Madras High Court
Krishna Kumar Mundhra vs Shyamdev Mundhra on 5 December, 2023
Author: D.Krishnakumar
Bench: D.Krishnakumar
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on : 12 .10.2023
Pronounced on : 05.12.2023
CORAM:
THE HONOURABLE MR.JUSTICE D.KRISHNAKUMAR
and
THE HONOURABLE MR.JUSTICE P.DHANABAL
O.S.A. (CAD) No.84 of 2022
& C. M .P. No.9643 of 2022
Krishna Kumar Mundhra ..Appellant
Vs.
1.Shyamdev Mundhra
2.Ashok Kumar Mundhra
3.Ms.Uma Rathi
4.Mr.Ramdev Mundhra
... Respondents
Prayer:Original Side Appeal No.84 of 2014 filed under Section 37 of the
Arbitration and Conciliation Act, 1996 read with Clause 15 of the Letters
Patent read with Order XXXVI Rule (1) of the Original Side Rules, read
with Commercial Court under Section 13 of Commercial Court Act, 2015
against the order passed by the Learned Single Judge in A.No.272 of 2022
dated 06.06.2022 on the file of this Court.
For Appellant : Mr.V.Raghavachari
Sr.Counsel
1/17
for M/S.M.Narayanaswamy
For R1 & R2 : Mr.Murali Kumaran
Sr.Counsel
for MC Gan Law Firm
For R3 : Mr.P.Ganesan
JUDGMENT
(The Judgment of the Court was delivered by P.DHANABAL,J)
This Original Appeal has been filed as against the order passed by the
Learned Single Judge in O.A.No.272 of 2022. Wherein the learned Single
Judge has closed the application.
2. Case of the appellant before the learned Single Judge is that
originally there was a partnership firm in the name and style of
M/s.Phusaram Munthada entered into the business of jewellery. The
partnership was more of family concern and all the family members were
made as partners. In the year 1982, a deed was executed, dated 28.8.1982
between the father Mr.Jeevanlal Mundhra, this appellant and respondents 1
& 2. Thereafter, this appellant retired from the partnership firm with effect
from 31.3.2011. However he continued to be the one of the Director in the
Private Limited Company, incorporated under the same name i.e., M/s.
Phusaram Munthada Private Limited. Thereafter, the mother of the
petitioner Mrs.Maina Bai Mundhra was inducted as a partner and entered
into partnership deed on 01.04.2011 and thereby she was entitled to 1/3rd
share over the partnership firm. Though the petitioner was retired from
partnership firm on 31.03.2011, his accounts were not settled and he also
believed, since his mother was a partner in the firm, he would be entitled to
its share and profits. While the facts are being so, the petitioner's mother
died on 01.04.2020 and the partners were reduced into two partners. The
2nd respondent also retired from the partnership firm on the same day i.e.,
1.4.2020. Thus immediately after retirement of R2 on the date of retirement
the partnership firm got dissolved by operation of law. But the first
respondent included the 3rd and 4th respondent as partners in the said firm
on the same day. The first respondent in only surveying partner on the death
and retirement of other partners cannot continue the business by inducting
his kith and kin. On the date of death of his mother, the petitioner was
entitled to the share in the assets and good will of the partnership firm. The
petitioner also came to know that there were several fraudulent activities
and diversion of funds were also taking place under the partnership firm.
The petitioner caused notice to the respondents on 12.1.2021 and there was
continuous correspondences there on, but the respondents have not given
any accounts to the petitioner.
3. According to the appellant he filed an application before the
Arbitral Tribunal under Section 9 of the Arbitration and Conciliation Act,
1996 for granting interim order to restrain the first respondent herein and his
men from using the assets, profits and goodwill of the dissolved firm
M/s.Phusaram Munthada and continuing the business in the name of
partnership either by operating the bank accounts of the firm more fully
described in the application in O.A.No.272 of 2022.
4. The same petitioner also filed another application in O.A.No.97 of
2022, for appointment of receiver to take over the charge of the Partnership
Firm. While hearing the O.A.No.272 of 2022 at the time of admission, the
learned Judge has granted interim stay not to run the partnership business,
as against stay order the respondents herein have filed applications in
A.Nos.107 to 109 of 2022 with prayers to vacate the interim order.
5.The Learned Judge has passed order by holding that the claim of the
petitioner/applicant who retired from the partnership firm as early as on
30.03.2011 was barred by limitation and thereby the petition filed by this
appellant in O.A.No.272 of 2022 was closed and Arbitration Application
Nos.107 to 109 of 2022 were allowed. Thereafter another application in
O.A.No.97 of 2022 was heard by another Learned Single Judge and the
same was also closed by holding that already similar application filed under
Section 9 of the Arbitration and Conciliation Act, 1996 was closed by the
another Learned Single Judge and thereby passed the order by closing the
said application.
6. As against the order passed in O.A.No.272 of 2022, the present
appeal has been filed by the appellant on the following grounds:-
(1) The impugned order is against the facts and the well settled proposition
of law and hence deserves to be set aside.
(2) The learned Judge ought to have seen that Partnership Firm has come to
an end by operation of law on the death of appellant's mother on 01.04.2020
and on the same day, another partner has also retired from the partnership
and it is settled law that single partner cannot continue the partnership firm
by including his own kith and kin.
(3) The learned Judge ought to have seen that assets and good will of the
firm cannot be utilized by the single partner according to his whims and
fancies and the appellant is entitled to a share in the assets and goodwill,
being one of the legal heirs of deceased partner.
(4) The learned judge has failed to appreciate the fact that the appellant
entitled to claim a share as the legal heir of the deceased partner, who died
on 01.04.2020 and as such the claim of the appellant is well within the
period of limitation.
(5) The learned Judge failed to see that partnership firm consists of 3
partners namely 1 and 2 herein and appellant's mother and on the death of
the appellant's mother on 01.04.2020, the composition has been reduced
into two and on the same day the 2nd respondent has tendered his
resignation. Hence by operation of law, partnership firm has come to an end.
The 1st respondent herein had reconstituted the partnership firm by falsely
creating a partnership deed said to have been dated 01.04.2020. This crucial
aspect has not at all been considered by the learned Judge while vacating the
interim order.
(6) The learned Judge ought to have seen that the alleged partnership deed
could not have been executed on 01.04.2020, because the entire country was
on lockdown from 24.03.2020 due to onset of covid-19 and it is alleged by
the 1st respondent that he had purchased the stamp papers on 01.04.2020
from a stamp vendor at Madras High Court campus and it is further alleged
that he had reconstituted the firm by executing partnership deed using the
said stamp papers. Moreover appellant's mother died on 01.04.2020 at her
residence at Sowcarpet Chennai and she was cremated on the very same day
by 4.00 p.m., and all the children of my mother and all the family members
gathered there on 01.04.2020. All the family members stayed in the
Sowcarpet residence on that day till late night and thus the alleged
partnership deed said to be dated 01.04.2020, could not have been executed.
It is clear from the alleged partnership deed between the 1st respondent and
his sons, the same has been created subsequently by anti dating the date of
the deed as 01.04.2020.
(7) The learned Judge ought to have seen that the respondents 1 and 2
herein formed another partnership firm by name PJS Commodities and
indulged in diverting the business from the company (PMPL) and the firm
Phusaram Munthada to their new firm PJS Commodities, which necessitates
the grant of interim order to preserve the subject matter of arbitration.
(8) The learned Judge ought to have seen that the 1st respondent is running
the business by using the assets of the firm which has been dissolved by the
operation of law as early as on 01.04.2020.
(9) That the learned Judge did not consider the claim of the appellant in the
right perspective and ought not to have declared that the claims are barred
by limitation.
(10) That the learned Judge ought to have considered the fact that limitation
is a mixed question of fact and law and only through a full-fledged trial it
could be even established whether a claim is time barred or otherwise.
(11) That the learned Judge was not right in concluding that the claim is
barred by limitation merely because the appellant had resigned from the
partnership firm on 30.04.2011.
(12) That the learned Judge having stated that the claim is barred by the
limitation directs the appellant to file a suit or arbitral proceedings. The
finding on limitation would become detrimental to the initiations of any
further arbitral proceedings or suit since the order of the learned Judge
would come in the way of a substantial adjudication between the parties.
(13) That an impugned order also deserves to be set aside as no other
reasons have been stated and a declaration that the claims are barred by
limitation has been made without sufficient materials and evidence.
(14) That the learned Judge does not have any powers to decide on the
claims of the parties under section 9 of the act and it is only an interim
measure and if case for interim measures are not made out, at the best, the
Courts sitting under section 9 only relegate the parties to arbitral
proceedings to adjudicate the disputes under facts and laws.
7.1. Mr.V.Raghavachari, Senior counsel for Mr.M.Narayanaswamy
would vehemently contend that the petitioner/appellant has filed arbitration
application in O.A.No.272 of 2022 seeking interim injunction to restrain the
2nd respondent from operating the accounts of partnership firm. The
another application was filed in O.A.No.97 of 2022, for appointment of
receiver to take over the partnership business. While hearing the
O.A.No.272 of 2022, at the time of admission, the learned Judge has
granted interim stay, not to run the partnership business, As against the
interim stay granted by this Court, the respondents herein have filed
application Nos.107 to 109 of 2022 with prayers to vacate the interim order.
The said applicants were heard by the learned Single Judge.
7.2. The learned Judge has passed order by holding that the claim of
the petitioner/applicant who retired from the partnership firm as early as on
30.03.2011 was barred by limitation and thereby the petition filed by this
applicant in O.A.No.272 of 2022 was closed and applications nos.107 to
109 of 2022 filed by the respondents for vacating the interim stay were
allowed. Thereafter another application in O.A.No.97 of 2022 was heard by
another learned Single judge and the same was simply closed by holding
that already similar application filed under section 9 of the Arbitration and
Conciliation Act, 1996 was closed by the another learned Single Judge and
thereby passed the order by closing the application.
7.3. According to the appellant, the Learned Single Judge ought to
have disposed the application on merits in O.A.No.97 of 2022. On the
contrary, while passing order in O.A.No.272 of 2022, it was decided that
the claim of the applicant is barred by limitation. While so, based on that
order the petition in O.A.No.97 of 2022 was also closed. The order passed
by the Learned Single Judge in respect of the limitation will infringe the
rights of the petitioner/appellant and according to the order of the Learned
Single Judge, the claim is barred by limitation since the petitioner retired
from the partnership firm in the year 2011, but the mother the appellant
passed away in the year 2020 and thereby the appellants being the legal heir
of the deceased mother is also entitled to the shares of the partnership firm
and thereby the right of the appellant would affect due to the findings
rendered by Learned Single Judge, therefore, the order passed by the
learned Single Judge is liable to be set aside.
8.This Court has heard both sides and perused the materials on record,
the order of the Learned Single Judge and grounds for appeal. The point for
determination in this appeal is whether the order passed by the Learned
Single Judge in O.A.No.272 of 2022 is sustainable in law and facts.
9. In this case, there is no dispute with regard to the existence of
arbitral agreement between the parties. The learned Judge has closed the
application by holding that the claim of the petitioner is barred by limitation
as he was retired from the partnership firm in the year 2011 itself.
10. The contention of the appellant is that the appellant filed an
application in O.A.No.272 of 2022 and also obtained interim stay as against
the respondents from running the partnership firm. Thereafter, these
respondents have filed applications to vacate the stay in applications
Nos.107 to 109 of 2022 and the same were allowed. Since the above said
petitions were allowed, the main arbitration application No.272 of 2022 was
closed by holding that the claim of the petitioner was barred by limitation as
the petitioner has retired from the partnership firm in the year 2011. In fact
the petitioner's mother who was partner in the firm died in the year 2020 and
thereby, the petitioner is entitled to share of his mother. Therefore, the
petition is well within the limitation period and not barred by limitation. The
appellant has filed another original application in O.A.No.97 of 2022 for
appointment of receiver to take charge of the partnership firm during
pending arbitration proceedings.
11. The respondents contention is that the petitioner retired from
partnership firm in the year 2011 itself, therefore, he cannot claim any share
in the business, but at the same time his claim is towards the share of his
mother. Therefore, the claim of the petitioner is not barred by limitation for
claiming share of his mother. Subsequent to the order passed by the learned
Single Judge, the petitioner herein issued notice for appointment of
arbitrator under Section 11 of the Arbitration Act.
12. Learned Counsel for the respondents had not adverted the said
fact that the petitioner has taken steps for appointment of an Arbitrator
under Section 11 of the Arbitration Act. In spite of the above facts, without
going into the merits of the case, this Court can dispose of the appeal with
liberty to the appellant to approach the Arbitrator, by raising all the grounds
raised in the Appeal. The order passed by the Learned Single Judge would
be in force till the appointment of an Arbitrator and it is a well-settled law
that the interim order passed under Section 9 of the Arbitration Act before
the appointment of Arbitrator, will exist till the appointment of an arbitrator
and the arbitration proceedings to be commenced within 90 days. In this
context Section 9 of the Arbitration Act is extracted hereunder for ready
reference:-
....9.Interim measures, etc., by Court – A party may,
before or during arbitral proceedings or at any time after the
making of the arbitral award but before it is enforced in
accordance with Section 36, apply to a Court:-
(i).for the appointment of a guardian for a minor or a
person of unsound mind for the purpose of arbitral proceedings;
or
(ii).for an interim measure of protection in respect of any
of the following matters, namely:-
(a). the preservation, interim custody or sale of any goods
which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any
property or thing which is the subject-matter of the dispute in
arbitration, or as to which any question may arise therein and
authorising for any of the aforesaid purposes any person to enter
upon any land or building in the possession of any party, or
authorising any samples to be taken or any observation to be
made, or experiment to be tried, which may be necessary or
expedient for the purpose of obtaining full information or
evidence;
(d)interim injunction or the appointment of a receiver;
(e)such other interim measure of protection as may appear
to the Court be just and convenient,
and the Court shall have the same power for making orders as it
has for the purpose of, and in relation to, any proceedings before
it. [(2)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 ninety days from the
date of such order or within such further time as the court may
determine.
[(3)Once the arbitral tribunal has been constituted, the
Court shall not entertain an application under sub-Section (1),
unless the Court finds that circumstances exist which may not
render the remedy provided under Section 17 efficacious.”........
13. On careful perusal of the said provision, it is clear that if any
interim order passed under section 9 of the Arbitration Act, before the
commencement of the arbitral proceedings, a Court passes an order for any
interim measure of protection under subsection (1), the arbitral proceedings
shall be commenced within a period of ninety days from the date of such
order or within such further time as the Court may determine. In this case
order was passed as early as on 06.06.2022, thereafter the petitioner has
taken steps to appoint an Arbitrator. Therefore, liberty is granted to the
petitioners, to agitate all the grounds raised by the petitioner/appellant
before the Arbitrator. The order passed by the learned Single Judge also will
be in force till the appointment of Arbitrator who has to commence the
proceedings within 90 days as per the Act. Sofar as limitation is concerned,
the learned Single Judge failed to consider that the petitioner as a legal heir
of his mother is entitled to share of his deceased mother who died on
01.04.2020, thereby the case is not barred by limitation. Hence, the
arbitrator has to decide the application without being influenced by the
order of learned Single Judge in respect of finding of limitation and to
conduct the proceedings on merits.
14. With the above said directions O.S.A. (CAD) No.84 of 2022
stands disposed. No costs. Connected Miscellaneous Petitions is closed.
(DKKJ) (PDBJ)
05.12.2023
Index : Yes/no
Speaking : Yes/No
Neutral Citation Case : Yes/No
nst
D.KRISHNAKUMAR,J
and
P.DHANABAL,J
nst
Copy to
The Sub-Assistant Registrar,
Original Side,
High Court,
Madras.
Pre-delivery order in
05.12.2023
