{"id":88749,"date":"2004-01-09T00:00:00","date_gmt":"2004-01-08T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/firm-ashok-traders-and-anr-etc-vs-gurumukh-das-saluja-and-ors-etc-on-9-january-2004"},"modified":"2018-01-29T22:21:41","modified_gmt":"2018-01-29T16:51:41","slug":"firm-ashok-traders-and-anr-etc-vs-gurumukh-das-saluja-and-ors-etc-on-9-january-2004","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/firm-ashok-traders-and-anr-etc-vs-gurumukh-das-saluja-and-ors-etc-on-9-january-2004","title":{"rendered":"Firm Ashok Traders And Anr. Etc vs Gurumukh Das Saluja And Ors. Etc on 9 January, 2004"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Firm Ashok Traders And Anr. Etc vs Gurumukh Das Saluja And Ors. Etc on 9 January, 2004<\/div>\n
Bench: R.C. Lahoti, Ashok Bhan<\/div>\n
           CASE NO.:\nAppeal (civil)  131-132 of 2004\n\nPETITIONER:\nFIRM ASHOK TRADERS AND ANR. ETC.\n\nRESPONDENT:\nGURUMUKH DAS SALUJA AND ORS. ETC.\n\nDATE OF JUDGMENT: 09\/01\/2004\n\nBENCH:\nR.C. LAHOTI & ASHOK BHAN\n\nJUDGMENT:\n<\/pre>\n
JUDGMENT<\/p>\n
2004(1)SCR 404<\/p>\n
The following Order of the Court was delivered : Leave granted in both the
\nSLPs.\n<\/p>\n
The dispute is among 12 persons who are, or are alleged to be, or claim to
\nbe partners in the firm M\/s Ashok Traders, the respondent no.l. These 12
\nprivate parties to the litigation can be grouped into three, for the sake
\nof convenience. Gurumukhk Das Saluja, Sanjay Chawla and Ajay Arora shall be
\ncollectively referred to as Group “A”. Bhagwati Prasad Kulharai, Badri
\nPrasad Jaiswal and Harprasad Jaiswal shall be referred to as Group “B”.
\nRajesh Jaiswal Ram Sewak Sharma, Baljeet Singh Bhatia, Rajendra Prasad
\nJaiswal, Anil Kumar Shrivastava and Sushil Kumar Shrivastava shall be
\nreferred to as Group “C”.\n<\/p>\n
M\/s. Ashok Traders are in liquor trade. In the Dead of Partnership entered
\ninto on 27.2.2002 there were 7 partners including Bhagwati Prasad Kulhara
\nand 6 others. The partnership firm was registered with Registrar of Firms.
\nSix partners (i.e. other than Bhagwati Prasad Kulkhara) retired from the
\npartnership and a new partnership came to be constituted on 5.3.2002
\nevidenced by a Deed of the even date wherein all the persons belonging to
\nGroups A, B and C are partners. However, the names of the new partners were
\nnot communicated to the Registrar of Firms. The firm was awarded a liquor
\ncontract licence for Bhopal for the year 2002-03 at a licence fee of Rs.
\n66.51 crores. The existence of these two Deeds of Partnership and the
\nfactum of the first one being registered and the second one being not
\nregistered with the Registrar of Firms are admitted facts. For convenience
\nsake, we would refer to the partnership dated 27.2.2002 as Partnership-I,
\nthe Partnership dated 5.3.2002 are Partnership-II and the alleged
\npartnership dated 6.3.2003 as Partnership-Ill.\n<\/p>\n
The business ran smoothly upto February 2003 and then differences and
\ndisputes are alleged to have arisen amongst the partners. Clause 20 of the
\nPartnership Deed-II incorporates an Arbitration Clause. Group “B” alleges
\nthe existence of yet another Deed of Partnership which is dated 6.3.2003
\nwherein the names of the members of Group “A” are not to be found mentioned
\nas partners. The partnership-IIl is also not registered.\n<\/p>\n
On 6.3.2003 auction for IMFL and country-liqour shops (60 in number) for
\nthe year 2003-04 was held at Bhopal. M\/s Ashok Traders was declared to be
\nsuccessful bidder for a licence fee of Rs. 73.25 crores. The shops are
\nrunning and have always remained operational even during the present
\nlitigation.\n<\/p>\n
Disputes arose giving rise to complaints by the members of Group “A”
\ncomplaining of the violation of their rights as partners at the hands of
\nGroup “B”, Group “A” complained of their being denied access to accounts,
\nof Group “B” indulging into mismanagement of affairs and siphoning off of
\nthe funds and so on. Ajay Arora (of Group “A”) filed a civil suit which was
\nheld to be not-maintainable in view of Section 69 (3) of the Indian
\nPartnership Act, 1932; the name of Ajay Arora having not been shown in the
\nRegister of Firms as a partner of the firm. According to Group “A”, a
\nnotice was issued on 2.6.2003 to the other partners invoking the
\narbitration clause and calling upon them to join in the appointment of
\narbitrator\/s consistently with the arbitration clause so as to adjudicate
\nupon the disputes between the partners. The contesting respondents do not
\nadmit the receipt of the notice. On 22.7.2003, Gurumukh Das Saluja of Group
\n“A” filed an application under Section 9 of the Arbitration and
\nConciliation Act, 1996 wherein the principal relief sought for is the
\nappointment of a receiver under Section 9(ii)(d) of the Act to take charge
\nof the entire business of the firm. Other incidental injunctions are also
\nsought for. Group “B” contested the application on very many grounds and
\nmainly by submitting that the application was not maintainable in view of
\nthe bar enacted by Section 69(3) of the Partnership Act as the name of the
\napplicant does not figure in the Register of Firms as partner of the firm.
\nThe plea has prevailed with the learned Additional District Judge resulting
\nin dismissal of the application. Gurumukh Das Saluja preferred an appeal
\nbefore the High Court under Section 37(1)(a) of the A & C Act. During the
\npendency of the appeal an application under Section 9 pleading similar
\nfacts and seeking similar reliefs, as was done before the Trial Court, was
\nfiled. Group “B” contested the application on all possible grounds. The
\nfactum of Group “A” being partners of the firm so far as the contract for
\nthe year 2003-04 is concerned was vehemently denied. It was reiterated that
\nthe application was hit by Section 69(3) of the Partnership Act and hence
\nwas liable to be dismissed. The High Court has allowed the appeal. It has
\nheld that the applicability of Section 69(3) is not attracted to an
\napplication under Section 9 of A & C Act. But on merits the High Court has
\nfound substance in the grievance raised by Group “A”. The High Court has
\nalso held that the business in the year 2003-04 was continuing under the
\nPartnership Deed dated 5.3.2002, i.e., Partnership-II; and that prima facie
\nthe existence of the Partnership Deed dated 6.3.2003 (Partnership-Ill) was
\ndoubtful and accompanied by suspicious circumstants raising doubts about
\nthe genuineness of any new partnership having come into existence on
\n6.3.2003 superseding the Partnership-II. The High Court seems to have made
\nefforts at resolving the controversy and finding out at least some such
\nsolution as would take care of the disputes for the moment and protect the
\ninterests of all the parties and then concluded as under-\n<\/p>\n
“Various options were explored at the time of hearing of the appeal. It was
\nsuggested that the Excise Commissioner may be appointed as a receiver. But
\nthat does not appear to be feasible. Further, the running of liquor
\nbusiness requires an expertise of its own and as such it would not be
\nproper to entrust the management of the business to third person who might
\nnot be aware of its intricacies. Therefore, it would be proper that the
\npartners themselves should manage the business as receivers. It is found
\nthat the contesting respondents No.2, 6 and 7 have run this business in
\nMarch, 2003 and also from 1.4.2003 and they are still doing so. The present
\nliquor contract is upto 31.3.2004. It would be proper to appoint the
\nrespondents No.2, 6 and 7 to continue to run this business as receivers
\nsubject to their complying with the provisions given in Order 40 rules 1 to
\n4 CPC. They shall submit their accounts the court in which the application
\nunder section 9 of the Act was considered i.e. Court of Vth Additional
\nDistrict Judge, Bhopal. Further, from 1.1.2004 it would be just and
\nequitable to entrust the management and running of the business by the
\nappellant* and the respondents No,8 and 9* who together have 20% share in
\nthe firm. Therefore, they are appointed as receivers from 1.1.2004 to
\n31.3.2004 and they will take over the management of the business of this
\nfirm as receivers from that date. The other respondents will hand over the
\nmanagement of the business of this firm to them from 1.1.2004. The
\nappellant and respondents No.8 and 9 will submit full accounts to the court
\nof Vth Additional District, Judge Bhopal every month and will abide by the
\nOrder 40 Rules 1 to 4 CPC. In case of any difficulty the parties will be
\nfree to approach the court of Vth Additional District Judge, Bhopal for
\nnecessary orders. The Court of Vth Additional District Judge, Bhopal will
\nmonitor the functioning of the receivers and issue necessary directions
\nfrom time to time. This direction is as per decision of the Supreme Court
\nin V. T. Slpahimalani v. Kanta, AIR (2000) SC 1848. The Applicant will take
\nsteps for the appointment of arbitrator as early as possible. This
\ndirections is being given as per decision of Supreme court in M\/s Sundaram
\nFinance Ltd. v. M\/s NEPC India Ltd., AIR<\/a> (1999) SC 565.\n<\/p>\n
*(N.B.-‘Appellant’ in High Court was Gurumukh Das Saluja and respondent
\nnos. 8 and 9 were Sanjay Chawla and Ajay Arora; Hence Group “A”)<\/p>\n
We have heard all the learned counsel appearing for Groups “A”, “B” and
\n“C”. The submissions made by the learned counsel for the parties have
\ncentered around two questions: one, effect of the bar created by Section
\n69(3) of the Partnership Act on maintainability of an application under
\nSection 9 of the A & C Act, 1996; and two, in the event of the question of
\nmaintainability being decided for Group “A”, what interim arrangement,
\nwhether by way of appointment of receiver or otherwise, would meet the ends
\nof justice?\n<\/p>\n
On the question of maintainability of application under Section 9 of A &C
\nAct ever by a partner of an unregistered firm or by a person not shown as a
\npartner in the Register of Firms, the High Court has, for upholding the
\nmaintainability, relied on the decision of this Court in Kamal Pushpa
\nEnterprises v. Dr. Construction Company, AIR<\/a> (2000) SC 2676. The learned
\ncounsel for Group “B” have placed forceful reliance on Jagdish Chandra v.
\nKajaria Traders (Ind.) Ltd., AIR<\/a> (1964) SC 1882. The decision of this Court
\nin M\/s. Shreeram Finance Corporation Ltd. v. Vasin Khan and Ors.,<\/a> [1989] 3
\nSCC and Delhi Development Authority v. Kochhar Construction Work and Anr.,<\/a>
\n[1998] 8 SCC 559 were also referred to.\n<\/p>\n
Section 9 of A & C Act, 1966 and Section 69 of Partnership Act, 1932
\n(relevant part thereof) provide as under:\n<\/p>\n
Arbitration and Conciliation Act, 1996<\/p>\n
9. Interim measures by Court etc.-A party may, before or during arbitral
\nproceedings or at any time after the making of the arbitral award but
\nbefore it is enforced in accordance with section 36, apply to a court-\n<\/p>\n
(I)     for the appointment of a guardian for a minor or a person of
\nunsound mind for the purposes of arbitral proceedings; or<\/p>\n
(II)   for an interim measure of protection in respect of any of the
\nfollowing matters, namely:-\n<\/p>\n
(a)    the preservation interim custody or sale of any goods which are the
\nsubject-matter of the arbitration agreement;\n<\/p>\n
(b)    securing the amount in dispute in the arbitration;\n<\/p>\n
(c)    the detention, preservation or inspection of any property or thing
\nwhich is the subject-matter of the dispute in arbitration, or as to which
\nany question may arise therein and authorizing for any of the aforesaid
\npurposes any person to enter upon any land or building in the possession of
\nany party, or authorizing any samples to be taken or any observation to be
\nmade, or experiment to be tried, which may be necessary or expedient for
\nthe purpose of obtaining full information or evidence;\n<\/p>\n
(d)    interim injunction or the appointment of a receiver;\n<\/p>\n
(e)    such other interim measure of protection as may appear to the court
\nto be just and convenient, and the Court shall have the same power for
\nmaking orders as it has for the purpose of and in relation to, any
\nproceedings before it.\n<\/p>\n
Indian Partnership Act, 1932<\/p>\n
69. Effect of non-registration.-(1) No suit to enforce a right arising from
\na contract or conferred by this Act shall be instituted in any Court by or
\non behalf of any person suing as a partner in a firm against the firm or
\nany person alleged to be or to have been a partner in the firm unless the
\nfirm is registered and the person suing is or has been shown in the
\nRegister of Firms as a partner in the firm.\n<\/p>\n
(2)  No suit to enforce a right arising from a contract shall be instituted
\nin any Court by or on behalf of a firm against any third party unless the
\nfirm is registered and the persons suing are or have been shown in the
\nRegister of Firms as partners in the firm.\n<\/p>\n
(3) The provisions of sub-sections (1) and (2) shall apply also to claim of
\nset-off or other proceeding to enforce a right arising from a contract, but
\nshall not affect-\n<\/p>\n
(a) xxx       xxx         xxx\n\n(b) xxx      xxx         xxx (4) xxx      xxx         xxx\n\n<\/pre>\n
To begin with, for the controversy centering around the abovesaid two
\nprovisions we told the learned counsel for the parties that we are not
\ninclined to go in-depth in the issue inasmuch as a prolonged hearing on the
\nissue and decision thereon may take time and that would have devastating
\neffect on the rights of the parties. The learned counsel for the parties
\nagreed that de hors the issue, the Court may proceed to determine the
\nappeal on merits. Yet, we feel duty-bound to record at least our prima
\nfacie opinion on the issue, lest we should be misunderstood as having side-
\ntracked the same.\n<\/p>\n
Sub-Sections (1) and (2) of Section 69 of Partnership Act strike at the
\nvery root of the jurisdiction of the Court to entertain a suit to enforce a
\nright arising from a contract, if the applicability of Section 69 is
\nattracted. By virtue of sub-Section (3), the bar enacted by sub-Sections
\n(1) and (2) applies also to a claim of set-off or ‘other proceedings to
\nenforce a right arising from a contract’ which, in the submission made by
\nthe learned counsel for Groups “B” and “C”, includes a proceeding
\ncommencing on an application under Section 9 of the A & C Act.\n<\/p>\n
In our opinion, which we would term as prima facie, the bar enacted by
\nSection 69 of the Partnership Act does not affect the maintainability of an
\napplication under Section 9 of A & C Act.\n<\/p>\n
A & C Act, 1996 is a long leap in the direction of alternate dispute
\nresolution systems. It is based on UNCITRAL Model. The decided cases under
\nthe preceding Act of 1940 have to be applied with caution for determining
\nthe issues arising for decision under the new Act. An application under
\nSection 9 under the scheme of A & C Act is to a suit. Undoubtedly, such
\napplication results in initiation of civil proceedings but can it be said
\nthat a party filling an application under Section 9 of the Act is enforcing
\na right arising from a contract? “Party” is defined in Clause (h) of sub-
\nSection (1) of Section 2 of A & C Act to mean ‘a party to an arbitration
\nagreement’. So, the right conferred by Section 9 is on’ a party to an
\narbitration agreement. The time or the stage for invoking the jurisdiction
\nof Court under Section 9 can be (i) before, or (ii) during arbitral
\nproceeding, or (iii) at any time after the making of the arbitral award but
\nbefore it is enforced in accordance with Section 36. With the pronouncement
\nof this Court in M\/s Sundarum Finance Ltd. v. M\/s NEPC India Ltd., AIR<\/a>
\n(1999) SC 565 the doubts stand cleared and set at rest and it is not
\nnecessary that arbitral proceeding must be pending or at least a notice
\ninvoking arbitration clause must have been issued before an application
\nunder Section 9 is filed. A little later we will revert again to this
\ntopic. For the moment suffice it to say that the right conferred by Section
\n9 cannot be said to be one arising out of a contract. The qualification
\nwhich the person invoking jurisdiction of the Court under Section 9 must
\npossess is of being a party to an arbitration agreement A person not party
\nto an arbitration agreement cannot enter the Court for protection under
\nSection 9. This has relevance only to his locus standi as an applicant.
\nThis has nothing to do with the relief which is sought for from the Court
\nor the right which is sought to be canvassed in support of the relief. The
\nreliefs which the Court may allow to a party under clauses (i) and (ii) of
\nSection 9 flow from the power vesting in the Court exercisable by reference
\nto ‘contemplated’, ‘pending’ or ‘completed’ arbitral proceedings. The Court
\nis conferred with the same power for making the specified orders as it has
\nfor the purpose of and in relation to any proceedings before it though the
\nvenue of the proceedings in relation to which the power under Section 9 is
\nsought to be exercised is the arbitral tribunal. Under the scheme of A & C
\nAct, the arbitration clause is separable from other clauses of the
\nPartnership Deed. The arbitration clause constitutes an agreement by
\nitself. In short, filing of an application by a party by virtue of its
\nbeing a party to an arbitration agreement is for securing a relief which
\nthe Court has power to grant before, during or after arbitral proceedings
\nby virtue of Section 9 of the A & C Act. The relief sought for in an
\napplication under Section 9 of A & C Act is neither in a suit nor a right
\narising from a contract. The right arising from the partnership deed or
\nconferred by the Partnership Act is being enforced in the arbitral
\ntribunal; the Court under Section 9 is only formulating interim measures so
\nas to protect the right under adjudication before the arbitral tribunal
\nfrom being frustrated. Section 69 of the Partnership Act has no bearing on
\nthe right of a party to an arbitration clause to file an application under
\nSection 9 of A & C Act.\n<\/p>\n
In Jagdish Chandra Gupta’s case (supra) Constitution Bench approved of a
\nliberal and full meaning being assigned to the phrase ‘other proceedings’
\nin sub-Section (3) of Section 69 of the Partnership Act untramelled by the
\npreceding words ‘a claim of set-off. The Court refused to countenance the
\nplea for interpreting the words ‘other proceedings’ ejusdem generis with
\nthe preceding words ‘a claim of set-off. M\/s. Shreeram Finance Corporation.
\n(supra) calls for the effect of bar created by Section 69 being determined
\nby reference to the date of institution of the suit and not by reference to
\nany subsequent event. In Delhi Development Authority’s case, this Court
\nheld Section 69 of Partnership Act applicable to an application under
\nSection 20 of the Arbitration Act, 1940 as such an application (under the
\nscheme of that Act) would be included within the meaning of ‘other
\nproceedings’ in Section 69(3) of Partnership Act. In Kamal Pushpa
\nEnterprises, this Court held that the bar under Section 69 of Partnership
\nAct is not applicable at the stage of enforcement of the award by passing a
\ndecree in terms thereof because the award crystallises the rights of the
\nparties and what is being enforced at that stage is not any right arising
\nfrom the objectionable contract. None of the cases throws any direct light
\non the issue at hand. Rather, the undercurrent of dictum in Kamal Pushpa
\nEnterprises lends support to the view we are tentatively taking herein. We
\nleave the matter at that and proceed to examine the merits of the appeal as
\nagreed to by all the learned counsel appearing.\n<\/p>\n
The most basic principle governing the discretion of the Court in
\nappointing a receiver is whether it is ‘just and convenient’ to do so. A
\nfew factors are of relevance which we proceed to record dispensing with the
\nneed of delving into any detailed discussion. On the own showing of Group
\n“A”, they have 20% share in the partnership business and Group “B” has 18%
\nshare. The stand taken by Group ‘C’, which according to Group “A” holds 62%
\nshare, was not known before the High Court, and therefore, so far as the
\nHigh Court is concerned the tussle was between the holders of 20% interest
\n(Group “A”) and holders of 18% interest (Group “B”). In this appeal, Group
\n‘C’ is represented and has vocally supported Group “B” standing by its
\nside. Before us it is a case of holders of 20% interest claiming against
\nthe holders of 80% interest.\n<\/p>\n
The finding recorded by the High Court is that it was Group “B” which was
\nrunning business upto the date of passing of the order by it and was found
\nentitled to continue the same upto 31.12.2003, meaning thereby, for nine
\nmonths out of the total twelve months’ period for which the business is to
\nrun, it is Group “B” which has been running the business. Excepting bald
\nand general allegations of mismanagement and siphoning off of the fund
\nnothing concrete has been alleged muchless demonstrated to give real colour
\nto the averments made. The High Court has thought it proper to appoint
\nGroup “A” as captain of the ship, which is the running business, to sail
\nfor the remaining period of three months. We fail to understand the logic
\nbehind such a change. It is a serious matter to appoint a receiver, on a
\nrunning business. The High Court in spite of having formed an opinion in
\nfavour of directing the appointment or receiver has rightly observed that
\nretail liquor trade is an intricate and tricky trade and hence cannot be
\nentrusted to a third party. If that be so, we fail to appreciate the
\njustification behind turning out the persons in actual management of
\nbusiness and passing on the reins in the hands of those who were not
\nholding the same for nine months out of the twelve. We do not say that such
\na course has any prohibition in law on being followed. But we do not think
\na case oppression of minority by majority- the sense in which their term is
\nunderstood in law-having been made out on the material available in the
\npresent case. A better course would have been to allow the conduct of the
\nbusiness continuing in the hands of persons who were doing so still now but
\nat the same time issuing such directions and\/or devising such arrangement
\nas would protect and take care of the interest of those who are not
\nactually running the business and that is what we propose to do.\n<\/p>\n
There are two other factors which are weighing heavily with us and which we
\nproceed to record. As per the law laid down by this Court in M\/ s. Sundaram
\nFinance Ltd an application under Section 9 seeking interim relief is
\nmaintainable even before commencement of arbitral proceedings. What does
\nthat mean? In M\/s. Sundaram Finance Ltd., itself the Court has said-“It is
\ntrue that when an application under Section 9 is filed before the
\ncommencement of the arbitral proceedings there has to be manifest intention
\non the part of the applicant to take recourse to the arbitral proceedings”.
\nSection 9 permits application being filed in the Court before the
\ncommencement of the arbitral proceedings but the provision does not give
\nany indication of how much before. The word ‘before’ means inter alia,
\n‘ahead of; in presence or sight of; under the consideration or cognizance
\nof. The two events sought to be interconnected by use of the term ‘before’
\nmust have proximity of relationship by reference to occurrence; the later
\nevent proximately following the preceding event as a foreseeable or ‘within
\nsight’ certainty. The party invoking Section 9 may not have actually
\ncommenced the arbitral proceedings but must be able to satisfy the Court
\nthat the arbitral proceedings are actually contemplated or manifestly
\nintended (as M\/s Sundaram Finance Ltd. puts it) and are positively going to
\ncommence within a reasonable time. What is a reasonable time will depend on
\nthe facts and circumstances of each case and the nature of interim relief
\nsought for would itself give an indication thereof. The distance of time
\nmust not be such as would destroy the proximity of relationship of the two
\nevents between which it exists and elapses. The purposes of enacting
\nSection 9, read in the light of the Model Law and UNCITRAL Rules is to
\nprovide ‘interim measures of protection’. The order passed by the Court
\nshould fall within the meaning of the expression ‘an interim measure of
\nprotection’ as distinguished from an all-time or permanent protection.\n<\/p>\n
Under the A & C Act 1996, unlike the predecessor Act of 1940, the arbitral
\ntribunal is empowered by Section 17 of the Act to make orders amounting to
\ninterim measures. The need for Section 9, in spite of Section 17 having
\nbeen enacted, is that Section 17 would operate only during the existence of
\nthe arbitral tribunal and its being functional. During that period, the
\npower conferred on the arbitral tribunal under Section 17 and the power
\nconferred by the Court under Section 9 may overlap to some extent but so
\nfar as the period pre and post the arbitral proceedings is concerned the
\nparty requiring an interim measure of protection shall have to approach
\nonly the Court. The party having succeeded in securing an interim measure
\nof protection before arbitral proceedings cannot afford to sit and sleep
\nover the relief, conveniently forgetting the ‘proximately contemplated’ or
\n‘manifesty intended’ arbitral proceedings itself. If arbitral proceedings
\nare not commenced within a reasonable time of an order under Section 9, the
\nrelationship between the order under Section 9 and the arbitral proceedings
\nwould stand snapped and the relief allowed to the party shall cease to be
\nan order made ‘before’ i.e. in contemplation of arbitral proceedings. The
\nCourt, approached by a party with an application under Section 9, is
\njustified in asking the party and being told how and when the party
\napproaching the Court proposes to commence the arbitral proceedings.
\nRather, the scheme in which Section 9 is placed obligates the Court to do
\nso. The Court may also while passing an order under Section 9 put the party
\non terms and may recall the order if the party commits breach of the terms.\n<\/p>\n
During the course of hearing, we asked the learned counsel for Group “A”
\nwhat steps have they taken for initiation of arbitral proceedings ever
\nsince 2.6.2003 the date on which they claim to have invoked arbitration
\nclause, or since 22.7.2003 the date on which the application under Section
\n9 was filed? We were told that Group “A” was awaiting for the orders of the
\nCourt under Section 9 of the Act. This is hardly an explanation.
\nCommencement of arbitral proceedings is not dependent on the interim relief
\nbeing allowed or denied. It was expected of Group “A” to have post-haste
\nsought for the appointment of arbitrator under Section 11 of the Act if the
\npartners noticed had failed to respond to the demand of Group “A” for
\narbitration. This, by itself, in our opinion would have been enough to deny
\nrelief to Group “A”. However, in the facts and circumstanes of the case, as
\nwe find the High court having felt convinced of the need for appointment of
\nreceiver and as we are inclined only to suitably modify the order, we do
\nnot deem it proper to dismiss the application under Section 9 in its
\nentirety and for this reason alone. We direct the applicant under Section
\n9, to take steps for appointment of arbitrator\/s, without any further loss
\nof time. The other factor centers around the very factum of existence of
\npartnership. The Deed dated 5.3.2002 relating to Partnership-II is a fixed
\nterm partnership agreed to stand terminate at the close of the year as on
\n31st March, 2003. The High Court has proceeded on the premises that in
\nspite of the term of the partnership coming to an end by expiry of the
\ncontracted term if the partners have continued the business beyond the
\nexpiry of the terms limited by the contract and without having expressly
\nentered into a partnership agreement afresh, the relationship shall
\ncontinue to exist and govern the parties so long as the business continues.
\nIt is not necessary for us, for the present, to pronounce upon the
\ncorrectness of the view so taken. Suffice it to observe that in the liquor
\ntrade involving heavy investments and heavy stakes it appears highly
\nimprobable that the people in trade would continue as partners without
\nentering into a fresh contract though fully aware of the expiry of the term
\nlimited by the previous contract, more so, when they are called upon to
\ndeal as a partnership firm with the State Government. No reason has been
\nassigned as to why a fresh Deed of Partnership was not entered into. If the
\nmembers of Group “A” have allowed the liquor business to proceed without
\nentering into a formal Deed of Partnership for the year 2003-04 and thereby
\nallowed the members of Groups “B” and “C” to bring into existence a Deed of
\nPartnership excluding the members of Group “A” and filing it on the record
\nof the State Government (or substituting the same, as Group “A” alleges)
\nthey have to thank themselves for the misadventure which they have indulged
\ninto. Their lack of alertness in vigilantly protecting their rights tells
\nadversely on the availability of strong prima facie case in their favour
\nwhich only can persuade the Court to direct appointment of receiver over
\nthe business and in particular entrust the actual conduct of business in
\ntheir hands, may be as receivers.\n<\/p>\n
During the course of hearing, we asked the learned counsel for the parties
\nof either of them could suggest a practically feasible mechanism which
\nwould work and also effectively protect the interest of the parties kept
\naway from the actual running of the business but no concrete suggestion
\ncame forward. On behalf of Group “A”, a suggestion was mooted that l\/5th of
\nthe shops may be allowed to be run by them and remaining 4\/5th may be
\nallowed to be run by Group “B” and identical precautionary or protective
\nmechanism may be introduced as cross-checks. But, what would be the
\nmechanism, none has been able to propound and project.\n<\/p>\n
As a result, the order under appeal is modified. Though the order of the
\nHigh Court appointing a receiver on the partnership business is maintained,
\nthe rest of the order is set aside and substituted by the following
\ndirections;-\n<\/p>\n
(1)    The business shall run as before under the actual management and
\ncontrol of Group “B” but as receivers.\n<\/p>\n
(2)    The Commissioner of Excise, Madhya Pradesh shall appoint an official
\nwho has been associated with the excise department of Madhya Pradesh,
\npreferably a retired person, who shall act as an observer. The observer
\nshall keep a watch on the business of M\/s. Ashok Traders generally and in
\nparticular to see:\n<\/p>\n
(i) that the business is run by receivers without any hindrance by any of
\nthe partners;\n<\/p>\n
(ii) that the accounts are properly, truly and correctly maintained, (iii)
\nthat the receipts and payments are properly vouched.\n<\/p>\n
(iv) that the sale proceeds are properly accounted for and no part of the
\nproceeds is siphoned off and\/or carried away unaccounted by anyone.\n<\/p>\n
(3)    All the sale proceeds shall be deposited day to day in a bank
\naccount to be opened in a nationalised bank in the name of the ‘Firms M\/s
\nAshok Traders (under orders of the Court)’. Any amounts to be withdrawn
\nshall be only under the joint signatures of at least one members of Group
\n“B” or “C” and the observer, for the purpose of making payments to the
\nState Government, and on account of rent\/licence fee of the shops, salary
\nof the staff, transport charges and other necessary expenses required for
\nrunning day to day business.\n<\/p>\n
(4)    Though the conduct of the business is being allowed to be continued
\nby Group “B” but that is in their capacity of receivers as appointed by the
\nCourt. They must truly and strictly perform their duties as receivers. Any
\ndeviation would be viewed seriously.\n<\/p>\n
(5)    The members of Group “A” and\/or their representative\/s, authorized
\nin writing, shall have a reasonable right to visit the shops during
\nbusiness hours and watch the activities going on but without interfering
\nwith the business activities run by the receivers.\n<\/p>\n
(6)    The observer shall be paid such monthly remuneration and reimbursed
\nsuch expenses, as may be considered reasonable and appointed by the
\nCommissioner of Excise subject to overall directions of the Trial Court.\n<\/p>\n
(7)  This arrangement shall continue till 31st March 2004 and also for such
\nfurther period as may be necessary for winding up of the business as per
\nterms of the license of the State Government (Excise Department).\n<\/p>\n
(8)  On finalization of the accounts duly audited by Chartered Accounts the
\nnet profit or loss, if any, shall be distributed in accordance with the
\naward given by the arbitrator or decision by any competent forum.\n<\/p>\n
(9)  The receivers and observers shall be under the control of the trial
\nCourt. In case of any difficulty in carrying out this order, the parties,
\nthe observer and the Excise Commissioner of Madhya Pradesh or any officer
\nsubordinate to him shall be at liberty to seek directions from the trial
\nCourt.\n<\/p>\n
Before parting we would like to clarify that whatever has been stated
\nhereinabove in this order is not in any manner intended to be a reflection,
\nmuch less a finding, on the merits of the case of either party which shall
\nbe available to be determined on evidence and material brought on record in
\nany duly constituted legal proceedings, whether before the arbitral
\ntribunal or before the Court or any other forum. All that has been said
\nhereinabove is by way of prima facie observations confined to the disposal
\nof the present appeals.\n<\/p>\n
The appeals stand disposed of. No order as to the costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Firm Ashok Traders And Anr. Etc vs Gurumukh Das Saluja And Ors. Etc on 9 January, 2004 Bench: R.C. Lahoti, Ashok Bhan CASE NO.: Appeal (civil) 131-132 of 2004 PETITIONER: FIRM ASHOK TRADERS AND ANR. ETC. RESPONDENT: GURUMUKH DAS SALUJA AND ORS. ETC. DATE OF JUDGMENT: 09\/01\/2004 BENCH: R.C. LAHOTI & […]<\/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":[30],"tags":[],"class_list":["post-88749","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nFirm Ashok Traders And Anr. Etc vs Gurumukh Das Saluja And Ors. 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