Author: Bharat Sharma, 3rd Year student at RNB Global University.
Date of Decision: April 7, 2021
Bench: M. S. Ramachandra Rao, T. V. Kumar
Original Copy: N/A
Statutes involved:The Arbitration and Conciliation Act, 1996
Issue in question:
- Whether the application filed for restraining the respondent from alienating the O.P. schedule property from changing its nature was valid or not?
Background of the case:
- On date 13.03.2020 X Additional chief Judge, City Civil Court, Hyderabad dismissed an application filed by the appellant under Section 9 of the Act in regarding to M/s Menaka theatre. And now the appellant file a Miscellaneous Appeal No. 317 of 2020 is filed under Section 37 of the Arbitration and Conciliation Act, 1996 against the order X Additional Chief Judge.
- Ownership of the above-mentioned property was in the hand of appellant father by name P. Anand Rao and one Vallabha Das Loya and registered date of the Sale deed was 10.04.1996. Under registration Sale deed date 10.02.1963. father of appellant P. Anand Rao and one Vallabha Das Loya sold the property to one R.S. Cheoy and Shahpur Chenoy. But subsequently registered Sale deed date 19.03.1966 legal heirs of the R. S. Chenoy and Shahpur Chenoy re-sold the property to the P. Anand Rao and Vallabha Das Loya, Ch. Hanumanath Rao and Smt. Appayamma.
- Before the death of P. Anand Rao both these theatres were run under the partnership agreement but after the death of the appellant father, two separate deeds of partnership were registered on date 19.05.1998, because of a 3rd appellant was inducted as a partner in two separate firms named by M/s. Menaka and M/s. Apsara theatre.
- And the appellant was entitled to 15% shares in the firm according to the partnership deed. In December, 2011 both the theatre was closed for the purpose of renovation of the theatre. The applicant said that the respondent did not invest their shares for the renovation of the theatre. For that a meeting was held and, in this meeting, appellant said that Respondents agreed to sell their collective share of 85% in favour of Appellant. And it was also agreed that until and unless the share purchase materialized the said property will not be sold.
- Further the Appellant argued that the one of the other partner and respondent no 5th by creating a third party documents making illegal attempts. The appellant argued on the point that the subject property belongs to all partners and without taking the consent of the other partner no partner has the right to create a third party interest in the property.
- According to the partnership deed dated 19.05.1998, appellant invoked Arbitration clause. Appellant nominated one Rangaiah Goud, as a sole Arbitrator to adjudicate the dispute by issuing a notice on date 18.03.2019. On date 18.03.2019 respondent in reply of the appellant notice disputing the allegations mentioned in the said notice and nominated B. Sheshadri as a sole Arbitrator to adjudicate the dispute. Thereafter, appellant under Section 11 of the Act filed an Arbitration application in the High Court to appoint an Arbitrator for this matter.
- Appellant also argued that a person named G. Krishnan along with his henchmen, on date 20.04.2019 claimed to be an owner of the subject property and also started demolishing and trespassing into the property. To stop him, the appellant lodged a police report against him on date 22.04.2019. As the dispute is a civil in nature police show their inability to do anything on this matter. Under Section 9 of the act in Arbitration appellant filed an application O.P.Nos.52 and 50 of 2019 in respect of M/s. Menaka and M/s. Apsra theatres. Opposing in granting any interim relief to the appellant respondent filed a counter-affidavit.
- On 29.04.2019 status quo orders were granted by the court below in both the OPs. But, on date 13.03.2020 both the applications for Arbitration were dismissed by the court below. After referring to the contention of both the parties and to Section 9 of the Arbitration and Conciliation Act, 1996 court observed that the status quo orders were granted by it on date 29.04.2019 thereafter the proceedings of the Arbitration did not commence. That’s why the status quo order was liable to be vacated. And along with the above it refused to go into the merits and demerits of the case.
- The Division Bench of court said that on date 17.04.2019 an application under section 11 of the Act for the appointment of an Arbitrator had been moved by the appellant and on date 05.06.2020 applications were allowed by the court. Court said that according to Appellant that though a partner have “implied authority” to bind the firm do certain acts, and this authority does not empower to transfer a movable property of the partnership firm and relied on Sec 19(2)(g) of the Partnership Act, 1935
- The Court set aside the impugned order passed by the Court below. The Division Bench said that the court below on an erroneous understanding of law refused to go into the merits and contention of both the parties and also that the arbitral proceedings had not been commenced by the appellant.
- The Division Bench of the Court set aside the order passed in Arbitration O.P.Nos. 50 and 52 of 2019 and allowed the appeals of the appellant. The Division Bench also ordered the X Additional chief Judge to decide the said O.P.’s afresh in accordance with law. And within the four weeks after hearing both sides.
- So in this present case Section 19(2)(g) of the Partnership Act,1935 the Court described the ‘implied authority’ of the partner of the firm.
- Section 11 of the Arbitration Act was also discussed in which for the appointment of the Arbitrator applied by the appellant.