Bombay High Court
Hasina Mohamed Shafik Laljee And 3 ... vs Fatima Correa Nee Fatima Yakub Ali on 22 June, 2021
Bench: R.D. Dhanuka, Virendrasingh Gyansingh Bisht
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO. 28 OF 2020
IN
ARBITRATION PETITION NO. 792 OF 2018
WITH
INTERIM APPLICATION (L) NO. 9905 OF 2020
IN
APPEAL NO. 28 OF 2020
1. Hasina Mohamed Shafik Laljee
2. Shabina Mohamed Shafik Laljee
3. Mohamed Mushtaq Ali Mohamed Shafik Laljee
All adult Indian Inhabitants, residing
at 1903-04, Sheffield Towers,
Lokhandwala Complex, 2nd Cross Lane,
Andheri (West), Mumbai - 400 063. ... Appellants/
Applicants
Versus
Fatima Correa Nee Fatima Yakubali,
Permanently residing at Lords, 1st Floor,
Almedia Park, Bandra (West),
Mumbai - 400 050. ... Respondent
******
Mr. Shiraz Rustomjee, Senior Advocate a/w Ms. Shreya Parikh,
Mr.Chirag Mody, Mr. Hridhay Khurana, Ms. Garishma Dalvi i/by
M/s.Link India Law Services for the Appellants/Applicants.
Mr. Akshay Patil a/w Mr. Suraj Iyer a/w Ms. Kavita Sharma and
Mr.Mani Thevar i/by M/s. Ganesh and Company for the Respondents.
******
CORAM : R. D. DHANUKA &
V. G. BISHT, JJ.
RESERVED DATE : 4th MAY, 2021
PRONOUNCED DATE: 22nd JUNE 2021
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JUDGMENT (Per R. D. Dhanuka, J.) :-
. By this Appeal filed under Section 37 of the Arbitration and
Conciliation Act, 1996 (for short 'Arbitration Act'), the appellants have
impugned the order dated 11th July, 2019 passed by the learned Single
Judge dismissing the Arbitration Petition filed by the appellants under
Section 34 of the Arbitration Act. By consent of parties, appeal was
heard finally.
Some of the relevant facts for the purpose of deciding this Appeal
are as under :-
2. The appellants were the original petitioners in the Arbitration
Petition filed under Section 34 of the Arbitration Act and the
respondent was the original respondent in the Arbitral proceedings.
Before October 1960, Mr. Mahomedali Esmail, the grand father-in-law
of the respondent no.1 and great grand father of the appellant nos. 2 to
4 were carrying on the business of tanners, export and import and were
dealers in hides and skin, shares and other allied lines under the name
and style of M/s. Mohamedali Esmail, a sole proprietary concern. Vide
a Deed of Partnership dated 9th November, 1960, Mr. Mohamedali
Esmail constituted a partnership firm with Mr. Yakubali Mohamedali
Sewjee (hereinafter referred to as 'Yakubali') w.e.f. 21 st October, 1960
for carrying out the same business in the same name.
3. On 17th January, 1961, M/s. Mahomedali Esmail entered into an
agreement and acquired all the assets and liabilities of the said sole
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proprietary concern. After the death of Mr. Mahomedali Esmail on 26 th
April, 1965, Yakubali invited his nephew, one Mr. Mohamed Shafik
Habib Hajibhoy Laljee to join him as a partner to carry out similar
business. Vide a Deed of Partnership dated 1 st June, 1965, Yakubali and
Mohamed Shafik constituted a registered partnership firm in the name
and style of M/s.Mohamedali Esmail. The said firm carried out the
business of import and exports of hides & skin and various other items.
4. It is the case of the respondent that the Yakubali solely
contributed to the capital of the said firm including money, name, client
base, goodwill of the previous firm etc. Yakubali and Mohamed Shafik
shared the profits and losses in ratio of 51% - 49% respectively. The
said partnership was a partnership at will. It is the case of the
respondent that the business of the said firm was carried out from 703,
Stock Exchange Tower, Dalal Street, Mumbai - 400 001. The said
premises were owned by the Yakubali and he allowed the said
partnership firm to use the same for carrying out its business.
5. The respondent (original claimant) is the grand daughter and the
appellant nos.2 and 3 are great grand children of one late Mr.
Mohamedali Esmail. The appellant no.1 is the respondent's deceased
cousin's wife. The appellant nos. 2 and 3 are the daughters of the
appellant no.1. It is the case of the respondent that after her marriage
on 16th January, 1974, she shifted permanently to Kuwait with her
husband. The respondent lived in Kuwait for almost four decades and
occasionally visited her parents in Mumbai.
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6. It is the case of the respondent that vide Indenture dated 28 th
February, 1978, (i) Salmabai Abdullamia, (ii) Amin Bibi Shaik Ahmed,
(iii) Hafsabibi Abdul Hafiz, (iv) Fatmabibi Shaik Mahmud, (v) Rukiya
Bibi Shaik Mohamed and (vi) Rashidabibi Abubakar styled as 'the
Vendors' granted, sold, assigned, released and conveyed into the said
partnership firm styled as 'the Purchaser' (i) Government land situate
in the Registration District of Sub-Registrar of Bombay City and
Bombay Suburban at Dharavi, Mahim bearing Collector's Old Nos. 4,
16 and 27 New Nos. 16493, A/16493, 1505, B/16505 and 16517, New
Survey Nos. 1-A/3743, 1-2/3743, 1/3742, 4/3741, 2-3/3741 and 1/3742
and bearing C.S. No. 342 (part) admeasuring approximately 3329 sq.
yards equivalent to 3042.7 sq. mtrs. or thereabouts together with
tenements and dwelling houses standing thereon; and (ii) Leasehold
land situate in the Registration District of Sub-Registrar of Bombay
City and Bombay Suburban at Dharavi, Mahim bearing Collector's Old
Nos. 1856 (part), New Survey No. 1/3743 (part) and bearing C.S. No.
1/342 admeasuring approximately 4369 sq. yards equivalent to 3993.26
sq. mtrs. or thereabouts together with hereditaments and premises
standing thereon, more particularly described in the said Indenture for a
consideration of Rs.1,25,000/-. It is the case of the respondent that
pursuant to the said Deed of Indenture, all the revenue records,
assessment bills and all other such documents relating to the said lands
were transferred in the name of the suit firm.
7. On 27th June, 1982, Yakubali expired leaving behind his wife
Mrs. Zarina Yakubali and the respondent herein who was the daughter
of Yakubali as the only legal heirs. It is the case of the respondent that
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around 1982 prior to the death of Yakubali, the firm had stopped its
business of tanners etc. The firm however had given the various
properties on rent to various tenants. After the death of Yakubali, the
said partnership firm was not reconstituted and stood dissolved. It is
the case of the respondent that to best of knowledge and belief of the
respondent, the said partnership firm did not have any liability. The
legal heirs of Yakubali and Mohamed Shafik became entitled to the
assets of the firm as the co-owners.
8. It is the case of the respondent that the said Mohamed Shafik
however continued to collect rent and in the name of the said firm from
the tenants and utilized the said properties and said premises etc. He
neither disclosed the accounts nor shared the profits derived from the
assets of the firm with the respondent or her late mother in her life
time. It was the case of the respondent that the said Mohamed Shafik
held the profit derived from the assets of the firm in trust for the heirs
of Yakubali. As the income from the assets of the dissolved firm was
not substantial and the respondent was residing abroad and her mother
was old and unable to look into the matter, neither the respondent nor
her mother insisted for their share from Mohamed Shafik. The
respondent and the Mohamed Shafik had formal relations and therefore
the respondent had full faith that Mohamed Shafik would manage the
assets of the dissolved firm honestly.
9. On 26th July, 2004, Mrs. Zarina Yakubali expired leaving behind
the respondent as the only legal heir. It is the case of the respondent
that vide her last Will and Testament dated 7 th February, 20020 Mrs.
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Zarina Yakubali bequeathed her entire estate including the said
property in favour of the respondent and accordingly the respondent
being the only legal heir of Yakubali and Mrs.Zarina Yakubali becomes
entitled to the said share of Yakubali in the suit property. On 22 nd
August, 2004, Mohamed Shafik expired leaving behind the appellants
and Ms. Heena Mohamed Shafik Laljee as his only legal heirs. It is the
case of the respondent that after the death of Mr. Mohamed Shafik, the
appellants and the said Heena Mohamed Shafik Laljee continued to
collect the rents from the properties/lands in the name of the said firm.
10. It is the case of the respondent that it appears that the appellants
especially appellant no.3 continued representing themselves as the
partners of the firm before various statutory authorities and the public
at large, until 2012. The appellants however neither furnished any
accounts nor shared the profits earned out of the firm business or the
said property with the respondent. According to the respondent, the
appellant no.3 vide his letter dated 29th December, 2005 falsely
represented to the Additional Collector and C.A., Mumbai that he was
a partner of the said partnership firm and issued the said letter in the
capacity as a partner.
11. It is the case of the respondent that when the respondent visited
India in the month of September/October 2012 through tenants i.e. Mr.
Vijay Dharma Pol, Mr. Aspi Darab Pader and Mr. Kanayalal Maurya
came to know that the appellants were making misrepresentations to
the world at large in relation to the said property with malafide
intentions to defeat the vested right, title and interest in the said
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property of the respondent. The respondent returned to India on 19 th
December, 2012 and decided to stay in Mumbai and made various
efforts to find out the status of the properties of the said firm.
12. It is the case of the respondent that the enquiries under RTI Act
revealed that the appellants had made a purported Declaration-Cum-
Indemnity and an affidavit both dated 13th October, 2010 and various
other documents with a view to defeat the right, title and interest of the
properties of the said firm. The appellants alleged in those documents
that after the death of Yakubali, the said firm was converted into a sole
proprietorship of Mohamed Shafik and after the death of Mohamed
Shafik the said property devolved upon the appellants as they were the
only legal heirs of Yakubali and Mohamed Shafik. Yakubali after his
death had left behind Mrs. Zarina Yakubali. The appellants were
entitled to the said property. It is also the case of the respondent that
the appellants made various attempts to transfer the said property in
their name and made various applications to various authorities in that
regard. On 15th February, 2012, the respondent through her advocate
addressed a notice to the appellant and called upon them to desist from
making any illegal claims regarding the ownership of the property and
also invoked the arbitration clause comprised in the said Partnership
Deed. It is the case of the respondent that the appellants were
negotiating with few tenants for transfer fees for consenting to transfer
the respective tenanted premises and may receive transfer fees upto
Rs.5 crores for the transfer of the tenanted premises.
13. Sometime in the year 2013, the respondent filed Arbitration
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Petition bearing No. 503 of 2013 in this Court under Section 9 of the
Arbitration Act for certain interim measures. By an order dated 19 th
September, 2013, a learned Single Judge of this Court dismissed the
said Arbitration Petition. The respondent filed an Appeal bearing
Lodging No. 444 of 2013 before a Division Bench of this Court. By an
order dated 4th December, 2013, a Division Bench of this Court
disposed of the said Appeal. The Division Bench recorded that the
parties had decided to refer all their disputes and differences to the
Arbitral Tribunal. The respondent agreed that the appellants may
continue the firm business. The appellants were also entitled to
prosecute the suits filed against the tenants. The Division Bench
passed an order of injunction restraining the appellants from selling,
disposing of, encumbering, parting with possession, or creating any
third party rights in respect of the said property without giving two
weeks notice to the respondent. This Court granted liberty to the
respondent to make an application for interim reliefs in respect thereof
under Section 9 or 17 of the Arbitration Act. On 28 th February, 2014,
the respondent filed statement of claim before the Arbitral Tribunal for
various reliefs. The said statement of claim was resisted by the
appellants by filing written statement on 7th July, 2014.
14. The respondent filed her affidavit in lieu of examination in chief
before the Arbitral Tribunal affirmed on 26th May, 2015. She was cross
examined by the learned counsel for the appellants. The appellant no.3
filed affidavit in lieu of examination in chief affirmed on 9 th July, 2015.
He was cross examined by the learned counsel for the respondent. Both
the parties also filed written submissions before the Arbitral Tribunal
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and also the notes distinguishing the judgments cited by each other.
The Arbitral Tribunal made an award declaring that the respondent
(original claimant) is entitled to 51% share in the profits of the Dharavi
property as co-owner and will continue to receive her share in the
profits till winding up in terms of clauses 13 and 14 in the Deed of
Partnership.
15. The Arbitral Tribunal also directed the appellants to pay to the
respondent 51% of the profits from the Dharavi property from 1982 till
the date of the award and thereafter till the winding up. The Arbitral
Tribunal did not grant any interest in favour of the respondent till the
date of the award. The Arbitral Tribunal however granted interest at
the rate of 9% per annum in favour of the respondent on the share of
the profits till final payment and also awarded the cost quantified at
Rs.20 lacs in favour of the respondent. Being aggrieved by the said
Arbitralaward dated 23rd March, 2018, the appellants filed arbitration
petition bearing no. 792 of 2018 before this Court. On 11 th July, 2019,
the learned Single Judge dismissed the said arbitration petition filed by
the appellants. Being aggrieved by the said judgment dated 11 th July,
2019, the appellants preferred this appeal under section 37 of the
Arbitration Act.
16. Mr. Shiraz Rustomjee, learned senior counsel for the appellants,
invited our attention to various paragraphs from the pleadings filed by
the parties, various documents forming part of the record before the
Arbitral Tribunal, the issues framed by the Arbitral Tribunal and
various findings of the Arbitral Tribunal in the impugned award. He
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also invited our attention to various judgments in support of his
submissions and also made an attempt to distinguish the judgments
relied upon by the respondent.
17. Learned senior counsel invited our attention to prayer clause (a)
to the statement of claim and would submit that the respondent had
prayed for winding up of the partnership firm and for an order and
direction against the appellants to furnish true and correct accounts of
the total income derived, expenses incurred and the profit earned out of
the partnership firm and the said property from 1982 till the accounts
of the partnership firm were settled. He invited our attention to the
findings recorded by the Arbitral Tribunal in paragraph (7)(ah)(xxv) of
the impugned award and would submit that the Arbitral Tribunal has
clearly rejected the reliefs prayed by the respondent in the prayer
clause (a) of the statement of claim. He submits that the Arbitral
Tribunal though had held that the prayer for accounts cannot be granted
on the ground that the same was not maintainable in view of the
provisions to section 48 of the Partnership Act, the Arbitral Tribunal
has declared that the respondent was entitled to 51% share in the
profits in the Dharavi property from 1982 till the date of the award and
thereafter till the winding up of the partnership firm. He submits that
this part of the award discloses the patent illegality and contradictions
in terms of the reliefs that are rejected and in terms of the reliefs that
are granted.
18. It is submitted by the learned senior counsel that under section
37 of the Partnership Act, only a right to a outgoing partner or the
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representative of the deceased partner is to make a claim for the
subsequent profit earned on carrying on the business of the partnership
firm by the other partners is provided. The case of the respondent
would not fall under section 37 of the Partnership Act since neither the
business of the partnership firm was carried on by Mohamed Shafik
nor section 37 of the Partnership Act gives right to the respondent to
make a claim in respect of the assets of the partnership firm. At the
most, the respondent could only make a claim for the share in the
subsequent profit which according to the respondent had not been paid
by the predecessor of the appellants. The respondent had failed to
prove her case before the Arbitral Tribunal.
19. It is submitted by the learned senior counsel that under section
37 of the Partnership Act, the respondent who claimed to be a
representative of the deceased partner Yakubali could not make any
claim in respect of the property of the partnership firm. The respondent
could claim only the shares in the profit of the partnership firm or an
interest at the rate of 6% per annum on the amount of its share of the
property of the partnership firm. The claim in respect of the assets of
the dissolved firm was ex-facie barred by law of limitation under
Article 5 of the Limitation Act. He submits that in any event no such
claim could be maintained under section 37 of the Partnership Act.
20. It is submitted by the learned senior counsel that the Arbitral
Tribunal had committed patent illegality in holding that Mohamed
Shafik had continued the business of the partnership firm. The
partnership firm had already stood dissolved upon the death of
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Yakubali. The name of Yakubali had been deleted from the Registrar
of Firms. The appellants had denied the claim of the respondent in the
assets of the partnership firm specifically in the statement of defence.
Learned senior counsel placed reliance on clause 14 of the Partnership
Deed and would submit that the said clause clearly provided that any
legal heir of the deceased partner cannot as a matter of right claim to be
a partner and it is depending upon the surviving partners if he/she
desires such legal heir to be made a partner.
21. It is submitted that neither the respondent nor her mother could
as a matter of right claim to be a partner of the partnership firm. The
respondent or her mother had never claimed or had applied to become
the partners of the partnership firm upon the death of Yakubali. Under
clause 14 of the Partnership Deed, the respondent could not claim any
right to receive any share in the profits of the Dharavi property. Various
findings rendered by the Arbitral Tribunal suffers from non-application
of mind and are perverse.
22. It is submitted by the learned senior counsel that there was no
final settlement of the accounts between Mohamed Shafik and the legal
representative of the Yakubali. Section 48 of the Indian Partnership
Act was thus applicable which provides for modes of settlement of the
account of the partners upon dissolution of the partnership firm. The
claim made by the respondent was ex-facie barred by law of limitation.
No evidence was produced by the respondent to prove that Mohamed
Shafik was carrying on any business by using the alleged partnership
assets upon dissolution of the partnership firm. The finding rendered
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by the Arbitral Tribunal on this issue is contrary to the documents and
evidence on record and shows perversity.
23. It is submitted by the learned senior counsel that section 37 of
the Partnership Act was not at all applicable in view of contract to the
contrary found in clause 14 of the Partnership Deed which provided for
the consequence that follows the death of the partner and failure of the
deceased partner's heirs to be inducted as a partner. The Arbitral
Tribunal had committed jurisdictional error. The impugned award is in
conflict with the public policy. It is submitted that section 10 of the
Limitation Act strongly relied upon by the respondent and applied by
the Arbitral Tribunal was not at all applicable to the claims made by the
respondent. He also invited our attention to sections 37, 46, 48 and 50
of the Partnership Act. He submits that section 88 of the Indian Trusts
Act relied upon by the respondent and the Arbitral Tribunal in the
impugned award was also not at all attracted to the facts of this case.
The appellants were not acting as a trustees on behalf of the respondent
or her mother as sought to be canvassed by the respondent before the
Arbitral Tribunal.
24. Learned senior counsel invited our attention to the averments
made by the appellants in paragraph (13) of the statement of defence
filed by the appellants and would submit that it was a specific case of
the appellants before the Arbitral Tribunal that there was an oral
understanding between the mother of the respondent and Mohamed
Shafik that she or any one from the family of the Yakubali would not
have any right or interest in the partnership business and assets and it
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was for that reason that neither the mother of the respondent nor the
respondent or any person from the family of the Yakubali made claim
over the partnership business and the assets. Consequently Mohamed
Shafik continued to carry out the partnership firm and assets and
asserted rights over the partnership assets as the sole owner thereof in
his capacity as a sole proprietor of 'Mahomedali Esmail'.
25. Learned senior counsel invited our attention to various
paragraphs from the impugned award recording the submissions made
by both the parties and the findings rendered on the issue of limitation.
He strongly placed reliance on the observations made by the Arbitral
Tribunal in paragraph (y) on page 76 of the appeal paper book and
would submit that the Arbitral Tribunal has clearly recorded that the
present claim made by the respondent was not one for share of the
properties of the dissolved partnership firm. The respondent herein
does not claim any share in the profits of the suit firm that arose prior
to the dissolution. The main relief claimed in the present proceedings
pertains to the period after the dissolution of the partnership firm. The
only asset of the partnership at the time of the dissolution was Dharavi
property which was tenanted and the rent was received therefrom.
26. It is submitted that there was no reference in the alleged Will
executed by the mother of the respondent to any of the assets of the
partnership firm as her own asset or did not even reflect any such claim
in any of the assets of the said partnership firm. The respondent had
not explained the delay of 30 years in making the claim against the
appellants. He submits that no partners of the partnership firm has
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share in specie. The partner has only right to the residuary property
left, if any, after determination of accounts under section 48 of the
Partnership Act. Under Article 5 of the Limitation Act, the claim ought
to have been made within three years from the date of dissolution of
the partnership firm. The claim made by the respondent was much
beyond the period of three years and was ex-facie barred by law of
limitation.
27. It is submitted by the learned senior counsel that the Arbitral
Tribunal led emphasis on the letter dated 29th December, 2015
addressed by one of the appellants to the Collector and some of the
averments made in the suit filed by the appellants in the Small Causes
Court, Mumbai to hold that the appellants had admitted the
continuation of the partnership firm even beyond the date of death of
Yakubali. He submits that merely on the basis of such averments in the
plaint filed in the Small Causes Court after demise of Yakubali against
some of the tenants or in such letter dated 29th December, 2015 to the
Collector would not conclusively prove that the partnership firm had
continued. He submits that Article 5 of the Schedule to the Limitation
Act would apply to the claim for accounts under section 48 of the
Partnership Act. Section 37 of the Partnership Act cannot supplement
section 48 of the Partnership Act.
28. Learned senior counsel invited our attention to clause 14 of the
Partnership Deed referred by the Arbitral Tribunal at page 66 of the
paper-book and would submit that the then partners had mutually
agreed that the value of goodwill quota right, tenancy rights and other
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rights was fixed at Rs.2,501/-. No claim was made by the respondent
for any share in the assets of the partnership firm. The entire case was
under section 37 of the Partnership Act for share in the profits. Section
37 of the Partnership Act cannot take place of section 48 even if a
partner dies. The findings in paragraph (xxv) are inconsistent with
paragraph (E) i.e. the findings rendered in respect of the issue no.5 at
page 105 of the paper-book.
29. Learned senior counsel for the appellants tendered a joint
compilation of the judgments which are sought to be relied upon by
both the parties before this Court. He submits that out of 27 judgments
in the joint compilation, the judgments at serial nos. 1 to 10 are relied
upon by the appellants. He relied upon following judgments :-
i. Hajee Siddeek Summar Sait vs. Mohamed Husshum Sait, IV
1916 LW 521 and in particular paragraph 9.
ii. K Gopala Chetty vs. T.G.Vijayurughavachariar, XXVI 1922
Calcutta Weekly Notes 977 and in particular Pages 16 to 18.
iii. Kashi Ram vs. Kundan Lal & Ors., AIR 1956 ALL 660 and in
particular paragraphs 23 and 24.
iv. M.M.Valliammai Achi vs. KNPL V Ramanath Chettiar, AIR
1969 MAD 257 and in particular paragraphs 19 to 24.
v. N.Rajan Nair vs. M.T.Balakrishnan, (2003) 1 KLJ 485, and in
particular paragraphs 5 to 7.
vi. Peeran Sahib vs. Pedda Jamaluddin Sahib, AIR 1958 AP 48
and in particular paragraphs 27 to 39.
vii. Pradeep Arora vs. Samatha Kochar, 2016 SCC OnLine Del
6268 and in particular paragraphs 11 to 26.
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viii. Shanti Bai Agarwal vs. Uma Bai Agarwal, 2015 SCC OnLine
Chh 29 and in particular paragraphs 12 to 21.
ix. Yashvant Chunilal Mody vs. Yusuf Karmali Kerwala, 2014(3)
MhLJ.111 and in particular paragraphs 40 to 49.
x. Seemaben Shankar Patel vs. Motibhai K. Patel, 2015 SCC
OnLine Bom 337 and in particular paragraphs 29, 31, 32 and
73.
30. It is submitted by the learned senior counsel that even otherwise
there was gross delay in claiming share in profit in the partnership firm.
The respondent could not have been awarded any share in the assets of
the partnership firm. He submits that period of limitation applies for
making claim for winding up and also claim share in the assets. The
claim was made for the first time in the year 2013 though the firm
stood dissolved in the year 1982 upon demise of Yakubali. Even if the
case of the oral understanding as pleaded by the appellants was
accepted, the respondent could not have made claim beyond the period
of three years from the date of dissolution. The Arbitral Tribunal had
already rejected the prayer clause (a) on the ground of limitation and
thus could not grant any relief of 51% share in the partnership assets
which claims were also ex-facie barred by law of limitation.
31. Learned senior counsel invited our attention to the chart
submitted by the learned senior counsel showing the issues framed by
the Arbitral Tribunal, the conclusion drawn by the Arbitral Tribunal,
the corresponding paragraph numbers and the relevant pages and the
prayers sought in the statement of claim. He submits that though the
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Arbitral Tribunal has rendered the findings that the claim for winding
up made by the respondent was barred, at the same time has held that
the respondent could call for winding up. The award shows patent
illegality and contradiction which goes to the root of the matter.
32. Mr.Akshay Patil, learned counsel for the respondent, on the
other hand, invited our attention to various averments from the
pleadings filed by the parties, various documents, findings recorded
by the Arbitral Tribunal and by the learned Single Judge, grounds
raised in the appeal memo filed by the appellants and various
judgments. He also distinguished the judgments relied upon by the
appellant.
33. At the outset, it is submitted by the learned counsel that scope
of Section 37 of the Arbitration Act to interfere with the order passed
by the learned Single Judge under Section 34 of the Arbitration Act
upholding the award is very narrow. No review on merit is
contemplated under Section 37 of the Arbitration Act. He submits
that even otherwise on merits, no case is made out by the appellants
for interferring with the Arbitralaward or the judgment rendered by
the learned Single Judge. He tendered additional compilation of the
judgments and relied upon those judgments.
34. Learned counsel placed reliance on the judgment of MMTC
Limited Vs. Vendanta Limited, (2019) 4 SCC 163 and in particular
paragraphs 10, 11 and 14 on the scope of Section 37 of the Arbitration
Act. He also relied upon the judgment of the Supreme Court in the
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case of Dyna Technologies Private Limited Vs. Crompton Greaves
Limited, (2019) 20 SCC 1 and in particular paragraphs 24 and 25 in
support of the submission that even under Section 34 of the
Arbitration Act, scope to interfere with the Arbitralaward on factual
aspects is very limited. The scope of Section 37 is more limited than
the scope of Section 34 of the Arbitration Act. On the factual aspects,
the findings rendered by the Arbitral Tribunal cannot be interferred
with by the Court either under Section 34 or under Section 37 of the
Arbitration Act.
35. It is submitted by the learned counsel that it is an admitted
position that there were two partners in the said partnership firm
including Yakubali. There was no capital contribution made by
Mohamed Shafik. In the year 1978, the said Dharavi property was
acquired by the said partnership firm. Upon demise of one of the
partners out of two, i.e. Yakubali in the year 1982, the said partnership
was dissolved by operation of law. The said Dharavi property was
jointly held by the partners of the said firm and thereafter upon
dissolution of the partnership firm by operation of law, by legal heirs
of two partners i.e. the appellants and the respondent. Mother of the
respondent expired.
36. It is submitted that during the period of 1982 to 2004,
Mohamed Shafik continued to manage the said Dharavi property.
Ms.Zarina and her daughter did not pay any attention. They had trust
and full faith on Mohamed Shafik. After demise of Mohamed Shafik
in the year 2004, the said Dharavi property continued to be in the
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name of the firm. Some of the tenants approached the respondent in
the year 2012 and informed that the said Mohamed Shafik was
claiming an exclusive rights in the said property and after his demise,
the appellants started claiming exclusive right in the property. The
appellants have failed to produce any document showing that the
respondent would not claim any rights in the partnership property.
The respondent thus invoked the arbitration agreement recorded in
the said partnership deed and also led evidence before the Arbitral
Tribunal. The Arbitral Tribunal has rendered a finding that the
respondent and Ms.Zarina had become co-owners of the said
Dharavi property after the death of Yakubali and Mohamed Shafik
who were the partners of the said partnership firm. The respondent
had thus 51% share in the said Dharavi property.
37. Learned counsel for the respondent invited our attention to some
of the grounds impugning the Arbitralaward by the appellants in the
petition under Section 34 of the Arbitration Act before the learned
Single Judge. He submits that learned Single Judge considered all the
arguments advanced by the parties and rightly dismissed the arbitration
petition filed by the appellant. The Arbitral Tribunal has rightly
declared the respondent no.1 as co-owner to the extent of 51% of the
said Dharavi property.
38. Learned counsel placed reliance on Section 2(b) of Indian
Partnership Act, 1932 i.e. definition of "business" which includes every
trade, occupation and profession. He relied upon the definition of
"Partnership", "Partner", "Firm" and "firm name" under Section 4 of
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the Partnership Act and would submit that "firm" is merely a
compendious of the partners. He relied upon Section 9 of the
Partnership Act and would submit that the partners are bound to carry
on the business of the firm to the greatest common advantage, to be
just and faithful to each other, and to render true accounts and full
information of all things affecting the firm to any partner or his legal
representative.
39. Learned counsel relied upon Section 14 of the said Partnership
Act and would submit that the property of the firm includes all
property and rights and interests in property originally brought into the
stock of the firm, or acquired, by purchase or otherwise, by or for the
firm, or for the purposes and in the course of business of the firm, and
includes also the goodwill of the business subject to contract between
the partners. He submits that admittedly the said Dharavi property
was purchased by the suit firm. The Partnership Act distinguishes the
business of the firm and property of the firm of all the partners. The
partnership deed nowhere provides that after demise of one of the
partners, other partner would become entitle to the property of the
partnership firm exclusively.
40. Learned counsel for the respondent placed reliance on Section
15, 16(a) and 16(b) of the Partnership Act and would submit that it is
clear that the property of the firm has to be held and used by the
partners exclusively for the purposes of the business of the firm
subject to the contract between the partners. There is no contract to
the contrary what is provided in Section 15. He submits that under
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Section 16(a) if a partner derives any profit for himself from any
transaction of the firm, or from the use of the property or business
connection of the firm or the firm name, he shall account for that profit
and pay it to the firm. Under Section 16(b) if a partner carries on any
business of the same nature as such and competing with that of the
firm, he shall account for and pay to the firm all profits made by him in
that business. Both these provisions were applicable to the facts of
this case and were invoked by the respondent in the Arbitral
proceedings.
41. Learned counsel for the respondent placed reliance on Section
37 of the Partnership Act and would submit that the claims made by
the respondent also fall under Section 37 of the Partnership Act as one
of the legal heirs of the partners who died and in view of surviving
partner, during his lifetime and thereafter upon his demise, his family
members, continued to carry on the business of the firm with the
property of the firm without any final settlement of accounts as
between them and the outgoing partner of his estate. He relied upon
Section 50 of the Partnership Act and would submit that since the said
Mohamed Shafik during his lifetime and the appellants after his
demise continued the business of the firm by use of the property of
the suit firm and have not completely wound up the affairs of the
said firm, the said Mohamed Shafik during his lifetime and upon his
demise, the appellants became liable to give account of the profit
derived from any transaction from the firm or from use of the property
or business connection in accordance with Section 16(a) of the
Partnership Act.
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42. Learned counsel submits that dissolution of the partnership firm
and an exit of the partner are two different factors and cannot be
mixed up. He placed reliance on Section 53 of the Partnership Act
and would submit that under the said provision, the respondent being
a legal representative of the erstwhile partner, is entitled to restrain
the surviving partner from carrying on a similar business in the firm
name or from using any of the property of the firm for his own benefit,
until the affairs of the firm have been completely wound up. No
provision in the partnership deed permitted the said Mohamed Shafik
during his life time and to the appellants after demise of the said
Mohamed Shafik to carry on a similar business by using the property
of the partnership firm for their own benefits. Each and every partners
are the co-owners of the property of the firm during his life time and
upon his demise, his share in such property would devolve upon the
legal heirs of the said deceased partner. Legal heirs of the two partners
continued to enjoy the said Dharavi property as the co-owners.
43. Learned counsel for the respondent invited our attention to
paragraphs (h), (o) and (p) of the impugned award and would submit
that it was a specific case of the respondent in the statement of claim
that after death of Yakubali, the suit firm stood dissolved. The suit
firm to the best of knowledge and belief of the respondent herein
did not have any liability. Legal heirs of Yakubali and Mohamed
Shafik became entitle to the assets of the firm as co-owners. The
respondent had claimed 51% right, title and interest in the land and
100% right, title and interest in the premises. The appellants for the
first time purported to deny the right, title and interest of the
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respondent in the property vide a Declaration-Cum-Indemnity and
affidavit both dated 13th October 2010. The respondent came to know
of malafide and illegal acts of the appellants through some tenants of
the suit firm relying on the Declaration-Cum-Indemnity and affidavit
to suggest that they were exclusive owners of the property.
44. Learned counsel for the respondent invited our attention to the
Declaration-Cum-Indemnity dated 12th October 2010 signed by the
appellants and Ms.Shabina Mohamed Shafik Laljee who was also
one of the party to the Arbitral proceedings and in particular clauses 2
to 5 of the said document and would submit that the appellants have
admitted that the suit firm was consisting of Mohamed Shafik and
Yakub Ali and on 27th June 1982 upon death of Yakubali, suit firm
was automatically dissolved. In clause 3 of the said document, it was
alleged that upon demise of Yakubali, Mohamed Shafik became
the sole proprietor of the suit firm. Name of the Yakubali had been
deleted from the said partnership firm. The effect thereof was given
on the Record of Registration of Firms. In paragraph 4 of the said
document, the appellants declared that Mohamed Shafik Habib
Laljee died intestate on 22nd August 2004 leaving behind the
appellants and Ms.Shabina Mohamed Shafik Laljee as the only legal
heirs and representatives.
45. In paragraph 5 of the said document, the appellants declared
that since 2004, they were managing the said properties and paying
all the taxes as required by law to the Government Municipal
Corporation and all other concerned authorities. In the schedule to
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the said document, there was reference to the said Dharavi property.
The respondent was neither consulted nor her consent was obtained
by the appellants before executing such Declaration-Cum-Indemnity.
46. Learned counsel for the respondent invited our attention to the
affidavit affirmed on 12th October 2010 filed by the appellants and
Ms.Shabina Mohamed Shafik Laljee admitting that the said Dharavi
property was purchased by the suit firm consisting of two partners
i.e. Mohamed Shafik and Yakubali. In paragraph 4 of the said
affidavit, the appellants declared that to the best of their knowledge,
Yakubali and Mohamed Shafik had not published any Will prior to
their death and besides the appellants and the said Ms.Shabina
Mohamed Shafik Laljee, they left no other heirs in respect of their
estate effects, properties and credits thereof. He submits that the said
affidavit was filed for the purposes of recording the names of the
appellants and the said Ms.Shabina Mohamed Shafik Laljee in the
revenue records in respect of the said Dharavi property.
47. Learned counsel for the respondent invited our attention to the
averments made by the appellants and the said Ms.Shabina Mohamed
Shafik Laljee in RAE suit filed by the appellants and the said
Ms.Shabina Mohamed Shafik Laljee and in particular paragraphs 2
and 3 and would submit that in the said paragraphs, the appellants
admitted that the said Mohamed Shafik and Yakubali were partners
in the suit firm who were the original owners and the landlords in
respect of the suit premises. Mohamed Shafik was the father of
Mohamed Mushtaq Ali Laljee, Ms. Hasina Mohamed Shafik Laljee
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and Ms. Shabina Mohamed Shafik Laljee (plaintiff nos.2 and 3),
husband of the plaintiff no.2 i.e. Ms.Hasina Mohamed Shafik Laljee.
Yakubali died on 27th June 1982 leaving behind his wife as the only
heir. Wife of Yakubali also expired on 26 th July 2004. The said
Yakubali was the uncle of Mohamed Mushtaq Ali Lalji, Ms.Heena
Mohamed Shafik Laljee and Ms.Shabina Mohamed Shafik Laljee.
48. In paragraph 3 of the plaint, the appellants alleged that after
death of both the partners, the appellants and the said Ms.Shabina
Mohamed Shafik Laljee became the owners and landlords in respect
of the entire Dharavi property and started recovery rent from the
tenants occupying various tenaments including the defendant therein.
The respondent was not impleaded as party-respondent in the said
suit. It is submitted that the appellants fraudulently claimed to be the
exclusive owners of the said Dharavi property in the said suit.
49. Learned counsel for the respondent invited our attention to
paragraphs (d) and (e) of the impugned award and would submit that
the Arbitral Tribunal has summarised the case of the appellants in the
said paragraph 4. He submits that the appellants had falsely alleged
that upon demise of Yakubali and Mohamed Shafik, the appellants
had been openly and continuously enjoying the possession of the
Dharavi property and exercising rights as owners of the Dharavi
property to the exclusion of the said Zarina Yakubali and the
respondent herein. There was a complete ouster of Zarina Yakubali
and the respondent from the Dharavi property and other properties of
the firm.
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50. The appellants alleged oral understanding between the parties by
which according to the appellants, the said Zarina Yakubali had not
claimed any right, title and interest in the suit property or any share in
the account of the property of the firm. It is submitted that the Arbitral
Tribunal had rejected this plea of alleged oral understanding between
the parties and recorded a finding of fact. Learned Single Judge rightly
did not interfere with the facts rendered by the Arbitral Tribunal.
51. Learned counsel for the respondent invited our attention to the
issues framed by the Arbitral Tribunal in paragraph 6 of the impugned
award and would submit that all the findings rendered by the Arbitral
Tribunal are based on the evidence led by the parties and also after
considering the pleadings. The finding on issue no.2 i.e. "whether
the claimant proves that the legal heirs of Yakubali and Mohamed
Shafik became co-owner of the Assets of the Partnership Firm after
the death of Yakubali and consequent to dissolution of the Partnership
Firm?" was not even challenged by the appellants in the arbitration
petition filed under Section 34. Such findings of facts rendered by the
Arbitral Tribunal in the impugned award has attained finality. He also
invited our attention to the findings rendered by the learned Single
Judge in paragraph 25 on this issue.
52. Learned counsel for the respondent placed reliance on the
judgment of the Supreme Court in the case of Malabar Fisheries Co.
Vs. Commissioner of Income Tax, (1979) 4 SCC 766 and in
particular paragraphs 14 to 18 in support of the submission that the
rights of the partnership firm and its partners in the property of the
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firm are not extinguished after dissolution of the firm. He submits
that the suit firm did not have any liability. The suit property thus
would devolve in the partners or their estate in their profit sharing
ratio in the suit firm as partners. Learned counsel for the respondent
placed reliance on the judgment of the Supreme Court in the case of
V.Subramanium Vs. R.R. Rao, (2009) 5 SCC 608 and in particular
paragraph 11. He also relied upon the judgment of the Supreme Court
in the case of N. Kaderavalli Saheb Vs. N. Gundu Sahib, (2003) 3
SCC 229 and in particular paragraph 3 in support of the submission
that the partners are the real co-owners of the property acquired by
the partnership firm. Even if the partnership firm is dissolved,
partners continued to be the co-owners of the property during the life
time and after demise of the partners, legal heirs of such partners
continued to be the owners of such property.
53. Learned counsel for the respondent placed reliance on the
judgment of the Gujarat High Court in the case of Parmanand
Vasani Vs. State of Gujarat, AIR 1994 Guj 206 and in particular
paragraph 3 in support of the submission that assets of the partnership
firm after dissolution devolves in the partners or their representatives.
He submits that the findings rendered by the Arbitral Tribunal that
the respondent would be entitled to 51% share in the Dharavi property
does not disclose any error warranting any interference under Section
34 or Section 37 of the Arbitration Act.
54. Learned counsel for the respondent submits that after demise of
Yakubali, Mohamed Shafik had been holding suit property in trust.
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After death of Yakubali, the said Mohamed Shafik continued to use
the said property and had been recovering rent from the said property
without any settlement of the account with the estate of the said
Yakubali. He relied upon Sections 37 and 50 of the Partnership Act
and would submit that all the ingredients of the said provision
prescribing the rights of the estate of the said deceased to share the
subsequent profits earned by the surviving partner by carrying on
business of the firm without settlement of account between them are
satisfied.
55. Learned counsel for the respondent placed reliance on the
Partnership deed executed between the said Yakubali and Mohamed
Shafik and would submit that admittedly the Yakubali was entitled to
51% share in the net profits of the suit firm or 6% interest. He
submits that the said Yakub Ali was also entitled to 51% in the
assets of the suit firm. He relied upon clause 6 of the Partnership Deed
at page 137 of the appeal. The said Yakubali had chosen to 51%
share in the suit firm and not 6% interest. The respondent claimed
the share in the profit and the assets accordingly. It is submitted that
the entitlement of the surviving partner or his estate in the share of
the profit and assets of the partnership firm would continue till the
affairs of the partnership firm are wound up.
56. Learned counsel for the respondent placed reliance on Section
88 of the Indian Trusts Act, 1882 and also illustration (f) thereto. He
submits that the said Mohamed Shafik who was the sole surviving
partner upon the death of Yakubali continued to use the name of the
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suit firm and the assets, did not wind up the suit firm and continued
to gain advantage. The said Mohamed Shafik was holding the suit
property for the benefit of the estate of the said deceased Yakub Ali.
Upon demise of the said Mohamed Shafik, the appellants and the
said Ms.Shabina Mohamed Shafik Laljee continued the use of the
name of the firm and the assets and derived the profit and out of
such use and were holding the said property and the benefit as
trustees for the estate of the said Yakubali.
57. It is submitted that the said Mohamed Shafik during his life time
and the appellants and the said Ms.Shabina Mohamed Shafik Laljee
retained all the assets of the suit firm in the business exclusively
instead of winding-up the affairs of the partnership firm. The obligation
of surviving partner or the appellants being his legal heirs to pay the
share in profit and assets of the said Yakubali to his legal heirs or
estate continued and would continue till the affairs of the suit firm
are finally wound up. Such benefits are held by the said appellants
and the said Ms.Shabina Mohamed Shafik Laljee after demise of
Mohamed Shafik and during the life time of Mohamed Shafik by
himself held in a fiduciary capacity. Fiduciary relationship between
the parties thus continued. No period of limitation for recovery of the
claim made by the respondent thus was applicable.
58. Learned counsel for the respondent placed reliance on Section
95 of the Indian Trusts Act, 1882 and would submit that the said
Mohamed Shafik during his life time and the appellants and the said
Ms.Shabina Mohamed Shafik Laljee upon demise of the said
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Mohamed Shafik are subjected to the same liabilities and disabilities
as if they were trustees of the property for the person for whose benefit
they held it, i.e. estate of the said deceased person Yakubali. He also
placed reliance on Section 88 read with Section 95 of the said Act.
Obligation and the legal duties cast on trustees under Section 88 read
with Section 95 of the said Indian Trusts Act are continued. Cause of
action also thus continued till the use of name of the partnership firm
and the assets continues by the surviving partner or his legal heirs till
the affairs of the firm are finally wound up.
59. Learned counsel for the respondent invited our attention to
section 10 of the Limitation Act and would submit that prior to 1932,
Indian Contract Act was governing the provisions relating to
partnership. In view of section 10 of the Limitation Act, 1963 read with
other provisions, share in the profit of the partnership firm can be
claimed irrespective of the period involved. He invited our attention to
paragraph (XXVI) of the impugned award and would submit that after
referring to various judgments relied upon by both the parties the
Arbitral Tribunal has held that once a finding is recorded that the
surviving partner carries on the business with the property of the firm
without any final statement of account, the outgoing partner and/or his
estate is entitled to such share of profits made since he ceased to be a
partner as may be attributable to use of him share of assets or interest
@ 6% p.a. The Arbitral Tribunal after considering clause 14 of the
partnership deed was of the view that Mohamed Shafik was bound to
act as trustee for the estate of the deceased partner.
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60. The Arbitral Tribunal also placed reliance on section 88,
illustration (f) of the Indian Trust Act and held that Mohamed Shafik
during his life time and subsequent to his death, the appellants herein
as his heirs were acting as the trustees for the legal representatives of
Yakubali. In paragraph XXVII however, the Arbitral Tribunal held that
the relief for share in the profits subsequent to the death of Yakubali is
maintainable and is neither barred under Article 5 or 65 of the
Limitation Act and accordingly answered the said issue no.2 against
the appellants herein.
61. Insofar as clause 14 of the partnership deed providing for
valuation of goodwill quota rights, tenancy rights and other rights fixed
at Ra.2501/- is concerned, it is submitted by the learned counsel for the
respondent that the rights in Dharavi property is not to be valued at
Rs.2501/- since the said Dharavi property was intangible asset and was
thus not covered under the said valuation of Rs.2501/-.
62. It is submitted by the learned counsel for the respondent that the
findings in paragraph 7(y) of the impugned award strongly relied upon
by the appellants that the person claimed is not one for share of the
profits of the dissolved partnership firm is an obvious typing error. It
was not the case of the appellants that the respondent did not claim any
share of the respondent in the assets of the partnership firm. The
submission of the appellants in respect of the share in the assets has
been recorded by the Arbitral Tribunal in several paragraphs of the
impugned award. The Arbitral Tribunal after considering the pleadings,
documents and evidence has rightly held that the respondent herein
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was entitled to 51% share in the Dharavi property. The entire award has
to be read in toto and not few lines allegedly containing the typing
mistake. The special circumstances existed on the date of death of
Yakubali.
63. Learned counsel for the respondent placed reliance on the
judgment of the Calcutta High Court in case of Tilokram Ghosh and
Ors. v/s. Smt. Gita Rani Sadhukhan and Ors., AIR 1989 Calcutta
254, the judgment of the Punjab High Court in P.S. Nagarunjan vs.
Robert Hotz, AIR 1954, Punjab 278 in support of the submission that
the cause of action under section 37 of the Partnership Act arose after
the death of Yakubali, who was one of the partner of the said firm but
the cause of action continued till the business of the firm continued by
the surviving partner during his life time and thereafter by the
appellants and Ms. Shabina thereafter till the affairs of the suit firm are
not wound up.
64. Learned counsel for the respondent placed reliance on various
judgments which were referred to and relied upon by the respondent
before the Arbitral Tribunal during the course of hearing which are
referred to and relied upon by the Arbitral Tribunal in various
paragraphs of the impugned award in support of his submissions. He
submits that the appellants could not distinguish any of those
judgments before the Arbitral Tribunal or before this Court.
65. Mr. Patil, learned counsel for the respondent placed reliance on
the following judgments :-
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i. Mohamed Laiquiddin and Anr. vs. Kamala Devi Misra, (2010)
2 SCC 407 and in particular paragraphs 23 to 25.
ii. Commissioner of Income Tax M.P., Nagpur and Bhandara,
Nagpur vs. Seth Govindram Sugar Mills, AIR 1966 SC 24 and
in particular paragraphs 7 and 8.
iii. Y. Venkanna Chowdhary and Anr. vs. G. Lakshmidevamma
and Ors., AIR 1994 MAD 140 and in particular paragraphs 40 to
42.
iv. Prem Ballabh Khulbe vs. Mathura Datt Bhatt, (1967) 2 SCR
298 and in particular pages 144 and 145.
v. Mansha Ram vs. Tej Bhan, AIR 1958 P&H 5 and in particular
pages 157 and 158.
vi. Barclays Bank Trust Co. Ltd. vs. Bluff, (1981) 3 ALL ER 232
and in particular pages 181(F) to 182 (H).
vii. Nilmadhab Nandi and Ors. vs. Srimati Nirada Sundabi Dadi,
1941 SCC OnLine Cal 119 and in particular page 187.
viii. Mr. P. S. Nagarunjan vs. Mr. Robert Hotz, AIR 1954 Punj 278
and in particular page 197.
ix. Shreedhar Govind Kamerkar vs. Yesahwant Govind Kamerkar
and Anr., (2006) 13 SCC 481.
x. M/s. Malabar Fisheries Co., Calicut vs. Commissioner of
Income Tax, Kerala, (1979) 4 SCC 766 and in particular pages
228 and 229.
xi. Addanki Narayanappa and Anr. vs. Bhaskara Krishtappa and
Ors., (1966) 3 SCR 400.
xii. V. Subramaniam vs. Rajesh Raghuvandra Rao, (2009) 5 SCC
608 and in particular paragraph 11.
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xiii. N. Khadervali Saheb and Anr. vs. N. Gudu Sahib and Ors.,
(2003) 3 SCC 229 and in particular page 249.
xiv. Parmanand Vadilal Vasant and Anr. vs. State of Gujarat and
Anr., AIR 1994 Guj 206 and in particular pages 252 and 253.
xv. Md. Mohamed Ali vs. Jagadish Kalita and Ors., (2004) 1 SCC
271 and in particular pages 261 and 262.
xvi. Ramnarayan and Ors. vs. Kashinath Jagnarain and Anr., 1953
SCC OnLine Pat 154 and in particular page 267.
xvii. Babu alias Govindoss Krishnadoss vs. Official Assignee of
Madras and Ors., 1934 SCC OnLine PC 22 and in particular
page 278.
66. Learned counsel for the respondent placed reliance on the
judgment of the Hon'ble Supreme Court in case of Shreedhar Govind
Kamerkar (supra) and in particular paragraphs 9, 22, 36 to 38 and
would submit that till the said firm is completely would up, the rights
of the legal heirs of a partner continues in the profits and assets of the
said firm. He submits that since the appellants have not pressed the
plea of adverse possession, the respondent is not required to deal with
the said plea. The respondent also placed reliance on the judgment of
the Patna High Court in case of Mansha Ram vs. Tej Bham AIR 1958
Patna 854 in support the submission that the partners stand in fiduciary
relation to one another and in such a case equity will never permit the
surviving partner to trade, or to utilize the property of the other for his
exclusive personal profit. If he makes a profit, it must be paid over to
the owner of the property, the use of which produced the profit.
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67. Learned counsel for the respondent placed reliance on the
judgment of the Privy Council in case of Ahmed Musaji Saleji & Ors.
vs. Hashim Ebrahim Saleji & Ors., AIR 1915 P.C. 116 (D) in support
of the submission that since the appellants and the said Shabina had
retained the assets of the suit firm without disclosing any statement of
accounts and had been using the name of the suit firm and the assets
for their personal benefit, the appellants were liable to be ordered to
give the accounts for those assets with interest thereon to the
respondent. He submits that all the judgments cited by the appellants
have been rightly distinguished by the Arbitral Tribunal in the
impugned award. No interference with the impugned award is thus
warranted on the ground that none of the judgments cited by the
appellants have not been dealt with properly by the Arbitral Tribunal.
68. Learned counsel for the respondent distinguished the judgment
of the Privy Council in K.Gopala Chetty (supra) on the ground that the
said judgment was admittedly delivered prior to enactment of the
Partnership Act, 1932. Section 37 of the Partnership Act, thus was not
considered in the said judgment and thus would not assist the case of
the appellants. There was no immovable property involved in that case.
69. Learned counsel for the respondent distinguished the judgment
of the Madras High Court in case of M.M. Valliammai Achi (supra)
and would submit that the said judgment was also not dealing with the
case under section 37 of the Partnership Act. There was no claim made
by the plaintiff in the assets of the partnership firm in that case.
Learned counsel for the respondent distinguished the judgment of the
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Andhra Pradesh High Court in case of Peeran Sahib and others
(supra) relied upon by the appellants on the ground that even the said
judgment was not dealing with section 37 of the Partnership Act. He
invited our attention to paragraph 29 of the said judgment. He
distinguished the judgment of this Court in case of Seemaben Shankar
Patel (supra) on the ground that in that matter the dissolution of the
firm had already taken place. The assets of the partnership firm were
already partitioned. No claim was made by the legal heirs of the
deceased partner for dissolution of the assets of the firm. He submits
that the appellants have not cited any judgment holding that the period
of limitation under section 37 of the Partnership Act would be three
years from the date of death of the deceased partner.
70. Learned counsel for the respondent distinguished the judgment
of Chattishgarh High Court in case of Shanti Bai Agrawal & Ors.
(supra) on the ground that even the said judgment had not considered
section 37 of the Partnership Act. The suit property involved in that
matter was only movable property for distribution amongst the
partners. Learned counsel for the respondent invited our attention to
paragraph 7 (xxv) of the impugned award and would submit that the
Arbitral Tribunal has rejected the prayer for accounts considering
section 48 of the Partnership Act from 1982 till the accounts are settled.
He submits that the Arbitral Tribunal has not rejected the claim made
by the respondent under section 37 of the Partnership Act on the
ground of limitation. He submits that there is thus no inconsistency or
contradiction in the impugned award as sought to be canvassed by the
learned senior counsel for the appellants.
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71. Insofar as prayer clause (b) of the statement of claim is
concerned, learned counsel for the respondent invited our attention to
the discussion on the said prayer in paragraph 7 (xxv) of the impugned
award. He submits that the Arbitral Tribunal has rightly relied upon the
letter addressed by the appellants to the Collector on 29 th December,
2005 in respect of the notification issued under the provisions of the
Land Ceiling Act as a partner of the suit firm M/s. Mohamed Ali Ismail
and rightly rejected the explanation sought to be given by the
appellants in respect of the said letter. He submits that reliance is also
rightly made on the averments made in the suit filed by the appellants
before the Small Causes Court in the year 2012 and more particularly
the averments that the appellants had become owners of the said
Dharavi property on the death of the mother of the respondent which
even happened on 26th July, 2004.
72. It is submitted that the Arbitral Tribunal has rightly rendered a
finding of fact that these admissions on the part of the appellants were
clear to the effect that the assets of the suit firm were being used by
Mohamed Shafik and thereafter by the appellants and Ms.Shabina. The
Arbitral Tribunal also noticed that there was no denial to the averments
made by the respondent in her statement of claim in paragraph 2 (g)
and 2(h) that were replied in paragraph 13 of the statement of defence.
It was specifically pleaded by the respondent that the partnership
before 1983 had stopped all other business except letting out of the
properties on rent to various tenants.
73. Learned counsel for the respondent invited our attention to the
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findings rendered by the Arbitral Tribunal in paragraph 7 (xxvi) of the
impugned award that once a finding is recorded that the surviving
partner carries on the business with the profit of the firm without any
final statement of accounts, the outgoing partner and/or his estate is
entitled to such share of profits made since he ceased to be the partner
as may be attributed to use of his share of assets or interest by 6% p.a.
He submits that the Arbitral Tribunal has rightly recorded the finding
that Mohamed Shafik was bound to act as a trustee of the deceased
Yakubali. The Arbitral Tribunal rightly placed reliance on section 88,
illustration (f) of the Indian Trust Act. He invited our attention to
various findings rendered by the Arbitral Tribunal in paragraph 7
(xxviii) of the impugned award and would submit that the Arbitral
Tribunal has rightly rendered the finding of fact on the aspect of assets
and the profits subsequent to the death of Yakubali is maintainable and
is neither barred by Article 5 nor Article 65 of the Limitation Act and
rightly answered the said issue in favour of the respondent herein and
against the appellants.
74. It is submitted that the Arbitral Tribunal while recording such
finding has dealt with the pleadings, documents and oral evidence led
by the parties. He invited our attention to the conclusions drawn by the
Arbitral Tribunal in respect of each of issues framed in paragraph 8 of
the impugned award at page 105. He submits that there is no
inconsistency in paragraph 8 (E) with any portion of the impugned
award including the findings in paragraph 7 (xxv) of the impugned
award. He invited our attention to the final reliefs granted by the
Arbitral Tribunal at pages 206 and 107 of the petition. He submits that
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the Arbitral Tribunal has not awarded any interest in favour of the
respondent till the date of award and has restricted the award of interest
at the rate of 9% p.a. on the share of profits of the respondent herein till
final payment from the date of award. The cost of Rs.20,00,000/-
awarded by the Arbitral Tribunal in favour of the respondent is also
reasonable. He submits that even otherwise no argument was advanced
by the appellants in respect of the claim of interest and the arbitration
cost awarded by the Arbitral Tribunal.
75. Learned counsel for the respondent placed reliance on the
judgment of the Hon'ble Supreme Court in case of Associated
Builders (supra) and in case of Ssangyong Engineering and
Construction Company Limited vs. National Highways Authority of
India (2019) 15 SCC 131 and would submit that even if there is any
contradiction of law on the part of the Arbitral Tribunal, it would not
amount to patent illegality. No such ground is available under section
34 of the Arbitration Act. He also relied upon explanation to section
34(2)(b) of the Arbitration Act. He submits that the financial policy of
the Indian Law principles would not apply in this type of dispute
between the parties. He relied on paragraphs 34, 35, 37 and 38 of the
judgment of the Hon'ble Supreme Court in case of Ssangyong
Engineering and Construction Company Limited (supra).
76. Learned counsel for the respondent placed reliance on an
unreported judgment of this Court in Fermenta Biotech Limited vs.
K.R. Patel delivered on 11th October, 2018 and in particular paragraph
10 and would submit that even if the view taken by the Arbitral
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Tribunal is plausible view, such view cannot be interfered by this Court
under section 34 of the Arbitration Act. The Arbitral Tribunal has done
justice to both the parties. Learned single Judge has also rightly not
interfered with the impugned award. Learned counsel invited our
attention to the judgment of the Hon'ble Supreme Court in case of
Vijay Kariya & Ors. Prysmian Cavi E Sistemi SRL & Ors. (2020) 11
SCC 1 and more particularly paragraph 88. He submits that even in
case of FEMA violation by one of the parties, the Hon'ble Supreme
Court has held that the arbitral award does not become void on that
ground. He submits that the learned senior counsel for the appellants
could not point out any flaw in the impugned judgment of the learned
single Judge upholding the arbitral award in toto.
77. Insofar as the alleged contradiction in the impugned award
pointed out by the learned senior counsel for the appellants is
concerned, it is submitted by the learned counsel for the respondent
that no such arguments were advanced by the appellants before the
learned single Judge and more particularly the alleged contradiction or
inconsistency in the findings recorded in paragraph 7 (xxv) and the
conclusion drawn in paragraph 8 (E) of the impugned award. He
submits that even otherwise there is no inconsistency in any part of the
award. The entire award has to be read in toto.
78. Learned counsel for the respondent relied upon section 56 and 48
of the Partnership act and would submit that under section 46 of the
said Act, right is created in the partners to have winding up after
dissolution. Under section 48 of the Partnership Act, provides for the
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mode and manner of the settlement of accounts between the partners
after dissolution of the partnership firm. The Arbitral Tribunal has
recorded a finding that the Arbitral Tribunal has dealt with the
deposition of the affidavit of evidence filed by the respondent that the
said firm did not have any liability and that the legal heirs of Yakubali
became entitled to the assets of the said firm. The Arbitral Tribunal
also dealt with the deposition of the respondent that Mohamed Safik
carried out the business of the firm, utilized the assets of the firm and
all material times, acknowledged the rights of the legal heirs of
Yakubali and never disputed the rights with respect to the profits,
assets of the firm as well as accrued therefrom.
79. Mr. Shiraz Rustomjee, learned senior counsel for the appellants
in rejoinder submits that the appellants had referred to the order passed
by the learned single Judge dismissing the arbitration petition filed by
the appellants but did not go in detail in respect of the said order since
the learned single Judge has fully accepted the findings recorded by the
Arbitral Tribunal without any exception. He submits that since the
arbitral award was liable to be set aside under section 34 of the
Arbitration Act by the learned single Judge and since the learned single
Judge has not set aside the impugned award, the arbitral award as well
as the order passed by the learned single Judge deserve to be set aside.
80. Learned senior counsel invited our attention to the findings
rendered by the learned single Judge in paragraphs 31 and 44 of the
impugned order and would submit that the learned single Judge failed
to appreciate the distinction between the share in assets and the share in
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the profits. He submits that section 37 of the Partnership Act also
applies if the partner ceases to be a partner and not only in case of
death of any partner. Learned senior counsel distinguished the
judgment of the Madras High Court in case of M.M. Valliammai Achi
(supra). He relied upon paragraphs 10, 11 and 14 of the said judgment
and would submit that in the facts of this case, the appellants had made
out the case for interference with the impugned Arbitral award under
section 34 of the Arbitration Act and in this appeal filed under section
37 of the Arbitration Act.
81. Learned senior counsel distinguished the judgment of the
Hon'ble Supreme Court in case of Dyna Technologies Private Limited
vs. Crompton Greaves Limited (2019) 20 SCC 1 and would submit
that the appellants had made out a case for interference with the
Arbitralaward under section 34 of the Arbitration Act. He submits that
since all the judgments relied upon by the appellants have been
distinguished without recording any reasons, the impugned arbitral
award was susceptible to section 34 of the Arbitration Act and was
liable to be set aside. Since the learned single Judge failed to set aside
the impugned award, the Appeal Court is empowered to set aside the
impugned award rendered by the Arbitral Tribunal and the judgment of
the learned single Judge by exercising powers under section 37 of the
Arbitration Act.
82. Learned senior counsel for the appellants invited our attention to
paragraph 3 of the affidavit filed by the appellants and Ms.Shabina
disputing that the respondent was not a legal heir of Yakubali and
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would submit that this position has been given by the respondent in the
arbitration proceeding. He submits that the averments made in
paragraphs 2 and 3 of the said affidavit filed against the tenant before
the Small Causes Court is consistent with the case of the appellants. A
plea of oral agreement pleaded by the appellants before the Arbitral
Tribunal is also not inconsistent with the documents produced by the
appellants.
83. Learned senior counsel for the appellants invited our attention to
the findings recorded by the Arbitral Tribunal in paragraph 8 (B) in
respect of issue no.2 holding that the respondent herein is entitled to
51% of the profits as her share from Dharavi property and would
submit that issue no.2 as framed by the Arbitral Tribunal and the
findings recorded on the said issue no.2 are totally different. The issue
whether the claimant proves that the legal heirs of Yakubali and
Mohamed Shafik became co-owners of the assets of the partnership
firm after the death of Yakubali and consequent to the dissolution of
the partnership firm has not been answered by the Arbitral Tribunal in
the entire arbitral award. The Arbitral Tribunal has directly granted
final relief declaring that the respondent herein is entitled to 51%
share of the profits on Dharavi property as the co-owner and will
continue to receive her share in the profits till winding up under clauses
34 and 14 of the Deed of Partnership. Arbitral Tribunal has further
directed the appellants to pay 51% of the share in the profits from
Dharavi property from 1982 till the date of award and therefore, till
winding up. The Arbitral Tribunal only made a passing reference in
paragraph 7 (k) of the award to the effect that the assets of the
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partnership firm would continue to be the assets of the dissolving
partnership firm with the existing partner and the legal heirs of the
deceased partner as co-owners of the profit until winding up and
distribution of the profits in the members as provided in clause 14 of
the Deed of Partnership in the context of issue of limitation.
84. Learned senior counsel invited our attention to paragraphs 8, 10
and 13 and the ground (t), (u) and (ee) and would submit that various
findings of fact rendered by the Arbitral Tribunal in the impugned
award had been challenged by the appellants in the arbitration petition
filed under section 34 of the Arbitration Act before the learned single
Judge. These findings are also challenged on various grounds raised in
the memorandum of appeal and more particularly on the issue whether
the partners became co-owners of the assets and the profit of the firm
or not. He submits that no partner has a right to any specific part of the
immovable property. He only has a right of profit upon winding up of
the partnership firm under section 48 of the Partnership Act. In support
of this submission, learned senior counsel invited our attention to
paragraphs 14 and 17 of the judgment of the Hon'ble Supreme Court in
case of Malabar Fisheries Co. supra) cited by the learned counsel for
the respondent and would submit that even in the said judgment relied
upon by the respondent, it is clearly held that no partner has any right
over any particular portion of the asset and right of partner or his estate
is obtained surplus of the profit upon determination of the accounts of
the partnership firm under section 48 of the Partnership Act.
85. Learned senior counsel for the appellants invited our attention to
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paragraphs 29 and 30 of the judgment of the Madras High Court in
case of M.M. Valliammai Achi (supra) and would submit that the
impugned award is totally contrary to the principles of law laid down
by the Madras High Court in the said judgment and by the Hon'ble
Supreme Court and this Court in various judgments already referred to
and relied upon by the appellants.
86. It is submitted by the learned senior counsel that the mother of
the respondent herein and the respondent also had given up their
alleged rights in the immovable property or in the accounts of the said
firm by accepting the oral understanding between the parties. The
impugned award however does not mention that the mother of the
respondent had not mentioned about her alleged entitlement in respect
of Dharavi property in her will about and in respect of the said
accounts of the suit firm. Neither the mother of the respondent nor the
respondent herself had made any claim for accounts of the partnership
firm or in any immovable. The Arbitral Tribunal has not answered issue
no.2 in affirmative but had only rendered a cryptic finding that the
respondent holds 51% share in the profit of the said firm. The said
claim was ex-facie barred in view of Article 5 of Schedule to the
Limitation Act.
87. It is submitted that the Arbitral Tribunal has not issued any
directions in the impugned award as to how the deductions towards
expenses incurred by the appellants on maintaining the said property
were required to be done out of the rental income from the Dharavi
property without any accounts under section 48 of the Partnership Act.
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He submits that Article 5 of the Limitation Act has to be given a
meaning which the Arbitral Tribunal failed completely. The argument
of the respondent in support of the claim for 51% of the partnership
firm was under section 37 of the Partnership Act read with section 88
of the Indian Trust Act and section 10 of the Limitation Act.
88. Learned senior counsel submits that there is no dispute that
section 37 of the Partnership Act came into effect only on the
enactment of Partnership Act, 1932. However, prior to 1932, section
42 of the English Act, 1890 was applicable which was in pari-materia
to section 37 of the Partnership Act. He submits that the law under
section 37 of the Partnership Act was the same all through out. The
judgments thus cited by the appellants though delivered prior to 1932
dealing with the provisions which are in pari-materia to section 37 of
the Partnership Act thus could not have been distinguished by the
Arbitral Tribunal. The judgment in case of Gopala Chetty (supra) and
other judgments which were though delivered prior to 1932 were
binding upon the Arbitral Tribunal even after 1932.
89. Learned senior counsel for the appellants submits that there was
no typing error in paragraph 7 (y) of the impugned award holding that
the respondent's claim was not one for share of the assets of the
dissolved partnership firm. The respondent did not make any attempt to
correct the alleged typographical error in the said paragraph at any
point of time. Prayer clauses (a) and (b) of the statement of claim were
for share in the profit and not in the Dharavi property or any other
assets of the partnership firm.
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90. Insofar as the findings rendered by the Arbitral Tribunal in
paragraph 7 (xxv) is concerned, it is submitted that the Arbitral
Tribunal has only held that the issue for accounts cannot be considered
in view of section 48 of the Partnership Act as the relief would not be
maintainable. He submits that in prayer clauses (a) and (b) of the
statement of claim, there was prayer for share in the partnership firm
prior to 1982 and thus there was nothing to reject any claim for share in
the profit of the partnership firm prior to 1982. The findings recorded
in paragraph 7 (xxv) are thus perverse.
91. Learned senior counsel once again led emphasis on the findings
recorded in paragraph 7 (xxv) at page 94 and the conclusion drawn in
paragraph 8 (E) and would submit that there is clear contradiction in
those findings and conclusion which goes to the root of the matter.
Once the Arbitral Tribunal had rejected the claim for seeking
accounts, there was no question of any right in the respondent to seek
winding up of affairs of the said firm. Once the prayer for seeking
accounts has been rejected, issue of winding up of the affairs of the suit
firm cannot be determined. Drawing up of the accounts under section
48 of the Partnership Act was mandatory which fact has been totally
over looked by the Arbitral Tribunal.
92. It is submitted that without drawing up of accounts under section
48 of the Partnership Act, the impugned award cannot be given effect
at all. The expenses incurred by the appellants during all these years
have to be deducted from the rental income, if any, which could be
done only upon determination of accounts under section 48 of the
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Partnership Act. Learned senior counsel for the appellants once again
distinguished the judgments cited by the respondent and referred to and
relied upon by the Arbitral Tribunal in the impugned award and would
submit that the judgment of this Court in case of Seemaben Shankar
Patel (supra) has not been distinguished by the Arbitral Tribunal in
proper manner. He submits that since the respondent had not made any
claim for about 30 years, the Arbitral Tribunal on that ground did not
grant claim for interest upto the date of award. The view of the
Arbitral Tribunal is not plausible view and thus the impugned award
was liable to be interfered with under section 34 of the Arbitration Act.
The Arbitral Tribunal has not discussed the evidence led by the
appellants in the impugned award at all.
REASONS AND CONCLUSION :-
93. We have heard the learned counsel for the parties at length and
have given our anxious consideration to the rival submissions made.
Learned counsel for the respondent vehemently urged that scope of
powers of the Appellate Court under Section 37 of the Arbitration Act
are very limited. It is submitted by the learned counsel that learned
Single Judge has rightly not interfered with the impugned award which
was rendered after considering the pleadings, documents, evidence and
various judgments relied upon by both the parties. In support of this
submission, various judgments are relied upon by the learned counsel
for the appellants.
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94. We shall first deal with the scope of powers of the Appellate
Court under Section 37 of the Arbitration Act. Supreme Court in the
case of MMTC Limited Vs. Vendanta Limited (supra) and in case of
Dyna Technologies Private Limited Vs. Crompton Greaves Limited
(supra) has dealt with powers of an Appellate Court for interfering
with the Arbitralaward under Section 37 of the Arbitration Act. It is
held by the Supreme Court that the powers of the Appellate Court
under Section 37 are very limited. It is held that there is no dispute
that Section 34 of the Arbitration Act limits a challenge to an award
only on the grounds provided therein or as interpreted by various
courts. In our view, powers of the Appellate Court under Section 37
are more limited than the limited powers of the Court under Section 34
of the Arbitration Act. We will now deal with rival contentions of
both the parties to determine whether the appellants have made out a
case for exercise of such limited powers of this Court under Section
37 of the Arbitration Act or not.
95. The respondent was the original claimant before the Arbitral
Tribunal whereas the appellants were the original respondents. In the
statement of claim dated 28th February 2014, the respondent had
prayed for winding up of the suit firm and an order or direction to
furnish true and correct accounts of the total income derived, expenses
incurred and the profit earned out of the said firm and the said
property for the period from 1982 till the Accounts of the said firm
are settled. The respondent had also applied for an order against the
appellants to pay an ascertained amount equivalent to 51% of the
profit earned by the respondent including Mr.Mohamed Shafik along
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with interest @ 18% p.a. thereon for the period from 1982 till date.
96. The respondent applied for declaration that the respondent was
the co-owner having 51% share in the assets of the said firm including
the said Dharavi property and also for a declaration that the original
Declaration-Cum-Indemnity and affidavit both dated 13th October
2010 annexed at Exhibits- "G1" and "G2" respectively are null and
void and of no effect whatsoever. The statement of claim was resisted
by the appellants by filing written statement. Both the parties led oral
as well as documentary evidence.
97. In the impugned award, the Arbitral Tribunal declared that the
respondent (original claimant) is entitled to 51% share in the profits of
the Dharavi property as co-owner and will continue to receive her share
in the profits till winding up in terms of clauses 13 and 14 of Deed of
Partnership. The appellants are directed to pay the respondent 51%
of the profit from the Dharavi property form 1982 till the date of the
award and thereafter till winding up. The Arbitral Tribunal did not
award any interest till the date of award however directed the
appellants to pay interest @ 9% p.a. on their share of profits till final
payment from the date of the award and awarded costs quantified at
Rs.20 lacs.
98. Learned Single Judge recorded detailed reasons and after
dealing with the submission advanced by both the parties and record,
dismissed this arbitration petition filed by the appellants under Section
34 of the Arbitration Act.
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99. It is an admitted position that by a Deed of Partnership dated 9 th
November 1960, Mr.Mohamed Ismail constituted a Partnership with
Mr.Yakubali Mohamedali w.e.f. 21st October 1960 for carrying on
the same business which was started prior to 1960 as proprietary
concern by Mohamed Ismail. The said Mohamed Ismail expired on
25th April 1965. Mr.Yakubali who is predecessor and the father of the
respondent invited his nephew Mr.Mohamed Shafik to join him as a
partner to carry on the said business. Mr.Yakubali and Mohamed
Shafik executed Partnership Firm in the name and style of
M/s.Mohamedali Ismail duly registered. Mr.Yakubali and Mohamed
Shafik are entitled to share profit and losses in the ratio 51% : 49%
respectively. The Dharavi property was purchased by the suit firm vide
an Indenture Deed dated 28th February 1978 duly registered,
admeasuring 3029 sq. yards equivalent to 3042.74 sq.mrts or
thereabout together with tenements and dwelling houses and leasehold
land admeasuring approx.4369 sq. yards equivalent to 3993.26 sq.mtrs
for consideration of Rs.1,25,000/-.
100. There is also no dispute that Yakubali expired on 27 th June
1982 leaving behind his wife Mrs. Zarina Yakubali and the
respondent herein as his only legal heirs. The suit firm had stopped
the business of tanners etc. around 1982 prior to the death of
Yakubali. The said Dharavi property was given on rent to various
tenants by the suit firm. In view of demise of Yakubali on 27 th June
1982, the said suit firm came to be dissolved by operation of law.
There was no change of constitution of suit firm after death of
Yakubali.
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101. It was a specific case of the respondent in the statement of claim
that after demise of Yakubali, the said Mohamed Shafik during his
lifetime and the appellants after demise of Mohamed Shafik continued
the business of the suit firm by use of the assets of the suit firm and
did not give any account or share in the profit of the suit firm to the
respondent. The respondent issued a notice for referring the dispute
to the arbitration and for dissolution of the suit firm to the appellants
on 15th February 2013.
102. The appellants in their statement of defence raised a preliminary
issue of limitation in respect of the claim made by the respondent. The
appellants relied upon Article 5 of the Limitation Act, 1963 and
contended that any claim for account or share in the profit of a
dissolved partnership firm is required to be made within 3 years
from the date of the dissolution of the partnership firm. Any claim in
respect of any particular property or asset of the a dissolved
partnership firm is also required to be made within 3 years from the
date of the dissolution of the partnership firm. It was the case of the
appellants that upon death of Yakubali, neither the respondent nor
her mother Zarina Yakubali raised any claim in respect of the assets
and/or properties of the partnership firm nor sought for any share in
the accounts of the partnership firm. No letters were addressed by
the respondent or by her mother to the appellants making any claim
in respect of the assets of the partnership firm or for accounts of the
partnership firm for a period of more than 30 years.
103. It was also the case of the appellants that after the death of
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Yakubali, Mohamed Shafik and after his demise, the appellants had
been openly and continuously enjoying the possession of the said
Dharavi property and have been exercising rights as owner of the
said Dharavi property to the exclusion of the said Zarina Yakubali and
the respondent herein. They have been also collecting rent, issuing
rent receipts, paying taxes, looking after the day to day affairs and
managing the said Dharavi property to the complete exclusion of the
said Zarina Yakubali and the respondent herein. The respondent and
her mother are completely ousted from Dharavi property and other
properties of the suit firm.
104. In the alternate submission, the appellants also relied upon
Article 65 of the Limitation Act and contended that any claim or any
interest in an immovable property of a partnership firm based on being
a legal heir of a deceased partner (i.e. based on title) is required to be
made within 12 years from the date of the death of partner concerned
and/or dissolution of the partnership firm. The appellants also
contended that legal heirs of Yakubali was not entitled to the assets of
the partnership firm as prayed by the respondent.
105. In paragraph 15 of the written statement, the appellants
contended that the mother of the respondent was at all times aware of
Mohamed Shafik becoming the sole proprietor and carrying on
business as M/s. Mohomedali Ismail and did not raise any objections
of any nature whatsoever. Mohamed Shafik was openly and
continuously enjoying the possession of the assets of the partnership
firm including the said Dharavi property as sole owner thereof to the
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exclusion of the said Zarina Yakubali and the respondent herein. The
appellants also pleaded that it was agreed between the mother of the
respondent and Mohamed Shafik that the mother of the respondent or
any one from the family of the Yakubali would not have any right or
interest in the said partnership business and assets and it is for this
reason that neither the mother of the respondent nor the respondent or
any person from the family of Yakubali made any claim over the said
partnership business and assets. The appellants however did not rely
upon any rights in support of this contention in the written statement.
106. The Arbitral Tribunal in the impugned award framed 10 issues
and recorded various findings of facts on those issues framed. The
Arbitral Tribunal also relied upon clauses 13 and 14 of the Deed of
Partnership in the impugned award. In so far as Issue no.5 in respect
of prayer for winding up and for furnishing true and correct accounts
for the period of 1982 is concerned, learned senior counsel for the
appellants vehemently relied upon the findings recorded by the
Arbitral Tribunal in paragraph (xxv) (internal page 45 of the award)
and vehemently urged that in the said paragraph, though the Arbitral
Tribunal held that in so far the prayer for accounts is concerned,
considering Section 48 of the Partnership Act, relief would not be
maintainable and on the other hand, while dealing with the issue
no.5 (internal page 56 of the award), the Arbitral Tribunal held that
relief for account cannot be granted by the Arbitral Tribunal and
consequently answered that the said claim was barred by limitation.
The respondent was however entitled to call the appellants to wind up
the firm.
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107. It is vehemently urged that both the findings are inconsistent
with each other and are perverse. He invited our attention to
paragraph 1 of the final relief (internal page 57 of the award) and
would submit that the relief that the respondent herein would be
continued to receive her share in the profit till winding up in terms of
clauses 13 and 14 of the Deed of Partnership is contrary to the
findings rendered in paragraph (xxv) at internal page 45 of the
award.
108. Learned counsel for the respondent could not dispute that the
award rendered by the Arbitral Tribunal which was the subject matter
of the petition under Section 34 was a final award. In our view, there
is substance in the submission of the learned senior counsel for the
appellants that in view of the findings of the Arbitral Tribunal that the
respondent would not be entitled to prayer for accounts have not been
impugned by the respondent and has attained finality. In our view,
the final reliefs that respondent herein would continue to receive her
share in the profit till winding up is not executable in view of the
Arbitral Tribunal itself not determining the accounts under Section 48
of the Partnership Act. This part of the declaration in the award
simplicitor is not executable in view of there being a final award.
109. The next arguments which is vehemently urged by the learned
senior counsel for the appellants is that the respondent could not have
been awarded 51% share or any other share in the Dharavi property
of the partnership firm is concerned, there is no merit in this
submission of the learned senior counsel. The submission that Section
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37 of the Partnership Act would not be applicable to the claims made
by the respondent on the ground that neither the business of the
partnership firm was carried on by Mr.Mohamed Shafik after the
demise of Yakubali nor Section 37 of the Partnership Act gives rights
to the respondent to make a claim in respect of the assets of the
Partnership Firm has no merit. The Arbitral Tribunal has rightly relied
upon the clauses 13 and 14 of the Partnership Deed.
110. In our view, clause 14 of the Partnership Deed read with
Section 14 of the Partnership Act is rightly invoked by the respondent
which provides that subject to contract between the partners, the
property of the firm includes all property and rights and interests in
property originally brought into the stock of the firm, or acquired, by
purchase or otherwise, by or for the firm, or for the purposes and in the
course of business of the firm, and includes also the goodwill of the
business. Mr. Rustomjee, learned counsel for the appellants did not
point out any clause of the Partnership Deed providing that no partner
will have any share in the assets of the Partnership Firm or providing
that the sole surviving partner upon demise of the other partner
would exclusively become owner of the property acquired by the suit
firm.
111. The Arbitral Tribunal has recorded a finding that the case of
the respondent was that the respondent had no knowledge that
Mohamed Shafik or the appellants continued to collect rent in the
name of the firm. The Arbitral Tribunal had recorded the finding that
documentary evidence shows that Dharavi property was an asset of
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the partnership firm and income was received from the Dharavi
property. It is also rightly held by the Arbitral Tribunal that the
assertion of the appellants in the Declaration-Cum-Indemnity that
after the death of Yakubali, Mohamed Shafik acted as a sole proprietor
would only demonstrate that business of firm was now being carried
on by Mohamed Shafik as a sole proprietor by using the assets of the
firm. The appellants also did not produce any documentary evidence
to show that Mohamed Shafik apart from the Dharavi property was
carrying on any other business.
112. A perusal of the averments made in the written statement and
more particularly in paragraph 13 clearly indicates that it was the case
of the appellants themselves that Mohamed Shafik continued to carry
on partnership business and asserted the rights over the partnership
assets as the sole owner thereof in his capacity as a sole proprietor in
M/s.Mohamedali Ismail. The arguments thus advanced by the learned
senior counsel that there was no finding recorded by the Arbitral
Tribunal that after dissolution of the partnership firm upon demise of
Yakubali, the partnership business continued by Mohamed Shafik by
use of the assets of the partnership firm is contrary to the case pleaded
by the appellants themselves in the written statement.
113. The Arbitral Tribunal also recorded a finding that the appellants
had made all attempts to get all the properties mutated in their names
before the Revenue Authorities which was rejected by the Revenue
Authorities. The appellants continued to make a representation as a
partner of the suit firm before various statutory authorities and the
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public at large until 2002. The appellants had addressed a letter dated
29th December 2005 to the Additional Collector and represented that
the appellant no.3 was the partner of the suit firm and had issued the
said letter in the capacity as a partner of the suit firm. The appellants
had also initiated various suits in the year 2012 against some of the
tenants in Small Causes Court. It was averred by the appellants in
the said suit that properties were owned by Yakubali and Mohamed
Shafik. Yakubali left behind Mrs. Zarina Yakubali as his only legal
heir. It was however pleaded by the appellants that after the death of
Yakubali and Zarina Yakubali, the appellants were entitled to the said
property.
114. In the said suit also, it was averred by the appellants that
Mohamed Shafik and Yakubali were the partners in the name and
style of M/s.Mohamedali Ismail who were the original owners and
landlords in respect of the suit premises. However in paragraph 3 of
the plaint, it was averred that after the death of Mohamed Shafik and
Yakubali and his wife Zarina, the appellants have become owners
and landlords in respect of the entire piece and parcel of the land. It
is thus clear that the said Dharavi property was the partnership asset.
The said Mohamed Shafik and Yakubali were the original owners and
the landlords of the suit premises. The rights of the ownership claim
in respect of the said property after the death of Mohamed Shafik and
Yakubali devolved on their legal heirs. Even according to the
appellants, the suit property continued to be owned by Mohamed
Shafik and Yakubali and only after demise of wife of Yakubali, the
appellants started claiming ownership.
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115. Mr. Rustomjee, learned senior counsel for the appellants could
not dispute these averments made by the appellants themselves in
the written statement filed before the Arbitral Tribunal. There is no
dispute about such averments made before the Small Causes Court and
the representation made by the appellants before various authorities
admitting that the said Dharavi property was an asset of the suit
partnership firm. These findings of facts rendered by the Arbitral
Tribunal are after appreciating the oral and documentary evidence led
by the parties and after considering the admissions on the part of the
appellants in the averments made in the statement of defence and in the
plaint filed by the appellants before the Small Causes Court.
116. There was no perversity in those findings rendered by the
Arbitral Tribunal. Learned Single Judge thus rightly did not interfere
with those findings of facts and the reliefs granted by the Arbitral
Tribunal in respect thereof in paragraph 1 of the operative part of the
Arbitralaward declaring the respondent as co-owner of 51% share in
the said Dharavi property. The said relief granted by the Arbitral
Tribunal will have to be read with the answer to issue no.2 given in the
impugned award and in paragraph (e) at page 52 of the Arbitralaward.
117. We shall now decide whether 51% share claimed by the
respondent was barred by law of limitation or not ? Simultaneously,
we will also deal with the issue as to whether Section 37 of the
Partnership Act was at all applicable to the said claim made by the
respondent or not ?
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118. It was the specific plea of the respondent in the statement of
claim that the respondent and the Mohamed Shafik had family relation
and therefore the respondent had full faith that Mohamed Shafik would
manage the assets of the dissolved firm honestly. On the other hand, it
was pleaded by the appellants that it was oral understanding between
the mother of the respondent and Mohamed Shafik that neither the
mother of the respondent nor anyone else from the family of the
Yakubali would have any right or interest in the assets or share in the
profit of the suit firm and for this reason neither mother of the
respondent nor any person from the family of the Yakubali made any
claim over the said partnership business and assets for all these years.
119. It was the case of the appellant that there was thus no question of
managing the assets of the said partnership firm in trust or for and on
behalf of the respondent by the appellant or their predecessor as sought
to be alleged by the respondent. This aspect has been dealt with by the
Arbitral Tribunal in detail and more particularly in sub-paragraph (r) to
paragraph 7 (internal pages 24 to 28 of the Arbitralaward). The claim
made by the respondent was under Section 37 of the Indian Partnership
Act read with Section 50 read with Sections 88 and 95 of the Indian
Trusts Act, 1882. Both the parties relied upon several judgments on
this issue, which are discussed by the Arbitral Tribunal in the impugned
award. After referring to the pleadings, evidence, various provisions of
Partnership Act, Indian Trusts Act and Limitation Act, the Arbitral
Tribunal held that relief for share in the profit subsequent to the death
of Yakubali is maintainable and is not barred by Article 5 or 65 of the
Limitation Act.
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120. Arbitral Tribunal rightly held that the claim was maintainable
under Section 37 of the Partnership Act. Arbitral Tribunal also rightly
recorded a finding that the respondent herein had been able to establish
that the business of the partnership was continued by Mohamed Shafik
and then by the appellants by continuing to collect the income from the
Dharavi property. It is held that a Trust is created de-hors Section 5 of
the Indian Trusts Act other than by any written instrument as is clear
from the judgment of the Supreme Court in case of Prem Bellabh
Khulbe. In the instant case, Mohamed Shafik and the respondent were
closely related which fact had come on record. The Arbitral Tribunal
rightly rejected the case of the appellant that the Mohamed Shafik
became the sole owner on the death of Mr. Yakubali.
121. The Arbitral Tribunal rightly held that provisions of Sections 37,
50 read with Section 50(a) of the Partnership Act and Section 88
illustration (f) and Section 95 of the Indian Trusts Act are applicable in
the facts and circumstances of the present case. The learned Single
judge thus rightly did not interfere with the findings of the fact
recorded by the Arbitral Tribunal in the impugned judgment delivered
on 11th July, 2019. The respondent had satisfied the ingredients of
Section 37 and therefore became entitled to share of profits. The claim
made by the respondent was not barred by law of limitation even in
view of Section 10 of the Limitation Act.
122. Under Section 16(a) of the Partnership Act, if a partner derives
any profit for himself from any transaction of the firm, or from the use
of property or business connection of the firm or the firm name, he
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shall account for that profit and pay it to the firm. Under Section 16(b)
of the Partnership Act, if a partner carries on any business of the same
nature as and competing with that of the firm, he shall account for and
pay to the firm all profits made by him in that business. The learned
senior counsel for the appellants could not point out any provision in
the Partnership Deed that Mohamed Shafik upon his demise was solely
entitled to derive any profit for himself from any transaction of the
firm, or from the use of property or business connection of the firm or
the firm name.
123. Under Section 37 of the Partnership Act, if the surviving partner
continues the business of the firm with the property of the firm without
any final settlement of accounts, outgoing partner or his estate, then, in
the absence of a contract to the contrary, the outgoing partner or his
estate is entitled at the option of himself or his representatives to such
share of the profits made since he ceased to be a partner, as may be
attributable to the use of his share of the property of the firm or interest
at the rate of 6% per annum on the amount of his share in the property
of the firm. Learned senior counsel for the appellants could not point
out any contract to the contrary. Though the appellants had pleaded in
the written statement that there was an oral agreement between the
Mohamed Shafik during his life time and mother of the respondent that
neither the respondent nor any other person from her family would
claim any share in the assets of the partnership or any profit, the
appellants failed to prove their case before the Arbitral Tribunal.
124. The learned senior counsel for the appellants could not point out
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any perversity in the impugned award on this aspect before the learned
Single Judge or even before us in this Appeal. Under Section 42 of the
Partnership Act, the firm stood dissolved in view of the demise of one
partner out of two partners by operation of law. Under Section 46 of
the Partnership Act, on the dissolution of a firm, every partner or his
representative is entitled, as against all the other partners or their
representatives, to have the property of the firm applied in payment of
the debts and liabilities of the firm, and to have the surplus distributed
amongst the partners or their representatives according to their rights.
Under Section 47 of the Partnership Act, after the dissolution of a firm,
the authority of each partner to bind the firm, and the other mutual
rights and obligations of the partners, continue notwithstanding the
dissolution, so far as may be necessary to wind up the affairs of the
firm and to complete transactions begun but unfinished at the time of
the dissolution, but not otherwise.
125. Section 48 of the Partnership Act provides mode of settlement of
accounts between the partners. Under Section 50 of the Partnership
Act, subject to contract between the partners, the provision of Section
16(a) shall apply to transactions by any surviving partner or by the
representatives of a deceased partner, undertaken after the firm is
dissolved on account of the death of the partner and before its affairs
have been completely wound up. The learned senior counsel for the
appellants could not point out any contract contrary to the said
provision before this Court. The respondents was thus entitled to claim
all the profits earned by the said Mohamed Shafik and thereafter upon
his demise by the appellants by the use of the property or business
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connection in the firm or the firm name as they were liable to account
for that profit and to pay to the firm. It was the case of the respondent
before the Arbitral Tribunal that there was no liability of the suit firm.
The appellants also could not dispute that there were no liabilities of
the suit firm before the Arbitral Tribunal or before this Court.
126. Under Section 10 of the Limitation Act, it is made clear that
notwithstanding anything contained in the earlier provisions in the said
Limitation Act, no suit against a person in whom property has become
vested in trust for any specific purpose, or against his legal
representatives or assigns for the purpose of following in his or their
hands such property, or the proceeds thereof, or for an account of such
property or proceeds, shall be barred by any length of time. Section 10
of the Limitation Act has to be read with Section 88 illustration (f) of
the Indian Trusts Act which makes it clear that where a trustee,
executor, partner, agent, director of a company, legal adviser, or other
person bound in a fiduciary character to protect the interests of another
person, by availing himself of his character, gains for himself any
pecuniary advantage, or where any person so bound enters into any
dealings under circumstances in which his own interests are, or may be,
adverse to those of such other person, and thereby gains for himself a
pecuniary advantage, he must hold for the benefit of such other person
the advantage so gained. Illustration (f) makes it clear that if one
partner out of the two dies and surviving partner instead of winding up
the affairs of the partnership, retains all the assets in the business, the
surviving partner must account to the legal representatives of the
deceased partner for the profits arising from deceased partner's share of
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the capital.
127. It is thus clear that the provisions of Sections 37, 50 read with
Section 16(a) of the Partnership Act and Section 88 illustration (f) and
Section 95 of the Indian Trusts Act are applicable in the facts and
circumstances of this case. There is no period of limitation prescribed
in view of Section 10 of the Limitation Act for recovery of the assets of
the partnership firm which were in the hands of the surviving partner
upon dissolution of the said firm i.e. Mohamed Shafik and thereafter
upon his demise in the hands of the appellants as trustees on behalf of
the respondent. The Arbitral Tribunal has accordingly rightly held that
the case of the claim in Dharavi property was not barred by law of
limitation.
128. Learned Single Judge also after recording detail reasons rightly
held that respondent had satisfied the ingredients of Section 37 of the
Partnership Act. Section 88 of the Trust Act read with illustration (f) of
the Indian Trusts Act clearly stipulates a set of rights in favour of the
legal heir or representatives of the deceased partner against the trustees
holding the property of the partnership in trust and also the benefit
arising there from. The learned Single Judge has rightly held that the
winding up of the firm is complete only upon the distribution of the
assets.
129. We shall now deal with the judgments referred to and relied upon
by both the parties before the Arbitral Tribunal, before the learned
Single Judge and also in this appeal. The Arbitral Tribunal has already
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dealt with all these judgments in great detail. The Supreme Court in
case of Prem Ballabh Khulbe v/s. Mathura Datt Bhatt (supra) has
held that partnership itself does not create a fiduciary relation between
the partners or make any one of them a trustee from the other or for his
representatives. The relation may however arise on the death of one of
them or be created by other special circumstances. The principles laid
down by the Supreme Court in the said judgment applies to the facts of
this case. Upon the demise of Yakubali, Mohamed Shafik and upon
demise of Mohamed Shafik, the appellants were holding the said
Dharavi property and the business of the partnership firm as trustees
for the respondent.
130. The Calcutta High Court in case of Tilokram Ghosh and Ors. v/
s. Smt. Gita Rani Sadhukhan and Ors. (supra) has held that Section
37 of the Partnership Act has to be read with Section 88 of the Trust
Act which provides that the continuing partners are trustees for the
estate of the deceased partner as would be evident from the illustration
(f) set out thereunder. In our view, the principles laid down by the
Calcutta High Court in the said judgment would apply to the facts of
this case. We are in agreement with the views expressed by the
Calcutta High Court in the said judgment.
131. The Punjab and Haryana High Court in case of P.S. Nagarunjan
(supra) has held that in a case where the surviving partner carries on
the business of the firm and continues to do so then though the suit for
accounts may be barred, a suit for share of the profits under Section 37
of the Partnership Act is maintainable and does not fall under Article
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106 of Limitation Act, 1908 corresponding to Article 5 of the
Limitation Act, 1963. The Calcutta High Court in case of Nilmadhab
Nandi and Ors. (supra) has held that the rights given to legal
representative of a deceased partner under Section 37 of the
Partnership Act is not a right to a share of profits of a dissolved
partnership within the meaning of Article 106 of the Limitation Act but
is a right accruing to him by the subsequent dealing with the assets
belonging to the deceased partner. We are in agreement with the views
expressed by the Calcutta High Court in the said judgment which
applies to the facts of this case.
132. The Madras High Court in case of Babu alias Govindoss
Krishnadoss (supra) has held that the rights of the representative of the
deceased partner in one of the property and does not rest merely on
contract, and the surviving partners, who have the right and duty to
realize the partnership property, hold a fiduciary relationship towards
the deceased partner's representatives as regards his interest in the
partnership property. The Madras High Court in the said judgment
referred to a judgment in case of In re Bourne in which it was held that
when a partner dies and the partnership comes to an end, it is not only
the right, but the duty, of the surviving partner to realize the assets for
the purpose of winding up the partnership affairs, including the
payment of the partnership debts. In our view, the said Mohamed
Shafik who continued the use of the partnership assets even after the
suit firm having been dissolved by operation of law as far back in the
year 1982 failed in fiduciary duties toward the legal representatives and
estate of the said deceased partner Yakubali. Such fiduciary duty
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continued till the properties held in trust are distributed to all the
partners and the estate of the deceased partner. We are in agreement
with the views expressed by the Madras High Court.
133. Supreme Court in case of Shreedhar Govind Kamerkar (supra)
held that the rights and liabilities of the partners in respect of the
partnership property would be discharged only when the firm is finally
would up and the properties of the firm are distributed. Supreme Court
in case of S. V. Chandra Pandian and Ors. (supra) held that during the
subsistence of the partnership a partner would be entitled to a share in
the profits and after its dissolution to a share in the residue, if any on
settlement of accounts. In this case, the appellants could not prove
independently or disputed the case of the respondent that there were no
liabilities of the suit firm. The appellants were thus liable to pay the
legitimate due share of the respondent. Both these judgments apply to
the facts of this case. We are respectfully bound by these judgments.
134. Supreme Court in case of Mohamed Laiquiddin and Anr.
(supra) has held that when there are only two partners constituting the
partnership firm, on the death of one of them, the firm is deemed to be
dissolved despite the existence of a clause which says otherwise. It is
held by the Supreme Court in the said judgment that under the
Partnership Act, 1932, property which is brought into the partnership
by the partners when it is formed or which may be acquired in the
course of the business becomes the property of the partnership and a
partner is, subject to any special agreement between the partners,
entitled upon dissolution to a share in the money representing the value
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of the property. We are thus not inclined to accept the submission
made by the learned senior counsel for the appellants that upon demise
of Yakubali and thereafter upon demise of wife of Yakubali, the said
property became the property of Mohamed Shafik exclusively or after
his demise became the exclusive property of the appellants. The
Statement of the learned senior counsel is contrary to the case of the
appellants in the pleadings and contrary to law.
135. Supreme Court in case of V. Subramaniam (supra) has held that
the partners of a firm are the co-owners of the property of the firm,
unlike shareholders in a company who are not co-owners of the
property of the company. The principles laid down by the Supreme
Court in the said judgment applies to the facts of this case. In our view,
the said Mohamed Shafik and the said Yakubali were the owners in the
ratio 51:49 in the profits as well as in the assets of the said suit firm.
The fiduciary relationship between the Mohamed Shafik and the said
estate of Yakubali continued and after demise of Mohamed Shafik and
the respondent continued. The argument of the learned senior counsel
that the respondent who was the legal heir of the said Yakubali cannot
make any claim in the assets of the suit property on the ground of
limitation or otherwise is contrary to the principle of law laid down by
the Supreme Court and various other High Courts.
136. Punjab and Harayan High Court in case of Mansha Ram (supra)
has held that a partner is not a trustee of the other partner, but it cannot
be denied that the partners stand in fiduciary relation to one another
and in such a case equity will never permit the surviving partner to
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trade, or to utilize the property of the other for his exclusive personal
profit. If he makes a profit, it must be paid over to the owner of the
property, the use of which produced the profit. The appellants have
admitted in their statement of defence before the Arbitral Tribunal that
after demise of Yakubali, the said Mohamed Shafik and then after his
demise, the appellants continued to use the said Dharavi property,
however the business was run as a sole proprietor. The appellants
having admitted the use of the partnership assets after dissolution of the
partnership firm by an operation of law thus acted in fiduciary capacity
and trustee in respect of the share of the estate of the said deceased
partner and were thus liable to return the share of the deceased partner
to the estate in the profits as well as in the assets of the suit firm.
137. Though, the appellants in their statement of defence had pleaded
adverse possession in the Arbitral proceedings, the learned senior
counsel for the appellant did not press the said plea before us. Even
otherwise, the findings of fact rendered by the Arbitral Tribunal on this
issue against the appellants being not perverse was rightly not
interfered by the learned Single Judge under Section 34 of the
Arbitration Act. A Division bench of Privy Council in case of Ahmed
Musaji (supra) has held that it is well settled that in certain cases,
when on the dissolution of a firm one of the partners retains assets of
the firm in his hands without any settlement of accounts and applies
them in continuing the business for his own benefit, he may be
ordered to account for these assets with interest thereon, apart from
fraud or misconduct in the nature of fraud. That decree was affirmed
in appeal and thereafter by judicial committee.
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138. The Arbitral Tribunal has also distinguished various judgments
relied upon by the appellants on the ground that none of those
judgments had dealt with Section 37 of the Partnership Act and the
Indian Trusts Act. Learned senior counsel for the appellants though
invited out attention to each of those judgments which were referred
and relied upon by the appellants before the Arbitral Tribunal could not
demonstrate as to how any of those judgments are applicable to the
facts of this case. The learned Single Judge has also rightly held that
none of those judgments would assist the case of the appellants.
139. The Arbitral Tribunal has recorded a finding that the
documentary evidence makes sure that the Dharavi property is the
assets of the partnership and income was received from the Dharavi
property by Mr.Mohamed Shafik and after his demise by the
appellants. The assertion of the appellants in the declaration-cum-
indemnity that on the death of Yakubali, Mohammed Shafik acted as a
sole proprietor would demonstrate that the business of the firm was
being carried on by Mohamed Shafik by using the assets of the firm.
We do not find any perversity in the said findings rendered by the
Arbitral Tribunal. The appellants themselves were representing before
authorities that the said Dharavi property was an assets of the suit firm
and that the appellant no. 3 was asserting himself to be a partner of the
firm. There was a clear admission as on 2005 on the part of the
appellants that the Dharavi property was the asset of the partnership
firm.
140. Arbitral Tribunal rightly rejected the case of oral agreement
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between Mohammed Shafik and the mother of the respondent that
neither the mother of the respondent nor the respondent or anybody
else from her family would make any claim in the said property or in
the share or profit of the suit firm. The learned senior counsel for the
appellants could not demonstrate as to how the said finding rendered
by the Arbitral Tribunal is perverse.
141. Since the Arbitral Tribunal itself has not carried out that exercise
for ascertainment of the profit earned by Mr.Mohamed Shafik and
upon his death by the appellants by use of the assets of the suit firm,
we cannot issue such directions at this stage. In our view, Mr.
Rustomjee, learned Senior Counsel for the appellant is right in his
submission that the exercise of ascertainment of profit not having been
done by the Arbitral Tribunal, no such direction can be issued at this
stage.
142. In so far as the alleged inconsistency pointed out by the learned
senior counsel in the impugned award is concerned, learned senior
counsel could not dispute that in the statement of claim, the
respondent had prayed for 51% share in the assets and in the profits
of the suit firm. The entire award has to be read in proper
perspective to assign true and correct meaning and not any isolated
sentence in the award. We do not find any patent illegality in that
part of the impugned award. There is no substance in the submission
of the learned senior counsel for the appellants that 51% claim in the
assets of the suit firm is barred by law of limitation under Section 5 of
the Limitation Act or under any provisions of the Limitation Act.
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143. The submission of the learned senior counsel that the award
discloses patent illegality while holding that Mohamed Shafik had
continued the business of the partnership firm after dissolution of the
suit firm by operation of law, is contrary to the pleadings of the
appellants themselves. The parties were ad-idem that the suit firm
stood dissolved by operation of law after demise of Yakubali. The
question was whether the asset and the business of suit firm continued
to be used in the name of the firm by Mohamed Shafik and upon
demise of him, the appellants or not. There is no substance in the
submission of the learned senior counsel of the appellants that under
Clause 14 of the Partnership Deed, the respondent could not claim
any right to receive any share in the profit of the Dharavi property.
The submission of the learned senior counsel that Sections 10 and 37
of the Partnership Act and Section 88 of the Indian Trusts Act were
not applicable to the claims made by the respondent is without any
merit.
144. In so far as the observations made by the arbitral tribunal
in paragraph (y) at internal page 27 that the present claim was not
one for share of the properties of the dissolved Partnership firm is
concerned, the said paragraph has to be read with the findings
rendered by the Arbitral Tribunal that the respondent had made claim
of 51% share in the asset of the suit firm and the reliefs granted.
The said paragraph also has to be read with the averments made and
the prayer in the statement of claim filed by the respondent. It is not
the case of the appellants that the respondent had given up the claim
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for the share in the said Dharavi property before the Arbitral Tribunal.
145. In our view, merely because there was no reference to the
assets of Partnership firm in the alleged Will executed by the mother
of the respondent would not amount to relinquishment of the share in
the Partnership assets and profits of the deceased husband. The bequest
made in testamentary document cannot be considered as
extinguishment of any claim which otherwise in law, the testator is
entitled to. The respondent had already explained delay in making
claim against the appellants and had pleaded that because of the
relationship between the parties and the said Mohamed Shafik during
his life time and thereafter the appellants after his demise were
holding the said property in trust. No period of limitation was thus
applicable to the claim for share in the assets of the suit firm or for
share in profit from the date of dissolution of the firm. There is no
substance in the submission of the learned senior counsel for the
appellants that Article 5 of the Limitation Act would have been
attracted to the said claim made by the respondent under Section 37
of the Partnership Act. The said claim under Section 37 has to be read
with Section 50 read with Section 16A of the Partnership Act and
Section 88, illustration (f) and Section 95 of the Indian Trusts Act.
146. The arbitral tribunal has already interpreted clause 14 of
the Partnership Act and has rightly held that the respondent had
51% share in the suit firm whereas Mohamed Shafik was entitled to
49% share. The interpretation of the arbitral tribunal being a possible
interpretation even otherwise could not have been substituted by
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another interpretation by the learned Single Judge while hearing the
petition under Section 34 of the Arbitration Act or by this Court while
hearing the appeal under Section 37 of the Arbitration Act. It was
clearly admitted by the appellants themselves that the said Dharavi
property was acquired by the suit firm of which the said Yakubali and
Mohamed Shafik were the joint owners thereof.
147. There is no substance in the submission of the learned senior
counsel for the appellants that the entire claim of the respondent
under Section 37 of the Partnership Act was for share in the profit.
Under Section 14 of the Partnership Act, the property of the firm
includes all property and rights and interests in property originally
brought into the stock of the firm, or acquired, by purchase or
otherwise, by or for the firm, or for the purposes and in the course of
business of the firm, and includes also the goodwill of the business
subject to contract between the partners. Under Section 15 of the
Partnership Act, the property of the firm shall be held and used by the
partners exclusively for the purposes of the business subject to contract
between the partners. Learned senior counsel for the appellants could
not point out any clauses in the Partnership Deed contrary to Sections
14 and 15 which are subject to the contract between the partners.
148. A perusal of the Declaration-Cum-Indemnity dated 12th
October 2010 signed by the appellants and Ms.Shabina Mohamed
Shafik Laljee and in particular clauses 2 to 5 of the said document
would clearly admit on the part the appellants that the Dharavi property
referred in the said document was the property of the suit firm. Even in
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the affidavit affirmed on 12th October 2010 filed by the appellants and
Ms.Shabina Mohamed Shafik Laljee, it was admitted that the said
Dharavi property was purchased by the suit firm consisting of two
partners i.e. Mohamed Shafik and Yakub Ali.
149. Supreme Court in the case of Malabar Fisheries Co. Vs.
Commissioner of Income Tax (supra) has held that rights of the
Partnership Firm and its partners in the property of the firm are not
extinquished after dissolution of the firm. Supreme Court in the cases
of V. Subramanium Vs. R.R. Rao (supra) and N. Kaderavalli Saheb
Vs. N. Gundu Sahib (supra) has held that the partners are the real
co-owners of the property acquired by the partnership firm. Even if
the partnership firm is dissolved, partners continued to be the co-
owners of the property during the life time and after demise of the
partners, legal heirs of such partners continued to be the owners of
such property. The principles of law laid down by the Supreme Court
in the cases of V. Subramanium Vs. R.R. Rao (supra) and N.
Kaderavalli Saheb Vs. N. Gundu Sahib (supra) apply to the facts of
this case.
150. Gujarat High Court in the case of Parmanand Vasani Vs.
State of Gujarat (supra) has held that on dissolution of the firm, the
partnership assets would devolve upon its partners or the
representatives of the partners as tenants-in-common. The principles
of law laid down by the Gujarat High Court in the case of Parmanand
Vasani Vs. State of Gujarat (supra) applies to the facts of this case. We
are in agreement with the views expressed by the Gujarat High Court
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in the said judgment.
151. Under Section 95 of the Indian Trusts Act, the said
Mohamed Shafik during his life time and upon his demise, the
appellants and Ms.Shabina Mohamed Shafik Laljee are subjected to
the same liabilities and disabilities as if they were trustees of the
property for the person for whose benefit they hold it, i.e. estate of the
said deceased person Yakub Ali. Section 88 of the Indian Trusts Act
has to be read with Section 95 of the said Act.
152. Supreme Court in the case of Shreedhar Govind
Karmekar Vs. Yesahwant Govind Kamerkar & Ors. (supra) has held
that if affairs of Partnership firm are completely wound up, the right
of the legal heirs of the partners is continued in the profit and the
assets of the said firm. The respondent has rightly distinguished the
judgment of the Privy Council in the case of K. Gopala Chetty (supra)
on the ground that the said judgment was admittedly delivered prior
to enactment of the Partnership Act, 1932 and also the judgment of the
Madras High Court in the case of M.M. Valliammai Achi (supra),
judgment of Andra Pradesh High Court in the case of Peeran Sahib
& Ors. (supra) and judgment of the Chatish Garh High Court in the
case of Shanti Bai Agrawal & Ors. (supra) on the similar ground.
153. Learned counsel for the respondent has rightly
distinguished the judgment of this Court in the case of Seemaben
Shankar Patel (supra) on the ground that matter of dissolution of
firm had already taken place. The assets of the Partnership firm were
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already partitioned. No claim was made by the deceased partner for
dissolution of the assets of the said firm.
154. Learned counsel for the respondent rightly placed reliance
on the judgment of the Supreme Court in the case of Associated
Builders (supra) and in the case of Ssangyong Engineering and
Construction Company Limited Vs. National Highways Authority
of India (supra) in support of the submission that since the findings
rendered by the arbitral tribunal were not perverse, no interference
under Section 34 of the Arbitration Act is permissible. Principles of
law laid down by the Supreme Court in the case of Associated
Builders (supra) and in the case of Ssangyong Engineering and
Construction Company Limited Vs. National Highways Authority
of India (supra) apply to the facts of this case. This Court in the case
of Fermenta Biotech Limited Vs. K.R. Patel (supra) has held that
even if the view taken by the arbitral tribunal is plausible view, such
view cannot be intereferred with by this Court while hearing the
petition under Section 34 of the Arbitration Act.
155. Learned senior counsel for the appellants could not point
out any infirmity from the impugned judgment rendered by the
learned Single Judge refusing to interfere with the arbitral award.
Learned Single Judge also has dealt with all the arguments advanced
by the parties in the said detailed judgment and has rightly refused to
interfere with the impugned award. There is no substance in the
submission of the learned senior counsel for the appellants that the
findings recorded on the issue no.2 by the arbitral tribunal is different
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than the issue as framed. It is not the case of the appellants that there
was no claim made by the respondent for share in the assets of the
Partnership firm or that such claim was though made in the statement
of claim was given up by the appellants.
156. The appellants themselves had admitted in the statement
of defence that the said Dharavi property was acquired by the
Partnership Firm and that the said Yakubali and Mohamed Shafik
were the co-owners of the said property. There was thus no lis between
the parties in so far as the issue whether the said Dharavi property was
an asset of the suit firm and that the said Yakubali and Mohamed
Shafik were the owners of the said property.
157. In so far as the submission of the learned senior counsel
for the appellants that even if it is considered that the said Dharavi
property was an asset of the suit firm and both the partners were
entitled to share in the said asset, no partner can claim any specific
portion of the said property is concerned, though this submission has
merit, the actual division of the said Dharavi property can be applied
in the execution proceedings.
158. The scope of the powers of the Appellate Court under
Section 37 of the Arbitration Act are more limited than the limited
powers of the Court hearing the petition under Section 34 of the
Arbitration Act. No case is made out by the appellants for exercising
such limited powers by the Appellate Court in this appeal to interfere
with the impugned award as well as the impugned judgment rendered
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by the learned Single Judge except to the limited extent.
159. We therefore pass the following order :-
(i) Appeal No.28 of 2020 is partly allowed and is disposed of in
the following terms :-
(ii) The impugned award dated 23rd March 2018 passed by the
Arbitral Tribunal declaring that the respondent herein (original
claimant) is entitled to 51% share in the Dharavi property as Co-
owner is upheld.
(iii) The impugned direction in the arbitral award that the respondent
herein would continue to receive her share in the profits till winding
up in terms of clauses 13 and 14 of the Deed of Partnership and that
the appellants to pay the respondent 51% of the profit from the
Dharavi property from 1982 till the date of award and thereafter till
winding up is set aside since the account between the partners are not
settled by the Arbitral Tribunal. Consequently, the award directing
the appellants to pay interest on that share of profits till final
payment from the date of award is set aside.
(iv) The award in respect of costs quantified at Rs.20,00,000/- in
the impugned award is upheld.
(v) The appellants to comply with the arbitral award dated 23 rd
March 2018 as modified by this order expeditiously and not later
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than three months from today.
(vi) In view of disposal of the appeal, Interim Application No.9905
of 2020 does not survive and is accordingly disposed of.
(vii) There shall be no order as to costs.
V. G. BISHT, J. R.D. DHANUKA, J.
