TMI Blog2004 (1) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... other necessary expenses required for running day to day business. 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.The members of Group "A" and/or their representative/s, authorized in writing, shall have a reasonable right to visit the shops during business hours and watch the activities going on but without interfering with the business activities run by the receivers. The observer shall be paid such monthly remuneration and reimbursed such expenses, as may be considered reasonable and appointed by the Commissioner of Excise subject to overall directions of the Trial Court. This arrangement shall continue till 31-3-2004 and also for such further period as may be necessary for winding up of the business as per terms of the license of the State Government (Excise Department). On finalization of the accounts duly audited by Chartered Accountants the net profit or loss, if any, shall be distributed in accordance with the award given by the arbitrator or decision by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngst the partners. Clause 20 of the Partnership Deed-II incorporates an Arbitration Clause. Group "B" alleges the existence of yet another Deed of Partnership which is dated 6-3-2003 wherein the names of the members of the Group "A" are not to be found mentioned as partners. This partnership-III is also not registered. 5. On 6-3-2003 auction for IMFL and country-liquor shops (60 in number) for the year 2003-04 was held at Bhopal. M/s. Ashok Traders was declared to be successful bidder for a licence fee of Rs. 73.25 crores. The shops are running and have always remained operational even during the present litigation. 6. Disputes arose giving rise to complaints by the members of Group "A" complaining of the violation of their rights as partners at the hands of Group "B". Group "A" complained of their being denied access to accounts, of Group "B" indulging into mismanagement of affairs of the siphoning off of the funds and so on. Ajay Arora (of Group "A") filed a civil suit which was held to be not-maintainable in view of Section 69(3) of the Indian Partnership Act, 1932; the name of Ajay Arora having not been shown in the Register of Firms as a partner of the firm. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oversy and finding out at least some such solution as would take care of the disputes for the moment and protect the interests of all the parties and then concluded as under: "Various options were explored at the time of hearing of the appeal. It was suggested that the Excise Commissioner may be appointed as a receiver. But that does not appear to be feasible. Further, the running of liquor business requires an expertise of its own and as such it would not be proper to entrust the management of the business to third person who might not be aware of its intricacies. Therefore, it would be proper that the partners themselves should manage the business as receives. It is found that the contesting respondent Nos. 2, 6 and 7 have run this business in March, 2003 and also from 1-4-2003 and they are still doing so. The present liquor contract is upto 31-3-2004. It would be proper to appoint the respondent Nos. 2, 6 and 7 to continue to run this business as receivers subject to their complying with the provisions given in Order 40 rules 1 to 4 CPC. They shall submit their accounts before the court in which the application under section 9 of the Act was considered i.e. Court of Vth Add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Yasin Khan [1989] 3 SCC 476 and Delhi Development Authority v. Kochhar Construction Work [1998] 8 SCC 559 were also referred to. 9. Section 9 of A C Act, 1996 and section 69 of Partnership Act, 1932 (relevant part thereof) provide as under: " ARBITRATION AND CONCILIATION ACT, 1996 9. Interim measures, etc. by Court. A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court ( i )for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or ( ii )for an interim measure of protection in respect of any of the following matters, namely: ( a )the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; ( b )securing the amount in dispute in the arbitration; ( c )the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorizing for any of the aforesaid purposes any person to enter upon any land or building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a right arising from a contract which, in the submission made by the learned counsel for Groups "B" and "C", includes a proceeding commencing on an application under section 9 of the A C Act. 12. In our opinion, which we would term as prima facie , the bar enacted by section 69 of the Partnership Act does not affect the maintainability of an application under section 9 of A C Act. 13. A and C Act, 1996 is a long leap in the direction of alternate dispute resolution systems. It is based on UNCITRAL Model. The decided cases under the preceding Act of 1940 have to be applied with caution for determining the issues arising for decision under the new Act. An application under section 9 under the Scheme of A C Act is not a suit. Undoubtedly, such application results in initiation of civil proceedings but can it be said that a party filing an application under section 9 of the Act is enforcing a right arising from a contract? "Party" is defined in Clause ( h ) of sub-section (1) of section 2 of A C Act to mean a party to an arbit- ration agreement . So, the right conferred by section 9 is on a party to an arbitration agreement. The time or the stage for invoking the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing interim measures so as to protect the right under adjudication before the arbitral Tribunal from being frustrated. Section 69 of the Partnership Act has no bearing on the right of a party to an arbitration clause to file an application under section 9 of A C Act. 14. In Jagdish Chandra Gupta s case ( supra ) the Constitution Bench approved of a liberal and full meaning being assigned to the phrase other proceedings in sub-section (3) of section 69 of the Partnership Act untrammelled by the preceding words a claim of set off . The Court refused to countenance the plea for interpreting the words other proceedings ejusdem generis with the preceding words a claim of set- off . Shreeram Finance Corpn. Ltd. s case ( supra ) calls for the effect of bar created by section 69 being determined by reference to the date of institution of the suit and not by reference to any subsequent event. In Delhi Development Authority s case ( supra ), this Court held section 69 of Partnership Act applicable to an application under section 20 of the Arbitration Act, 1940 as such an application (under the scheme of that Act) would be included within the meaning of other proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge. It is a serious matter to appoint a receiver, on a running business. The High Court in spite of having formed an opinion in favour of directing the appointment of receiver has rightly observed that retail liquor trade is an intricate and tricky trade and hence cannot be entrusted to a third party. If that be so, we fail to appreciate the justification behind turning out the persons in actual management of business and passing on the reins in the hands of those who were not holding the same for nine months out of the twelve. We do not say that such a course has any prohibition in law on being followed. But we do not think a case of oppression of minority by majority - the sense in which the term is understood in law-having been made out on the material available in the present case. A better course would have been to allow the conduct of the business continuing in the hands of the persons who were doing so till now but at the same time issuing such directions and/or devising such arrangement as would protect and take care of the interest of those who are not actually running the business and that is what we propose to do. 17. There are two other factors which are weighing he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power conferred on the arbitral Tribunal under section 17 and the power conferred by the Court under section 9 may overlap to some extent but so far as the period pre and post the arbitral proceed- ings is concerned the party requiring an interim measure of protection shall have to approach only the Court. The party having succeeded in securing an interim measure of protection before arbitral proceedings cannot afford to sit and sleep over the relief, conveniently forgetting the proximately contemplated on manifestly intended , arbitral proceedings itself. If arbitral proceedings are not commenced within a reasonable time of an order under section 9, the relationship between the order under section 9 and the arbitral proceedings would stand snapped and the relief allowed to the party shall cease to be an order made before , i.e., in contemplation of arbitral proceedings. The Court, approached by a party with an application under section 9, is justified in asking the party and being told how and when the party approaching the Court proposes to commence the arbitral proceedings. Rather, the scheme in which section 9 is placed obligates the Court to do so. The Court may also whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m limited by the previous contract, more so, when they are called upon to deal as a partnership firm with the State Government. No reason has been assigned as to why a fresh Deed of Partnership was not entered into. If the members of Group "A" have allowed the liquor business to proceed without entering into a formal Deed of Partnership for the year 2003-04 and thereby allowed the members of Groups "B" and "C" to bring into existence a Deed of Partnership excluding the members of Group "A" and filing it on the record of the State Government (or substituting the same, as Group "A" alleges) they have to thank themselves for the misadventure which they have indulged into. Their lack of alertness in vigilantly protecting their rights tells adversely on the availability of strong prima facie case in their favour which only can persuade the Court to direct appointment of receiver over the business and in particular entrust the actual conduct of business in their hands, may be as receivers. 21. During the course of hearing, we asked the learned counsel for the parties if either of them could suggest a practically feasible mechanism which would work and also effectively protect the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring business hours and watch the activities going on but without interfering with the business activities run by the receivers. (6)The observer shall be paid such monthly remuneration and reimbursed such expenses, as may be considered reasonable and appointed by the Commissioner of Excise subject to overall directions of the Trial Court. (7)This arrangement shall continue till 31-3-2004 and also for such further period as may be necessary for winding up of the business as per terms of the license of the State Government (Excise Department). (8)On finalization of the accounts duly audited by Chartered Accountants the net profit or loss, if any, shall be distributed in accordance with the award given by the arbitrator or decision by any competent forum. (9)The receivers and observers shall be under the control of the trial Court. In case of any difficulty in carrying out this order, the parties, the observer and the Excise Commissioner of Madhya Pradesh or any officer subordinate to him shall be at liberty to seek directions from the trial Court. 23. Before parting we would like to clarify that whatever has been stated hereinabove in this order is not in any manner inten ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
