B.K. Raghukumar and Others vs C. Goutam and Others

Aravind Kumar, J.—Heard Sri. Vishwanath Shendge, learned counsel appearing for petitioners and Sri. Gangadhar Ithal, learned counsel appearing for the respondents. Perused the records.

Petitioners are seeking for appointment of an arbitrator contending inter alia that petitioners and respondents had entered into a partnership agreement on 01.09.1987 whereunder, it was agreed upon between the parties that in case of any dispute arising between partners same would be settled by arbitration of three persons. On account of demand having been made by petitioners at the first instance on 23.1.2012 which came to be refuted by respondents by reply dated 2.2.2012, as such a petition was filed in CMP 38/2013 which came to be rejected as premature with liberty to file fresh petition vide Order dated 16.1.2014 and as such after issuing notice on 18.1.2014, Annexure-B, calling upon respondents to concur with appointment of an arbitrator, as indicated on said notice respondents failed to concur with said demand made by petitioners and as such petitioners have been perforced to approach this court through this petition seeking for appointment of an arbitrator and as such they have sought for allowing the petition.

Per contra, respondents after service of notice have entered appearance, filed their statement of objections by way of counter and have contended that partnership deed dated 1.9.1987 is a dummy document, created a specific purpose and petitioners are guilty of suppression of facts viz., they have not in the present petition stated about earlier notice got issued by them which was duly replied to by respondents on 2.2.2012 and on the ground of suppression of true facts also, petition is liable to be dismissed.

Adverting to the averments made in the petition, respondents have contended that earlier there was a partnership deed in the year 1984 i.e., 1.10.1984 and said partnership came to be dissolved by dissolution deed dated 15.6.1985 and petitioners herein, as outgoing partners, had received consideration amount towards their share of the dissolved firm and as such business came to be continued by 1st respondent as its proprietor and petitioners also assured and promised respondent No. 1 that petitioners would extend all cooperation and help needed by respondents in any manner as required including matters pertaining to application made earlier to the KIADB for allotment of an industrial plot in favour of the firm. It is further contended that after such dissolution of firm on 15.6.1985 KIADB made allotment of a plot No. 29B in Peenya II Phase, Industrial Area, Bengaluru and thereafter 1st respondent got the same on payment of consideration amount to KIADB as proprietor of the firm, possession certificate was issued by the KIADB to 1st respondent. It is further contended that there was delay in executing the proposed project in allotted industrial plot due to financial constraints and hence, in the year 1987 in order to comply with certain conditions with regard to claiming exemption under Urban Land (Ceiling and Regulations) Act, 1976, KIADB insisted 1st respondent to get the said business firm changed to a partnership firm. In order to comply with the said direction the firm namely M/s. Maruthi Steel Industries was changed to partnership firm on 01.09.1987 and for that limited purpose only it came into existence and said partnership was never acted upon nor any amount came to be contributed by any other person towards said business firm except respondent No. 1. It is also contended that first respondent thereafter has entered into a separate partnership on 21.01.1994 by constituting a fresh partnership firm, in which firm none of the petitioners are parties and they have not contributed any amount towards capital and they have nothing to do with the said firm. It is contended that petitioners are fully aware of the said fact. It is contended by Mr. Gangadhar Aithal, learned counsel appearing for respondents that under Article 137 of the Limitation Act, a petition for appointment of an Arbitrator ought to have been filed within three years from the date of accrual of cause of action and in the instant case, petitioners have never approached for payment of any amount from the firm by virtue of alleged partition deed dated 01.09.1987 and at this stage, after a period of 27 years petitioners cannot be heard to contend that the lis is alive or cause of action still subsist for them to seek appointment of an arbitrator and that too by virtue of an non existent partnership deed dated 01.09.1987. Hence, he submits that there is no merit in the petition and prays for its dismissal.

Reiterating the contentions urged in the petition Sri. Vishwanath Shendge, learned counsel appearing for petitioners would submit that right to seek appointment of an arbitrator accrued only after denial by respondents to the demand made by petitioners namely, when respondents refused to render accounts of the firm and as such, petition in question has been filed within three years of such refusal. He would also contend that at the first instance CMP No. 38/13 filed by petitioners came to be rejected on 16.01.2014 with a liberty to file fresh petition and after due compliance of statutory prescription namely after issuing notice on 18.01.2014, present petition has been filed on 28.02.2014 which is well within time and hence, he contends that petition in question need not be dismissed on the ground of having been barred by limitation.

Learned counsel appearing for petitioners has relied upon the judgment of Hon''ble Apex Court in the case of Major (Retd.) Inder Singh Rekhi Vs. Delhi Development Authority, AIR 1988 SC 1007 : (1988) 2 ARBLR 270 : (1988) 2 JT 6 : (1988) 1 SCALE 612 : (1988) 2 SCC 338 : (1988) 3 SCR 351 : (1988) 1 UJ 692 . He has relied upon the judgment of Delhi High Court in the case of Sh. Rajesh Kumar Garg Vs. MCD and Another, (2008) 2 ARBLR 107 : (2008) 149 DLT 343 : (2008) 102 DRJ 137 in support of his submission.

Petitioners in the instant case have relied upon the partnership deed dated 01.09.1987 to contend that parties had entered into partnership deed and in respect of the said partnership deed dispute has arisen. Petitioners have also relied upon Clause 12 of the said agreement to contend that there is an arbitration clause namely, arbitration agreement entered into between the parties and on account of dispute having arisen between the parties under the said partnership deed, matter will have to be referred to arbitration by appointing an arbitrator. Clause 12 of the partnership deed reads as under:

"12. In case of any dispute among the partners, the same shall be settled by an arbitration of three persons."

Perusal of the petition averments would indicate that there is no mention of either the earlier partnership deed having been entered into between the partners on 01.10.1984, its dissolution thereto on 15.06.1985, receipt of money by the petitioners for the said dissolution on 15.06.1985. These aspects are also not disclosed in the present petition by the petitioners. On the other hand, it is the respondents who have appeared after service of notice and brought to the notice of the court through its counter statement about earlier partnership deed having been entered into between the parties and said partnership having come to an end. Though earlier partnership deed entered into between the parties may not be of much relevance, in the peculiar facts and circumstances of the present case, it would have a bearing for the reasons indicated herein below.

Petitioners are claiming to have been entered into partnership with respondents under a partnership deed dated 01.09.1987 which has not been denied by respondents in their objection statement and they have fairly admitted entering into with such agreement with petitioners and have in extenso stated in their objection statement, the circumstances under which said agreement or deed of partnership came into existence namely, on account of industrial plot having been allotted by the KIADB in favour of the firm and firm having been dissolved in the year 1985 itself, circumstances under which the plot allotted to the firm was likely to be lost having been narrated, they have contended that at the behest and at the instance of KIADB, the partnership firm M/s. Maruthi Steel Industries was again brought into existence by a partnership deed dated 01.09.1987 which document having been relied upon by petitioners to buttress their arguments for appointment of an arbitrator. It is true there is no limitation prescribed for seeking an appointment of an arbitrator under the Arbitration Act. It is also not in dispute that Section 43 of the Arbitration and Conciliation Act would indicate that Limitation Act, 1963, would be applicable insofar as the arbitrations as it applies to the proceedings in the court. Section 21 of the Act would indicate that unless it is otherwise agreed to between the parties, the arbitral proceedings in respect of a particular dispute would commence on the date on which a request is made for the dispute to be referred to arbitration is received by the respondents. In other words, when there is a demand or claim made and same is refused by the respondents.

The residuary article namely Article 137 of the Limitation Act would be applicable in respect of arbitration proceedings. As already noticed hereinabove, there is no provision under the Arbitration Act which lays down the time within which an application for appointment of arbitrator should be made. Application for arbitration can be made only when the dispute arises between parties to the agreement. Article 137 which is a residuary article will apply to a petition under Section 11 and hence the period will be three years from the time to apply accrues to a party and such time would run from the time when right to apply accrues. For this proposition the judgment of the Hon''ble Apex Court in the case of The Kerala State Electricity Board, Trivandrum Vs. T.P. Kunhaliumma, AIR 1977 SC 282 : (1976) 4 SCC 634 : (1977) 1 SCR 996 : (1977) 9 UJ 16 can be looked into. There cannot be any straight jacket formula to this preposition and as such, in the facts and circumstances of the case, such claim will have to be examined. Thus, as to whether in the facts and circumstances of the case the right to sue accrued and if so, when, will have to be examined.

Keeping these principles in mind when the case on hand is examined it would indicate that prior to filing of petition CMP No. 38/13 petitioners herein had got issued the notice on 23.01.2012 to the respondents indicating thereunder that parties had entered into a partnership firm agreeing to share profit and loss in the ratio of 30:20: 30:10:10. It has been specifically contended by the petitioners in the said notice that since inception the respondents were assuring the petitioners of maintaining accounts of the firm and when they enquired, first respondent had postponed the rendition of accounts on one pretext or the other. In the words of the petitioners, claim made in this regard in their legal notice dated 23.01.2012 reads as under:

"Our clients xxxx and when enquired the 1st of you, put forth the rendition of accounts on some pretext or the other and the 1st of you has for all purposes has failed to keep out client briefed and informed of about the affairs of the partnership firm and its account ever since."

Thus, it would emerge from the above plea put-forth by the petitioners that from the date of inception of the firm petitioners have been demanding respondents to render accounts of the firm. However, it is contended that on account of same not having been complied by respondents and said demand was being postponed by respondents according to petitioners, petitioners claim that ultimately they got issued a legal notice on 23.01.2014 calling upon the respondents to render accounts of the firm within the time stipulated therein and contend that on account of accounts having not been rendered by 1st respondent, they have a right to seek for appointment of arbitrator. However, it would not detain this court for long to arrive at a conclusion that petitioners in order to revive a dead cause of action has got issued legal notice in question i.e., dated 23.01.2014. Petitioners were undisputedly partners of the firm, at the first instance i.e., when they became partners of the firm along with same respondents on 01.10.1984 and continued with the said partnership firm for about few months namely till its dissolution dated 15.6.1985 and received consideration under the dissolution deed at the time of dissolution, namely they received a sum of Rs. 62,600/- and executed receipt for having received said amount. There is not even a whisper about this fact either in the legal notice dated 23.01.2012 or in the petition. They claim that pursuant to partnership deed dated 01.09.1987 they continued as partners of the firm. However, not an iota of material is placed to prima facie establish that petitioners have acted upon said partnership. No person of ordinary prudence would have slept over his right for 27 years without seeking for rendition of accounts. Hence, petitioners cannot be heard to contend that they were still claiming rendition of accounts pursuant to the partnership deed entered into with respondents on 01.09.1987 till they got issued the notice on 23.01.2012 i.e., for a period of 25 years. The right to sue having accrued, even according to petitioners from the date of inception of partnership firm petitioners have failed to raise their little finger or seek redressal of their grievance before an appropriate Forum for past 27 years, have now made a demand to revive the dead cause of action by relying upon the legal notice dated 23.01.2012 to contend that on demand being made by them under the said notice seeking rendition of accounts and same having been refused by the respondents by their reply dated 02.02.2012 it has given a cause of action for the petitioners to seek for appointment of an arbitrator requires to be considered with utmost circumspection. Firstly petitioners who were earlier partners of the partnership firm under the partnership deed dated 01.10.1984 had went out of the firm by entering into a dissolution deed dated 15.06.1985 and had also received the amounts by executing receipts on 15.06.1985. Hence, they cannot be heard to contend that on partnership firm coming into existence once again on 01.09.1987 they were repeatedly requesting respondents to render accounts from 1987 till date and only on refusal of their demand by respondents in the year 2012 a right to sue accrued to them. The claim having become time barred or not being enforceable has been sought to be resurrected by issuance of legal notice dated 23.01.2012. Hence, this court is of the considered view that cause of action for the petitioners having arisen way back in the year 1987 and they having not taken any steps as expected of ordinary prudent person and particularly they being partners cannot be heard to contend that their claim was still alive. In that view of the matter, I do not see any merit in the contentions raised by the petitioners. Hence I proceed to pass the following

ORDER

Petition is hereby dismissed. Costs made easy.