K.Balakoteswara Rao vs Mrs. Manne Anuradha
2021 Latest Caselaw 1060 Tel

     HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO
                                     AND
         HONOURABLE SRI JUSTICE T.VINOD KUMAR

                Civil Miscellaneous Appeal No.82 of 2021

JUDGMENT: (Per Hon'ble Sri Justice M.S. Ramachandra Rao)


      This Appeal is preferred under Section 37 of the Arbitration and

Conciliation Act, 1996 (for short 'the Act') challenging the order

dt.31-12-2020 in Arbitration Petition No.2 of 2020 passed by the sole

Arbitrator.


2.    A dispute between the appellant and 1st respondent had been

referred to the sole Arbitrator (2nd respondent), and the said dispute had

arisen between the 1st respondent and appellant in terms of a partnership

deed dt.27-06-2015 relating to the firm 'M.K.Estates', which was later

amended on 21-09-2016.

3. The 1st respondent was the claimant before the Arbitrator. Several

reliefs were sought by the 1st respondent before the Arbitrator.

4. The 1st respondent contended that the appellant was the Managing

Partner as per the terms of the partnership deed dt.27-06-2015, which was

later amended on 21-09-2016; the appellant's investment in the firm was

meager and negligent, while 1st respondent's investment ran into around

Rs.10.00 crores and she had invested not only her own funds, but also

borrowed from financial institutions; and that the appellant withdrew his

capital investment to meet his personal requirements and did not show

any interest in the business of the firm and only acted in self-interest.

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5. The 1st respondent alleged that the appellant joined hands with the

business rivals for his personal advantage and started sabotaging the

partnership business and started refusing to cooperate with the

1st respondent in selling the plots and apartments in the layout developed

by the firm. It was also alleged that the appellant, with a mala fide

intention, tried to usurp the sale of plots in the layout developed by the

firm without the consent, authority and knowledge of the 1st respondent.

Certain transactions entered into by appellant with third parties are also

challenged as fraudulent by the 1st respondent and certain reliefs were

sought by her in the claim petition filed on 12-08-2020 before the 2nd

respondent.

6. Later claim petition was also revised/ amended on 04-11-2020.

7. Before the Arbitrator, the 1st respondent also filed I.A.No.2 of 2020

under 17 of the Act for the following interim reliefs:

(i) To restrain the appellant from claiming to be the partner of the

firm with a direction to deliver/disclose / handover the passwords

and OTPs related to Income Tax, Real Estate Regulatory

Authority (RERA), Goods and Services Tax (GST) etc.

(ii) To restrain the appellant from selling, trying to sell, market,

advertise for sale of any of the property of the firm M.K.Estates;

(iii) to restrain the appellant from withdrawing any amounts from the

Firm account in the Bank, or open new account in the name of the

Firm M.K.Estates;

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(iv)     permit the 1st respondent/claimant to operate the account of the

Firm and deal with the Bank, run the business of the Firm in her

capacity as partner of the firm;

(v) To restrain the appellant from interfering with possession and day

to day management and business of the office and property of the

Firm M.K.Estates during pendency of Arbitration and till

adjudication; and

(vi) any other order that is deemed reasonable and justifiable in the

opinion of the Tribunal and in the interest of justice.

8. The appellant filed a counter thereto disputing the contentions of

the 1st respondent and even denying the existence of amended partnership

deed.

He alleged that 1st respondent's husband, who was an auditor of

the firm, managed the accounts and balance sheet and played fraud on the

appellant and that the appellant continued to hold 40% of the profits of

the firm.

The appellant also contended that the amendment of the claim

statement was ordered by the Arbitrator without any application by

1st respondent and some of the reliefs sought in the place of interim relief

are final in nature such as permitting the 1st respondent to operate the

bank account, open bank account, to sell the property and the Arbitral

Tribunal had no jurisdiction to pass such orders.

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9. An interim order was passed on 27-11-2020 by the 2nd respondent-

Arbitrator giving the following directions:

"1. That the appellant is restrained from claiming to be managing partner and shall not sell, advertise to sell any of the property of the Firm M.K.Estates:

2. That the appellantt shall deliver up the passwords and OTPs relating to Income Tax, RERA, GST and other statutory authorities;

3. The appellant is restrained from withdrawing any amounts of the firm from the Bank or from opening from new account or accounts in any bank;

4. That the 1st respondent shall not open any new Bank account but shall continue existing bank account and is permitted to operate the existing bank account. She shall maintain the payments received and expended through the same account and the income and expenditure shall reflect in the day book and the ledger promptly.

5. That the income, expenditure as maintained in the book of accounts, shall be verified and certified by the independent auditor in writing. Hence, the appellant is restrained from interfering with the position and day to day management of the business and properties of the Firm during the pendency of the Arbitration till adjudication.

6. Any sale of property by agreement, or by execution of sale deed etc, or mortgage or creation of any encumbrance over the property shall be with the prior verification and approval by the independent auditor in writing.

7. The independent auditor if finds any discrepancy or any entry of income and expenditure, or any transaction of property is doubtful, shall report to the Arbitrator and theappellant, if the 1st respondent failed to cure the defect within a reasonable time allowed by the independent auditor.

8. That the independent auditor shall verify and certify the transactions in books and financial statements and give his findings and report to the appellantt and the Arbitral Tribunal/quarterly reports the first report being for the period starting from this date to 31, March, 2021.

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9. Both the parties are at liberty to seek further directions or orders from the Arbitrator if the above order or orders are not executable, not performed in accordance with the directions above.

10. Both the parties are at liberty to approach the tribunal for modification, alteration or amendment of the above directions, in case of ambiguity, impracticability or redundancy.

11. Mr.Pavuluri Achutha Ramaiah, a reputed Chartered Accountant having is office at Pavuluri & Co., 3rd floor, Plot No.48, Kavuri Hills, Phase-I, Madhapur, Hyderabad, is proposed to be appointed as independent auditor. Both the parties shall file their objections, if any on his appointment within 3 day from today, failing which, his appointment shall stand confirmed. His remuneration is tentatively fixed at Rs.25,000/- to be charged on the firm's account. This petition allowed accordingly. .."

10. The appellant questioned the same in C.M.A.No.483 of 2020

before this Court, but withdrew the same on 02-12-2020.

11. Taking advantage of Clause-10 of the order dt.27-11-2020 passed

by the learned Arbitrator in Arbitration Petition No.2 of 2020 that parties

are at liberty to approach him for modification, alteration or amendment

of the interim directions given by the Arbitrator in the event of ambiguity,

impracticability or redundancy, the appellant filed an application to

review the said order. He wanted deletion of clause-6 in the order

dt.27-11-2020 passed by the Arbitrator in Arbitration Petition No.2 of

2020, which stated:

"6. Any sale of property by agreement, or by execution of sale deed etc, or mortgage or creation of any encumbrance over the property shall be with the prior verification and approval by the independent auditor in writing."

12. The appellant wanted the Arbitrator to appoint two auditors from

each panel to audit the statement of accounts that may be submitted by ::6:: MSR,J & TVK,J cma_82_2021

both parties and contended that the Arbitral Tribunal had erred in

appointing an auditor of Arbitrator's choice, which is not permissible.

13. Counter was filed by 1st respondent opposing the said application

contending that the appellant had challenged the order dt.27-11-2020 in

C.M.A.No.483 of 2020, and had withdrawn the same, that the Review

application is not bona fide and it amounts to forum shopping. Reliance

was also placed on the judgment of the Delhi High Court in

Development Authority Vs. Naveen Kumar1.

14. The learned Arbitrator dismissed the Review petition by order

dt.31.12.2020.

15. After considering the submission of both sides, he noted that in the

Delhi High Court judgment it was held that the Arbitral Tribunal has no

powers of review unless there is some procedural lacunae .Though it was

sought to contended before the Arbitrator that the Delhi High Court was

not dealing with the interim award, but with a final award, the Arbitrator

did not agree with the said contention and pointed out that the Act makes

no distinction between a final award or an interim measure. He also

observed that power of review is not an inherent power and it has to be

conferred by law either expressly or by implication. It therefore rejected

the review application. It also observed that if the review is entertained,

the Arbitrator has to rewrite the entire award as any modification would

change entire structure of the interim measure ordered in the order

dt.27-11-2020.

    (2017) 0 Supreme (Del) 2938
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16. Challenging the same, this appeal is preferred.

17. Heard Sri Prasadarao Vemulapalli, learned counsel for the

appellant.

18. Learned counsel for appellant contended that the 2nd respondent-

Arbitrator has committed manifest error in granting reliefs under Section

17 of the Act which had not been sought for; that the 2nd respondent had a

close relationship with the husband of the 1st respondent and has a bias

against the appellant; and so the order dt.27-11-2020 passed by

2nd respondent and also consequential order dt.31-12-2020 passed by the

2nd respondent are liable to be set side.

19. It is further contended that the 2nd respondent had committed

grave error in proceeding with the arbitration without deciding the

genuineness of the partnership deed alleged to have been amended on

21-09-2016; that the 2nd respondent even furnished a false declaration

under Section 12(1) of the Act and has attracted disqualification provided

under Section 12(5) of the Act on account of misrepresentation that he

has no personal relationship with either of the parties and that this goes to

the very root of the matter.

20. It would not be necessary for us to go into the merits of the case of

the respective parties in this Appeal since the appellant had earlier filed

C.M.A.No.483 of 2020 challenging the order dt.27-11-2020 passed by

the 2nd respondent Arbitrator under Section 17 of the Act, but had

withdrawn the same without seeking any liberty to challenge it again.

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21. The appellant cannot be now permitted to re-agitate the issues

which he had opportunity to raise in relation to the order dt.27-11-2020

passed by 2nd respondent when he filed C.M.A.No.483 of 2020

challenging the said order, after he has withdrawn the said CMA.

22. All the contentions raised in the grounds of appeal practically

amount to a challenge to the merits of the order

dt.27-11-2020 including the alleged bias of the Arbitrator and the same

cannot be allowed to be re-agitated in this appeal.

23. The scope of this appeal is confined to considering whether the

2nd respondent Arbitrator had any power to review his earlier order

dt.27-11-2020 as was sought by the appellant in the review application

filed before the Arbitrator.

24. The appellant is not able to point out any provision in the Act or

any judicial precedent empowering the Arbitrator to review his own

order- whether it was an interim order or a final award.

25. The appellant cannot be permitted to widen the scope of the appeal

which is confined to the correctness of the order dt.31-12-2020 passed by

2nd respondent to cover the issues relating to the correctness of the order

dt.27-11-2020 passed by the Arbitrator.

26. Therefore we hold that the 2nd respondent Arbitrator did not

commit any error of jurisdiction in refusing to review his earlier order

dt.27-11-2020 in Arbitration Petition No.2 of 2020.

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27. We therefore do not find any merit in the Appeal and it is

accordingly dismissed at the admission stage. No costs.

28. Consequently, miscellaneous petitions, pending if any, shall stand

closed.

____________________________ M.S. RAMACHANDRA RAO, J

___________________ T.VINOD KUMAR, J Date: 01-04-2021 Vsv