Pampati Sathaiah vs. Sri.Vanamaa Damodhar

The Court made the following: ORDER L

HON'BLE TICE A.RAJA EKER REDD This application is filed under sub-seclions 5 and 6 of Section 11 of the Arbitration and Conciliation Act, 1996 (for short'the Act'), read with Paragraph (3) (i) (c) of the Schemed of appointment of Arbitrators, 2006, as framed by High Court of Judicature at Hyderabad, to appoint an arbitrator as per Clause 15 of the Partnership Deed dated 10.02.2012, to resolve the disputes between the parties and to pass an award in accordance with law. The case of the applicant, as per the affidavit filed in support of the arbitration application, is that the l" respondent and some others have entered into a partnership deed dated 27.07.1977 to carry on the business to exhibit motion pictures under the name and style of Sri Venkateshwara Theatre, V.T. Road, Ramagiri, Nalgonda Town, and it was registered vide Reg.No.4448/78 dated 26.09.1978. The applicant herein joined as partner in the year 1980. Due to death of some of the partners, their legal represenlatives were added and some of the partners sold their shares and new partners joined, and accordingly number of fresh partnership deeds / re-constitution- cum-partnership deeds were executed, and the latest one was executed on 10.02.2012, and as per clause No.6 of the latest deed, the applicant herein was appointed as Managing Partner of the partnership firm, and he along with 1't respondent herein, who is the 6rh partner, were empowered to sign any agreements, or documents on behalf of the firm. Clause '15 of this deed dated 10.02.2012 provides for arbitration for resolution of disputes arising between the partners. Arbitration Apolication No.79 OF 2018 ORDER While so, consequent to retirement of one of the partner and for joining of some other member in the partnership firm as partners, it is stated that the respondents herein and three other partners issued a legal notice dated 14.03.2012 to the applicant and other partners, not to create any third party interest in the partnership firm. lt is stated that a meeting was held on 18.03.2012, wherein it was unanimously resolved to agree for transfer of shares. Accordingly, all the partner, including the respondents herein, have signed the resolulion dated 18.03.2012. As per the said resolution, reconstitulion- cum-partnership deeds dated 10.03.2012 and 24.o3.20i2 were prepared. lt is stated

2 that except the respondents herein, all the other partners signed. For resolution of the said issue, mediations and number of meeting were held, but the respondents failed to sign. The case of the applicant is that due to non submission of reconstitution - cum - partnership deeds, the firm is facing problems viz., renewal of Iicense of the theatre, online bookings, GST registration, release of original documents from the bank, bank transactions etc., Therefore, the applicant as l\.4anaging Partner of the firm, gave legal notice dated 09.02.2018 requiring the respondents to slgn the reconstatution-cum- partnership deeds within fifteen days and in case of default, they would be approaching the court of law, seeking for appointment of an arbitrator. Though the respondents received the said notice and failed to respond, the applicant filed the present arbitration application under Section '1 1(5) and (6) of the Act. Counter affidavit is filed by the respondent No.1. ln the counter affidavit, though the claim of the applicant on the grounds of limitation and /ocus sfandl of the applicant in filing the arbitratron application is disputed; existence of partnership deed / re- constitution-cum-partnership deed dated 10.02.2012 and the arbitration clause therein and the issuance of notice dated 09.02.2018 invoking the arbitration clause in the partnership deed, are not disputed. Applicant filed reply affidavit Heard the leaned counsel for the applicant, who reiterated the averments made in the affidavit filed in support of the arbitration application. Learned counsel for the respondents apart from disputing the claim of the applicant on merits, submitted that initially the partnership deed was executed on 27 .07 .1977 and in the said deed, Clause '14 provides for arbitration, but owing the addition and substitution of new members, partnership deeds / re-constitution-cum partnership deeds were executed, and the latest one was executed on 10.02.2012. As per the partnership deed dated 10.02.2012, which is in force as on today, the arbitration is provided under Clause '1 5, but in the legal notice dated 09.02.2018, the applicant sought to invoke clause 14 in the partnership deed dated 27.07.1977, which was superseded long back. He further submits that in the arbitration notice, the applicant has not expressed in clear terms that he is invoking the arbitration clause. Therefore, the J notice dated 09.02,2018 is defective and hence the present arbitration application may be dismissed. As per the averments on record and the submissions of the learned counsel, there is no dispute that initially, the partnership deed was executed on 27.07.1977 and clause 14 of the sa jd deed provides for arbitration. Subsequently, owing to death/retirement of members, new members and the legal representalives of the existing members were added and fresh partnership deeds / re-constitution-cum-partnership deeds were executed, and the latest one was executed on 10.02.2012, and clause 15 of the said deed, provides for arbitration. The grievance of the applicant is that in the meeting held on '18.03.20'12, it was unanimously resolved for transfer of shares of some of the members, including the shares of the applicant herein; and all the partners including the respondents herein have signed the said resolution, and in pursuance of the same, partnership deeds / re- constitution-cum -partnership deeds dated 10.03.2012 and 24.03.2012 were prepared, and all the partners signed the said deeds, except lhe present respondents. Though mediations and number of meetings were held, the respondents herein did not sign the above stated deeds, and this resulted in causing hindrance in their day{o-day business administration, and, therefore, they got issued legal notice dated 09.02.2018, invoking the arbitration clause. On the other hand, the case of the respondents is that they have issued legal notice dated 14.03.2012 not to create any third party interest, and since the cause of action arose on the said date, issuance of arbitration notice dated 09.02.2018, ie., after about five years, is barred by limitation. The facts on record disclose the existence of dispute between the applicant and the respondents with regard to signing of the partnership deeds / re-constitution-cum- partnership deeds dated 10.03.2012 and 24.03.2012, and the applicant issued legal notice dated 09.02.2018 requiring the respondents to sign the said deeds, within a period of fifteen days and that in case of default, it was made clear that they would be approaching the court of law invoking clause 14 of the partnership deed dated 27 .07 1977 I

+ There is no dispute with regard to execution of partnership deed dated 27 .07 .1977 and Clause 14 of the said deed provides for arbitration for resolution of disputes between the partners arising out of the said deed. The same is extracted as under for better appreciation:

"14. ln case of dispute or dispules amongst the partners either in regard to these presents or in the conduct of the business of the partnership, may be settled by arbitration as far as possible, each party to the dispute electing a single arbitrator or if agreed to by a common arbitrator. The decision of the arbitrators or arbitrator shall be binding on the parties to the dispute subject to the rules and regulations of lndian Arbitration Act in force." Subsequently, new partnership deeds / re-constitution-cum-partnership deeds were executed, and the latest one was executed on 10.02.2012, and Clause 15 of the said deed provides for arbitration. The same is extracted as under: 15. ln case of any dispute that may arise during the tenure of the partnership, the same shall be settled as far as possible by resorting to arbitration proceedings and for the purpose the rules and regulations of the lndian Arbitration Act as applicable to the State of Andhra Pradesh shall apply." Under the earlier partnership deed dated 27 .07.1977 , the arbitration is provided under Clause 14 and in the existing deed dated 10.02.2012, the arbitration is provided at Clause 1 5. ln the legal notice dated 09.02.2018, the applicant has made his intention clear with regard to invocation of arbitration clause, but however, instead of referring to Clause '15 of the partnership deed dated 10.02.2012, has referred to Clause 14 of the earlier deed daled 27.07.2017, which was superseded. ln my considered view, the expresston of intention with regard to invocation of arbitration clause in the partnership, is paramount. But by oversight, instead of mentionrng the clause in the present agreement, clause in the earlier agreement, which was superseded, was mentioned. ln my considered view, the objection taken by the respondents in this regard is technical in nature and cannot be sustained. The other preliminary objections are with regard to limitation and /ocus standi of the applicant. The same are required to be left open to be agitated before the arbitrator. Having regard to the facts and circumstances, as dispute arose between the partners ovt of the partnership deed dated 10.02.2012 and for resolution of the dispute, though the applicant got issued legal notice dated 09.02.2018 expressing his intention to invoke arbitration clause in the partnership deed, as the respondents failed to respond,

1 the present application came to be filed. Having regard to the facts and circumstances of the case, the arbitration application deserves to be allowed. For the foregoing reasons, the arbitration application is allowed Sri K.Sangareddy, retired District Judge, is appointed as arbitration to resolve the dispute between the parties arising out of the partnership deed / re-constitution-cum- partnership deed dated 10.02.2012 and to pass an award in accordance with law. All the issues are left open to both the parties to agitate before the learned Arbitrator, who shall consider and decide the same on merils and in accordance with law, uninfluenced by observation or finding, if any, made in this order. The learned Arbitrator is entitled to fees as per the rates specified in the Fourth Schedule to the Act of 1996, inserted by Act 3 of 2016 with effect from 23-10-2015, which shall be borne by the parties in equal shares. lnterlocutory applications pending, if any, shall stand closed. No order as to co sts ,II 1 Sri K Sanga Reddy, District Judge (Retd.), Flat No.10B, Babukhans Aneesh !oy19p,-H No 6-1-22,WalkarTo-wn, paOma nuo Hfrt"r, Secunderabid_SOO OZS Celi No.9440071 '155 (along with_copy of order, petition, affidavit and any other material papers) One cc to Sri M.Kesava Rao, Advocate (Opuai ' -' One cc_to_Sri V.Maili Babu. Advocate f OpUCl-' Two CD Copies \ To .K.GANGADHAR RAO JOTNT REG9TRAR W,' SECTION OFFICER 2. 3. 4. Kj. \-

HIGH COURT DATED:2910712020 ORDER ARBITRATION APPLICATION No.79 of 2018 ALLOWING THE ARBITRATION APPLICATION WITHOUT COSTS. 2I AUG 2020 1A E H 1 k oo * .t .\t$ 6 )9 .*"d,*.F**_*, {r'(