Karnataka High Court

Sri. Shivappa Dhulappa Holkunde Since ... vs Sri. L Narasimhaiah on 26 July, 2024

Author: K.Somashekar

Bench: K.Somashekar

                             1


     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

          DATED THIS THE 26TH DAY OF JULY, 2024

                         PRESENT
          THE HON'BLE MR JUSTICE K.SOMASHEKAR
                           AND
       THE HON'BLE DR. JUSTICE CHILLAKUR SUMALATHA
           COMMERCIAL APPEAL NO. 307 OF 2023



BETWEEN:

SRI. SHIVAPPA DHULAPPA HOLKUNDE
(SINCE DEAD BY HIS LEGAL REPRESENTATIVE)

SMT. PRATIMA BYALE,
W/O. GOWRISHANKARBYALE,
D/O LATE SHIVAPPA HOLAKUNDI,
AGED ABOUT 53 YEARS,
R/AT FLAT NO.703,
HIRANANDINI MEADOWS,
NEAR PAWAR NAGAR,
THANE.

                                              .... APPELLANT
(BY SRI. CHANDRANATH ARIGA K., ADVOCATE)


AND:

1.   SRI. L. NARASIMHAIAH
     S/O LATE LAXIPATHAIAH,
     NO.193, 27TH CROSS,
     2ND MAIN, 6TH BLOCK,
     JAYANAGAR,BANGALORE-560082.

2.   NORTH EAST KARNATAKA ROAD
     TRANSPORT CORPORATION
     CENTRAL SARIGESADAN,
     GULBARGA,
     REPRESENTED BY ITS MANAGING DIRECTOR
                                            ... RESPONDENTS
(BY SRI. L. NARASIMHAIAH, PARTY IN-PERSON-R1;
SMT. H.R. RENUKA, ADVOCATE FOR R2)
                                   2



     THIS COMMERCIAL APPEAL UNDER SECTION 13(1A) OF
COMMERCIAL COURT ACT R/W SECTION 37 OF THE ARBITRATION
AND CONCILIATION ACT, 1996, PRAYING TO SET ASIDE THE
JUDGMENT    DATED   17.04.2023  PASSED  IN   COMMERCIAL
A.P.NO.49/2023 ON THE FILE OF LXXXV ADDL. CITY CIVIL AND
SESSION JUDGE, BENGALURU (COMMERCIAL COURT) AND ETC.


     THIS COMMERCIAL APPEAL HAVING BEEN HEARD AND
RESERVED FOR ARGUMENTS ON 25.06.2024, COMING ON FOR
PRONOUNCEMENT, THIS DAY, DR. CHILLAKUR SUMALATHA, J.,
DELIVERED THE FOLLOWING:


CORAM:     HON'BLE MR JUSTICE K.SOMASHEKAR
           AND
           HON'BLE DR. JUSTICE CHILLAKUR SUMALATHA


                          CAV JUDGMENT

(PER: HON'BLE DR. CHILLAKUR SUMALATHA)

Challenge in this appeal is the judgment that is rendered by

the Commercial Court, Bengaluru in COM.A.P. No.49/2023 dated

17.04.2023.

2. Heard Sri.Chandranath Ariga K., learned counsel for the

appellant and Sri.L.Narasimhaiah - respondent No.1 who appeared

and argued as party-in-person.

3. The flow of events as could be perceived through the

material available on record are that respondent No.1 herein had

filed a claim petition contending that he did business of giving buses

on hire to North East Karnataka Road Transport Corporation

('NEKRTC' for short) i.e. respondent No.2 herein. He was allotted

tender to run buses on hire by respondent No.2 - NEKRTC from

20.04.2001 to 19.09.2006. A sum of Rs.2,00,000/- was deposited

as security deposit by respondent No.1. Respondent No.1 and father

of the appellant i.e. Shivappa Dhulappa Holkunde entered into

partnership which is named as M/s Kalyan Travels. Partnership

Deed was executed on 29.12.2001. A sum of Rs.6,75,000/- was

invested as opening capital. It was agreed upon that the

remuneration of the partner should be Rs.2,500/- per cluster and

out of the total profit or loss, the respondent No.1 is entitled for

51% share out of the payments received from NEKRTC. NEKRTC

made the payments in the name of the firm as agreed upon.

Though respondent No.1 requested for annual returns, the details

about the number of workmen employed by the firm, their salary

etc., there was no response from father of the appellant and

NEKRTC. The father of the appellant withheld the dues which the

respondent No.1 is entitled. The respondent No.1 issued a legal

notice. However, in response to the said notice, a sum of

Rs.1,50,000/- only was paid by the father of the appellant. On

10.11.2008 another legal notice was issued to the father of the

appellant requesting him to supply necessary accounts of business.

However, the father of the appellant did not reply. Another legal

notice was issued on 28.11.2008 stating that as per Clause-15 of

the Partnership Deed for settlement of dispute through Arbitration,

Prof.M.Narayana Reddy was suggested as sole Arbitrator. Though it

was served upon father of the appellant, there was no response. On

that, the respondent No.1 approached the High Court of Karnataka

and the High Court has appointed the Arbitrator.

4. The sole Arbitrator who dealt with the matter had

formulated the following points for consideration:

"1. Whether "M/s.Kalyan Travels" a firm operated by R-1 deserves to be dissolved?

2. Whether R-1 is liable to show profit and loss accounts of the above referred firm?

3. Whether the claimant is entitled for the remuneration as claimed from 29.11.2001.

4. Whether the claimant is entitled for refund of security deposit of Rs.2,00,000/- from R-1?

5. What Award?"

5. The learned Arbitrator giving his reasons for coming to a

conclusion, passed an award allowing the claim petition that is filed

by the respondent No.1 herein and directing the father of the

appellant to supply profit and loss accounts and all other relevant

books of accounts pertaining to the business run as per the

partnership agreement. The father of the appellant was also

directed to pay Ra.12,500/- per month from February 2003 till

28.11.2008 with interest at the rate of 9% per annum. A direction

was also issued to NEKRTC to release Rs.2,00,000/- which was

deposited as security deposit by respondent No.1 within six months

from the date of receipt of copy of the order.

6. Aggrieved by the award passed by the sole Arbitrator,

the appellant herein filed a petition under Section 34 of the

Arbitration and Conciliation Act, 1996. The Commercial Court,

Bengaluru, which dealt with the matter i.e., COM.A.P. No.49/2023,

dismissed the same.

7. Arguing the matter, learned counsel for the appellant

submits that there is no dispute about the execution of the

Partnership Deed dated 29.12.2001. Learned counsel states that

the partnership however lasted only for one week, as respondent

No.1 herein retired from the partnership firm. Subsequently,

dissolution of Partnership Deed was executed on 17.03.2002 and

thereafter no business transactions were carried out. Learned

counsel states that the father of the appellant was suffering with

dementia and was taking treatment and therefore he could not

participate in the arbitral proceedings. The respondent No.1 who

obtained an award in his favour filed an execution petition. On

receiving notice in the execution petition by the brother of the

appellant, the family members came to know about passing of an

arbitral award. On that the appellant challenged the award before

the Commercial Court. However, with a plea that the appellant has

no locus-standi to challenge the award, the arbitration petition

which was filed under Section 34 of the Arbitration and Conciliation

Act was dismissed.

8. Learned counsel for the appellant further submits that

the appellant being the daughter of one of the parties to the arbitral

proceedings has got every right to contest the matter. In this

regard, learned counsel brought to the notice of this Court the

contents of Section 2(1)(g) of Arbitration and Conciliation Act.

Learned counsel further submits that, the award was passed

exparte against the father of the appellant and therefore the award

that is passed by the Arbitrator is invalid. Learned counsel further

contends that as per Clause-13 of the Partnership Agreement, the

partnership firm does not dissolve upon the death of one of the

partners and the same shall be continued by the legal heirs of the

deceased partner. Therefore, the partnership extends to the legal

representatives of the deceased partner and even on that count, the

appellant has got every right to participate in the arbitral

proceedings and also has got every right to challenge the award

that is passed by the Arbitrator. Learned counsel also contends that

respondent No.1 was aware that the father of the appellant was not

keeping well. But suppressing the said fact, he invoked arbitration

clause which is unjustifiable. Learned counsel finally seeks to set

aside the order that is rendered by the Commercial Court in COM.AP

No.49/2023 dated 17.04.2023.

9. Vehemently opposing the submission thus made by the

learned counsel for the appellant, the respondent No.1 who

appeared as party-in-person contends that he was deceived by the

father of the appellant. He states that the version of the appellant

on one hand is that the partnership firm was dissolved within one

week and on the other hand contends that as per Clause-13 of the

Partnership Deed, partnership firm will not dissolve by the death of

one of the partners and it will be continued through the legal

representatives, which is unjustifiable. Learned counsel also states

that several legal notices were issued to the father of the appellant

before initiating arbitral proceedings and those notices were

received by the father of the appellant.

10. Respondent No.1 also submits that a copy of the claim

petition was also sent to the father of the appellant by registered

post and acknowledgement was received about due service, but the

father of the appellant did not respond and thus the arbitral

proceedings continued. Learned counsel also states that only to stall

the executing proceedings, now the appellant and her siblings are

filing one or the other petition before this Court. Respondent No.1

also states that only to escape from liability and to protect the

property which devolved upon them from their father, such tactics

are being played and thus observing all these facts, the present

appeal is required to be dismissed.

11. The version of the appellant is that her father is no

more. In the grounds of appeal, the appellant at paragraph No.10

mentioned that her father died on 22.03.2018. Surprisingly, at

paragraph No.30 she contends that her father died on 28.03.2017.

Thus, there is clear ambiguity with regard to the exact date of death

of father of the appellant. The sole Arbitrator passed an award on

20.08.2010. If it is taken that the father of the appellant died in the

year 2017 as narrated in paragraph No.30 of grounds of appeal or

in the year 2018 as narrated in paragraph No.10 of grounds of

appeal, the fact that is clear is that the father of the appellant lived

for more than six years from the date of the award. In the light of

the said fact and also taking into consideration absence of any

substantive proof with regard to the alleged acute ill-health of the

father of the appellant, it cannot be held that the father of the

appellant was not in a position to respond to the legal notices or to

project his version contesting the arbitral proceedings.

12. Respondent No.1 has raised consistent version that

initially a legal notice was issued to the father of the appellant and

in pursuance of the notice Rs.1,50,000/- was paid by the father of

the appellant on 11.2.2003. He also contended that again on

10.11.2008 another legal notice was issued, but there was no reply

and on 28.11.2008 another notice was issued and though it was

served, there was no response. The learned Arbitrator in the

impugned award in respect of service of notice observed as follows:

"Though notices were sent to the respondents by RPAD they did not appear. It is clear that claimant sent a copy of the claim petition to R-1 by RPAD, he did not respond. So the proceedings were conduced in his absence."

13. Thus, in the light of the aforementioned facts, though it

cannot be held that the appellant has no right to represent her

deceased father, yet having regard to the fact that the father of the

appellant was given sufficient opportunity at every stage to project

his version and was served with the required notices before

initiation of arbitral proceedings and thereafter, this Court is of the

view that the appellant now cannot seek for cancellation of the

arbitral award. The Commercial Court gave a finding that the

appellant has no locus standi to challenge the arbitral award, having

observed the aforementioned fact and also in the light of the

limitation prescribed under Section 34(3) of the Arbitration and

Conciliation Act.