Smt. Usha Kumari Akkinapalli vs. Sri Gangisetty Kuresh Kumar

Facts

This appeal arises from an order dated 09.11.2022 passed by the XII Additional Chief Judge, City Civil Court, Secunderabad, in an application filed under Section 9 of the Arbitration and Conciliation Act, 1996. The appellant, Smt. Usha Kumari Akkinapalli (Petitioner No. 2), sought interim measures to restrain Respondent No. 1, Sri Gangisetty Kuresh Kumar, from operating the bank accounts of the firm ALNKV Developers (Respondent No. 4) with IDBI Bank (Respondent No. 2) and to permit the appellant to operate them. The appellant alleged mismanagement and misappropriation of funds by Respondent No. 1 after the demise of his father, a co-managing partner, and non-payment of GST. The Court below dismissed the application, holding that neither partner could operate the accounts without a decision from all partners.

Held

The High Court modified the order of the Court below. It acknowledged that the partnership deed stipulated joint management by managing partners and that any change in managing partners required the written consent of the majority. Therefore, the Court found no infirmity in the lower court's initial view that neither party could unilaterally operate the accounts. However, recognizing that freezing the accounts would lead to defaults in salary payments, statutory dues, and day-to-day activities, which would not benefit the parties, the Court decided to appoint a Chartered Accountant to manage the firm's affairs and operate its bank accounts. This appointment is to continue until the Arbitration Original Petition (A.O.P.) No. 14 of 2022 is decided. The Chartered Accountant is empowered to operate the specified bank accounts, verify and clear cheques from the property manager, make payments for salaries and expenses upon production of bills, and pay pending and future statutory dues with interest. The auditor is entitled to a remuneration of Rs. 10,000 per month plus GST, and reimbursement for conveyance expenses. The respondent bank is directed to honor cheques issued by the Chartered Accountant.

Key Issues

1. Whether the Court below erred in holding that no partner was empowered to operate the accounts of the firm, thereby preventing necessary payments for salaries, statutory dues, business operations, and property maintenance? 2. Whether the appellant, as the majority stakeholder, should be permitted to operate the firm's accounts? Petitioner's Contentions: - The Court below erred by virtually freezing the firm's accounts, hindering its business operations. Access to accounts is crucial for salaries, statutory dues, business activities, and property maintenance. - The appellant, being the majority stakeholder (51%), should be allowed to operate the accounts. Respondent No. 1's Contentions: - The partnership deed dated 25.05.2013 is binding, and only managing partners are authorized to manage the firm's affairs. - As per Clause 22 of the deed, since the legal representatives of his deceased father (a managing partner) have not been inducted, Respondent No. 1 alone is authorized to operate the bank accounts. - The appellant, being a permanent resident of the USA and gainfully employed, should not be permitted to operate the firm's accounts.