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Karnataka High Court
F Srinivas S/O. F. Shanmukhappa vs M/S Basaveshwar Rice Industries on 25 February, 2026
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CMP No. 100027 of 2024
HC-KAR
IN THE HIGH COURT OF KARNATAKA, AT DHARWAD
DATED THIS THE 25TH DAY OF FEBRUARY, 2026
BEFORE
THE HON'BLE SMT. JUSTICE LALITHA KANNEGANTI
CIVIL MISC PETITION NO.100027 OF 2024
BETWEEN:
F. SRINIVAS S/O. F. SHANMUKHAPPA,
AGE. 51 YEARS, OCC. AGRICULTURIST AND BUSINESS,
R/O. #30, WARD NO.3, SIDDIKERI, GANGAVATHI,
DIST. KOPPAL-583235.
...PETITIONER
(BY SRI. ANOOP G.DESHPANDE, ADVOCATE)
AND:
1. M/S. BASAVESHWAR RICE INDUSTRIES,
A REGISTERED PARTNERSHIP FIRM,
HAVING REGISTERED OFFICE AT SY.NO.139
RAICHUR ROAD, VIDYA NAGAR,
GANGAVATI, DIST. KOPPAL-583235.
2. F. SHANMUKHAPPA S/O. FAKEERAPPA CHALUVADI,
AGE. 76 YEARS, OCC. BUSINESS,
R/O. #30, WARD NO.3 SIDDIKERE,
Digitally signed by GANGAVATI, DIST. KOPPAL-583235.
YASHAVANT
NARAYANKAR ...RESPONDENTS
Location: HIGH COURT (BY SRI. PRANAV BADAGI, ADVOCATE FOR
OF KARNATAKA
SRI. S.B. HEBBALLI, ADVOCATE FOR R2;
NOTICE TO R1 NOT REQUIRED (V/O/DATED 18.09.2025)
THIS CIVIL MISCELLANEOUS PETITION FILED UNDER SECTION
11(6) OF THE ARBITRATION AND CONCILIATION ACT 1996, PRAYING
TO A) TO APPOINT ANY ARBITRATOR TO ADJUDICATE THE DISPUTE
THAT HAS ARISEN BETWEEN THE PARTNERS OF THE FIRM, THE
PETITIONER AND RESPONDENTS HEREIN PURSUANT TO CLAUSE
NO.14 OF PARTNERSHIP DEED DATED 12.04.1994 AT ANNEXURE-A
AND TO RESOLVE THE DISPUTE BEFORE THE ARBITRATOR. HENCE IT
IS JUST AND PROPER TO ALLOW THIS PETITION IN THE INTEREST OF
JUSTICE AND EQUITY. B) TO AWARD COST OF THIS PETITION AND
PASS SUCH ORDERS AS THIS HON'BLE COURT DEEMS FIT.
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CMP No. 100027 of 2024
HC-KAR
THIS CIVIL MISCELLANEOUS PETITION HAVING BEEN HEARD
AND RESERVED ON 07.01.2026, COMING ON FOR PRONOUNCEMENT
OF ORDER THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:
CORAM: THE HON'BLE SMT. JUSTICE LALITHA KANNEGANTI
CAV ORDER
The present Civil Miscellaneous Petition is filed to appoint
any arbitrator to adjudicate the dispute that has arisen between
the partners of the firm, the petitioner and the respondents
herein pursuant to clause No.14 of the partnership deed dated
12.04.1994 and to resolve the dispute before the arbitrator.
2. The respondent No.1 is Firm registered under the
provisions of the Indian Partnership Act, 1932. The said firm was
established by the petitioner and respondent No.2 with mutual
agreement for establishment of a Rice Mill in the name and style
M/s. Basaveshwar Rice Industries for the purpose of carrying on
the business of producing paddy, rice, broken rice and rice bran
etc. In the said partnership deed, a specific clause No.14
mentions about the resolving the dispute if arose by way of
arbitration. It is the case of the petitioner that pursuant to the
partnership deed it was agreed between the parties i.e.,
petitioner and respondent No.2 that the place of manufacturing
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would be at Sy.No.139 measuring 2 acres situated at Raichur
Road taluk Gangavati District, Koppal. Further, it was agreed on
between the parties to the partnership deed that respondent
No.1 firm as per clause No.9 shall be in existence only for a
period of 20 years or the loan is cleared whichever is earlier and
that the capital shall be contributed in equal to the business and
if any additional capital was required the same could be availed
from the financial institutions. The profit and loss sharing ratio
between the parties was agreed at 50% each.
3. It is stated that as per clause No.10, the loan availed till
it is extinguished, no portion of firm's capital or interest accrued
on the capital contributed by the partners shall be withdrawn and
respondent No.1 firm could not be dissolved. It is stated that the
loan availed from the Karnataka State Financial Corporation was
repaid as per the terms of partnership deed. The property in
which the firm is situated is considered as assets of the firm by
virtue of clause No.5 of the partnership deed. It is the case of
the petitioner that the petitioner is entitled for 50% share in the
assets of the firm. It is the case that the firm's liabilities are in
existence and the firm is not dissolved and the respondent No.2
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has utilized the assets of the firm and is trying to alienate the
assets of the firm which is against the principles of terms of
agreement. Hence, the petitioner got issued a legal notice dated
11.03.2024 proposing to appoint Sri. M.H.M. Nanjundeshwara,
as sole Arbitrator as per clause 14 of the partnership deed. The
respondent No.2 has not replied to the said legal notice.
4. The petitioner has preferred a suit under Section 9 of
the Arbitration and Conciliation Act, 1996 seeking injunction,
restraining respondent No.2 from alienating the assets of the
firm. The same is pending consideration before the Principal
District and Sessions Judge, Koppal. Hence, invoking clause
No.14, the petitioner is before this Court seeking appointment of
the sole arbitrator for adjudication of the claims of the parties as
per the arbitration clause in the partnership deed.
5. Learned counsel appearing for the petitioner submits
that despite calling upon respondent No.2 to settle the liabilities
and claims of the firm, no reply was given by the respondent
No.2. As per the terms of the partnership agreement, the
property is firm's property and the petitioner is entitled for 50%
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of the share. Hence, appointment of Arbitrator is necessary for
resolving the disputes between the parties.
6. The respondent No.2 has filed the objections. It is the
case of respondent No.2 that the agreement provides for a
arbitration clause for the differences/disputes with respect to
conduct and activities of the management of the firm's business
and the relief sought by the petitioner is for different purpose.
Hence, there is no scope for arbitration and the same is liable to
be dismissed. It is stated that the petitioner is seeking
appointment of arbitrator for the purpose of carrying out the
dissolution of firm and also seeking partition in immovable
property which is not permissible in view of the clear terms in
the arbitration clause. The petitioner has to approach the
competent Court. The petitioner seeks to refer the dispute to
arbitration seeking dissolution, setting the accounts and also the
partition in respect of the property. The property being
immovable property being self acquired property of respondent
No.2 cannot be brought into property of partnership in absence
of registered deed.
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7. Learned counsel appearing for respondent No.2 has
relied on the judgment of the Hon'ble Apex Court in case of M/s
Alchemist Hospitals Ltd. Vs. M/s ICT Health Technology
Services India Pvt. Ltd. arising out of SLP(CIVIL)
No.19647/2024 dated 06.11.2025. He had relied on
paragraph Nos.17 to 21 which reads as follows:
"17. The above rulings lead us to the irresistible
conclusion that mere use of the word "arbitration" in a
clause of an agreement is not clinching or decisive.
Section 7 presupposes an express intention of
the dispute/difference being resolved through
arbitration and mere reference to the term is not
sufficient to meet this threshold. The A&C Act
acknowledges the existence of an arbitration agreement
based on its substance rather than its form. Regardless
of the formal structure, effect has to be given to an
arbitration agreement in essence. Arbitration being the
creature of a contract, the ad idem intention of the
parties is paramount to determine whether there exists
a valid arbitration agreement. That being said, the
invocation of the word "arbitration" nonetheless
provides, at the very least, a discernible clue to the
parties' underlying intention.
18. The exercise of legal drafting partakes equally of
art, science and logic, but we fear that Clause 8.28 does
not seem to show allegiance to any. Be that as it may,
the task of interpreting the clause is embarked upon
bearing in mind the authoritative rulings in the field.
19. Clause 8.28 of the Agreement states that the parties
must first attempt to negotiate the dispute in good faith.
This part of the clause is admittedly not disputed in its
meaning. The next part of the clause specifies that if the
negotiation fails, then the parties would be obligated to
mediate in the stated procedure and is then followed by
the punctuation (:) colon, following which it prescribes
that any dispute arising out of or relating in any way to
the Agreement shall be resolved by "arbitration"
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through senior management comprising respective
Chairmen of the two parties (Arbitrators). Moreover, the
agreement further stipulates that should the dispute not
be resolved within fifteen (15) days after the proposed
"arbitration", the complaining party shall seek remedies
through the courts of law.
20. The word "arbitration" apart from appearing in the
title of the relevant clause has been used 3 (three)
times in the body of the clause. It is but obvious that
the appellant has sought to rely on this inclusion of the
word within the clause to submit that it forms an
arbitration agreement.
21. Is mere repetitive use of the word "arbitration"
clinching/decisive? It is now time to ascertain in line
with the aforesaid decisions, whether the parties'
intention was indeed to arbitrate, or merely to delineate
a structured process of mediation."
8. Relying on this judgment, learned counsel for
respondent No.2 submits that this petition is outside the scope of
arbitration and the prayer as sought for by the petitioner cannot
be granted.
9. Having heard the learned counsels on either side,
perused the entire material on record. There is no dispute about
the fact that both the parties have entered into a partnership
deed on 12.04.1994 to carry on the business of producing
paddy, rice, broken rice and rice bran etc. Clause Nos.5, 9 and
14 of the partnership deed reads as follows:
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"5. It is mutually agreed that the rice-mill industry shall
be installed at Survey No.139 situated at Raichur Road,
Gangavati which land stands in the name of the first-
party i.e., Sri.F.Shanmukhappa, S/o Fakeerappa
Chaluvadi measuring 2 Acres and the same has been
contributed to the firm by way of his share-capital in the
firm's business profits/losses as such the said land shall
hereafter become the asset of the firm."
"9. The duration of the partnership shall be for a period
of Twenty Years or till the loan advanced/to be advanced
by Karnataka State Financial Corporation is fully cleared
whichever is earlier."
"14. That the difference of opinion between the partners
as to the conduct, activities of the management of the
firm is business, the same shall be settled by arbitration
according to the provisions of the Indian Arbitratin Act
as in force from time to time."
10. In this case, it is not in dispute that the twenty years
elapsed by the year 2014 and the entire dues to Karnataka
Financial Corporation are settled. Whether the firm is in
existence or not, this Court is not going into the said issue. The
only dispute that is raised before this Court is with regard to the
firm's property being sold by respondent No.2. The issue that
falls for consideration is whether the dispute relating to the
property of the partnership firm falls within the scope of
arbitration clause contained in the partnership deed and whether
the arbitrator can be appointed. It is the settled principle of law
that arbitration is a creature of the contract and the jurisdiction
of the arbitrator is spelled by the terms agreed between the
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parties. The arbitration clause contained in the present deed is
narrowly worded and restricts reference to arbitration only in
respect of disputes arising out of the differences of opinion
relating to the conduct and management of the business
activities of the firm. The clause does not employ wider
expression such as disputes arising out of or in connection with
the partnership or disputes relating to dissolution of settlement
of accounts. Therefore, the intention of the parties as seen from
the clause was to confine arbitration only to operation and
managerial disagreements concerning the functioning of the
firm.
11. Now, the issue that is raised by the petitioner is with
regard to the property and substantive civil disputes concerning
the propriety rights of the parties and the same cannot be
equated with disputes relating to conduct or management of
business operations. All those disputes are beyond the limited
ambit of managerial differences contemplated under the
arbitration clause. While interpreting the clause of the
partnership deed, this Court must give effect to the intention of
the parties as per the terms of the agreement. When the parties
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consciously restrict the scope of arbitration to specific categories
of disputes, this Court cannot expand the ambit of arbitration by
interpretation. If the intention of the party is to refer the
disputes relating to resolution or settlement of partnership
assets to arbitration, nothing prevented them from incorporating
a comprehensive arbitration clause.
12. In view of the restricted wording of the arbitration
clause and considering the nature of dispute relating to common
property and settlement of partnership assets, this Court is of
the view that the present dispute does not fall within the ambit
of the matters agreed to be referred to arbitration. The
invocation of arbitration clause in respect of the present dispute
is not sustainable. Hence, this Court is passing the following;
ORDER
i. Accordingly, the Civil Miscellaneous Petition filed seeking appointment of arbitrator is dismissed.
ii. However, the petitioner is at liberty to seek appropriate relief before the appropriate forum in accordance with law.
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NC: 2026:KHC-D:2944 CMP No. 100027 of 2024 HC-KAR iii. All I.As. in this Civil Miscellaneous Petition shall stand closed.
Sd/-
JUSTICE LALITHA KANNEGANTI MEG CT: UMD List No.: 1 Sl No.: 2