Karnataka High Court
Royal Orchid Associated Hotels Private ... vs M/S Hotel Grand Centre Point on 14 November, 2024
Author: H.P.Sandesh
Bench: H.P.Sandesh
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MFA No. 7168 of 2024
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
R
DATED THIS THE 14TH DAY OF NOVEMBER, 2024
BEFORE
THE HON'BLE MR JUSTICE H.P.SANDESH
MISCELLANEOUS FIRST APPEAL NO. 7168 OF 2024 (AA)
BETWEEN:
1. ROYAL ORCHID ASSOCIATED
HOTELS PRIVATE LIMITED,
A COMPANY INCORPORATED UNDER THE
PROVISIONS OF THE COMAPANIES ACT 1956,
HAVING ITS REGISTERED OFFICE
AT NO.1, GOLF AVENUE,
KODIHALLI, OFF AIRPORT ROAD,
BANGALORE-560 008,
REPRESENTED BY ITS
AUTHORISED SIGNATORY
MR. MAURICE REDDY.
...APPELLANT
(BY SRI. ARUN KUMAR, SENIOR COUNSEL FOR
Digitally signed
SRI PRADHYUMAN SINGH, ADVOCATE FOR
by DEVIKA M M/S. CRESTLAW PARTNERS)
Location: HIGH
COURT OF AND:
KARNATAKA
1. M/S. HOTEL GRAND CENTRE POINT,
A PARTNERSHIP REGISTERED UNDER
THE PARTNERSHIP ACT AND
HAVING ITS REGISTERED OFFICE
AT HOTEL GRAND CENTRE POINT,
NEAR HATRICK RESTAURANT, RAJ BAGH,
SRINAGAR - 190 001,
REPRESENTED BY ITS PARTNER.
2. MOHAMMAD RAFEEQ KARNAI,
S/O LATE ABDUL RAHEEM ,
PARTNER OF M/S. HOTEL GRAND CENTRE POINT,
HAVING ITS REGSITERED OFFICE
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MFA No. 7168 of 2024
ADDRESS AT HOTEL GRAND CENTRE POINT,
NEAR HATRICK RESTAURANT, RAJ BAGH,
SRINAGAR-190 001.
3. MANSOOR AHMED KARNAI,
S/O LATE ABDUL RAHEEM,
PARTNER OF M/S. HOTEL GRAND CENTRE POINT
HAVING ITS REGSITERED OFFICE
AT HOTEL GRAND CENTRE POINT,
NEAR HATRICK RESTAURANT, RAJ BAGH,
SRINAGAR-190 001.
4. NAZIR AHMED KARNAI,
S/O LATE ABDUL RAHEEM,
PARTNER OF M/S. HOTEL GRAND CENTRE POINT
HAVING ITS REGSITERED OFFICE
AT HOTEL GRAND CENTRE POINT,
NEAR HATRICK RESTAURANT, RAJ BAGH,
SRINAGAR-190 001.
5. BASHIR AHMED KARNAI,
S/O LATE ABDUL RAHEEM,
PARTNER OF M/S. HOTEL GRAND CENTRE POINT
HAVING ITS REGSITERED OFFICE
AT HOTEL GRAND CENTRE POINT
NEAR HATRICK RESTAURANT, RAJ BAGH,
SRINAGAR-190 001.
...RESPONDENTS
(BY SMT. SHEETHAL SONI, ADVOCATE C/R2)
THIS MFA IS FILED UNDER SECTION 37(1)(b) OF THE
ARBITRATION AND CONCILIATION ACT 1996, AGAINST THE
ORDER DATED 01.10.2024 PASSED ON IA.NOS.5 TO 7 IN
AA.NO.4/2024 ON THE FILE OF THE IX ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE, BENGALURU, DISMISSING THE IA.NO.V
TO VII FILED UNDER ORDER 39 RULE 1 AND 2 R/W SECTION
151 OF CPC AND SECTION 9 OF THE ARBITRATION RULES
(PROCEEDINGS BEFORE THE COURT) 2001.
THIS APPEAL COMING ON FOR ADMISSION THIS DAY,
JUDGMENT WAS DELIVERED THEREIN AS UNDER:
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MFA No. 7168 of 2024
CORAM: HON'BLE MR JUSTICE H.P.SANDESH
ORAL JUDGMENT
Heard the learned counsel for the appellant and the
learned counsel for the caveator/respondent No.2.
2. This miscellaneous first appeal is filed challenging
the order of the Trial Court dated 01.10.2024 dismissing
I.A.Nos.5 to 7 in AA No.4/2024 which have been filed under
Order 39 Rules 1 and 2 read with Section 151 of CPC and
Section 9 of the Arbitration Act read with Rule 9 of the
Arbitration (Proceedings Before the Courts) Rules, 2001.
I.A.No.5 was filed praying to grant an order of temporary
injunction restraining respondent No.2, his representatives,
successors in interest and anyone claiming under through him
from obstructing or impeding the smooth functioning and
operations of the hotel premises/schedule property in any
manner, pending disposals of the suit.
3. I.A.No.6 was also filed under the very same
provision of law seeking the relief of temporary injunction
restraining respondent No.2, his representatives, successors in
interest and anyone claiming under through him from
interfering, obstructing and/or in any manner impeding, either
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directly or indirectly with the management and operations of the
hotel premises/schedule property in any manner, pending
disposal of the suit.
4. I.A.No.7 was also filed under the very same
provision of law seeking the relief of temporary injunction
restraining respondent No.2, his representatives, successors in
interest and anyone claiming under through him from
interfering, obstructing and/or in any manner impeding, either
directly or indirectly with the staff member and/or
guests/customers of the petitioner in the hotel premises/
schedule property in any manner, pending disposal of the suit.
5. In support of the applications, an affidavit is sworn
to contending that on 23.03.2019, a franchise agreement was
entered between the parties for operating the hotel premises on
the schedule property. It is contended that the petitioner being
one of the India's finest and fastest growing hotel chain and
being one of the most sought-after hospitality brands in the
industry, enters into hotel operation agreement with the owner
of the properties and lending them goodwill associated with the
internationally renowned "Royal Orchid" "Regenta" and "Regenta
Central" brand name amongst others. The respondent No.1 is a
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partnership firm registered under the Partnership Act, 1932.
The respondent Nos.2 to 5 are partners of respondent No.1.
The respondent No.1 is the owner of a hotel premises located
near Hatrick Restaurant, Raj, Bagh, Srinagar, Jammu and
Kashmir "Premises" or "Schedule Property". The parties entered
into a franchisee agreement dated 23.03.2019, wherein the
petitioner would aid and facilitate the business of respondent
No.1 by contributing through its brand reputation, technical
know-how, training and expertise in running premium quality
hotel businesses. Subsequent to execution of the agreement,
the management and operations of respondent No.1 were
smoothly being carried out. However, respondent No.2 started
unnecessarily interfering in the functioning of the hotel
premises. The respondent No.2 has been shouting at staff in
the reception and threatening to cancel bookings, take away
records if he is not paid exorbitant sums separately over and
above what is agreed under the agreement. Therefore, the
operations of the hotel under the petitioner's name and guests,
is under serious jeopardy.
6. It is further contended that the interference and
disturbances being caused by respondent No.2 are in blatant
violation of the agreement. Clause 5.1 of the agreement clearly
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stipulates that respondent No.1 Firm will maintain a high moral
and ethical standard and atmosphere at the hotel premises. The
maintenance of atmosphere at the hotel premises is an essential
and indispensable part of providing the best quality hospitality
services to the customers of the petitioner. The disturbances
being caused by respondent No.2 has a direct bearing on the
customer experience and impacts the day-to-day functioning,
business operations and prospective profits of the petitioner. As
a consequence of the conduct of respondent No.2, the petitioner
was constrained to approach this Court to seek exparte ad-
interim injunctive relief's restraining the respondent from taking
any steps to interfere with the smooth operation of the hotel
premises, interference with staff and guests in the hotel
premises or from taking any steps to terminate the agreement
and create third party rights. It is contended that agreement is
for a period of ten years and notice was also issued and reply
was also given by respondent No.2 for initiating of the prima
facie proceedings despite being well aware of the interim order
that was passed by the Court, the respondent has continued to
interfere with the smooth operations of the hotel premises. The
respondent Nos.2 and 3 have threatened the use of physical
force to coerce the petitioner, their representatives and
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employees to remove themselves from the hotel premises. The
petitioner received an e-mail dated 26.03.2024 from the General
Manager of the hotel, documenting the grave and serious
threats being made by respondent Nos.2 and 3 to close down
the hotel. These actions of respondent No.2 are in blatant
violation of the interim order dated 17.02.2024 passed by this
Court and once again the petitioner was constrained to approach
the Court for protection and also sought for appropriate
directions against the respondents and hence I.As. are filed
seeking for the interim order of temporary injunction.
7. The respondent No.2 appeared and filed the
statement of objections contending that the suit itself is not
maintainable and petitioner is not having any locus standi. It is
contended that respondent No.2 is not a signatory to the
franchisee agreement and the suit is hopelessly barred by
limitation as their franchisee agreement on which the case is
based upon is not in existence at the time of filing this petition.
It is also contended that the case is not maintainable before this
Court for want of territorial jurisdiction as the suit schedule
property is situated in the State of Jammu and Kashmir and
though it has been mentioned in Clause 19.1 of the franchisee
agreement that the jurisdiction will be at Bengaluru, but as per
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the settled principal of injunction, for the relief of injunction
petition must be filed before the High Court of Karnataka. It is
pertinent to note down that no franchisee agreement is above
the law. It is contended that respondent No.5 started
concealing material information of the hotel and also started
obstructing the ingress and egress of the petitioner in the hotel
with an intention to grab the shares of respondent No.2 in the
profits of the hotel. The respondent No.2 have authority to
enter profits of hotel premises and participate towards smooth
operations of hotel business as per partnership agreement dated
01.04.2012. The respondent No.5 is not allowing respondent
No.2 in the profits of the hotel and hiding the profits of hotel
business and respondent No.5 is not allowing the respondent
No.2 to inspect the books of accounts, ledgers or bills etc. or
any stock register or any balance sheet. In the year 2021,
respondent No.3 filed a suit for declaration, partition and
injunction and for rendition of accounts before the Court of
Additional District and Sessions Judge, at Srinigar in Case
No.1071/2021. Accordingly, suit is arrived at compromise
between the parties by its compromise decree dated
20.04.2022. It is also the contention that respondent Nos.2 and
3 together filed a arbitration petition against respondent Nos.4
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and 5 before the Court of Principal District Judge at Srinigar in
Case No.Arb.No.1771/2024 and accordingly petition arrived at
by its order dated 01.04.2024. The said suit was disposed of by
way of compromise between the parties whereby the operation
of the hotel was the responsibility of respondent No.5 and daily
cash transaction of the hotel was the responsibility of
respondent No.5 and the profit accrued from the hotel was to be
shared among the respondent Nos.5 and 2 in the ratio as per
the settlement between the parties. After the expiry of two
years, respondent No.5 did not step down from conducting the
operation of hotel and is not allowing respondent No.2 to enter
the hotel and operate the same nor respondent No.5 is allowing
the parties to conduct the voting as per the terms and
conditions of the settlement deed arrived between the parties.
8. The Trial Court having taken note of the pleading of
the parties, framed the points whether the petitioner proves the
prima facie case, balance of convenience and whether petitioner
proves that in case temporary injunction is not granted, it will be
put to irreparable loss and injury and the Trial Court answered
all the points in the negative. The Trial Court while coming to
such a conclusion made an observation in paragraph No.27 that
there is no dispute between the company, hotel and
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characteristics of hotel by both the parties. The main contention
of the petitioner is that the respondents hotel used the name of
the petitioner for business and if any quarrels and unwanted
issues created by respondent No.2 in the hotel, then the
petitioner will lose the reputation of his name in the eyes of
customers. The Trial Court also taken note of that the
respondents contention is that the arbitration proceedings has to
be started within 90 days and franchisee agreement entered into
between one respondent and all other respondents have not
given any authorization as per the partnership deed and further
contended that as per Section 21 of the Arbitration and
Conciliation Act, both parties have to agree for which respondent
has not agreed to the same to notice sent by the petitioner. The
Trial Court in paragraph No.28 made an observation with regard
to the partnership deed produced by respondent No.2, that "no
partners shall without the previous consent in writing of the
other partner shall assign, mortgage or charge his/her share or
interest in the partnership wholly or in part to any person other
than the other partner and also taken note of the recital in the
partnership. The Trial Court also made an observation that
ofcourse this Court cannot decide the merits of the case but
here a crucial point is involved about the business transactions
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and to who has prima facie case and balance of convenience
these facts are relevant to understand this. As per the above
clause in partnership deed the partner who enters into any
agreement has to get the consent in writing of other partners.
The Trial Court taken note of Section 21 of the Arbitration and
Conciliation Act and extracted the same and held that as per the
above provision, it is clearly stated that the other party has to
agree on the request made by one party for referring the matter
to arbitration and such request is received by respondent No. 2
herein. As per above provision respondent No.2 should agree for
the request of the petitioner to refer the matter to arbitration.
The Trial Court taking note of these aspects into consideration
comes to the conclusion that the plaintiff has not made out a
prima facie case and balance of convenience and rejected the
I.As.
9. Being aggrieved by the said order, this present
appeal is filed and the learned counsel for the appellant would
contend that earlier temporary injunction was granted on
17.02.2024. On two grounds the Trial Court has invoked for
vacating the interim order. The learned counsel brought to the
notice of this court Section 19 of the Partnership Act and
contend that franchisee agreement is for a period of 10 years
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from 2019 to 2029. The learned counsel contend that notice
was given on 04.04.2024 for appointment of arbitrator wherein
also in the notice specifically mentioned the name of the
arbitrator and reply was given on 23.04.2024. The learned
counsel brought to the notice of this Court the judgment of the
Division Bench of this Court in the case of SERVE AND VOLLEY
OUTDOOR ADVERTISING PRIVATE LIMITED v. BRUHAT
BENGALURU MAHANAGARA PALIKE, BANGALORE AND
OTHERS reported in MANU/KA/1082/2021, wherein
discussion was made in paragraph No.14 with regard to Sections
21 and 43 of the Arbitration Act. It is held therein that as per
Section 21 read with 43(2) of the Arbitration Act, an arbitration
shall be deemed to have commenced on the date on which a
request for reference to arbitration is received by the
respondent. However, if the parties agree under the agreement
to some other event for commencement of arbitration that
would have effect. Notice under Section 21 has to be served
and received by the respondent. If no notice is received by the
respondent, then there is no commencement of arbitral
proceedings under Section 21. Thus, the date of commencement
of the arbitration would be relevant for determining whether any
claim is barred by limitation. A time barred claim in arbitration
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is to be dealt with in the same manner as a time barred prayer
in a suit, covered by Section 3 of the Limitation Act. Thus, in
the absence of an agreement, Section 21 of the Arbitration Act
states that arbitral proceedings commence on the date on which
a request for reference to arbitration is received by the
respondent.
10. The learned counsel also submits that CMP
application was filed on 28.06.2024 and brought to the notice of
this Court Section 9(2) of the Arbitration and Conciliation Act
and contend that sub-Section (2) of Section 9 says where,
before the commencement of the arbitral proceedings, a Court
passes an order for any interim measure of protection under
sub-Section (1), the arbitral proceedings shall be commenced
within a period of 90 days from the date of such order or within
such further time as the Court may determine. The learned
counsel contend that in the case on hand, even though order
was granted on 17.02.2024 granting ad-interim injunction, on
04.04.2024 itself notice was given within a period of three
months and steps were taken and after the issuance of notice
only when the reply was given not agreeing for appointment of
arbitrator, a petition was filed on 28.06.2024 and hence the
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very contention of respondent No.2 that not filed the petition
within time cannot be accepted.
11. Per contra, the learned counsel for respondent No.2
would contend that the very franchisee agreement is not valid
and submits that partnership is also dissolved and issue was
also taken before the Court of Srinagar and family settlement
was arrived between the parties. The learned counsel submits
that no authorization was given to enter the franchisee
agreement and respondent No.2 is not a consenting party. The
learned counsel submits that family settlement happened on
20.04.2022 and partnership also stands cancelled and when
such being the case, there cannot be any preventive order
against respondent No.2. The learned counsel submits that CMP
is filed after four months and should have been filed within three
months. The learned counsel in support of her arguments relied
upon the order passed by this Court in the case of M/S. PATON
CONSTRUCTIONS PRIVATE LTD. v. M/S. LORVEN
PROJECTS LTD. reported in AIR 2017 KAR 135 and brought
to the notice of this Court the discussion made by this Court in
paragraph No.2, wherein contention was raised by the learned
counsel for the appellant that, in view of Rule 9(4) of the High
Court of Karnataka Arbitration (Proceedings before the Courts),
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Rules 2001, the impugned order dated 21.12.2013 granting the
interim measure under Section 9 of the Act stood vacated on the
expiry of three months from the date of presentation of the
application under Section 9 of the Act, as arbitral proceedings
were not initiated within the aforesaid three months. To examine
the contention urged, Rule 9(4) of the Rules requires to be
noticed and the same was extracted and discussion was made
that the above extracted sub-rule states that in the case of an
application for any interim measure made before initiating
arbitral proceedings, if the arbitral proceedings in respect of the
dispute are not initiated within three months from the date of
presentation of the application under Section 9 of the Act, any
interim order granted shall stand vacated without any specific
order to that effect by the Court which passed the order. It is
relevant to state that 'any interim order' referred to in Rule 9(4)
extracted above, in the context, shall include any order granting
any interim measure. The learned counsel referring this
judgment would contend that when the proceedings has not
been initiated within a period of three months from the date of
interim order, in view of the said Rule, automatically it stands
vacated and the contention of the learned counsel for the
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appellant that initiation of notice itself is commencement of
arbitral proceedings cannot be accepted.
12. Having heard the learned counsel for the appellant
and the learned counsel for respondent No.2 and considering the
principles laid down in the judgments referred (supra) by both
the learned counsel and also considering Sections 9, 21 and 43
of the Arbitration and Conciliation Act as well as Rule 9(4) of the
said Rules, the points that arise for the consideration of this
Court are:
(i) Whether the Trial Court committed an error in
vacating the interim order granted in
dismissing I.A.Nos.5 to 7 and whether it
requires interference of this Court?
(ii) What order?
13. Having heard the respective learned counsel, it is
not in dispute that there was a franchisee agreement between
the appellant and the respondent partners and the same is
dated 23.03.2019. It is also not in dispute that the appellant
was running a hotel without any hindrance from 2019 till
23.01.2024 and the appellant also specifically pleaded in the
plaint that respondent No.2 has been illegally interfering with
the smooth operations of the hotel premises. It is not in dispute
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that the franchisee agreement was entered into between the
appellant, respondent No.1 and other partners and no doubt
there was a difference between the partners and then started
the problem. The respondent No.2 started interfering with the
business of the appellant. It is also not in dispute that the suit
is filed wherein it is specifically pleaded with regard to the
interference of respondent No.2 and also interim order was
granted on 17.02.2024 when the proceedings was initiated
under Section 9 of the Arbitration proceedings. The learned
counsel for the appellant brought to the notice of this Court that
they have issued notice on 11.04.2024 and the same is
acknowledged by respondent No.2 and he has given reply on
23.04.2024, wherein he has rejected the offer of appointing an
arbitrator to resolve the issues among them. It is not in dispute
that CMP was filed on 28.06.2024. The contention of
respondent No.2 is that franchisee agreement is not valid and
he is not a consenting party and the said contention cannot be
accepted for the reason that, there was an agreement in the
year 2019 itself for running the hotel. No doubt, there was a
dispute between the partners and there was a family settlement
between them and also the document is placed with regard to
the family settlement is concerned.
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14. It has to be noted that when the period was given as
ten years for running the hotel and if there is any dispute
between the partners, the same was not inter se business of the
appellant and the respondent. It is also important to note that
when there is an arbitration dispute and reference is also made
after filing of the petition under Section 9, the only moot
question involved before this Court in view of the contention of
the learned counsel for the appellant and respondent No.2 is
whether the proceedings in CMP is initiated within three months.
No doubt, Section 9 of the Arbitration and Conciliation Act, 1996
discloses that the Court can grant interim relief to the aggrieved
party before or during arbitral proceedings or at any time after
making of the arbitral award. Section 9(2) of the Arbitration and
Conciliation Act, 1996 is very clear, before commencement of
arbitration proceedings, if the Court passes an order of interim
measure of protection under Section 9(1) of the Arbitration and
Conciliation Act, 1996 the arbitral proceedings shall commence
within a period of 90 days from the date of such order or within
an extendable timeline as per the courts' discretion.
15. In the case on hand, the extendable time which the
Court may determine does not arise, as there is no such order.
It is also important to note that Rule 9(4) of the High Court of
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Karnataka (Proceedings before the Courts) Rules, 2001 is also
clear that after a party obtains any relief from a Court under
Section 9 of the Arbitration and Conciliation Act, 1996, such a
party is required to take steps to commence arbitration
proceedings. Rule 9(4) further states that if a party fails to take
steps to commence arbitration, any interim order granted by the
Court shall stand automatically vacated. Further, if the arbitral
proceedings are not initiated within three months from the date
of presentation of application, the interim order would stand
vacated. Hence, this Court has to read Section 9(2) of the
Arbitration and Conciliation Act, 1996 as well as Rule 9(4) of the
High Court of Karnataka (Proceedings before the Courts) Rules,
2001 conjointly and on conjoint reading of both Section 9(2) and
Rule 9(4), it is clear that within 90 days from the date of such
interim order being granted, under Section 9(1) of the
Arbitration and Conciliation Act, 1996, arbitration proceedings
has to be initiated and also Rule 9(4) is very clear that, in case
of any application for interim-measure is filed before the Court,
if the arbitration proceedings is not initiated within three months
from the date of presentation of application under Section 9,
interim order shall stand vacated. The word used is 'shall'.
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16. Learned counsel for the appellant relies upon the
judgment of the Division Bench of this Court in SERVE AMD
VOLLEY OUTDOOR ADVERTISING PRIVATE LIMIED VS.
BRAUHAT BENGALURU MAHANAGARA PALIKE,
BANGALORE AND ORS. decided on 08.01.2021, wherein
discussion was made with regard to Section 21 as regards
commencement of arbitration proceedings, wherein Section 3 of
the Limitation Act is also discussed in paragraph No.14. The
Division Bench of this Court, having extracted Sections 21 and
43 of the Arbitration Act, 1996 discussed that as per Section 21
read with Section 43(2) of the Arbitration Act, an arbitration
shall be deemed to have commenced on the date on which a
request for reference to arbitration is received by the
respondent. However, if the parties agree under the agreement
to some other event for commencement of arbitration that
would have effect. In the case on hand, no such agreement is
entered into between the parties. It is also clear that notice
under Section 21 has to be served and received by the
respondent No.2. If no notice is received by the respondent
No.2, then there is no commencement of arbitral proceedings
under Section 21 of the Arbitration Act. Thus, the date of
commencement of arbitration would be relevant to determine
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whether information claimed and received is barred by limitation
and the case on hand, the notice is given on 11.04.2024.
Whether the notice is a commencement of arbitration
proceedings is the issue, since the learned counsel for the
respondent No.2 would contend that the appellant ought to have
filed the petition within a period of 90 days in view of Rule 9(4)
which has been referred supra. It is also very clear that as per
Section 9(2) of the Arbitration Act, where before the
commencement of arbitral proceedings, a Court passes an order
of interim measure under 9(2) of the Arbitration Act, within a
period of 90 days from the date of such order or within such
period, the petition has to be filed. In the case on hand, no
doubt, the interim order has been granted on 17.02.2024,
having conjointly read Section 9(2) of the Arbitration Act as well
as Rule 9(4) High Court of Karnataka (Proceedings before the
Courts) Rules, 2001, it is clear that maximum period given is 90
days.
17. This Court also in the judgment referred supra by
the respondent No.2 in M/S. PATON CONSTRUCTIONS
PRIVATE LTD. v. M/S. LORVEN PROJECTS LTD. reported in
AIR 2017 KAR 135 invoked Rule 9(4) and extracted the same,
comes to the conclusion that in case of an application for any
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interim measure made before initiating arbitral proceedings, if
the arbitral proceedings in respect of the dispute are not
initiated within three months from the date of presentation of
the application under Section 9 of the Act, any interim order
granted shall stand vacated without any specific order to that
effect by the Court which passed the order.
18. No doubt, in the case on hand, there was an interim
order on 17.02.2024, the very contention of the learned counsel
for the appellant is that notice was issued on 11.04.2024 and
notice was served and reply was given on 23.04.2024 rejecting
offer and the notice is within time and the appellant approached
the Court by filing CMP within the time period by issuing notice.
But, admittedly petition was filed on 28.06.2024 which was after
90 days and three months time as stipulated under Section 9(2)
and Rule 9(4). When such being the case, the contention of the
learned counsel for the appellant that issuance of notice is within
time cannot be accepted. The judgment of the Division Bench of
this Court in SERVE AMD VOLLEY OUTDOOR ADVERTISING
PRIVATE LIMIED's case is very clear that an arbitration shall
be deemed to have commenced on the date on which a request
for reference to arbitration is received by the respondent.
However, if the parties agree under the agreement to some
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other event for commencement of arbitration that would have
effect. But, in the case on hand, no such agreement and the
same was refused while giving reply and mere initiation of
notice itself cannot be construed as commencement of
proceedings. Hence, the contention of the learned counsel of
the appellant cannot be accepted.
19. When the proceedings has not been initiated within
the period of 90 days or three months as contemplated under
Section 9(2) as well as Rule 9(4), the very contention of the
learned counsel for the appellant cannot be accepted as the
notice was given. However, there is a force in the contention of
the learned counsel for the appellant that Trial Court committed
an error in relying upon partnership deed in paragraph No.28
i.e., "None of the partners shall without the consent of the other
partner in writing monies, goods and effects belonging to the
partnership firm for the purposes other than those for the
purpose of partnership business and matters arising out of or in
the course of such business" and "No partners shall without the
previous consent in writing of the other partner shall assign,
mortgage or charge his/her share or interest in the partnership
wholly or in part to any person other than the other partner", in
coming to the conclusion that Court cannot decide the merits of
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the case and decide who has prima facie case and balance of
convenience and these facts are relevant to understand this is
an erroneous observation, since there was an agreement in the
year 2019 itself and the partners have also kept quite from 2019
to 2023 i.e., till filing of the petition under Arbitration Act and if
any dispute arises between the partners that cannot be a
ground to come to a conclusion that there was no consent. The
Trial Court has given reasoning that there is no prima facie case,
since respondent No.2 was not party to the said agreement and
the same cannot be accepted as there was a franchisee
agreement to run the hotel.
20. However, taking note of the question involved in the
matter, particularly time frame under Section 9(2) as well Rule
9(4), initiation of the proceedings is not within time and Trial
Court also taken note of the same while vacating the interim
order in paragraph No.28 that respondent's contention is that
arbitration proceedings has to be started within 90 days and
Franchise agreement entered into between one respondent and
further contended that, all other respondents not given any
authorization as per the partnership deed and further contended
that as per Section 21 of the Arbitration and Conciliation Act,
both parties has to agree for which respondent has not agreed
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NC: 2024:KHC:46323
to the same to notice sent by the appellant. But the very
approach with regard to the other partners have not given
authorization cannot be a ground and the same is an inter se
dispute between them. When the arbitration proceedings has
not been initiated within time and Section 9(2) proviso of the
Act is clear that it has to be initiated within 90 days and the
same has not been initiated within 90 days and issuance of
notice itself is initiation of the arbitration proceedings and it has
to be construed as commencement of arbitration proceedings
cannot be accepted and issuance of notice itself is not
commencement of proceedings and the same is only for steps
taken for initiation of proceedings. In the case on hand, in reply
rejected the offer on 23.04.2024 itself and ought to have filed
on or before 17.05.2024 itself, but filed on 28.06.2024. Hence,
I do not find any merit to come to the conclusion that the Trial
Court has committed an error in dismissing the applications.
Accordingly, the miscellaneous first appeal is dismissed.
Sd/-
(H.P.SANDESH)
JUDGE
MD/ST
