TaxTMI 
TaxTMI 
2004 (1) TMI 377
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.... shall be referred to as Group "B'. Rajesh Jaiswal, Ram Sewak Sharma, Baljeet Singh Bhatia, Rajendra Prasad Jaiswal, Anil Kumar Shrivastava and Sushil Kumar Shrivastava shall be referred to as Group "C". 3. M/s. Ashok Traders are in liquor trade. In the Deed of Partnership entered into on 27-2-2002 there were 7 partners including Bhagwati Prasad Kulhara and 6 others. The partnership firm was registered with Registrar of Firms. Six partners (i.e. other than Bhagwati Prasad Kulhara) retired from the partnership and a new partnership came to be constituted on 5-3-2002 evidenced by a Deed of the even date wherein all the persons belonging to Groups A, B and C are partners. However, the names of the new partners were not communicated to the Registrar of Firms. This firm was awarded a liquor contract licence for Bhopal for the year 2002-03 at a licence fee of Rs. 66.51 crores. The existence of these two Deeds of Partnership and the factum of the first one being registered and the second one being not registered with the Registrar of Firms are admitted facts. For convenience sake, we would refer to the partnership dated 27-2-2002 as Partnership - I, the Partnership dated 5-3-2002 as Pa....
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.... District Judge resulting in dismissal of the application. Gurumukh Das Saluja preferred an appeal before the High Court under section 37(1)(a) of the A & C Act. During the pendency of the appeal an application under section 9 pleading similar facts and seeking similar reliefs, as was done before the Trial Court, was filed. Group "B" contested the application on all possible grounds. The factum of Group "A" being partners of the firm so far as the contract for the year 2003-04 is concerned was vehemently denied. It was reiterated that the application was hit by section 69(3) of the Partnership Act and hence was liable to be dismissed. The High Court has allowed the appeal. It has held that the applicability of section 69(3) is not attracted to an application under section 9 of A & C Act. But on merits the High Court has found substance in the grievance raised by Group "A". The High Court has also held that the business in the year 2003-04 was containing under the Partnership Deed dated 5-3-2002, i.e., Partnership - II; and that prima facie the existence of the Partnership Deed dated 6-3-2003 (Partnership - III) was doubtful and accompanied by suspicious circumstances raising doubts....
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....Court in V.T. Sipahimalani v. Kanta AIR 2000 SC 1848. The Applicant will take steps for the appointment of arbitrator as early as possible. This direction is being given as per decision of Supreme Court in M/s. Sundaram Finance Ltd. v. M/s. NEPC India Ltd. AIR 1999 SC 565." 7. We have heard all the learned counsel appearing for Groups "A", "B" and "C". The submissions made by the learned counsel for the parties have centered around two questions : one, effect of the bar created by section 69(3) of the Partnership Act on maintainability of an application under section 9 of the A & C Act, 1996; and two, in the event of the question of maintainability being decided for Group "A", what interim arrangement, whether by way of appointment of receiver or otherwise, would meet the ends of justice? 8. On the question of maintainability of application under section 9 of the A & C Act moved by a partner of an unregistered firm or by a person not shown as a partner in the Register of Firms, the High Court has, for upholding the maintainability, relied on the decision of this Court in Kamal Pushpa Enterprises v. D.R. Construction Co. AIR 2000 SC 2676. The learned counsel for Group "B" have....
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.... court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm. (3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affect" 10. To begin with, for the controversy centering around the abovesaid two provisions we told the learned counsel for the parties that we are not inclined to go in-depth in the issue inasmuch as a prolonged hearing on the issue and decision thereon may take time and that would have devastating effect on the rights of the parties. The learned counsel for the parties agreed that de hors the issue, the Court may proceed to determine the appeal on merits. Yet, we feel duty-bound to record at least our prima facie opinion on the issue; lest we should be misunderstood as having side-tracked the same. 11. Sub-sections (1) and (2) of section 69 of the Partnership Act strike at the very root of the jurisdiction of the Court to entertain a suit to enforce a right arising from a contract, if the applicability of section 69 is attracted. ....
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.... is sought for from the Court or the right which is sought to be canvassed in support of the relief. The reliefs which the Court may allow to a party under clauses (i) and (ii) of section 9 flow from the power vesting in the Court exercisable by reference to 'contemplated', 'pending' or 'completed' arbitral proceedings. The Court is conferred with the same power for making the specified orders as it has for the purpose of and in relation to any proceedings before it though the venue of the proceedings in relation to which the power under section 9 is sought to be exercised is the arbitral Tribunal. Under the scheme of A & C Act, the arbitration clause is separable from other clauses of the Partnership Deed. The arbitration clause constitutes an agreement by itself. In short, filing of an application by a party by virtue of its being a party to an arbitration agreement is for securing a relief which the Court has power to grant before, during or after arbitral proceedings by virtue of section 9 of the A & C Act. The relief sought for in an application under section 9 of A & C Act is neither in a suit nor a right arising from a contract. The right arising from the partnership deed or....
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....p "B" has 18 per cent share. The stand taken by Group 'C', which according to Group "A" holds 62 per cent share, was not known before the High Court, and, therefore, so far as the High Court is concerned the tussle was between the holders of 20 per cent interest (Group "A") and holders of 18 per cent interest (Group "B"). In this appeal, Group 'C' is represented and has vocally supported Group "B" standing by its side. Before us it is a case of holders of 20 per cent interest claiming against the holders of 80 per cent interest. 16. The finding recorded by the High Court is that it was Group "B" which was running business upto the date of passing of the order by it and was found entitled to continue the same upto 31-12-2003, meaning thereby, for nine months out of the total twelve months' period for which the business is to run, it is Group "B" which has been running the business. Excepting bald and general allegations of mismanagement and siphoning off of the fund nothing concrete has been alleged muchless demonstrated to give real colour to the averments made. The High Court has thought it proper to appoint Group "A" as captain of the ship, which is the running business, to sa....
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.... section 9 may not have actually commenced the arbitral proceedings but must be able to satisfy the Court that the arbitral proceedings are actually contemplated or manifestly intended (as M/s. Sundaram Finance Ltd. puts it) and are positively going to commence within a reasonable time. What is a reasonable time will depend on the facts and circumstances of each case and the nature of interim relief sought for would itself give an indication thereof. The distance of time must not be such as would destroy the proximity of relationship of the two events between which it exists and elapses. The purpose of enacting section 9, read in the light of the Model Law and UNCITRAL Rules is to provide 'interim measures of protection'. The order passed by the Court should fall within the meaning of the expression 'an interim measure of protection' as distinguished from an all-time or permanent protection. 18. Under the A & C Act, 1996, unlike the predecessor Act of 1940, the arbitral Tribunal is empowered by section 17 of the Act to make orders amounting to interim measures. The need for section 9, in spite of section 17 having been enacted, is that section 17 would operate only during the ex....
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....clined only to suitably modify the order, we do not deem it proper to dismiss the application under section 9 in its entirety for this reason alone. We direct the applicant under section 9, to take steps for appointment of arbitrator/s, without any further loss of time. 20. The other factor centres around the very factum of existence of partnership. The Deed dated 5-3-2002 relating to Partnership - II is a fixed term partnership agreed to stand terminated at the close of the year as on 31st March, 2003. The High Court has proceeded on the premises that in spite of the term of the partnership coming to an end by expiry of the contracted term if the partners have continued the business beyond the expiry of the term limited by the contract and without having expressly entered into a partnership agreement afresh, the relationship shall continue to exist and govern the parties so long as the business continues. It is not necessary for us, for the present, to pronounce upon the correctness of the view so taken. Suffice it to observe that in the liquor trade involving heavy investments and heavy stakes it appears highly improbable that the people in trade would continue as partners wit....
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....is run by receivers without any hindrance by any of the partners; (ii)that the accounts are properly, truly and correctly maintained; (iii)that the receipts and payments are properly vouched; (iv)that the sale proceeds are properly accounted for and no part of the proceeds is siphoned off and/or carried away unaccounted by anyone. (3)All the sale proceeds shall be deposited day to day in a bank account to be opened in a nationalised bank in the name of the 'Firm M/s. Ashok Traders (under orders of the Court)'. Any amounts to be withdrawn shall be only under the joint signatures of at least one members of Group "B" or "C" and the observer, for the purpose of making payments to the State Government, and on account of rent/licence fee of the shops, salary of the staff, transport charges and other necessary expenses required for running day to day business. (4)Though the conduct of the business is being allowed to be continued by Group "B" but that is in their capacity of receivers as appointed by the Court. They must truly and strictly perform their duties as receivers. Any deviation would be viewed seriously. (5)The members of Group "A" and/or their representative/s....