P. Ashok Rao And 3 Others vs Smt Shobaloya And 5 Others
2021 Latest Caselaw 1102 Tel

 THE HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO

                                 AND

      THE HONOURABLE SRI JUSTICE T. VINOD KUMAR

            Civil Miscellaneous Appeal No.317 of 2020
                                 and
            Civil Miscellaneous Appeal No.330 of 2020


COMMON JUDGMENT :


      The case of appellants is that there are two theatres by name

M/s.Menaka and M/s.Apsara.       They were constructed in property

bearing M.No.18-3-649 to 660, Lal Darwaza, Hyderabad which is an

area of over 11,472 Sq.Yds. in the years 1967 and 1983 respectively.


2.    Civil Miscellaneous Appeal No.317 of 2020 is filed under

Section 37 of the Arbitration and Conciliation Act, 1996 (for short,

'the Act') against order dt.13.03.2020 passed by the X Additional

Chief Judge, City Civil Court, Hyderabad dismissing an application

filed by appellants under Section 9 of the Act in relation to M/s

Menaka theatre. In the said application, the appellants sought an

order restraining the respondents from alienating the O.P. schedule

property, and also from changing its nature.

3. Civil Miscellaneous Appeal No.330 of 2020 is filed by the

appellants under Section 37 of the above Act challenging the order

dt.13.03.2020 passed by the X Additional Chief Judge, City Civil

Court, at Hyderabad dismissing the application filed under Section 9 ::2:: MSR,J & TVK,J cma_317&330_2020

of the above Act in relation to M/s Apsara theatre. The said

application was filed to restrain the respondents from alienating the

O.P. Schedule property and from changing its nature.

4. Initially, the above property was acquired by the father of

appellants by name P. Anand Rao and one Vallabha Das Loya under a

registered Sale Deed dt.10.04.1961.

5. P. Anand Rao and Vallabha Das Loya then sold the property to

one R.S. Chenoy and Shahpur Chenoy under a registered Sale Deed

dt.19.02.1963. But, subsequently the legal heirs of R.S. Chenoy and

Shahpur Chenoy re-sold the property again to P. Anand Rao (the

father of appellants), Vallabhdas Loya, Ch. Hanumanth Rao and

Smt. Appayamma under a registered Sale Deed dt.09.03.1966.

6. Both these theatres were being run under a partnership

agreement and after the death of P. Anand Rao, the 3rd appellant was

inducted as a partner in the two partnership firms by name

M/s.Menaka and M/s.Apsara theatres under two separate Deeds of

Partnership dt.19.05.1998.

7. According to these partnership Deeds, the appellants were

entitled to 15% shares in the partnership firms.

8. Both the theatres were closed in December, 2011 for the

purpose of renovation.

                                    ::3::               MSR,J & TVK,J
                                                        cma_317&330_2020




The case of the appellants

9. But, according to appellants, the respondents did not come

forward to invest their shares for renovation. Thereafter, a meeting

was held wherein, according to appellants, the respondents agreed to

sell their collective share of 85% in favour of appellants, and it was

also agreed thereon that the said property shall not be sold until the

share purchase materialized.

10. As things stood thus, appellants alleged that they came to know

that the other partners in the Firm, viz., M/s.Apsara theatre, at the

behest of one Mr. Praveen Rao and 5th respondent, were making

illegal attempts by creating a third-party documents by way of a sale

without the knowledge of appellants. The appellants further alleged

that the subject property belongs to all partners, and no partner has

any right to create third-party interest therein.

11. The appellants therefore invoked Arbitration Clause as per

Clause 14 of the Partnership Deed dt.19.05.1998 by issuing a notice

dt.18.03.2019 and a Corrigendum dt.12.04.2019 to respondents, and

nominated one Rangaiah Goud, Sole Arbitrator, to adjudicate disputes

between parties.

12. Thereafter, the respondents gave a reply notice dt.18.03.2019

disputing the allegations in the said notice issued by the appellants,

and nominating one B. Sheshadri to adjudicate the matter.

                                     ::4::               MSR,J & TVK,J
                                                         cma_317&330_2020

13. In view of difference in opinion among the parties, the

appellants filed Arbitration Application under Section 11 of the Act

seeking intervention of the High Court to appoint an Arbitrator to

adjudicate disputes between the parties.

14. The appellants also alleged that on 20.04.2019 a person by

name G. Krishna along with his henchmen, claiming to be owners of

the subject property through the respondents, started trespassing into

the property and also started demolishing the theatres. The appellants

contended that they succeeded in stopping him and lodged a police

complaint on 22.04.2019 with the Assistant Commissioner of Police,

Falaknuma. But the police expressed their inability to do anything

since the dispute is of a civil nature.

15. Therefore, the appellants filed applications under Section 9 of

the Act in Arbitration O.P.Nos.52 and 50 of 2019 in respect of

M/s.Menaka and M/s.Apsara theatres, respectively.

The case of the respondents

16. Counter-affidavit was filed by respondents opposing grant of

any interim relief to appellants.

17. According to respondents, the theatres Menaka and Apsara

were not registered firms; that on the ground of non-joinder of

necessary parties and on the ground that 2nd respondent is not a

partner of the Firm, the O.P.s are liable to be dismissed. They further

denied that they had demolished or changed the nature of the property.

                                       ::5::                  MSR,J & TVK,J
                                                              cma_317&330_2020

They also denied the existence of Partnership Deeds dt.19.05.1998,

and contended that since the firms were un-registered there is a bar

under Section 69 of the Indian Partnership Act. They further

contended that the Agreement of Sale - cum - General Power of

Attorney was executed by them in favour of G. Kiran Kumar and

M. Kishore Kumar and possession of property was also delivered to

them and they tried to dismantle Menaka Theatre only. They also

contended that every partner under the Partnership Deed

dt.19.05.1998 is entitled to sell their share of the property to a third-

party and so the interim relief cannot be granted in the above O.P.s.

They also raised a plea that the appellants had not commenced

arbitration proceedings after filing the applications under sec.9 CPC.

The order of the Court below

18. Initially the Court below granted status quo orders on 29.4.2019

in both the OPs.

19. But later, by separate orders dt.13.03.2020, the Court below

dismissed both the Arbitration applications.

20. The Court below, after referring to the contentions of parties

and to Section 9 of the Arbitration and Conciliation Act, 1996, and

held that as per the decision of the Supreme Court in Firm Ashwin

Traders vs. Gurmukh Das Saluja1, an unregistered partnership firm

(2004) 3SCC 155 ::6:: MSR,J & TVK,J cma_317&330_2020

can invoke Sec.9 of the Act as it is not a suit nor a proceeding arising

in a suit.

21. But it observed that though initially a status quo order had been

granted by it on 29.04.2019, even 10 months thereafter, the arbitration

proceedings did not commence; and so the status quo order was liable

to be vacated. It refused to go into the merits and de-merits of the

case on the above ground.

The present Appeals

22. Assailing the same, the present Appeals are preferred by

appellants.

23. The counsel for appellants contended that the view of the Court

below that the arbitral proceedings had not been commenced by the

appellants, is erroneous, because under Section 21 of the Act the

arbitral proceedings in respect of a particular dispute commence on

the date on which a request for that dispute to be referred to

arbitration is received by the respondent.

24. He contended that the appellants had issued on 18.03.2019

itself a notice to respondents appointing an arbitrator and had thus

initiated arbitration, and the respondents had replied to the same on

25.03.2019 but appointed a different arbitrator; and so the arbitral

proceedings are deemed to have commenced at least on 25.03.2019.

                                        ::7::                       MSR,J & TVK,J
                                                                    cma_317&330_2020




25.     Section 21 of the Act states as under :

"21. Commencement of arbitral proceedings : - Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent."

26. This provision has been interpreted by a Division Bench of this

Court in P.B. Karunakar and others vs. State of Telangana and

others2 at para no.22, as meaning that arbitral proceedings would

commence the moment the respondents / opposite party receives the

request for the dispute to be referred to arbitration.

27. The Division Bench also relied on the decisions of the Supreme

Court in Sundaram Finance Ltd. v. NEPC India Ltd.3 and

Milkfood Ltd. vs. GMC Ice Cream (P) Ltd.4.

28. This legal position is not disputed by the counsel for appellants.

29. We may also point out that applications under Section 11 of the

Act had been moved by appellants for appointment of an Arbitrator by

this Court on 17.04.2019 itself, and these applications were admittedly

allowed on 05.06.2020. Therefore, it is not possible to contend, as is

being done by respondents, that arbitral proceedings had not been

commenced by the time the O.P.Nos.52 and 50 of 2019 under Section

9 were filed by appellants.

  2018(3) A.L.D. 470 (D.B.)

  1999 (2) S.C.C. 479

  2004 (7) S.C.C. 288
                                  ::8::                  MSR,J & TVK,J
                                                         cma_317&330_2020

30. Moreover, according to appellants, though a partner has

'implied authority' to do certain acts to bind the firm, such 'implied

authority' does not empower a partner to transfer immoveable

property belonging to the firm and relied on Sec.19(2)(g) of the

Partnership Act, 1935.

31. However, since the Court below refused to go into the merits

and contentions of both parties, and presumed, on an erroneous

understanding of law, that arbitral proceedings had not been

commenced by the appellants though appellants have done so by

issuing a legal notice for appointment of Arbitrator on 18.03.2019 to

the respondents, which was even replied by respondents on

25.03.2019, and since the issuance of such notice dt.18.03.2019 under

Section 21 of the Act amounts to commencement of arbitral

proceedings, we are of the opinion that the impugned order cannot be

sustained.

32. Therefore, the appeals are allowed. The order dt.13.03.2020

passed in Arbitration O.P.Nos.50 and 52 of 2019 are set aside. The

matters are remitted to the X Additional Chief Judge, City Civil

Court, Hyderabad. The said court is directed to decide the said O.P.'s

afresh in accordance with law after hearing both sides within four (04)

weeks from the date of receipt of copy of the order.

                                   ::9::                 MSR,J & TVK,J
                                                         cma_317&330_2020

33. Pending disposal of the O.P.s afresh, there shall be interim

injunction restraining respondents from alienating the subject property

and also changing its nature.

34. However, the Court below shall decide the O.P.s uninfluenced

by the contents of this order.

35. No order as to costs.

36. As a sequel, miscellaneous applications pending if any in these

Civil Miscellaneous Appeals, shall stand closed.

__________________________________ JUSTICE M.S.RAMACHANDRA RAO

__________________________ JUSTICE T. VINOD KUMAR

Date: 07.04.2021 Ndr