@JUDGMENTTAG-ORDER
Ashok B. Hinchigeri, J@mdashC.M.P. No. 152/2014 is filed seeking the appointment of the arbitrator to adjudicate the disputes between the petitioner and the respondents in respect of the claims arising out of the reconstitution deed of partnership, dated 23.2.2008 (Annexure-A). The petitioner claims to be the founder partner of the sixth respondent Firm and that the respondent Nos. 1 and 2 are the partners and the respondent Nos. 3, 4 and 5 are the legal heirs of the deceased partner, namely, late Dr. N. Venugopala Reddy. The petitioner alleges that the respondent Nos. 1 to 5 are gaining and grabbing the property of the respondent No. 6. The respondent Nos. 1 to 5 have not been calling the meeting, have not been showing the accounts, having not been giving any share in the profits, have been acting whimsically and have thereby violated the terms and conditions of the partnership deed, dated 1.6.2006, of the final reconstitution deed of partnership and also of the provisions of the Indian Partnership Act, 1932.
2. The petitioner caused the issuance of two legal notices - one dated, 17.1.2014 (Annexure-C) calling upon the respondents for the meeting and the next notice, dated 12.6.2014 (Annexure-D) calling upon the respondents to give consent to the appointment of Sri G.C. Pradeep, Advocate as the arbitrator. The respondent No. 2 caused the issuance of the reply, dated 2.7.2014 (Annexure-E) denying the allegations made by the petitioner and alleging several fraudulent acts against the petitioner. The respondent No. 2 refused to submit to the arbitration of Sri G.C. Pradeep, as proposed by the petitioner''s side. However, the respondent No. 2 expressed his willingness to have the matter arbitrated through a retired High Court Judge.
3. The respondent No. 4 caused the reply, dated 2.7.2014 (Annexure-F). In the said reply, the respondent No. 4 has alleged that the petitioner has indulged in several criminal acts and fraudulently transferred several sites and misused the funds of the Firm for his own (petitioner''s) benefit.
4. C.M.P. No. 151/2014 is filed seeking the appointment of the arbitrator to adjudicate the disputes between the petitioner and the respondents in respect of the claims arising out of the joint development agreement, dated 25.2.2008 (Annexure-A). The said agreement is entered into between M/s. Classic Enterprises, the partnership Firm in question and the respondent Nos. 6 and 7. The respondent Nos. 1 and 2 are the partners of the said Firm and the respondent Nos. 3 to 5 are the legal representatives of the Firm''s late partner, Dr. N. Venugopala Reddy. It is the case of the petitioner that the respondent Nos. 1 to 7 have all colluded together to revoke the general power of attorney and to knock off the valuable property. The petitioner first caused the issuance of legal notice, dated 17.1.2014 (Annexure-C) and got issued the second legal notice, dated 12.6.2014 (Annexure-D) calling upon the respondents to give their consent to the appointment of Sri G.C. Pradeep, Advocate as the arbitrator. On not receiving any reply even after the expiry of the prescribed period, this petition is instituted.
5. Sri Vishnu Hegde, the learned counsel for the petitioner submits that Clause-22 of the reconstitution deed provides for arbitration. It reads as follows:-
"22. That in the event of any dispute or difference that may arise between the partners of the firm or between the legal representatives of the partners in respect of matters concerning firm, shall be referred to arbitration and settled as provided for under the Arbitration & Conciliation Act, 1996 and the decision of the Sole Arbitrator so appointed shall be final and binding on all parties thereto."
6. He submits that the respondents are resisting this petition on the ground that some of the respondents are not parties to the reconstitution deed. Such a resistance is not tenable, so submits the learned counsel. He relies on the Apex Court''s judgment in the case of BHARAT HEAVY ELECTRICALS LTD. v. BAYER SHIPPING AND TRADING LTD. AND OTHERS reported in (2005) 12 SCC 188 to advance the submission that the arbitrator himself can join/strike off the parties to the arbitration proceedings. He submits that the common arbitration is advisable to avoid the multiplicity of proceedings and conflicting decisions. He also relies on the Apex Court''s decision in the case of
7. The learned counsel submits that on the ground of allegation of fraud and the filing of criminal cases, the referring of the matter to the arbitrator cannot be deferred. He sought to draw support from the Hon''ble Supreme Court''s judgment in the case of
8. Sri Vishnu Hegde has also relied on an unreported decision of this Court in the case of SRI C.S. RADHAKRISHNA SETTY v. C.S. RAMAIAH SETTY in C.M.P. No. 85/2005 disposed off on 28.7.2006. The last part of paragraph No. 4 of the said decision read out by him is as follows:-
"4....Whether the petitioner continue to be a partner or not, whether the document relied on by the respondents, the deed of retirement, is obtained by them by fraud or not is a dispute to be resolved between the parties and the said dispute arises out of the terms of the partnership deed. Therefore, a dispute exists between the parties and the said dispute arises out of the terms of the partnership deed dated 1.1.1999 and therefore the contention of the respondents that no dispute exists cannot be countenanced."
9. Per contra Sri H.S. Dwarakanath, the learned counsel appearing for the respondent No. 1 submits that the persons whose actions are questioned are not parties to the partnership deed and hence to the partnership agreement. He submits that, as the complicated questions of fact and law are involved and as the criminal cases are filed, the matter requires adjudication by a competent civil court. He submits that the appointment of the arbitrator in a case of this nature is not warranted. He relies on the Apex Court''s judgment in the case of
10. The learned counsel relying on the Apex Court''s decision in the case of
11. Sri Dwarakanath brings to my notice Clause-18 of the joint development agreement, dated 25.2.2008 (Annexure-A in C.M.P. No. 151/2014). He submits that a plain reading of Clause-18 of the joint development agreement gives an impression that the parties may go either to the arbitration or to the suit, as the arbitration is not a sole remedy. Clause-18 of the agreement is not a firm or mandatory arbitration clause. It reads as follows:-
"18. ARBITRATION: In case any dispute or difference should arise between the parties hereto, in respect of any other matter arising out of or in connection with agreement it shall be referred to the arbitration under the Arbitration and Conciliation Act 1996 or any statutory modification thereof. The Civil court of Bangalore alone shall have jurisdiction in respect of such proceedings."
In support of his submissions, he relies on the Apex Court''s judgment in the case of
12. He submits that the petitioner is not even a party to the joint development agreement, dated 25.2.2008. Therefore, he is not entitled to maintain this petition for the appointment of the arbitrator. He submits that the respondent Nos. 1 to 5 are also not parties to the said agreement. He submits that the disputes sought to be raised are outside the joint development agreement.
13. Sri Mithun, the learned counsel appearing for the Nos. 6 and 7 in C.M.P. No. 151/2014 submits that the petitioner has no locus standi to demand the appointment of the arbitrator. The petition for the appointment of the arbitrator can be filed only by the Firm and not the individuals forming the Firm. Unless the Firm has passed the resolution authorizing a particular partner to file this petition, no single partner can claim any implied authority to seek the reference of the matter to the arbitration.
14. The learned counsel submits that the petitioner himself has illegally sold few sites formed by the respondent Nos. 6 and 7. As the said sale is without the knowledge of the eighth respondent Firm, a criminal complaint is also filed against the petitioner. He submits that this petition is only a counter-blast to the criminal proceedings initiated by the eighth respondent Firm against the petitioner in the matter of illegal sale of sites.
15. He submits that under Section 19 of the Indian Partnership Act, 1932, it is necessary that all the partners agree to refer the dispute to the arbitration. If one partner agrees to refer the matter to arbitration and if the other partners do not ratify it, the dispute cannot be referred to the arbitration. In support of his submissions, he relies on the Delhi High Court''s decision in the case of
16. The submissions of the learned counsel have received my thoughtful consideration. The following questions fall for my consideration:
1. Whether these petitions are liable to be rejected on the short ground of the mis-joinder of parties?
2. Whether the arbitrator is required to be appointed? If so, whether the arbitral proceedings have to be separate or composite for the resolution of the disputes raised in CMP No. 151/2014 and 152/2014?
17. I propose to take up C.M.P. No. 152/2014 first. The said petition is filed by one Sri Prabhakar Reddy, who is a party to the reconstitution deed, dated 23.2.2008. The other parties to the said deed are Sri H.R. Ravichandra, Sri D.M. Purnesh and Dr. N. Venugopala Reddy. The said Sri H.R. Ravichandra and Sri D.M. Purnesh are the respondent Nos. 1 and 2 to CMP No. 152/2014.
18. The petitioner''s objection is to arraign the respondent Nos. 3 to 6 as the respondents to this petition, as they are not parties to the said reconstitution deed. The respondent Nos. 3, 4 and 5 are said to be the L.R.s of late Dr. N. Venugopala Reddy. If they are indeed the L.R.s and if they have succeeded to the estate of the deceased Dr. N. Venugopala Reddy, they are certainly required for resolving the dispute between the petitioner and Dr. N. Venugopala Reddy.
19. The interest of the respondent Nos. 3 to 5 can be safeguarded by reserving the liberty to them to dispute that they are the L.R.s of Dr. N. Venugopala Reddy, should the arbitrator be appointed. It shall also be open to them to contend that all the L.R.s of the deceased Dr. N. Venugopala Reddy are not brought on record. Further, it is also worthwhile to notice that after the description of the partnering parties, the following explanation is given in the reconstitution deed itself: "(which expressions where the context so requires shall mean and include their heirs, legal representatives, administrators, executors and assigns)". Going by this clarification found in the deed itself, I have no hesitation in holding that the legal representatives of the deceased Dr. N. Venugopala Reddy cannot be excluded from these proceedings.
20. The allied question is whether the petitioner is justified in arraigning M/s. Classic Enterprises as one of the respondents. Admittedly, the reconstitution deed is in respect of the said partnership Firm. No doubt, the Firm has its own legal existence, but it is not a human entity. It has to act through the human limbs. Alongside its partners and the L.R.s of the deceased partner, the firm is rightly arraigned as one of the respondents. The petitioner cannot be found to be at fault for doing so.
21. As far as CMP No. 151/2014 is concerned, Dr.Venugopal Reddy, and the petitioner and respondent Nos. 6 and 7 are the parties to the Joint Development Agreement. The respondent Nos. 3, 4 and 5 are the L.Rs. of Dr.Venugopal Reddy. The respondent Nos. 1 and 2 are the other partners of the Firm and the respondent No. 8 is the Firm. Why and how they are the proper parties is already discussed at length in the context of CMP No. 152/2014. I answer the first question to the effect that these petitions do not suffer from any vice in the matter of joinder of parties.
22. Coming to the second question, on the ground that the criminal proceedings are pending, the consideration of the request for the appointment of the arbitrator cannot be deferred indefinitely. The sought arbitration is for a substantial relief; the criminal proceedings are for punishing the offender. It is also not the case of the respondents that the sought arbitral proceedings would put any party to prejudice in the pending criminal case. The Delhi High Court''s decision in the case of M/s. National Small Industries Corporation Ltd. (supra) also does not come to the rescue of the respondents. For, the Joint Development Agreement is signed by the respondent Nos. 6 and 7 in their capacity as the owners and by the petitioner and Dr. N. Venugopala Reddy in their capacity as the partners of M/s. Classic Enterprises, the property developers. Assuming that the said partners have acted without the authority from the other partners, their acts are to be challenged in separate and appropriate proceedings by the aggrieved parties. Besides, if any document is obtained by fraud, that question can also be decided by the arbitrator, as held by this Court in the case of C.S. Radhakrishna Setty (supra).
23. I am also not persuaded to accept the respondents'' interpretation of clause No. 18 of the Joint Development Agreement. The plain reading of the said clause reveals the clear intention of the parties to go to arbitration, if any dispute or difference arises between the parties. The last part of the clause only deals with the territorial aspect. It states the civil court at Bangalore alone shall have jurisdiction in respect of such proceedings. Thus, the various objections raised by the respondents are liable to be over-ruled and accordingly they are over-ruled. The concerned parties have executed the reconstitution deed, dated 23.2.2008 (Annexure-A in CMP No. 152/2014) and Joint Development Agreement, dated 25.2.2008 (Annexure-A in CMP No. 151/2014). Both the documents provide for the arbitral clause. The disputes have arisen in relation to the agreement. Therefore the arbitrator is required to be appointed.
24. The only question is whether the arbitral proceedings are to be separate or composite for resolving the disputes arising from the two agreements, dated 23.2.2008 and 25.2.2008. The petitioner is common in both the petitions. In C.M.P. No. 152/2014, arising from the reconstitution deed, dated 23.2.2008, his grievance is that the other partners are grabbing the funds and properties of the partnership Firm; they are not giving any share in profits to the petitioner. In C.M.P. No. 151/2014, arising from the Joint Development Agreement, dated 25.2.2008, the petitioner''s grievance is that the other partners in collusion with the respondent Nos. 6 and 7 (the owners of the schedule property) are deceiving by canceling the said agreement and the General Power of Attorney. The petitioner''s grievances are interconnected.
25. The Apex Court''s judgment in the case of P.R. Shah (supra) is of immense value in deciding the cases on hand. The Apex Court has this to say in paragraph Nos. 19 and 20 of its decision:-
"19. If A had a claim against B and C, and there was an arbitration agreement between A and B but there was no arbitration agreement between A and C, it might not be possible to have a joint arbitration against B and C. A cannot make a claim against C in an arbitration against B, on the ground that the claim was being made jointly against B and C, as C was not a party to the arbitration agreement. But if A had a claim against B and C and if A had an arbitration agreement with B and A also had a separate arbitration agreement with C, there is no reason why A cannot have a joint arbitration against B & C. Obviously, having an arbitration between A and B and another arbitration between A and C in regard to the same claim would lead to conflicting decisions. In such a case, to deny the benefit of a single arbitration against B and C on the ground that the arbitration agreements against B and C are different, would lead to multiplicity of proceedings, conflicting decisions and cause injustice. It would be proper and just to say that when A has a claim jointly against B and C, and when there are provisions for arbitration in respect of both B and C, there can be a single arbitration.
20. In this case though the arbitration in respect of a non-member is under Bye-law 248 and arbitration in respect of the member is under Bye Law 282, as the Exchange has permitted a single arbitration against both, there could be no impediment for a single arbitration it is this principle that has been applied by the learned Single Judge, and affirmed by the Division Bench. As the first respondent had a single claim against the second respondent and the appellant and as there was provision for arbitration in regard to both of them, and as the Exchange had permitted a common arbitration, it is not possible to accept the contention of the appellant that there could not be a common arbitration against the appellant and the second respondent."
26. Following the aforesaid judgment of the Apex Court and to avoid the multiplicity of proceedings and conflicting decisions, I am appointing the sole arbitrator in both the cases.
27. I appoint Sri K.N. Keshavanarayana, a retired Judge of this Court as the sole arbitrator. He is requested to enter upon the arbitration, arbitrate the dispute and conduct the arbitration proceedings at the Arbitration Centre as per the Arbitration Centre - Karnataka (Domestic and International) Rules, 2012.
28. Registry is directed to send a copy of this order to the Arbitration Centre, Bengaluru.
