% share and respondent No.1 was having only 2% share. Despite having been pushed to the minority insofar as shares of the Firm is concerned, respondent No.1 had opened the bank account and started misusing the funds by selling the sites available in the names of the owners which were part of the share for developing the property. He never credited the said amount to the Firm or the Bank account maintained by the Firm. Therefore, dispute arose between the partners of the said Firm. The petitioner had no other alternative except to issue legal notice on 18.01.2016 calling upon respondent No.1 to agree for the appointment of Arbitrator named in the said notice. However, respondent No.1 had not obliged to agree to the name of the said Arbitrator. He gave untenable reply. Therefore, the petitioner is before this Court for the relief sought for.
4. The respondent No.1 has filed objections to the civil miscellaneous petition and contended that the present civil miscellaneous petition is premature and not maintainable. The petitioner has already filed the original suit in O.S. No.157/2015 for the reliefs sought therein including the relief to declare that the plaintiff being the Managing Partner of ‘Pancham Associates’ shall be signatory to all sale conveyances in respect of the sites formed in the survey numbers mentioned therein. In the said suit, defendant No.1 (respondent No.1 herein) filed an application in I.A. No.2 under Section 8 of the Arbitration and Conciliation Act, 1996, (for short, ‘the Act’) for referring the matter for arbitration. The learned Civil Judge while allowing the said application, dismissed the said suit and directed the parties to resolve their dispute through arbitration. Against the said order, the petitioner filed writ petition in W.P.No.3420/2016, which is pending before this Court for adjudication. In the said suit, the plaintiff had taken the specific contention that there is misappropriation of funds and defendant No.1 also had not tendered the sale consideration amount and argued that it amounted to fraud and misrepresentation as he had illegally sold sites in favour of defendant Nos.4 to 9 therein. It is stated that the rights of the parties with respect to purchase are also involved and they not being parties to the agreement as per Annexure ‘B’ to the civil miscellaneous petition. Therefore, the present civil miscellaneous petition is not maintainable and sought for dismissal.
5. I have heard the learned counsel for the parties to the lis.
6. Sri K. Shrihari, learned counsel for the petitioner, reiterating the averments made in the civil miscellaneous petition contended that there is no dispute about the existence of the reconstituted deed of partnership entered into between the petitioner and the respondents on 31.03.2012 and existence of arbitral clause No.18 in the said deed. It is the specific case of the petitioner that respondent No.1 had misused his funds and therefore, he issued legal notice nominating his own Arbitrator. The same was disputed by respondent No.1 by issuing reply and denying the alleged averments made in the legal notice and contended that he had not misused the funds and it is the petitioner, who violated the terms and conditions of the reconstituted deed. Therefore, he sought to allow the civil miscellaneous petition.
7. Per contra, Sri Pavan, learned counsel for respondent No.1, reiterating the averments made in the objections to the civil miscellaneous petition contended that the very civil miscellaneous petition filed for the relief sought for appointment of the learned Arbitrator is not maintainable. In view of the fact that the petitioner has already filed original suit in O.S. No.157/2015 before the Court of the learned Civil Judge and JMFC., Shivamogga, for declaration and other reliefs, this civil miscellaneous petition is not maintainable and further contended that respondent No.1 never misused the funds and therefore, sought to dismiss the civil miscellaneous petition.
8. Having heard the learned counsel for the parties, it is an undisputed fact that the petitioner and respondents entered into reconstituted deed of partnership dated 31.03.2012. The terms and conditions mentioned in the agreement are also not in dispute. It is also not in dispute that there is an arbitration clause No.18 in the reconstituted deed of partnership dated 31.03.2012, which reads as under:
“Dispute and Arbitration:-
In the event of any dispute, or difference of opinion in the matter of interpretation, execution of carrying out the objects and functions of the enterprise, the same shall be referred to Arbitration under the Indian Arbitration Act. Both the parties put together shall appoint Two Arbitrators and those two appointed Arbitrators shall amongst themselves appoint an Umpire. The decision of the arbitrators would be binding on the parties to the dispute. In the event of any difference amongst them the decision of the Umpire would be final and binding upon all concerned.”
9. It is also not in dispute that the petitioner has issued legal notice to respondent No.1 on 18.01.2016 and respondent No.1 replied to the same. In the reply, it is contended by respondent No.1 that he never misused the funds as alleged by the petitioner and also contended that the suit in O.S. No.157/2015 filed by the plaintiff – petitioner herein before the trial Court came to be dismissed on the basis of the application filed by defendant No.1 – respondent No.1 herein.
10. In view of the aforesaid admitted facts and the existence of the arbitration clause No.18 in the reconstituted partnership deed dated 31.03.2012 and compliance of the provisions of Section 11(5) of the Act, there is no impediment for this Court to appoint sole Arbitrator to adjudicate the dispute between the parties. This Court cannot decide the disputed facts and it is to be decided by the learned Arbitrator. At this stage, the learned counsel appearing for the parties jointly submitted that Sri Kukkaje Ramakrishna Bhat, former District Judge, may be appointed as Arbitrator to adjudicate the dispute between the parties. The said submission is placed on record.
11. For the reasons stated above, the Civil Miscellaneous Petition is allowed. Sri Kukkaje Ramakrishna Bhat, former District Judge, is appointed as sole Arbitrator to adjudicate the dispute in terms of clause No.18 of the reconstituted deed of partnership dated 31.03.2012 entered into between the parties. All the contentions of both the parties are left open to be urged before the learned Arbitrator.
Registry is directed to send a copy of this order to Sri Kukkaje Ramakrishna Bhat, former District Judge, and Arbitration Centre for reference forthwith.
Sd/- JUDGE sma