Bombay High Court
Shakan Lalchand Surtani And 2 Ors vs Uma Constructions, (A ... on 6 June, 2023
Bench: Bharati Dangre
2023:BHC-OS:4569
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMM. ARBITRATION PETITION NO.264 OF 2022
Rajesh Sharma & Anr. .. Petitioners
Versus
Uma Constructions & Ors. .. Respondents
WITH
COMM. ARBITRATION PETITION NO.185 OF 2022
Deepa Sharma & Anr. .. Petitioners
Versus
Uma Constructions & Ors. .. Respondents
WITH
COMM. ARBITRATION PETITION (L) NO.16413 OF 2022
Deepa Sharma & Anr. .. Petitioners
Versus
Uma Constructions & Ors. .. Respondents
WITH
COMM. ARBITRATION PETITION (L) NO.7131 OF 2022
Shakan Lalchand Surtai & Ors. .. Petitioners
Versus
Uma Constructions & Ors. .. Respondents
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WITH
CONTEMPT PETITION (L) NO.6695 OF 2022
Sunny Mukesh Ramani .. Petitioner
Versus
Rajesh Gaurishankar Sharma & Ors. .. Respondents
WITH
ARBITRATION PETITION (L) NO.8860 OF 2020
Kishan Hukumchand Kappor & Anr. .. Petitioners
Versus
Uma Constructions & Ors. .. Respondents
WITH
ARBITRATION PETITION (L) NO.8861 OF 2020
Hema Amarlal Ahuja .. Petitioner
Versus
Uma Constructions & Ors. .. Respondents
WITH
ARBITRATION PETITION (L) NO.8869 OF 2020
Srichand Waduram Ahuja & Anr. .. Petitioners
Versus
Uma Constructions & Ors. .. Respondents
...
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Mr Rohan Cama, a/w Mr Piyush Raheja, Mr. Akash Menon, Mr
Vishal Pattabiraman, Ms. Bency Ramkrishanan, Mutahhar
Khan i/b Mr Veer Kantariya, Advocates for the Petitioner in
CARBP No.264/20, CARBP No. 185/2022 and for the
Respondent No.2 & 3 in CARBP(L) No.7131/2022, ARBP(L)
No.8860/2020, ARBP(L) No.8861/2020, ARBP(L)
No.8869/2020 and for the Respondent No. 3 & 4 in CARBP
(L)No.16413/2022.
Mr Sharan Jagtiani, Senior Advocate a/w Minal Jaiwant
Chandnani, Advocates for the Petitioner in CARBP
(L)No.16413/2022.
Dr. Birendra Saraf Senior Advocate a/w Ms. Naira Jeejeebhoy
a/w Ms Pooja Gera i/b Nitin Parkhe, Advocates for the
Respondent No. 4 in CARBP(L) No.7131/2022, ARBP(L)
No.8860/2020,ARBP(L)No.8861/2020,ARBP(L) No.8869/
2020 and for the Respondent No. 2 in CARBP
No.264/2022,CARBP No. 185/2022,CARBP (L)No.16413/2022
.
Mr.Pratik Jani a/w Ms. Princee Vaishnav i/b Prime Legem for
the Petitioner in ARBP(L) No.8860/2020, ARBP(L)
No.8861/2020, ARBP(L) No.8869/2020.
...
CORAM: BHARATI DANGRE, J.
RESERVED ON : 02nd DECEMBER, 2022
PRONOUNCED ON : 06th JUNE, 2023
JUDGMENT :-
1. The dispute involved in the three Commercial Arbitration
Petitions being fled as petition numbers CARBP No.264/2022,
CARBP No.185/2022 and CARBP No.16341/2022, revolve
around the affairs and assets of the partnership frm M/s. Uma
Constructions (hereinafter referred to as 'the frm'). The frm
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presently comprises of three partners, Mr Rajesh Sharma, Mr
Sunil Sharma and Mr Sunny Ramani. Mr Rajesh Sharma and
Mr Sunil Sharma (hereinafter referred to as Sharmas/Sharma
brothers) stake interest to the tune of 25% in the said frm
whereas Mr Sunny Ramani (hereinafter referred to as
'Ramani') claim to have 50% share in the profts and loss of the
frm.
The frm is a single venture partnership constituted to
redevelop a building - Hamrahi Co-operative Housing Society
Limited (Hamrahi) located at 15th Road, Khar Pali Road, Khar
(West), Mumbai.
2. The dispute between the partners arises out of the
redevelopment of the said building and the three distinct
petitions cumulatively challenge two orders passed by the sole
Arbitrator in form of interim orders, pending the arbitration
proceedings, which was made over to the Arbitrator by order
dated 06.11.2020, while dealing with the counter petitions fled
by the petitioners, i.e. the two Sharma brothers on one hand
and Mr Ramani on the other, which was alleged to be a
counterblast to the petitions fled under Section 9 of the
Arbitration and Conciliation Act, 1996. By order dated
06.11.2020, this Court directed the Arbitral Tribunal to
adjudicate the disputes between the petitioners on one hand
and the respondent no.2, Ramani, on the other.
3. Pursuant to the said order appointing the arbitral
Tribunal the Commercial Arbitration Petition fled by the
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Sharma brothers and that by the respondent no.2 were
converted into application under Section 17 of the Arbitration
and Conciliation Act, 1996 and the interim orders came to be
passed in sequence, the frst being passed on 31.03.2021 by
which the learned Arbitrator issued certain directions to the
Sharmas and Ramani, which included a direction to disclose
certain information on oath and extend their cooperation to the
Chartered Accountant in drawing of accounts for a particular
period. A restraint order was imposed, which restrained both
parties from dealing with selling, transferring, alienating,
disposing of, encumbering and/or creating third-party rights in
respect of the assets of the frm and particularly in respect of
certain fats including fat no.1301 in Hamrahi Building. A
further direction restrained the respective wives of the Sharma
brothers from using, occupying, carrying out any ftout work or
selling, transferring, alienating, disposing of, encumbering or
creating third-party rights in fat no.1301.
The Sharmas were cast with the income tax liability as
refected in the income tax notice to be discharged within a
period of four weeks and they were directed to fle an affdavit
to that effect.
The application of Ramani, for appointment of Receiver
and in the alternative relief for attachment of the frm's assets
came to be rejected.
4. The second order which is subject to challenge through
two petitions is the order dated 17.05.2022, which comes by
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way of a subsequent development and its genesis lies in the
alleged breach of the order dated 31.03.2021 by the Sharmas
and it was premised before the Tribunal on behalf of Ramani
that subsequent to the passing of the earlier order by the
Tribunal there is a complete breakdown in the affairs of the
frm and it has become necessary to safeguard the interest of
the frm by appointing a Receiver for the entire building and
also to ensure completion of the balance civil works/conduct
the affairs of the frm including obtaining the balance MCGM
permissions, selling the remaining units, handing over of fats
to the third party purchasers and ensuring that the proper
accounts are maintained.
After a serious contest to the said reliefs by the Sharmas,
the Tribunal granted the relief as prayed by Ramani, by
appointing a private Receiver to safeguard and protect the
disputed fats and directing the Receiver to complete the
balance/unfnished work in the disputed fats through the
current contractor and/or by appointing a new contractor. The
Receiver was directed to continue to be in possession of the
disputed fats pending the arbitration proceedings and take all
necessary steps to ensure that no further third-party rights are
created in respect of the said fats.
5. Before I adjudicate the legality and propriety of the two
impugned orders, it is necessary to consider the background
facts in detail, since the dispute now at this time is not only
restricted to the partners of the said frm but has also brought
within its sweep several purchasers of the respective fats in
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the said building, whose construction work is now complete and
even the Occupation Certifcate is received on 14.03.2022.
6. Through the learned Counsel Mr Rohan Cama appearing
for the Sharma brothers in Commercial Arbitration Petition
No.264/2022 and Mr Sharan Jagtiani, who represents the
petitioners in Commercial Arbitration Petition No.185/2022
and 16413/2022 fled by the wives Mrs Deepa Sharma and Mrs
Sangeeta Sharma and upon also hearing Ms Naira Jeejeebhoy
representing Ramani, the facts are assimilated from distinct
proceedings and the necessary facts are set out in the following
paragraphs.
7. By a Deed of Admission, Retirement and Continuation of
Partnership executed on 01.04.2011, by Mr Rajesh
Gaurishanker Sharma, in his capacity as continuing partner,
Mr Sunny Ramani came to be inducted as a partner upon one
Mr Chandru Chugani retiring from the existing partnership
carrying business through the frm named and styled as M/s.
Uma Constructions in terms of the Agreement of Partnership
dated 07.04.2008 and supplementary Deed of Partnership
dated 01.04.2010.
The continuing partners and retiring partners agreed to
an incoming partner in the partnership business with effect
from 01.04.2011 on the basis of certain terms and conditions
mutually agreed between the parties. Upon the retirement of
the "retiring partner" the continuing partners mutually agreed
to carry on running the partnership business as a going
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concern as per book values of all the assets, and liabilities of the
said partnership business as on the close of business hours on
31.03.2011. The continuing partners agreed to continue the
partnership frm M/s. Uma Constructions and take over the
existing partnership business with all its assets, liabilities and
obligations, if any, at their respective book values as on
31.03.2011. The retiring partner was permitted to retire with
no rights, titles, claims and/or interest of whatsoever nature, in
or against the partnership business.
The continuing partners and the incoming partners were
conferred with full rights and liberty to collect the assets of the
partnership business and to settle all the accounts, matters and
things relating to the partnership business. The continuing
partners and the retiring partners also agreed by the said Deed
to get completed all the pending Income Tax and Sales Tax
Assessments and all allied matters relating to the partnership
business and agreed to bear their respective income tax
liabilities, if any, including a share in the registered frm tax
payable up to the date of the retiring partner, that is up to
31.03.2011.
8. The above Partnership Deed provided for the share of
remuneration to the extent of 50.00% for Mr Rajesh Sharma
and 50.00% for Mr Sunny Ramani.
The Deed also provided for dissolution of the partnership
by mutual consent of the parties and it also prescribed that
after payment of liabilities, the assets of the partnership would
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be mutually distributed amongst the partners according to
their respective proft-sharing ratio.
9. The Deed comprised of an arbitration clause which
contemplated that the differences, if any, between the partners
shall be resolved through mutual discussion but if they could
not be settled, the dispute shall be referred for arbitration to
the sole Arbitrator and the decision and order of the Arbitrator
shall be binding on both the parties.
10. A Memorandum of Understanding was further executed
on 06.05.2011, between Mr.Rajesh Sharma and Mr.Baldev
Sharma, his brother as a part of the frst and second part and
Mr.Sunny Ramani, which incorporated that family members of
Sunny Ramani had purchased foors in the building Hamrahi to
be developed by M/s. Uma Constructions and a total amount of
₹6.24 crores was paid for the purchase of the said fats and it
was distributed to the members buying shares of retiring
partners. The said Deed also confrmed that fat nos.2,7 and 12
are owned by Rajesh Sharma and his family.
Another Declaration is signed between the three partners
parties on 15.12.2012 declaring the liability of the frm and the
Declaration was signed by Rajesh Sharma, Sunil Sharma and
Sunny Ramani referring to a Development Agreement dated
03.09.2009 entered with Hamrahi Co-operative Housing
Society for the redevelopment of a plot of land bearing C.T.S.
No.F/68, Plot no.608, 15th Road, Khar West, Mumbai. In terms
of the said Development Agreement, M/s. Uma Constructions
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became the absolute owner of the 6 th to 13th foors in the new
building whereas the society was allotted 1st to 5th foors in the
new building to be constructed on the said plot. The frst party
to the declaration Mr Rajesh Sharma, agreed to bring the
capital of ₹7.00 crores in the frm and transferred his half share
out of his 50% share in the frm in favour of party no.3 to the
declaration, Mr Sunil Gaurishanker Sharma, who agreed to
bring the capital of ₹7.00 crores to clear the liability of the frm
which was tentatively estimated as ₹27,52,00,000/- (Rupees
twenty-seven crores ffty-two lakhs only) as of date.
By the said Declaration, it was agreed between the parties
that the two Sharma brothers will hold a 25% share each
whereas Mr Ramani would hold 50% share in the frm. It was
also mutually agreed between the parties that the amount of
₹7.00 crores being contributed by the two Sharma brothers
each and an amount of ₹14.00 crores to be contributed by
Ramani would bring the collection to ₹28.00 crores, which shall
be utilised for clearing the liability of the frm.
The Declaration also recorded that the 6th and 7th foors in
the new building being constructed will be sold by the frm, and
the consideration received shall be utilised for the
construction/completion of the building. All the future
expenses for completion of the building, and for obtaining of
Occupancy Certifcate were agreed to be borne in the ratio of
25% and 50% by the signatories to the Declaration respectively
respectively.
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11. The understanding arrived between the parties was
recorded as under:
"e. The entire 8th, 9th and 10th foors of the new
building shall belong to deponent no.2 (Ramani),
f. The entire 11 th, 12th and 13th foors of the new
building shall jointly belong to deponent nos.1 and 3
(Sharma brothers),
g. The 6th and 7th foors will be sold..
It was also agreed that none of the partners, without
consent of the other, shall forgo the whole or any part of any
debt or sum due to the partners or trade or dispose of by loan
pledge, sale or otherwise of any part of the partnership
property or assign or charge their interest in the frm.
It was again agreed that if any dispute arises between the
parties, it shall be made over to the sole Arbitrator.
12. A separate Deed of Admission and Continuation of
Partnership was executed on 05.02.2013, thereby admitting
Sunil Sharma as a 25% partner in M/s. Uma constructions with
effect from 24.01.2013 and he was assigned a sharing ratio of
25%.
13. In this background, when the redevelopment of the
Hamrahi building progressed, the disputes surfaced arose
between the partners.
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Some free-sale fat purchasers fled petitions before the
High Court to protect their rights in their respective fats. This
resulted in the passing of several orders by the High Court
including the appointment of a monitoring committee to
complete the redevelopment work. The monitoring committee
was disbanded by an order dated 21.01.2020 in one of the
petitions, upon the construction work being completed.
14. The Sharmas fled a Section 9 petition, which was followed
by a petition fled by Ramani under Section 9 and on
06.11.2020 an ad interim order was passed by this Court,
protecting the assets of the frm including the fats under
redevelopment. A sole Arbitrator was appointed to adjudicate
the dispute arising between parties under the Deed of
Admission, Retirement and Continuation of Partnership dated
05.02.2013. Section 9 petitions fled by them were converted
into Section 17 application and the ad interim reliefs were
continued by the Arbitrator, who subsequently recused himself
upon an objection being raised by the Sharmas.
At this juncture, it is necessary to note that in the order
dated 20.01.2021 passed by the sole Arbitrator, it was recorded
that Mrs Deepa Rajesh Sharma and Mrs Sangeeta Sunil
Sharma had consented to the terms of reference and they
agreed to be parties to the arbitration proceedings. The terms
of reference were signed by all the concerned parties on
23.01.2021 and that is how the Sharma wives were introduced
in the arbitration proceedings.
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15. The Tribunal had before it the two applications fled by
the Sharma brothers on one hand and Ramani on the other.
It was the contention of the Sharmas that, Ramani who
was to bring initial capital of ₹6.24 crores had failed to do so
and has brought only ₹5.81 crores whereas Sharmas
themselves had invested an aggregate amount of ₹14.81 crores.
The Sharmas projected that prior to the induction of
Ramani they had acquired rights in respect of some fats in the
old building, that is fat no.202, 601 and 1301. It was alleged
that Ramani avoided executing documents and/or registering
deed in favour of the Sharmas in respect of fat no.1301. It was
submitted that in the year 2013, an agreement was executed by
M/s. Uma Constructions, which was even signed by Ramani in
favour of the Sharmas, that is the two Sharma brothers and
their wives and it was recorded in the said document that the
purchasers had paid to the promoter an amount of ₹4.00 lakhs
as part consideration before the execution of the document and
agreed to pay to the promoters the balance of the sale price
which would be followed by execution of a written agreement of
sale of premises to the purchasers under Section 4 of MOFA Act.
The consideration was agreed as ₹3.20 crores , but the said
document is undated and unstamped. However, Ramani resiled
and retained the original document and despite persistent
persuasion, the said document was not made available for
registration, despite an assertion that consideration of ₹3.20
crores having paid by the purchasers i.e. the Sharmas between
2015-17 by bank transfer into the frm's account. The Sharmas
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supported the said statement by furnishing the details of the
bank statement and the date when the transfers happened.
16. On failure to release the 2013 agreement, the two Sharma
brothers on behalf of the frm executed another document on
30.07.2020 in favour of Mrs Deepa Rajesh Sharma and Mrs
Sangeeta Sunil Sharma under which they were held entitled to
residential fat no.1301 on the 13 th foor, the fat being
specifcally described in the said sale agreement with a specifc
mention of a sum of ₹3.20 crores being paid by the purchasers
to the promoters before its registration and the receipt of the
amount being admitted and acknowledged on behalf of the frm.
The said agreement also comprised of a clause which
declared that the possession of fat no.1301 has been handed
over by the promoter/s to the purchaser/s on registration of
agreement and the possession of the purchasers is absolute and
shall not be revoked/challenged and they were entitled to
occupy the said premises and use any part thereof and permit
the same to be used for the purpose of residence.
The agreement bears the signature of Mr Rajesh Sharma
and Mr Sunil Sharma as the "promoters. of M/s. Uma
Constructions, the purchasers being shown to be Mrs Deepa
Rajesh Sharma and Mrs Sangeeta Sunil Sharma.
17. The Sharma brothers claim that as partners of the frm, it
is permissible for them to execute the said document as even
originally as per the agreement of the year 2013, the fat was to
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go to the Sharmas but under the 2020 document it has been
shown to be sold to their wives for a consideration of ₹3.20
crores and this consideration was consumed by the frm in its
business venture.
Apart from this, the Sharmas also claim their entitlement
to rent/compensation for their three fats being fat nos.2,7 and
12 but the same was refused to them.
18. In the application fled it was also alleged that it is Ramani
who is responsible for delaying the redevelopment process
resulting in proceedings being fled before the Bombay High
Court seeking specifc performance of the agreement executed
with the individual members.
Thus, Sharmas claimed relief of handing over the original
agreement of fat no.1301. A direction was sought against
Ramani to render true and correct accounts of the frm, in the
background that no accounts were maintained by the frm in
2011 nor any tax returns were fled and, therefore, it had
become necessary to draw the partnership account through an
independent Chartered Accountant. Sharmas ensured their
cooperation in undertaking the said exercise. The accounts
were prayed to be drawn from 01.04.2011 since Ramani came
to be inducted as a partner from the said date.
19. On the other hand, Ramani in his application under
Section 17 placed before the Tribunal the messy affairs of the
Sharmas. His case before the Tribunal is, prior to Ramani being
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inducted as a partner three of his family members had
purchased the 11th, 12th and 13th foor in the old building sought
to be redeveloped and a consideration of ₹6.24 crores was
parted as a part payment and even allotment letters were
issued by the frm in their favour. This payment was adjusted
towards Ramani's contribution towards the frm and the
allotments made in favour of the family members stood
cancelled.
As per Ramani, the MOU dated 01.04.2011 clearly
recorded that a sum of ₹6.24 crores is adjusted towards buying
shares of the retiring partner Mr Chughani. Ramani
specifcally pleaded that the Sharmas behind his back executed
an agreement on 30.06.2020, purportedly transferring fat
no.1301 in favour of their wives. This conduct of the Sharmas
led the applicant to believe that their wives would create
further third-party interest in fat no.1301 and/or other assets
of the frm and, therefore, he prayed for a restraint order for
either creating third-party rights or otherwise dealing with or
disposing of the assets of the frm.
In terms of MOU, it was argued that the sale of
consideration of ₹10.03 crores was to come to Ramani's
accounts from the sale of fats from the 8 th, 9th and 10th foors
along with 50% of sale proceeds for fat no.401 to be added
towards contribution from Ramani. It was specifcally denied
that they did not bring in the decided contribution into the frm.
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The manner in which fat no.1301 was alleged to have
been transferred by executing an agreement to sale in favour of
their wives by the Sharma brothers without any consideration
being paid towards the same, an apprehension was expressed
that they may create further third-party interest and
jeopardize the position of the frm and, therefore it is necessary
to appoint a Receiver to safeguard the project of the frm.
20. The two reliefs were primarily sought by Ramani, i.e.
appointing a Receiver on the entire project and restraining the
Sharmas and their wives from dealing with the assets of the
frm in any manner. Another relief was sought for deposit of
the amount due and payable as income tax dues for Assessment
Year 2011-12 for which the Sharmas were solely liable.
21. In this background, the Tribunal was called upon to
adjudicate the rival contentions.
A consensus was reached between the parties about
drawing up all the accounts of the frm through an individual
Chartered Accountant and, accordingly, the Tribunal appointed
an independent Chartered Accountant for drawing of the
accounts from 01.04.2009 till 31.03.2021 and both the parties
were directed to render their cooperation by preferring a joint
application to the concerned banks and disclosing on oath the
statement of all bank accounts of the frm as well as disclosing
the list of assets/properties and all transactions executed by
the frm during the said period. The parties were also directed
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to give the list of all payments received by the frm during the
said period towards the sale of each fat.
Though the direction to draw the accounts from
01.04.2009 is frowned upon by the Sharmas, and it is one of the
grounds raised in the appeal fled by them, I fnd the order of
the arbitral Tribunal is perfectly justifed in refecting drawing
the accounts from the said date, as it will be necessary to
ascertain the position of the frm prior to induction of
Mr.Ramani from 01.04.2011 and, therefore, there is no merit in
the submission that the accounts ought to have been directed to
be drawn from 01.04.2011. In any case, prior to the induction,
Ramani is not expected to discharge any liability of the frm,
which is the complete responsibility of Sharmas and upon the
accounts being drawn from 01.04.2009, the position of the frm
as on 01.04.2011 would be clearly refected.
22. A challenge was raised before the Tribunal, as refected in
the impugned order dated 31.03.2021, as regards the tax
liability and has fastened the Sharmas with the income tax
liability of ₹1,64,89,451/- recorded in the income tax notice
dated 11.03.2020.
The income tax authorities raised a demand for its dues of
the Assessment Year 2011-12 (Financial Year 2010-11) to the
tune of ₹1,64,89,451/- with interest.
23. The sole Arbitrator referred to the Court appointed
Administrator's report which referred to the income tax notices
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and he also made a reference to the High Court's order dated
21.01.2020 which recorded that there are no income tax dues
to be recovered from the project building Hamrahi. However, it
is clarifed by the Arbitrator that once again a demand notice
was issued on 11.03.2020 to pay the arrears of ₹1.64 crores
and there is also a garnishee notice by the Income Tax
Department calling upon a customer Mr Pravin Talreja to pay
the amount payable by him to the frm.
24. Sharmas deny the demand-cum-liability by the Income
Tax Department and even before me, it was vehemently argued
and strongly disputed that the Income Tax Department had
ever issued such a notice. The Arbitrator clearly recorded a
fnding that the frm despite its registration never fled any
income tax returns or statutory returns since its formation.
The learned Arbitrator has also offered justiciable explanation
for drawing the accounts from 01.04.2009, which would in fact
in the interest of the frm to ascertain whether Ramani has paid
an amount of ₹6.24 crores which in the MOU dated 01.04.2011
came to be adjusted towards the share of Ramani. However, if
there is a demand for arrears of tax, it amounts to a liability
and the frm must clear the same.
Despite Sharmas' denial about the liability, the Arbitrator
after making reference to the garnishee notice deemed it
appropriate to direct the Sharmas to satisfy the demand in the
notice dated 11.03.2020.
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25. Since the demand in the said notice is prior to induction
of Ramani, with effect from 01.04.2011, and it was agreed in the
Deed of Admission, Retirement and Continuation of Partnership
that the continuing partner shall continue the partnership frm
M/s. Uma Constructions and take over the existing partnership
business as a going concern with all its assets and liabilities at
their respective book values on the close of business hours on
31.03.2011, it is imperative for Sharmas to discharge the said
liability. It is also agreed by the very said document that the
continuing partner and the retiring partner shall get completed
all the pending income tax and sales tax assessments and
alleged matters relating to said partnership business and agree
to bear their respective income tax liability, if any, including a
share in the registered frm, tax payable up to the date of
retirement of the retiring partner, that is up to 31.03.2011.
Necessarily, since Ramani walked into the said venture with
effect from 01.04.2011, the liability of whatsoever nature
including that of the income tax must fall upon the Sharmas.
There cannot be any iota of doubt in my mind that the said
liability shall be discharged by the Sharmas subject to the rider
that it is open for the Sharmas to dispute the liability fastened
or take any appropriate steps for questioning the burden cast
upon the frm. However, this will be completely for the Sharmas
to take appropriate steps with no involvement of Ramani since
the liability is imposed for a period which is prior in the point of
time when Ramani joined M/s. Uma Constructions.
The direction of the Arbitral Tribunal on 31.03.2021 to
clear the arrears of income tax demanded in the notice dated
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11.03.2020, through the Sharmas, therefore, does not warrant
any interference and the direction is upheld.
26. This takes me to another point which is the bone of
contention between the parties and this is in respect of the
allocation of fats.
The building Hamrahi comprises of 13 foors along with a
stilt plus a podium. Undoubtedly, in terms of the understanding
between the parties, both Sharmas and Ramani are entitled to
some of the fats. The said understanding between the parties
in MOU dated 01.04.2011, on the basis of Ramani being
inducted as a 50% of the partner of the frm record that family
members of Ramani had purchased foors in the building and
paid some token amount. As per Ramani, fats were purchased
on the 8th, 9th and 10th foors. The MOU record that fat nos.12,7
and 2 are owned by Rajesh Sharma and his family. Admittedly,
there is no reference to fat no.1301.
27. The declaration signed by the Sharmas and Ramani on
15.12.2012 clearly recorded the understanding reached
between the partners of the frm which even included Sunil
Sharma, the 25% partner whose Deed of Admission was to be
executed on a subsequent date. The capital amount to be
brought by the parties was clearly defned so as to clear the
liability of the frm on the said date. It is clearly agreed
between the parties that the 6th and 7th foor of the new building
shall be sold by the frm and the consideration received shall be
utilised for construction/completion of the building whereas the
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8th, 9th and 10th foors shall belong to Ramani and 11 th, 12th and
13th foors would jointly belong to the Sharma brothers.
28. There is no clarity on the amount of capital being brought
by Ramani as the Sharmas had contended before the learned
Arbitrator that Ramani has failed to bring the agreed amount.
As on the date of the declaration, that is 15.12.2012, the
liability of the frm was tentatively assessed at ₹27.52 crores
and, therefore, it was an arrangement worked between the
partners of M/s. Uma Constructions to pump in a sum of ₹28.00
crores, in the proportion of 50% to be brought by Ramani and
the remaining to be contributed by Sharmas in equal portions.
However, after a decade of arriving at such an arrangement,
one is not sure of the estimated liability, which may have
accrued in the years subsequent to 2012 on account of non-
payment of income tax and other statutory liabilities.
The sole Arbitrator has rightly recorded that he is unable
to verify the actual contribution towards the capital
involvement and the further understanding about the
entitlement of the fats to the partners, in proportion of their
capital contributions, could not be ascertained. The Arbitrator
specifcally record that the correctness of the claim staked by
the contesting parties could not be ascertained at that stage
and it would be determined at the time of trial. However, in
order to ensure that the assets are protected, he deemed it
appropriate to continue the status quo order operating from
06.11.2020 as the Occupancy Certifcate was yet to be obtained
and as such fats cannot be used or occupied by any person and
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if any amount was received towards consideration, the same
was to be deposited in the frm's account. He dealt with fat
no.601, 201, 102, 202, 802, 1001 and 1002 and recorded that
the order of status quo deserves to be continued in respect of
the said fats as they form the subject matter of certain
proceedings, as some of them form part of the pending
proceedings.
29. The controversial fat being fat no.1301 was dealt with
separately by the Arbitrator in the backdrop of the rival
contentions about it being validly transferred to Sharmas. It is
the case of Sharmas that an agreement was executed in respect
of the said fat in the year 2013 without the date being
mentioned and though it is not registered it came to be signed
by Ramani as one of the partners of M/s. Uma
Constructions/the promoters in favour of the purchasers, the
Sharma family. But since this document was kept away and not
offered for registration despite the entire consideration of
₹3.25 crores having been transferred, the two Sharma brothers
executed an agreement for sale in respect of the said fat in
their capacity as partners of the said frm on a subsequent date,
that is 30.07.2020 conveying fat no.1301 in favour of their
respective wives.
30. The High Court by its order dated 06.11.2020, injuncted
the Sharmas and their wives from creating any third-party
rights till the decision of the Tribunal and this ad interim
injunction is continued by the sole Arbitrator by his order dated
31.03.2021. The relief sought by the Sharmas to deposit the
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agreement in respect of the fat executed in the year 2013,
stands on shaky ground about the placing of the agreement
with the Advocate by way of escrow but in the fairness of the
things, the Tribunal directed Ramani to contact the Advocate
and obtain the original documents and submit it to the Tribunal
within two weeks, as Ramani had failed to demonstrate any
right to hold on the documents either directly or through
someone else. The relief prayed by Ramani that the Sharma
wives should execute the Deed of Cancellation in respect of the
document dated 31.07.2020 was however declined at an
interim stage.
31. Subsequent to the order dated 31.03.2021, on
14.03.2022, the MCGM granted Occupancy Certifcate (OC) for
the entire building. Sharmas continued with the process of
completing the fnishing works to hand over the fats pursuant
to the Occupancy Certifcate being granted.
32. On 15.03.2022, this Court, by an order passed in a batch
of appeals fled by the third-party fat purchasers and the
litigating parties, issued a direction for the appearance of the
concerned parties before the Tribunal so that appropriate
directions can be passed in protecting the disputed fats
pending the award.
33. This also resulted in an application being fled by Ramani
under Section 17 of the Arbitration and Conciliation Act on
20.03.2022, seeking directions to safeguard the frm's assets,
that is the disputed fats and also for the appointment of a
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private Receiver or in the alternative for handing over of the
keys in respect of the disputed fats of Ramani.
In this application, it was alleged that Sharmas had
misrepresented that fat nos.2,7 & 12 belong to them and, in
fact, it was realised that fat no.7 is an asset of the frm as it was
purchased in the name of the frm and it was never transferred
to the Sharmas. The application highlighted the status of the
fats in the Hamrahi building and it was specifcally averred
that the frm had sold fat nos.802, 1101 and 1102 to Hema
Ramani, Sheena Ramani and Neha Ramani for consideration of
₹3,91,80,000/- and as per the Sale Agreement, the possession
ought to have been handed over to them but despite receiving
consideration, steps were not taken to hand over the
possession. It was also stated that the Sharmas did not have
any interest in the said fats, which clearly fell to the share of
Ramani but they unilaterally and wrongfully purported to
cancel/terminate agreements in relation to the aforesaid fats
by issuing a letter from the Advocate. Ramani disputed the
cancellation of the said agreements in respect of the three fats
and contended that they continue to be valid purchasers of the
three fats and the agreement being binding on the frm itself.
34. It was also projected by Ramani that Sharma brothers are
obstructing the completion of the project and wrongfully
claiming rights in the assets of the frm and attempting to act in
a unilaterally high-handed manner to his prejudice and also
prejudicially affecting the interest of the frm. It was alleged
that the frm had to exchange fats due to the wrongful act of
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the Sharmas and they are now purporting to unilaterally cancel
valid agreements and foist liability on the said frm and,
therefore, Ramani apprehended that Sharmas will unilaterally
and wrongfully attempt to deal with and create third party
rights in respect of the said fats purchased by distinct
purchasers and also third party purchasers, contribution from
whom has formed part of the partnership assets.
A restraint order was, therefore, sought to restrain
Sharmas from dealing with the fats in any manner, i.e. either
by selling, transferring, alienating, disposing or encumbering
and/or creating third-party rights in respect of the assets of the
frm.
35. The basis of the application seeking the appointment of
Receiver over the entire building was purportedly the breach of
the earlier order passed by the learned Arbitrator on
31.03.2021 and a specifc allegation is levelled that the breach
was intentional. The change of circumstance was pressed into
service for granting the relief of appointment of Receiver which
was refused, on 31.03.2021 and it was projected that the action
of the Sharmas has resulted in a failure to secure the assets of
the frm and it was highlighted that in respect of the three fats
which were sold in the year 2013, that is fat no.801, 901 and
902 by way of registered agreements under MOFA to one
Talreja, the frm had received ₹6.10 crores, which amounted to
approximately 90% of the consideration for the three fats.
Though there was no consensus as to what was the balance
amount remaining unpaid as according to Ramani and Talrejas,
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an amount of ₹66.38 lakhs is due and payable against the three
fats, Sharma brothers claimed that the outstanding amount
was to the tune of ₹96.18 lakhs.
36. It was specifcally submitted that by order dated
31.03.2021 passed by the Tribunal, Ramani and Sharmas were
restrained from "dealing with" in any manner in respect of the
assets of the frm which would include selling, alienating,
creating third party rights in respect of the said assets. It was
alleged that despite this injunction on 06.07.2021, Sharmas
sought to unilaterally terminate the three registered
agreements and this unilateral termination amounted to a
breach of the order dated 31.03.2021 passed by the Tribunal.
Ramani alleged that there was no valid or contractual basis for
terminating the agreement with Talreja. As such, termination
has now resulted in the frm expending money on litigating. A
heap of correspondence was relied upon with the justifcation
being offered from Sharmas, the contention of Ramani before
the Tribunal was to the effect that the fats will revert back as
assets of the frm, should be safeguarded by the appointment of
a Receiver who shall prevent repetition of such action in
respect of these fats as well as any other fats.
37. Another breach attributed to the Sharmas is in respect of
the directions issued in the order dated 31.03.2021, which had
resulted in a delay in drawing of the accounts of the frm so as
to avoid the actual fnancial picture of the frm coming on
record as well as their failure to discharge the liability towards
the tax obligation.
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28/49 CARBP-264-22 GRP.odt
38. The learned Counsel Ms Jeejeebhoy, representing
Ramani, who argued before the Tribunal and even before me,
would invite my attention to another fagrant breach of the
earlier order passed by the Tribunal in respect of the fat
no.301, as an asset of the frm.
She would submit that the Sharmas had attempted to deal
with the said fat despite an injunction being passed by
unilaterally executing an agreement on 30.06.2020, which was
without consent of her client. She would submit that the parties
were directed to maintain the status quo in respect of the said
fat by order dated 31.03.2021 and the Sharma wives were
restrained from using, occupying, carrying out any ft-out
works or alienating or creating any third-party rights for the
said fat but by submitting ample proof it was pointed out to the
Tribunal that they are in possession of the said fat and are
illegally occupying and using the same. They had obtained an
electric meter and the bills revealed heavy consumption and it
was even demonstrated that Air Conditioners were installed in
the said fats. It was apparent from a notice of disconnection
issued by the service provider due to non-payment of the
charges that the fat no.1301 was being put to use. When the
MCGM conducted the site inspection Sharma wives were not
found in possession of the fats and when Ramani attempted to
have an inspection of the building on 24.02.2022, the main gate
of the building was locked and the inspection was avoided and
after the Tribunal's intervention when the inspection was
granted, there appeared to be shifting of furniture from fat
no.1301 to 1201 and on the basis of the said report it is sought
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to be argued that despite an injunction and restraint order, the
fat has been put to use.
39. The allegation about the breach of the Tribunal's order
dated 31.03.2021 is specifcally denied by the Sharmas
including their wives and the argument advanced on their
behalf is to the effect that they were in possession of the fat
subsequent to the agreement dated 30.06.2020 and their
possession is prior in point of time of passing of any interim
orders. But a distinction is drawn by them between, being in
"possession" and being in "occupation". The use of electricity
was sought to be explained, that the electricity meter for fat
no.1301 was utilised for completing the common building work
so that the Occupancy Certifcate can be granted for the entire
building. It is pointed out that the fat is inhabitable and none of
the members of the Sharma family is in occupation of the said
fat.
40. The Tribunal, thereafter, dealt with the alleged change in
circumstance pointed out by Ramani and as regards the
undisputed fats in the building, since the Occupation Certifcate
was now received, it referred to the understanding recorded by
it during the course of hearing on 21.03.2022 when it referred
to fat nos.101, 501, 502, and 701 possession of which was
already handed over to the respective purchasers. In respect of
fat nos.102, 301, 302, 401, 402, 1101 and 1102 the locks of
which were found to be broken and the keys of which were with
Sharmas, an undertaking was submitted not to deal with the
said fats by creating any third party rights over them. It was
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30/49 CARBP-264-22 GRP.odt
also undertaken that the fats in which the ongoing
cleaning/fnishing work was ongoing for the parties of handing
over to the fat purchaser, they would complete the work and
hand over the fats to the respective fat purchasers. This
covered fat nos.301, 302, 401, 402, 1101 and 1102.
41. A consensus was recorded by the Tribunal in respect of
handing over of these fats. Thus, out of 23 fats in the newly
constructed building, 10 fats were undisputed whereas fat
no.602 was reserved for the society's offce and since the
consensus was recorded in respect of these fats there is no
dispute among the parties in respect of these 10 plus 1 fats.
42. The following fats, which are in dispute, are as below :
(i) Flat nos.102, 201, 202, 601 - belong to the
partnership frm or certain third-party claimants,
(ii) Flat nos.802, 1101, 1102 - Ramani fats,
(iii) Flat nos.801, 901, 902 - the purported Talreja
fats,
(iv) Flat nos.1201, 1202 - Sharmas' fats
(v) Flat no.1301 - the fat belongs to the Sharma
wives.
43. The fats in above fve categories are sought to be
bifurcated into distinct categories; item nos.(i),(ii) & (v),
covering 8 fats are projected to be accounting for change in the
circumstances. As far as the third category is concerned, that
is the fats belonging to Talreja though it was not initially in
dispute, they have come into the disputed category since it is
alleged that Sharmas terminated the agreement with Talreja on
account of non-clearance of dues and it is sought to be projected
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31/49 CARBP-264-22 GRP.odt
that, in any case, the fats will come back to the frm and the
ffth category is in respect of the fat no.1301 where the
Sharmas argue that they were already in possession of the said
fat and were not occupying the same. As far as category (iv) is
concerned, that is fat no.1201 and 1202, though an injunction
order operated in respect of the said fats, Sharmas attempted
to settle Bedi and my attention is invited to the consent terms
presented to this Court in Commercial Suit No.448/2019 fled
by Rajendra Bedi against M/s. Uma Constructions on a Notice of
Motion (L) no.1037 of 2019.
The order passed by this Court on 03.05.2019 records
that parties have entered into consent minutes of an order
signed by the plaintiff as well as the defendant, who were the
partners of M/s. Uma Constructions and these consent of
minutes which bear the signature of Ramani as well as the
Sharmas record that Sharmas, i.e. defendants nos.2 & 3 were
paying an amount of ₹22.50 lakhs to the plaintiff Bedi, by way
of interest for an extension being granted and due to the
assertion of the plaintiff that there is a breach of an order
passed in his favour. It was agreed that in the event the full
payment of ₹5.00 crores is made prior to 31.07.2019, Sharmas
will be entitled to get a proportionate reduction.
The consent terms record that pending the payment of
the entire sum, fat nos.1201 and 1202 belong to the Sharmas
on the 12th foor and the building shall remain injuncted and
would offer as a security for satisfaction of the claim of the
plaintiff. Upon payment of the entire sum, the security shall be
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32/49 CARBP-264-22 GRP.odt
released and the plaintiff shall withdraw the said suit.
Defendant nos.2 & 3, the Sharmas reserved the liberty to bid
for the said security fat or bring a new buyer for the same.
44. As far as Ramani is concerned the consent terms clearly
record that he being a partner impleaded as defendant no.4 to
the suit shall not have any right, title and interest in respect of
the secured fat, that is fat nos.1201 and 1202. It is thus
argued that Ramani had given up his claim over the said fats.
Thus as far as fat nos.1201 and 1202 are concerned since the
same is pending adjudication in the suit, it is by way of security
and that is why not subjected to arbitration.
45. I fnd suffcient justifcation in keeping the said fats aside
since Ramani did not stake any claim in respect of the said fat
and the understanding drawn in the form of the consent terms
amounted to an order which was purely between the Sharmas
and Bedi, who had already instituted a suit, which is pending.
46. In this background, the Arbitrator dealt with the alleged
breach asserted by Ramani, on each count.
The frst allegation faced is dealing with Talreja's fats that
is fat nos.801, 901 and 902.
Admittedly, the order dated 31.03.2021 restrained
Ramani and Sharmas from dealing with, selling, transferring,
disposing of encumbering and/or creating third-party rights in
respect of the assets of the frm and in particular fat nos.102,
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33/49 CARBP-264-22 GRP.odt
201, 202, 601, 802, 1001, 1002 and 1301. The said order
restricted the parties from dealing with the assets of the frm.
The Tribunal attributed the broadest possible meaning to
the word "dealing with" and held that the purpose of passing an
injunction restraining the parties on both sides, that they do
not deal with the assets of the frm thereby prejudicially
affecting the rights of the other partner. The termination of the
agreement in respect of the said fat unilaterally was held to be
a breach of an order, by which a restraint was imposed for
"dealing with. the said fats.
47. I concur with the view expressed by the Arbitral Tribunal
where the Tribunal has returned a fnding, rejecting the broad
argument that, in any case, if the agreement with Talreja is
cancelled, it would restore the fats to the frm, was no
justifcation for the alleged breach.
In any case, the underlying spirit of the order dated
31.03.2021 was to restrain the parties from creating any third-
party interest in the fats, pending the arbitration proceedings
and if at all any decision was to be taken for terminating the
existing agreement, the Tribunal should have been kept for in
the loophole or by seeking consent from the other partner, with
the permission of the Tribunal the exercise ought to have been
undertaken. But admittedly, there is no such step taken and,
hence, the Tribunal rendered a fnding that cancellation of the
agreement in respect of the fat nos.1201 and 1202, has
defnitely resulted in the breach of the order.
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34/49 CARBP-264-22 GRP.odt
48. Dealing with the breach of the directions directing the
parties to produce their accounts so that they can be certifed
through the Chartered Accountant, admittedly there is no
compliance with the order and specifcally the direction issued
in para 58(ii)(a), 58(iii) read with paragraph 33 of the order
dated 31.03.2021. The Tribunal recorded that Sharmas were
once again directed to furnish the details but the information
was submitted on a piecemeal basis and they dragged their feet
in submitting the relevant information which would have
enabled the expert in drawing up of the accounts. In fact,
Sharmas were in charge of the frm for the relevant period
before the induction of Ramani and, therefore, it was
imperative for them to submit the necessary information. The
learned Arbitrator has therefore rightly recorded that Sharmas
are not extending cooperation to the expert in drawing the
accounts and their non-cooperation has also delayed the
statutory compliances of the frm. There is also suffcient
justifcation for recording a conclusion that the breach is
deliberate and intended to delay the drawing up of accounts by
the expert and prevent the correct facts from coming to light.
I fnd no infrmity in the fnding recorded by the Tribunal
that the breach is deliberate.
49. As regards fat no.1301 where certain evidence has been
tendered before the Tribunal by Ramani to demonstrate that
the Sharmas are in occupation of the fat, I have dealt withwith
the counter affdavits fled by both parties. Prior to the
Occupancy Certifcate of the building being received, the
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Sharmas claim that they were put in possession of the said fat
and this they claim on the basis of an agreement executed on
30.07.2020, in favour of their Sharma wives by them, in their
capacity as promoters/ the partners of M/s. Uma Constructions.
This agreement in clause no.12 has recorded as under:
"12. The possession has been handed over by
the promoter/s to the purchaser/s on the
registration of this agreement hereof. The
possession of the purchaser has been absolute..
Admittedly, this document itself is the bone of contention
between the parties as it is strongly argued on behalf of Ramani
that this document could not be executed behind his back as it
was only executed by the two Sharma brothers in favour of
their own wives, when allegedly there was a refusal to produce
the agreement executed in the month of April 2013
transferring fat no.1301 in favour of Sharmas.
50. In any case, the fate of the document dated 30.07.2020
though in the form of a registered Sale Agreement is the subject
matter of the arbitration proceedings and its legality and
propriety will have to be determined during the course of the
arbitration proceedings. The argument of the Sharmas that
they were put in possession by the said agreement from the
date of execution of the registered Sale Deed, is an argument to
be tested by the Arbitrator.
51. As regards the occupation of the said fat, the learned
Arbitrator has rightly recorded that the photographs of the
dish antenna, electricity consumption, A/c installation, and the
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lights being on at night cannot be considered as fndings of its
usage and therefore the Sharmas deserve the beneft.
The Sharmas have also categorically defended in their
affdavit that they may be in possession of fat no.1301 but they
are not in occupation of the said fat. The learned Arbitrator
has, therefore, rightly directed the Sharmas and their wives to
hand over the keys of the said fat within a period of one week.
52. The moot question that arises for consideration and which
is vehemently argued by the learned Senior Counsel Mr Sharan
Jagtiyani, as well as Mr Cama, is about the power exercised by
the Arbitrator, in appointment of the Receiver and whether
merely alleging breach of an earlier order passed by the
Tribunal would justify the appointment of a private Receiver.
Ms Jeejeebhoy appearing for Ramani and supporting the
second impugned order dated 17.05.2022 passed by the
Arbitral Tribunal appointing the Receiver to take possession of
the entire premises, would submit that the said order was
necessitated in the background facts in order to safeguard the
interest of both the parties, pending the hearing and
determination of the arbitration proceedings. She would
submit that it is a settled position of law that the appointment
of a Receiver is justifed in the peculiar circumstances where it
appears to the authority exercising discretion that the assets
and properties of the partnership frm should be prevented
from being wasted and be kept in the custody of an impartial
person.
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Relying upon the precedent as laid down in the case of
Iqbalnath Premnath Anand V/s. Rameshwarnath Premnath
Anand and Anr.1, Ms Jeejeebhoy would submit that in the said
case before the Court, in view of the approach of the defendants,
with a clear fnding being recorded that the defendants had
effectively kept the plaintiff out and are arrogating to
themselves from the ownership of the partnership business, the
Court had deemed it necessary to appoint a Receiver.
She would specifcally submit that in order to protect and
safeguard the business of the partnership frm, pending the
winding up of its affairs and settlement of accounts between the
partners, it is necessary, that the Receiver is appointed for such
business and this is a normal relief which would be granted in
such a scenario and, in this case, the scenario being
particularly worst since Sharmas have acted in utter
dereliction of the earlier orders passed by the Tribunal and
their approach would spell out a possibility, that they will deal
with the property of the frm and, if they do so, at the end
point, when the frm is to be dissolved, the frm may not be in a
position to meet its debts and liabilities, which otherwise are
mounting on account of delay in the project.
53. Per contra, Mr Jagtiani, learned Senior Counsel for
Sharma wives and Mr Cama representing Sharma brothers are
extremely critical about the exercise of power by the learned
Arbitrator, which though being a discretionary relief did not
justify the appointment of an Arbitrator. They would invite my
1 1976 SCC OnLine Bom. 68
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attention to the settled proposition of law as set out by various
precedents revolving around Order 40 Rule 1 of CPC, which
would justify the power to appoint a Receiver not only on the
ground that it is just and convenient for the parties but also in a
situation of eminent danger and/or waste of the property. It is
submitted by Mr Jagtiani that a fnding being rendered by the
Tribunal that the Sharmas are not in occupation, as no proof
has been tendered to establish the said aspect, the Tribunal
could not have exercised the discretion in favour of Ramani, by
appointing a Receiver over the entire property. The submission
advanced on behalf of the Sharmas is, the Tribunal has arrived
at a decision to appoint a Receiver, on the basis of its own
assumption and there is a gross error in the order of the
Tribunal, which deserved to be rectifed by this Court by
exercising it's power under Section 37 of the Arbitration and
Conciliation Act.
54. It is no doubt true that the scope of the power to be
exercised by this Court under Section 37 is limited, as it is a
settled position of law that the Arbitral Tribunal is the fnal.
Tribunal on facts as well as in law and not every error, factual
or legal which falls short of perversity would permit
interference by the Court either under Section 34 or 37 of the
Act. It is equally well settled that the ultimate view of the
Tribunal on any issue concerned, so long as the view is
plausible and not merely possible, the Court would loath to
interfere therewith. But it is equally well settled that when the
fnding by the Tribunal is either contrary to the terms of the
contract between the parties or ex-facie perverse, interference
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by the Court is warranted and also justifed. True it is that the
Court will not substitute the view of the Arbitrator but in a case
where it is demonstrated that the view is so thoroughly
implausible, that it would constitute perversity and patent
illegality, then defnitely the Court would exercise its power
under Section 37 and it is always permissible to pass a
workable order.
The settled position of law as regards the exercise of
discretion vested in the Court is clearly spelt out in Wander Ltd.
& Anr. V/s. Antax India Pvt. Ltd. 2, where the position of law has
been clarifed to the effect that the appellate Court will not
interfere with the exercise of discretion by the Court of frst
instance and substitute its discretion except when the
discretion has been shown to have been exercised arbitrarily,
capriciously or perversely or where the Court has ignored the
settled principles of law. Though the appellate Court may not
reassess the material and seek to reach a conclusion different
from the one reached by the Courts below, solely on the ground
that if it had considered the matter at the trial stage, it would
have come to a different conclusion, and if discretion by the
Trial Court is exercised reasonably and in a judicial manner the
fact that the appellate Court could have taken a different view
may not justify interference with the exercise of discretion.
55. The impugned orders dated 31.03.2021 and 17.05.2022
will therefore have to be tested on the aforesaid parameters.
2 1990 (Sup) SCC 727
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By the frst order dated 31.03.2021, the Tribunal though
restrained the Sharmas as well as Ramani from creating any
further interest in the fats and this obligation was cast upon
both of them, also in respect of fat no.1301, which was claimed
by the Sharma wives on the basis of a registered document
signed by the Sharma brothers, under which the said fat was
conveyed to them, when the other partner Sunny Ramani was
not kept in the loophole, it was directed that they shall not use,
occupy or carry out any ft-out works or sell, transfer, alienate,
dispose of, encumber and/or create third party rights in respect
of the said fat.
On the change in circumstances, the Tribunal however
granted the relief prayed by Ramani for the appointment of a
Receiver and the Tribunal by its order dated 17.05.2022, in the
form of an interim order appointed a private Receiver to
safeguard and protect the disputed fats, which were listed
along with the application under Section 17. The Sharmas were
directed to hand over the keys of all the disputed fats and the
Receiver was directed to complete the balance/unfnished work
in the disputed fats through a contractor and he was also
entrusted with the work of testing the amenities, plumbing and
electrical system and ensure that the MCGM obligations are all
discharged so that the premises shall be made ready for
occupation.
56. This order being passed on 17.05.2022, the fats came
under the control of the Receiver and in respect of the
undisputed fats (10 fats plus 1 fat), the possession was
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handed over in respect of fat nos.101, 501, 502 and 701. Upon
the Occupancy Certifcate being issued from the planning
authority, it was agreed that the possession of fat nos.301, 302,
401, 402, 1101 and 1102 will be handed over to the respective
fat purchasers.
Flat nos.102, 201, 202, 601 belonging to the partnership
frm, fat nos.802, 1001 and 1002 claimed by family members of
Ramani as bonafde purchasers, fat nos.801, 901 and 902
purported to be Talreja fats, fat nos.1201 and 1202 handed
over by Bedis to the Sharmas and fat no.1301 claimed to be in
possession of Sharma wives are the fats in dispute.
57. The exercise of power to appoint a Receiver is well settled
and in case of T. Krishnaswamy Chetty V/s. C. Thangavelu
Chetty & Ors.3, which is considered to be a classic authority on
the law pertaining to the appointment of a Receiver, the broad
principles are culled out to the following effect.
"(1) The appointment of a receiver pending a suit is a
matter resting in the discretion of the Court. The
discretion is not arbitrary or absolute: it is a sound
and judicial discretion, taking into account all the
circumstances of the case, exercised for the purpose
of permitting the ends of justice, and protecting the
rights of all parties interested in the controversy and
the subject-matter and based upon the fact that there
is no other adequate remedy or means of
accomplishing the desired objects of the judicial
proceeding;
(2) The Court should not appoint a receiver except
upon proof by the plaintiff that prima facie he has
very excellent chance of succeeding in the suit;
(3) Not only must the plaintiff show a case of adverse
and conficting claims to property, but, he must show
3 AIR 1955 Madras 430
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some emergency or danger or loss demanding
immediate action and of his own right, he must be
reasonably clear and free from doubt;
(4) ....... It would be different where the property is
shown to be 'in medio', that is to say, in the enjoyment
of no one, as the Court can hardly do wrong in taking
possession: it will then be the common interest of all
the parties that the Court should prevent a scramble
as no one seems to be in actual lawful enjoyment of
the property and no harm can be done to anyone by
taking it and preserving it for the beneft of the
legitimate who may prove successful. Therefore, even
if there is no allegation of waste and mismanagement
the fact that the property is more or less 'in medio' is
suffcient to vest a Court with jurisdiction to appoint a
receiver.
(5) The Court, on the application of a receiver,
looks to the conduct of the party who makes the
application and will usually refuse to interfere unless
his conduct has been free from blame. He must come
to Court with clean hands and should not have
disentitled himself to the equitable relief by laches,
delay, acquiescence etc..
58. In the wake of the aforesaid enunciation of law as well as
the law laid down by the highest Court of the Country, it is well
settled that the power to appoint a Receiver must justify it's
existence. Merely because there is disobedience of an order
passed by the Arbitrator, in my considered opinion, would not
justify its exercise. The allegations against the Sharmas in
respect of breach of an earlier order to the following effect as
justifed, in particular, the following instances have formed the
basis for the exercise of discretion by the Tribunal in its second
impugned order:
(a) Preventing Ramani from accessing the site although
Sharma members were in a position to visit the fats;
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(b) Unilateral and surreptitious correspondence by
Sharmas regarding undisputed fats even during the
pendency of the present application;
(c) Change in circumstances since the frst order
passed by the Tribunal.
59. When the second impugned order passed by the Tribunal
on 17.05.2022 is carefully perused, I can only observe that the
prime factor of change in circumstances was based on
contradictory stands adopted by the consenting parties and the
Arbitrator has clearly recorded in the impugned order that the
argument advanced by Ramani as regards fat no.1301 being
put to use by the Sharmas was not of conclusive nature and he
deemed it ft to grant beneft of the doubt in favour of the
Sharma wives but the learned Arbitrator however denied that
argument advanced on behalf of Sharmas that the wives were
in possession of the fat though not occupation and the fnding is
rendered that they were neither in possession nor in
occupation of fat no.1301 and until the Occupancy Certifcate
was obtained there was no question of anyone being in
possession or occupation, even for ft-out works. The
Occupancy Certifcate being granted on 14.03.2022, it is held by
the Tribunal that thereafter no possession is made over to the
wives.
60. As regards the notices being issued unilaterally to Talreja
in respect of fat nos.801, 901 and 902, though it is held by the
Tribunal that issuing the termination notices to Talreja
amounted to "dealing with. the said fats and a peculiar
situation was noticed by the learned Arbitrator, where one
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partner was objecting to the termination and other partner
claimed that the termination is valid, as the dispute was in
respect of the balance amount to be paid. The difference
between the amounts staked by the two contenders is barely of
some lakhs as against the admitted consideration paid by
Talreja as against the fats. Whether the termination of Talreja
is valid or invalid or whether a partner could unilaterally
terminate the registered agreement is a question which was left
open by the learned Arbitrator and the learned Arbitrator
rejected the relief of handing over the fats of Talreja against
the deposit as may be considered by the Tribunal to be
appropriate. The Tribunal refused to hand over the possession
of fats to either of the partners and recorded that the
possession of these fats will have to be protected pending the
arbitration proceedings.
61. Undoubtedly, the Tribunal recorded the breaches
committed by Sharmas, in not abiding by it's earlier direction of
giving the accounts, as a result of which the statement of
accounts of the frm could not be drawn by the Chartered
Accountant.
However, only for the aforesaid reason, the Arbitrator
could not have exercised his discretion in appointing the Court
Receiver, which relief was refused in the earlier round of
litigation, in the given facts. When the frst order was passed by
the Tribunal on 31.03.2021, fat no.1301 was already alleged to
have been conveyed in favour of the Sharma wives by the
Sharma brothers and when the Tribunal deemed it appropriate
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to impose a condition upon the Sharmas not to occupy the said
fats, that served the purpose and interest of the frm, as
ultimately whether the registered agreement for sale without
approval from Ramani had really conveyed the property in
favour of Sharma wives is a question required to be determined
by the Arbitrator during the proceedings pending before him
for adjudication.
62. The exercise of discretion to appoint an Arbitrator must
be a judicial exercise, which would necessarily be justifed in the
given circumstances for protecting the rights of the parties and
for meeting the ends of justice. The two terms are not a mere
projection but the conditions must be made out to justify the
exercise of the power. The allegation that Ramani was excluded
from partnership business and the Sharmas are not willing to
share any information, documents and data that may pertain to
the frm cannot be a ground for the appointment of a Receiver.
The deadlock in the frm defnitely cannot be resolved by
appointing a Receiver and merely because one of the parties
has allegedly committed a breach of the earlier order passed by
the Tribunal would also not justify the appointment of a
Receiver, which power will have to be exercised only when it
appears that the property or the assets of the frm are being
wasted or mismanaged. The partnership between Ramani and
Sharmas was restricted to the development of one building and
now on 14.03.2022, the Occupancy Certifcate is also received.
The undisputed fats are already handed over to the prospective
purchasers and as regards the fats under dispute, independent
petitions are also fled by the purchasers, who claim
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appointment of a Receiver for the purpose of carrying out the
work of completion of the building.
63. The aforesaid circumstances in my considered opinion do
not justify the appointment of a Receiver. Ramani can always
take recourse to the appropriate remedies available to him by
moving an application before the Tribunal as and when the
circumstances arise and seek appropriate directions. The
appointment of the Receiver need not be further continued as
the Receiver has served the purpose by ensuring that the
construction of the building is completed and now the
Occupancy Certifcate is also granted. The undisputed fats are
already delivered to the purchasers and as regards the disputed
fats the Arbitrator is expected to resolve the dispute at the
earliest as it is not only the Sharmas and Ramani, the two
partners who are the parties to the dispute but because of their
dispute, the other petitioners, who are the purchasers of the
distinct fats are also facing serious concern as despite they
having parted with different considerations towards the
purchase of the fat, the fats cannot be handed over to them.
The Receiver, till date, has also exercised his control over
the disputed fats, but now since they are identifed, both the
parties shall maintain status-quo as regards the disputed fats
and shall not create any third party interest or any
encumbrances therein, as directed by the frst order passed by
the Tribunal on 31.03.2021. Though the other reliefs sought
by Ramani are rejected, no proceedings are fled by Ramani,
challenging the said order.
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64. As a result of the aforesaid discussion, by continuing the
frst order passed by the Arbitrator on 31.03.2021, continuing
the restraint upon the Sharmas and Ramani from dealing with,
selling, transferring, alienating, disposing off, encumbering
and/or creating third party rights in respect of the assets of the
frm and in particular, fat nos.102, 201, 202, 601, 802, 1001,
1002 and 1301 in Hamrahi building, the order dated
31.03.2021 is upheld.
As a result, Comm.Arbitration Petition No.185 of 2022 is
dismissed.
Comm.Arbitration Petition No.262 of 2022 and Comm.
Arbitration Petition (L) No.16413 of 2022 stand allowed by
setting aside the impugned order dated 17.05.2022, appointing
the Receiver in respect of "Hamrahi Building., including fat
no.1301 in possession of the Sharmas.
65. Comm.Arbitration Petition No.7131 of 2022, which is
connected with the above proceedings is fled by the three
petitioners, who claim that they are entitled for the fats in the
redeveloped "Hamrahi Building. under the original
"Development Rights Agreement. dated 03/09/2009 and they
allege that respondent no.1-Uma Constructions alongwith it's
partners have failed to complete the redevelopment work and
have neglected their statutory duty by not registering
themselves with Maharashtra Real State Regulatory Authority.
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The petitioners refer to the arbitration clause contained
in the "Development Rights Agreement. dated 03/09/2009 and
have approached the Court, seeking appointment of Court
Receiver in respect of the suit property and/or the premises,
including fat nos.802, 1001, 1002, 1301 in the premises of the
new Hamrahi Building, which is in direct or indirect possession
of M/s. Uma Constructions and it's partners. They also seek a
restraint order against the frm and it's partner from creating
any third party interest/rights in the suit fats.
The petitioners allege that during the pendency of the
redevelopment project the Sharmas and Ramani executed a
Deed of Transfer on 26.04.2016 with respect to the Hamrahi
Building and the respondent nos.2 & 3, that is the Sharmas and
Ramani, accrued the development rights under the original
agreement to which M/s. Uma Constructions was a confrming
party. It is the specifc case of these purchasers that fats of the
original members of Hamrahi building were acquired by the
partners of the frm and by creating a charge on these fats to be
attached and sold under the supervision of the Court Receiver
and moneys to be utilised for completion of Hamrahi Building
and for compensating the petitioners and other members of the
Hamrahi Cooperative Housing Society.
66. Since I have set aside the direction of the Arbitrator in
appointing the Court Receiver, in respect of the suit property, I
am not inclined to grant prayer clause (a) in the above petition
fled by the respective petitioners, but I deem it appropriate to
restrain the respondent nos.1 to 4 in the said petitions from
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dealing with, disposing of, selling, transferring, alienating,
encumbering or creating any third party rights in respect of the
unsold fats which include the disputed fat nos.802, 1001, 1002
and 1301 in the newly constructed "Hamrahi Building".
67. Conferring the liberty upon the respective parties to move
the Arbitrator in case of any exigency arising in future, the
learned Arbitrator is directed to conclude the arbitration
proceedings expeditiously and, in any case, within a period of 6
months from today or on or before 31.12.2023 whichever is
earlier. The Commercial Arbitration Petition Nos.264/22,
185/22 and Comm.Arbitration Petition (L) Nos.16413/22 and
7131/22 stand disposed of.
68. Commercial Arbitration Petition Nos.8869/2020,
8860/2020 and 8861/2020, which seek a relief of payment of
rent/compensation are separated and directed to be listed for
hearing on 12.06.2023.
69. As far as Contempt Petition bearing CPCUL No.6695/2022
is concerned, I deem it appropriate to issue notice to the
respondents, who shall fle the responses within a period of 8
weeks from today and the Contempt Petition is de-tagged from
the bunch of Arbitration Petitions, which are disposed of by the
present order.
( SMT.BHARATI DANGRE, J. )
Niti/M.M.Salgaonkar
