{"id":36632,"date":"2010-05-04T00:00:00","date_gmt":"2010-05-03T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/c-m-narayanan-vs-c-g-babu-on-4-may-2010"},"modified":"2017-09-22T08:17:21","modified_gmt":"2017-09-22T02:47:21","slug":"c-m-narayanan-vs-c-g-babu-on-4-may-2010","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/c-m-narayanan-vs-c-g-babu-on-4-may-2010","title":{"rendered":"C.M.Narayanan vs C.G.Babu on 4 May, 2010"},"content":{"rendered":"
Kerala High Court<\/div>\n
C.M.Narayanan vs C.G.Babu on 4 May, 2010<\/div>\n
       \n\n  \n\n  \n\n \n \n  IN THE HIGH COURT OF KERALA AT ERNAKULAM\n\nArb.A.No. 33 of 2007()\n\n\n1. C.M.NARAYANAN, S\/O C.V.MUTHUVELAN,\n                      ...  Petitioner\n2. C.N.MUTHUKRISHNAN, S\/O C.M.NARAYANAN,\n3. T.R.RAJANI, W\/O C.M.NARAYANAN,\n\n                        Vs\n\n\n\n1. C.G.BABU, S\/O LATE C.M.GANGADHARAN,\n                       ...       Respondent\n\n2. C.G.PRIVI, S\/O LATE C.M.GANGADHARAN,\n\n3. C.G.RAJEEV, S\/O LATE C.M.GANGADHARAN,\n\n4. P.S.SATHEEDEVI, W\/O LATE C.M.GANGADHARAN\n\n                For Petitioner  :SRI.T.KRISHNAN UNNI (SR.)\n\n                For Respondent  :SRI.C.C.THOMAS (SR.)\n\nThe Hon'ble MR. Justice PIUS C.KURIAKOSE\nThe Hon'ble MR. Justice C.K.ABDUL REHIM\n\n Dated :04\/05\/2010\n\n O R D E R\n      PIUS C. KURIAKOSE & C.K. ABDUL REHIM, JJ.\n            ------------------------------------------\n          Arb. Appeal Nos. 33 0f 2007 & 8 of 2008\n         ------------------------------------------------\n            Dated this the 4th day of May, 2010\n\n                       J U D G M E N T\n<\/pre>\n
Pius C. Kuriakose, J.\n<\/p>\n
     Both these appeals are directed against the order of<\/p>\n
the District Court, Palakkad in OP. (Arb.) No. 29 of 2007.<\/p>\n
Appeal No. 33 of 2007 is filed by the petitioners in the<\/p>\n
Arbitration O.P. while Appeal No. 8 of 2008 is filed by the<\/p>\n
respondents in the Arbitration O.P.                For sake of<\/p>\n
convenience we will refer to the appellants in Arb. Appeal<\/p>\n
No. 33 of 2007 as the petitioners and the respondents in<\/p>\n
that appeal as the respondents.\n<\/p>\n
     2. As found by the court below the facts are that the<\/p>\n
petitioners  and the respondents are partners of a<\/p>\n
partnership firm by name and style Hotel Arathi which is<\/p>\n
conducting a hotel and managing a shopping complex at<\/p>\n
Vadakkumcherry in Palakkad District. The petitioners and<\/p>\n
the respondents are partners of yet another partnership<\/p>\n
  Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                               – 2 –\n<\/p>\n
\nfirm by name Savitha Bar which carries on business as retail<\/p>\n
dealers of various varieties of Indian made foreign liquor at<\/p>\n
Vadakkumcherry itself. The first respondent Sri. C.G.Babu<\/p>\n
is the Managing Partner of both these firms. When disputes<\/p>\n
arose between the petitioners and the respondents as<\/p>\n
regards the business of the two firms for resolving those<\/p>\n
disputes by arbitration, petitioners 2 and 3 filed AR. No. 20<\/p>\n
of 2002 in respect of Savitha Bar and A.R. No. 21 of 2001 in<\/p>\n
respect of Hotel Arathi before this Court. This court<\/p>\n
appointed Mrs. Elizabeth Mathai Idiculla, former District and<\/p>\n
Sessions Judge as Arbitrator under the provisions of the<\/p>\n
Arbitration and Conciliation Act, 1996.       The Arbitrator<\/p>\n
passed an award in the two arbitration cases referred to her<\/p>\n
on 12-6-2004. By the above award in arbitration request<\/p>\n
No. 21\/02 it was directed that the firm Hotel Arathi shall<\/p>\n
stand dissolved and it was declared that the        share of<\/p>\n
petitioners 1 and 2 in the assets and liabilities of the firm<\/p>\n
shall be 50%. , the remaining 50% being the share of<\/p>\n
 Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                                 – 3 –\n<\/p>\n
\nrespondents. By the award in A.R. No. 21 of 2002 it was<\/p>\n
directed that the firm Savitha Bar will also stand dissolved<\/p>\n
and it was declared that the share of petitioners 2 and 3 in<\/p>\n
the assets and liabilities of the firm will be 50% while the<\/p>\n
remaining 50% will be the share of the respondents. In the<\/p>\n
award passed in AR. No. 21\/02 the Arbitrator has left open<\/p>\n
the dispute between the parties as regards the title of 40<\/p>\n
cents of land wherein Hotel Arathi is situated on the ground<\/p>\n
that the arbitration clause in the partnership deed does not<\/p>\n
cover the said         dispute. The Arbitrator has directed the<\/p>\n
petitioners who are claimants in the A.R. to apply on the<\/p>\n
execution side for valuation of only the movable assets of<\/p>\n
the firms including the goodwill and the licence of the firms<\/p>\n
Savitha Bar and Hotel Arathi which was found to be assets<\/p>\n
of the firms.\n<\/p>\n
      3. The respondents filed Arb. O.P. No. 160 of 2004<\/p>\n
under Section 34(2b)(i) of the Arbitration & Conciliation Act,<\/p>\n
1996 for setting aside the award in AR. No. 20 of 2002 to<\/p>\n
  Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                               – 4 –\n<\/p>\n
\nthe extent the same holds that the FL-3 Licence pertaining<\/p>\n
to Savitha Bar is an asset of the firm.      In that O.P. the<\/p>\n
respondents filed IA. No. 1863 of 2004 for stay of all further<\/p>\n
proceedings pursuant to the finding of the Arbitrator that<\/p>\n
the FL-3 Licence is an asset of the firm and to permit the<\/p>\n
first respondent o use the licence as per the Abkari Act. Stay<\/p>\n
was sought for on the averment that unless the same is<\/p>\n
granted, petitioners 2 and 3 will prevent the first respondent<\/p>\n
from using the licence granted by the authorities to him in<\/p>\n
his individual capacity. The District Court granted stay and<\/p>\n
according to the petitioners, the respondents continued to<\/p>\n
exploit the FL-3 Licence and even got the same renewed. It<\/p>\n
is stated that the above stay was in force till O.P. No. 160 of<\/p>\n
2004 was finally disposed of. According to the petitioners,<\/p>\n
since the Arbitrator had left out the disputes regarding the<\/p>\n
fixed assets (land and building) of the firm Hotel Arathi,<\/p>\n
even though the firm stood dissolved by the award, the<\/p>\n
petitioners were not in a position to have the assets and<\/p>\n
  Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                                 – 5 –\n<\/p>\n
\nliabilities of the firm determined and quantified in execution<\/p>\n
of the award. It is pointed out that under the provisions of<\/p>\n
the Foreign Liquor Rules, an FL-3 Licence is limited and can<\/p>\n
be exploited only in the premises described therein. The<\/p>\n
award passed by the Arbitrator is therefore enforceable only<\/p>\n
as regards the share of profits due to the petitioners in the<\/p>\n
two businesses. The goodwill, licence and other movable<\/p>\n
assets cannot be valued de hors the fixed assets.<\/p>\n
       4. According to the petitioners, the respondents were<\/p>\n
utilising the fixed assets of the firm for exploiting FL-3<\/p>\n
licence and        the licensed premises without satisfying the<\/p>\n
award and were continuing to deny the petitioners their<\/p>\n
legitimate share of the income. Hence they filed O.P. No.<\/p>\n
221 of 2004 before the District Court, Palakkad under<\/p>\n
Section 9 of the Arbitration and Conciliation Act praying that<\/p>\n
a receiver be appointed to take charge of hotel Arathi and<\/p>\n
Savitha Bar or in the alternative to appoint either the<\/p>\n
second petitioner or the first respondent as the receiver of<\/p>\n
 Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                                – 6 –\n<\/p>\n
\nthe businesses. In O.P. No. 221 of 2004, the petitioners<\/p>\n
offered to run Savitha Bar and Hotel Arathi as receivers and<\/p>\n
to pay to the respondents a sum of Rs.1,75,000\/- per<\/p>\n
mensem. The prayer was that the above arrangement be<\/p>\n
continued till winding up of the firms and distribution of the<\/p>\n
assets of the firms by court. Since the hearing and disposal<\/p>\n
of Arb. O.P. No. 221 of 2004 was getting delayed and the<\/p>\n
respondents were taking steps to seek renewal of the FL-3<\/p>\n
Licence without bothering to pay the petitioners their share<\/p>\n
of profits for the periods prior to and after awards passed by<\/p>\n
the Arbitrator, the petitioners filed IA. No. 507 of 2005 in<\/p>\n
Arb. O.P. No. 221 of 2004 invoking various provisions for<\/p>\n
an interim order restraining the respondents from carrying<\/p>\n
on the hotel and bar business and from applying for and<\/p>\n
obtaining renewal of the FL-3 licence for the period from 1-<\/p>\n
4-2005. Section 53 of the Indian Partnership Act, 1932 was<\/p>\n
one of the provisions was invoked and according to the<\/p>\n
petitioner, the said provision will enable the petitioners to<\/p>\n
  Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                               – 7 –\n<\/p>\n
\nobtain the relief sought for in the IA. I.A. 507 of 2005 and<\/p>\n
Arb. O.P. Nos. 221 of 2004 and 160 of 2004 were heard<\/p>\n
together. The District Judge by common order dated 25-7-<\/p>\n
2005 dismissed O.P. No. 160 of 2004 and confirmed the<\/p>\n
finding of the Arbitrator in AR. No. 20 of 2002 that the FL-3<\/p>\n
Licence is an asset of the firm. O.P. No. 221 of 2004 and<\/p>\n
IA. No. 507 of 2005 were also dismissed by the District<\/p>\n
Court.      According to the petitioners, this was without<\/p>\n
properly appreciating the reliefs sought for and on a wrong<\/p>\n
understanding of the law on the point and without noticing<\/p>\n
the significant fact that a winding up of the firms after<\/p>\n
dissolution can be had only after the assets are ascertained,<\/p>\n
valued and put up for sale.\n<\/p>\n
       5. Against the order dismissing the O.P. (Arb.) No. 220<\/p>\n
of 2004, the petitioners filed Arb. Appeal No. 34 of 2005<\/p>\n
before this Court. The respondents challenged the order in<\/p>\n
Arb. O.P. No. 160 of 2004 by filing Arb. Appeal No. 35 of<\/p>\n
2005. In that matter, this Court passed an interim order<\/p>\n
  Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                               – 8 –\n<\/p>\n
\ndirecting the respondents to pay the entire arrears ordered<\/p>\n
by the Arbitrator and to continue to pay at the rate of<\/p>\n
Rs.50,000\/- per mensem to the petitioners till the disposal<\/p>\n
of the appeals. Petitioners allege that though the arrears<\/p>\n
ordered by the Arbitrator were paid, monthly payments<\/p>\n
directed by this Court from the date of the award were not<\/p>\n
made. Both the appeals were disposed of by this Court by<\/p>\n
judgment dated 30-3-2006. By virtue of that judgment this<\/p>\n
Court appointed the first respondent as party receiver for<\/p>\n
conduct of the businesses.       He was directed to submit<\/p>\n
periodical reports before the District Court.  It was also<\/p>\n
directed that if any further direction is necessary, the<\/p>\n
parties were free to move the District Court. It is pointed<\/p>\n
out that though the above judgment was challenged before<\/p>\n
the Supreme Court, the SLPs were dismissed confirming the<\/p>\n
judgment of this Court.        The petitioners submit that<\/p>\n
pursuant to the appointment as receiver by this Court, the<\/p>\n
first respondent is conducting the businesses. It is alleged<\/p>\n
 Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                               – 9 –\n<\/p>\n
\nthat he is not making the monthly payment due to the<\/p>\n
petitioners. It is pointed out that the quantification of the<\/p>\n
shares of profits at Rs.50,000\/- was made only as an an<\/p>\n
interim measure by this Court. Even that amount is not<\/p>\n
being paid from the date of the award onwards. Since this<\/p>\n
court had directed the parties to approach the District Court<\/p>\n
for further directions, the petitioners filed Arb. O.P. No. 29<\/p>\n
of 2007 before the District Court praying that the first<\/p>\n
respondent be removed        from receivership and that the<\/p>\n
second petitioner be appointed as receiver in his place and<\/p>\n
also for a direction to the first respondent to deposit before<\/p>\n
the court the entire profits from the two businesses which<\/p>\n
may come to Rs.1,75,000\/- per mensem, each from 12-6-<\/p>\n
2004 onwards. In that O.P. the petitioners filed IA. No. 298<\/p>\n
of 2007 seeking a temporary injunction restraining the first<\/p>\n
respondent from getting the FL-3 licence relating to the Bar<\/p>\n
renewed. The above IA was dismissed by the District Court.<\/p>\n
However, the District Court directed payment of Rs.50,000\/-<\/p>\n
 Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                               – 10 –\n<\/p>\n
\nper mensem to the petitioners towards the share of profits.<\/p>\n
Subject to those conditions, the first respondent was<\/p>\n
allowed to continue as receiver. Petitioners complain that<\/p>\n
even after that order the first respondent did not deposit the<\/p>\n
share of profits as directed by this Court and the District<\/p>\n
Court. The first respondent has not cared to file any report<\/p>\n
or accounts either before this Court or the District Court<\/p>\n
with respect to the conduct of the business.    Finally, when<\/p>\n
O.P. No. 29 of 2007 came up for final hearing the District<\/p>\n
Court dismissed the same by virtue of the impugned<\/p>\n
judgment reiterating the direction to the first respondent to<\/p>\n
deposit Rs.50,000\/- per mensem towards the share of<\/p>\n
profits.\n<\/p>\n
      6. In Arb. Appeal     No. 33 of 2007 the order of the<\/p>\n
District Court in the Arbitration O.P. No. 29 of 2007 is<\/p>\n
challenged on various grounds.       It is urged that in open<\/p>\n
disobediance of the directions passed by this Court and by<\/p>\n
the District Court, the first respondent receiver is<\/p>\n
 Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                                – 11 –\n<\/p>\n
\nappropriating the entire profits derived out of the businesses<\/p>\n
without      caring to deposit or pay even the amount of<\/p>\n
Rs.50,000\/- per mensem which is due to the petitioners. It<\/p>\n
is urged that the quantum ofRs.50,000\/- per mensem fixed<\/p>\n
by this Court was only as an interim measure.             The<\/p>\n
Arbitrator in her award fixed the above amount on the basis<\/p>\n
of an agreement between the parties entered into as early<\/p>\n
as in 1999.          Subsequently there has been substantial<\/p>\n
increase in the volume of business and theprofits derived<\/p>\n
out of the business during the last nine years. It is pointed<\/p>\n
out that the consistent case of the petitioners is that the<\/p>\n
respondents are earning net profit of Rs.3.6 lakhs per<\/p>\n
mensem (Rs.12,000\/- per day) from the date of the arbitral<\/p>\n
award. The petitioners are admittedly entitled to 50% of<\/p>\n
the actual profits derived. The petitioners offered before the<\/p>\n
Court below that they are prepared to accept 1.75 lakhs per<\/p>\n
mensem as their share of profits and prepared to pay so<\/p>\n
much of amounts to the respondents if the management of<\/p>\n
  Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                               – 12 –\n<\/p>\n
\nthe businesses is entrusted with them.      The court below<\/p>\n
fixed the quantum at Rs.50,000\/- per mensem itself without<\/p>\n
taking into consideration the subsequent increase of the<\/p>\n
volume of business and profit derived out of the business.<\/p>\n
It is urged that the court below went wrong in not taking<\/p>\n
into consideration the conduct of the respondents in not<\/p>\n
filing any report or accounts before any court regarding the<\/p>\n
business conducted by him. It should have been noticed by<\/p>\n
the Court below that he is not making payment of share of<\/p>\n
profits and that the entire profit is being appropriated<\/p>\n
without accounting to anybody.        The court below should<\/p>\n
have seen that a court receiver is not expected to function<\/p>\n
in such a manner. It is urged that the court below went<\/p>\n
wrong in thinking that no material is available to fix the<\/p>\n
quantum of profits derived out of the business. The court<\/p>\n
below should have accepted the offer of the petitioners that<\/p>\n
they will conduct the business and pay Rs.1,75,000\/- per<\/p>\n
mensem to the respondents if they are appointed as<\/p>\n
 Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                               – 13 –\n<\/p>\n
\nreceivers.\n<\/p>\n
      7. The grounds urged in Arb. Appeal No. 8 of 2008 filed<\/p>\n
by the respondents are mostly founded on the plea of the<\/p>\n
respondents that the FL-3 Licence is the exclusive private<\/p>\n
property of the first respondent and that the ex-partners of<\/p>\n
the dissolved firm cannot have any right whatsoever in the<\/p>\n
businesses of the dissolved firm. The challenge is mostly<\/p>\n
against the direction under the impugned order to the<\/p>\n
respondent to deposit the amount of Rs.50,000\/- per<\/p>\n
mensem towards the share of the respondents. It is urged<\/p>\n
in the appeal that the direction to the first respondent to<\/p>\n
deposit the sum of Rs.50,000\/- per mensem towards the<\/p>\n
share of the petitioners is illegal and that the said direction<\/p>\n
is passed without proper application of mind. It is urged<\/p>\n
that the petitioners cannot have any right in the profits of<\/p>\n
the business after the dissolution of the partnership firm.<\/p>\n
Once the partnership firm is dissolved with effect from a<\/p>\n
particular date the partners of the dissolved firm are entitled<\/p>\n
 Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                                 – 14 –\n<\/p>\n
\nto claim settlement of accounts as on the date of<\/p>\n
dissolution.        The business under the FL-3 Licence issued<\/p>\n
and renewed in the name of the first respondent is carried<\/p>\n
on by him in his individual capacity and the ex-partners of<\/p>\n
the dissolved firm cannot have any right. It is urged that<\/p>\n
overlooking the above vital aspects that the impugned<\/p>\n
direction is passed by the court below. It is urged that the<\/p>\n
court below having found that the remedy of the<\/p>\n
respondents to seek settlement of the accounts in<\/p>\n
appropriate proceedings, the court below was not at all<\/p>\n
justified in issuing the impugned direction. It is urged that<\/p>\n
the remedy of the petitioner is to seek settlement of the<\/p>\n
accounts in appropriate proceedings. It is urged that the<\/p>\n
court below should have found that as far as the shares of<\/p>\n
the petitioners are concerned execution petitions are<\/p>\n
pending before the District Court, Palakkad. It is urged that<\/p>\n
the finding that petitioners are entitled to share in the FL-3<\/p>\n
Lincense carried on by the first respondent is illegal. As the<\/p>\n
  Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                                – 15 –\n<\/p>\n
\nfirst respondent is the holder of the licence which stands in<\/p>\n
his name and as the firm is now dissolved with effect from<\/p>\n
12-6-2004 the exploitation of the licence by the first<\/p>\n
respondent is in his individual capacity nobody has any right<\/p>\n
in it and can make any claim for share of profit. It is urged<\/p>\n
that     FL-3        licence in    question   is  issued   to<\/p>\n
Sri.C.M.Gangadharan, father of        respondents 1 to 3 and<\/p>\n
husband of the 4th respondent.           After the demise of<\/p>\n
Sri.Gangadharan the licence was transferred into the name<\/p>\n
of the first respondent on the basis of the no objection<\/p>\n
certificate given by the other legal heirs. Even though the<\/p>\n
licence was extracted by the firm illegally violating Rule 19<\/p>\n
of the Foreign Liquor Rules, the said licence cannot be<\/p>\n
conducted by any other person except the first respondent.<\/p>\n
Reference is made to the judgment of this Court in<\/p>\n
Narayanan & Co. v. Commissioner of Income Tax,<\/a> 1996(1)<\/p>\n
KLT 546, Joseph Francis v. Commissioner of Excise & others<\/a>,<\/p>\n
2005(2) KLJ 256, and also to the judgment of the Supreme<\/p>\n
  Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                                 – 16 –\n<\/p>\n
\nCourt in Joseph Joseph v. State of Kerala,<\/a> 2002 (1) KLT 827<\/p>\n
(SC) and it is argued that conduct of partnership business<\/p>\n
by exploiting a licence which is issued in favour of a named<\/p>\n
licensee      is illegal and void in view of Section 23 of the<\/p>\n
Indian Contract Act and that           being so, the petitioners<\/p>\n
cannot insist on any share of profit from the business now<\/p>\n
carried on and their right can only be to get the accounts<\/p>\n
settled with effect from 12-6-2004.         It is urged that the<\/p>\n
conduct of business by the partnership by exploiting an FL-3<\/p>\n
Licence is without notice to the Excise Department and<\/p>\n
hence the business was done in violation of Rule 19 of<\/p>\n
Foreign Liquor Rules. The building where the business is<\/p>\n
being carried on belongs absolutely to the respondents.<\/p>\n
These aspects have not been taken into account by the<\/p>\n
District Judge while passing the impugned order. It is urged<\/p>\n
that the respondents are ready and willing for appointment<\/p>\n
of an Arbitrator for settling the accounts of the firm as on<\/p>\n
12-6-2004, the date of dissolution of the firms.            The<\/p>\n
 Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                              – 17 –\n<\/p>\n
\nrespondents have no objection in appointing the very same<\/p>\n
Arbitrator for the purpose of settlement of accounts.<\/p>\n
      8. Very extensive arguments were addressed before us<\/p>\n
by Sri.T.Krishnan Unni, learned senior counsel for the<\/p>\n
appellants petitioners and by Sri. C.C. Thomas, learned<\/p>\n
senior counsel for the respondents. The submissions of the<\/p>\n
learned counsel were based on the basis of the grounds<\/p>\n
raised in the respective appeal memos. Sri.C.C. Thomas in<\/p>\n
support of his submissions placed reliance on the judgment<\/p>\n
of    a Full Bench of this Court in Narayanan & Co. v.<\/p>\n
Commissioner of Income-tax,<\/a> 1996(1) KLT 546 (FB) and on<\/p>\n
the judgment of a Division Bench of this Court in State of<\/p>\n
Kerala     & others v. M\/s. Panamoottil Investments and<\/p>\n
others<\/a>, 2010 (1) KHC 353 (DB). Sri.T. Krishnan Unni, per<\/p>\n
contra drew my attention to the order of the District Court in<\/p>\n
IA. 298\/07 as well as to a judgment of this Court in<\/p>\n
C.M.Appeal No. 110 of 1999.\n<\/p>\n
      9. Having anxiously considered the rival submissions<\/p>\n
  Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                               – 18 –\n<\/p>\n
\naddressed at the Bar in the light of the ratio emerging from<\/p>\n
the precedents cited and having gone through the impugned<\/p>\n
order as well as the other papers to which our attention was<\/p>\n
drawn by the learned counsel, we are of the view that the<\/p>\n
respondents (appellants in Arb. Appeal No. 8 of 2008)<\/p>\n
cannot have no legitimate grievance about the order<\/p>\n
impugned.           At the same time, we find elements of<\/p>\n
genuineness in the grievance voiced by the appellants in<\/p>\n
Arb. Appeal No. 33 of 2007.\n<\/p>\n
       10. The award passed by the Arbitrator has become<\/p>\n
final in the sense that the application filed by the appellants<\/p>\n
in Arb. Appeal No. 8 of 2008 to the court under Section 34<\/p>\n
(2b)(i) of Arbitration and Conciliation Act 1996 (OP. (Arb.)<\/p>\n
No. 160 of 2004) was dismissed and Arb. Appeal No. 35 of<\/p>\n
2005 preferred against the same to this Court was disposed<\/p>\n
of without interfering with the finding that the FL-3 Licence<\/p>\n
is an asset of the partnership firm. The Supreme Court also<\/p>\n
dismissed the special leave petition preferred against the<\/p>\n
 Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                              – 19 –\n<\/p>\n
\njudgment of this Court in Arb. Appeal No. 35 of 2005. It is<\/p>\n
therefore idle for the appellants in Arb. Appeal No. 8 of 2008<\/p>\n
to contend that the FL-3 Licence is a        private property<\/p>\n
belonging to the first appellant therein and the appellants in<\/p>\n
Arb. Appeal No. 33 of 2007 are not entitled to raise any<\/p>\n
claim over the profits arising from the business carried on<\/p>\n
the strength of the licence. The appointment of the first<\/p>\n
appellant in Arb. Appeal No. 8 of 2008 as party receiver was<\/p>\n
made by this Court by its judgment in Arb. Appeal Nos. 34<\/p>\n
of 2005 and 35 of 2005. It was this court which directed him<\/p>\n
to submit periodical reports before the District Court as is<\/p>\n
expected to be done by any court receiver.        As already<\/p>\n
indicated, the common judgment of this Court in Arb.<\/p>\n
Appeal Nos. 34 and 35 of 2005 has become final since the<\/p>\n
special leave petitions filed against them before the<\/p>\n
Supreme Court was dismissed by the Supreme Court.<\/p>\n
Under the above facts situation it is not at all open to the<\/p>\n
appellants in Arb. Appeal No. 8 of 2008 to dispute the<\/p>\n
  Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                               – 20 –\n<\/p>\n
\nliability of the first appellant therein to pay 50% of the<\/p>\n
profits from the business to the appellants in Arb. Appeal<\/p>\n
No. 33 of 2007. The argument of Mr.C.C.Thomas, learned<\/p>\n
senior counsel for the appellant in Arb. Appeal No. 8 of 2008<\/p>\n
on the basis of the Abkakri Law cannot be accepted in the<\/p>\n
factual backdrop of the present appeals. The appellant in<\/p>\n
Arb. Appeal No. 8 of 2008 need not have any apprehension<\/p>\n
of being pulled up by any statutory authority for conducting<\/p>\n
the bar in alleged violation of the conditions of licence since<\/p>\n
his conduct of licence is not in his individual capacity but in<\/p>\n
his capacity as receiver appointed by the court. In fact,<\/p>\n
similar contentions appear to have been raised by the<\/p>\n
appellant in CMA. No. 110 of 1999, a case decided by a<\/p>\n
Division Bench of this Court on 10-4-2001. That was also a<\/p>\n
case where a court receiver was appointed for the running<\/p>\n
of business on the strength of a bar licence which stood in<\/p>\n
the name of one of the parties to the case, a partnership<\/p>\n
firm. It was argued on behalf of the appellants in that case<\/p>\n
 Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                                 – 21 –\n<\/p>\n
\nthat a liquor licence cannot be transferred without the prior<\/p>\n
permission of the Excise Commissioner in terms of Rule 19<\/p>\n
of Foreign Liquor Rules and in such a situation, the court<\/p>\n
cannot appoint a receiver to exploit the liquor licence or to<\/p>\n
run a bar sanctioned. This is what the Division Bench says<\/p>\n
with reference to that argument.\n<\/p>\n
       ” We are not, prima facie, in a position to accept such
\n      an argument. After all, if it comes to that, the Court
\n      can always call for the necessary permission by the
\n      Excise Commissioner for the running of the business by
\n      the receiver.       Moreover, when the Court appoints a
\n      Receiver, the court is only taking the business of the
\n      firm into custodia legis and the Court is not even
\n      “otherwise dealing with” the licence. It is only securing
\n      the running of the business by the licensee, the firm,
\n      to the best interest of the partners of the firm.
\n      Therefore, we find no merit in the argument raised on
\n      behalf of the appellants”.\n<\/p><\/blockquote>\n
      11. Now the question is whether the appellant in Arb.\n<\/p><\/blockquote>\n
Appeal No. 33 of 2007 is entitled to ask for a change in the<\/p>\n
conditions for appointment of receiver and the further<\/p>\n
question is whether there is justification for making any<\/p>\n
change in such conditions.         The sum of Rs.50,000\/- per<\/p>\n
 Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                              – 22 –\n<\/p>\n
\nmensem was directed to be paid to the appellants in Arb.<\/p>\n
Appeal No. 33 of 2007 by this Court first through an interim<\/p>\n
order passed in Arb. Appeal No. 34 of 2005. In the final<\/p>\n
judgment in that appeal also the same amount is retained<\/p>\n
by this Court. At the same time, it is clear that this court<\/p>\n
left the issue to be decided by the District Court if any of the<\/p>\n
parties approached that court for further directions.    In the<\/p>\n
interim order obviously this court became persuaded to fix<\/p>\n
the sum of Rs.50,000\/- in view of the award passed by the<\/p>\n
Arbitrator, where the Arbitrator had fixed the above sum as<\/p>\n
share of profits on the basis of the agreement between the<\/p>\n
parties entered into way back in 1999.        It cannot be in<\/p>\n
dispute that during the 10 years thereafter there was<\/p>\n
substantial increase in the volume of business and the<\/p>\n
profits derived from the business also increased.           The<\/p>\n
appellants in Arb. Appeal No. 33 of 2007 have been<\/p>\n
maintaining before the court below consistently that the<\/p>\n
respondents in that appeal are earning profit ofRs.12,000\/-<\/p>\n
 Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                                 – 23 –\n<\/p>\n
\nper day which comes to Rs.3.6 lakhs per mensem. In fact,<\/p>\n
there was an offer by the appellants that they will pay<\/p>\n
Rs.1.75 lakhs to the respondents provided the management<\/p>\n
of the business is given to them. We are of the view that<\/p>\n
the court below was not justified in refusing to change the<\/p>\n
amount payable monthly by the receiver on the technical<\/p>\n
reason that no cogent evidence is available to determine as<\/p>\n
to what is the correct monthly income. It should have been<\/p>\n
noticed by the court below that documents reflecting the<\/p>\n
correct monthly income from the business carried on by the<\/p>\n
receiver can only be with the receiver and the receiver was<\/p>\n
not enthusiastic in submitting even the regular reports<\/p>\n
before the court much less produce documents pertaining to<\/p>\n
the income derived.         The offer of the appellants in Arb.<\/p>\n
Appeal No. 33 of 2007 should have been taken seriously by<\/p>\n
the court below.          We are of the view that the receiver<\/p>\n
should be directed to pay to the appellants in Arb. Appeal<\/p>\n
No. 33 of 2007 at the rate of Rs.1,50,000\/- for each month<\/p>\n
 Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                                – 24 –\n<\/p>\n
\nof business subject to the condition that on failure to make<\/p>\n
such payment, the receivership given to first respondent in<\/p>\n
the appeal will stand withdrawn and that the court below<\/p>\n
will appoint either second appellant in Arb. Appeal No. 33<\/p>\n
of2007 or a senior Advocate           of the court having some<\/p>\n
acquaintance with liquor business as new receiver.<\/p>\n
      12. The result of the above discussion is therefore as<\/p>\n
follows:\n<\/p>\n
        Arbitration Appeal No. 8 of 2008 is dismissed.<\/p>\n
Arbitration Appeal No. 33 of 2007 is allowed. The first<\/p>\n
respondent receiver is directed to pay the amount due to<\/p>\n
appellant in Arb. Appeal No. 33 of 2007 till 31-3-2010 at the<\/p>\n
rate of Rs.50,000\/- per mensem, less the amounts paid so<\/p>\n
far, within two months from today. The order impugned is<\/p>\n
modified.       It is directed that the first respondent court<\/p>\n
receiver shall pay at the rate of Rs.1,50,000\/- per mensem<\/p>\n
to the appellant in Arb. Appeal No. 33 of 2007 as their share<\/p>\n
from the profits of the business of Hotel Arathi and Savitha<\/p>\n
 Arb. Appeal. 33\/07 & 8\/08\n<\/p>\n
                                – 25 –\n<\/p>\n
\nBar conducted on the strength of FL-3 Licence for each<\/p>\n
month of business till such time as execution proceedings<\/p>\n
stated to have initiated come to a final close. It is ordered<\/p>\n
that in case the court receiver defaults payments as ordered<\/p>\n
above, he will stand discharged as receiver and in such a<\/p>\n
contingency the District Court will appoint a fresh receiver<\/p>\n
on proper terms to be fixed by the court giving option to the<\/p>\n
District Court to appoint second appellant in Arb. Appeal No.<\/p>\n
33 of 2007 or any senior Advocate of the Court having<\/p>\n
acquaintance with liquor business. Parties are directed to<\/p>\n
suffer their respective costs.\n<\/p>\n<\/p>\n
                           PIUS C.KURIAKOSE, JUDGE<\/p>\n
                            C.K. ABDUL REHIM, JUDGE
\nksv\/-<\/p>\n","protected":false},"excerpt":{"rendered":"
Kerala High Court C.M.Narayanan vs C.G.Babu on 4 May, 2010 IN THE HIGH COURT OF KERALA AT ERNAKULAM Arb.A.No. 33 of 2007() 1. C.M.NARAYANAN, S\/O C.V.MUTHUVELAN, … Petitioner 2. C.N.MUTHUKRISHNAN, S\/O C.M.NARAYANAN, 3. T.R.RAJANI, W\/O C.M.NARAYANAN, Vs 1. C.G.BABU, S\/O LATE C.M.GANGADHARAN, … Respondent 2. C.G.PRIVI, S\/O LATE C.M.GANGADHARAN, 3. C.G.RAJEEV, S\/O LATE C.M.GANGADHARAN, 4. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,21],"tags":[],"class_list":["post-36632","post","type-post","status-publish","format-standard","hentry","category-high-court","category-kerala-high-court"],"yoast_head":"\nC.M.Narayanan vs C.G.Babu on 4 May, 2010 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/c-m-narayanan-vs-c-g-babu-on-4-may-2010\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"C.M.Narayanan vs C.G.Babu on 4 May, 2010 - Free Judgements of Supreme Court & High Court | Legal India\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.legalindia.com\/judgments\/c-m-narayanan-vs-c-g-babu-on-4-may-2010\" \/>\n<meta property=\"og:site_name\" content=\"Free Judgements of Supreme Court & High Court | Legal India\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/LegalindiaCom\/\" \/>\n<meta property=\"article:published_time\" content=\"2010-05-03T18:30:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2017-09-22T02:47:21+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/i0.wp.com\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg?fit=512%2C512&ssl=1\" \/>\n\t<meta property=\"og:image:width\" content=\"512\" \/>\n\t<meta property=\"og:image:height\" content=\"512\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Legal India Admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@legaliadmin\" \/>\n<meta name=\"twitter:site\" content=\"@Legal_india\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Legal India Admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"23 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/c-m-narayanan-vs-c-g-babu-on-4-may-2010#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/c-m-narayanan-vs-c-g-babu-on-4-may-2010\"},\"author\":{\"name\":\"Legal India Admin\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#\\\/schema\\\/person\\\/0bfdffe9059fb8bb24a86d094609c5ea\"},\"headline\":\"C.M.Narayanan vs C.G.Babu on 4 May, 2010\",\"datePublished\":\"2010-05-03T18:30:00+00:00\",\"dateModified\":\"2017-09-22T02:47:21+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/c-m-narayanan-vs-c-g-babu-on-4-may-2010\"},\"wordCount\":4467,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#organization\"},\"articleSection\":[\"High Court\",\"Kerala High Court\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/c-m-narayanan-vs-c-g-babu-on-4-may-2010#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/c-m-narayanan-vs-c-g-babu-on-4-may-2010\",\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/c-m-narayanan-vs-c-g-babu-on-4-may-2010\",\"name\":\"C.M.Narayanan vs C.G.Babu on 4 May, 2010 - 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