Chandra Shipping And Trading … vs Beerapalli Chenchu Subba Reddy … on 2 May, 2003 Equivalent citations: 2003 (4) ALD 572, 2004 55 SCL 501 AP

Bench: J Chelameswar, D Subrahmanyam
JUDGMENT Dubagunta Subrahmanyam, J.
1. All these three matters arise out of interim orders passed in O.S. No. 4 of 2003 on the file of IV Additional District & Sessions Judge, Kakinada. These three matters are being disposed of by a common order. The parties will be referred to in the course of this order as they are arrayed in the civil suit.
2. Necessary facts for the disposal of these three matters are as follows:
Plaintiffs land 2 and defendants 2 and 3 are partners of first defendant-partnership firm. There is a written partnership deed dated 1.4.1997. Clause 15 of the partnership deed provides that in the event of disputes, the matter shall be referred to a single Arbitrator whose decision shall be binding on all the parties. Clause 12 of the partnership deed stipulates that death, retirement or insolvency of any of the parties shall not dissolve the business of the firm and the remaining parties shall carry on the business. Clause 13 stipulates that retiring party shall give three months notice to the remaining parties. Plaintiffs decided to retire from the partnership firm and they intimated their intention to retire to the second defendant on 30.6.2002 and on 31.7.2002 first plaintiff demanded settlement of accounts and for payment of their respective capital, etc. On 31.8.2002 all the partners entered into a retirement agreement permitting the plaintiffs 1 and 2 to retire from the first defendant – partnership firm. For the disposal of these three matters, it is not necessary to consider under what circumstances the retiring agreement was entered into between the parties. The plaintiffs claimed that as per the retirement agreement, first plaintiff is to be paid a sum of Rs. 36,00,000-00 and second plaintiff is to be paid another sum of Rs. 29,50,000-00 by the firm, and other partners of the firm. The plaintiffs filed a suit to recover the above sums with interest at 18% per annum from 1.9.2002 to 24.1.2003. The value of the suit is Rs. 70,21,200-00.
3. The plaintiffs filed an interim application in I.A. No. 169 of 2003 under Order 39 Rule 7 and Order 26 Rules 11, 12 and Section 151 C.P.C., requesting the trial Court to appoint a commissioner for the purpose of detention, preservation and inspection of the properties of the first defendant – firm and seize them from the custody of defendants 1 to 5 and produce the same before the Court. On 24.1.2003 the trial Court passed an ex parte order appointing Sri P. Rajesh Babu, Advocate as Commissioner to inspect the premises of the first defendant firm and the properties and prepare an inventory of all relevant books and other material which are in the form of statements, vouchers, contracts, accounts and contained in the computer of the firm kept in the Accounts Section of the first defendant firm and seize them from the custody of defendants 1 to 5and prepare an inventory in the presence of the parties after giving notice to both parties. Questioning the said ex parte order dated 24.1.2003, defendants 1 and 2 filed the revision in C.R.P. No. 548 of 2003. It is stated across the Bar that the Commissioner took inventory of the various accounts and documents found at the premises of the first defendant – firm and returned all the original documents to the contesting defendants under proper acknowledgment.
4. The plaintiffs filed another interim application in LA. No. 172 of 2003 under Order 38 Rule 5 and Section 151 C.P.C. to direct the defendants 1 to 3 to deposit the suit amount into Court together with costs of the suit and if they failed to do so, to order attachment before judgment of the movable/immovable properties of the defendants 1 to 3 described in the petition schedule. On 24.1.2003 the trial Court passed an ex parte conditional order of attachment in the said petition. Aggrieved by that ex parte order of attachment, revision in CRP No. 412 of 2003 is filed.
5. The plaintiffs filed another interim application in I.A. No. 170 of 2003 under Order 39 Rule 1(b) and Section 151 C.P.C., requesting the Court to grant temporary injunction restraining defendants 2 and 3 in any manner alienating or transferring or trying to otherwise deal with the movable assets of the first defendant firm described in the petition schedule. In this petition also on 24.1.2003 the trial Court passed an ex parte order of injunction. Aggrieved by the said ex parte order of injunction, C.M.A. No. 449 of 2003 is filed.
6. The contesting defendants did not file any written statement in the suit in the trial Court. They did not also file any counter in any of the above three interim applications. They did not also file any petition to vacate or modify ex parte orders passed by the trial Court. It is pertinent to point out that defendants 1 to 3 and 5 filed an application in I.A. No. 185 of 2003 in the trial Court under Section 8(1) of Arbitration and Conciliation Act, 1996, requesting the trial Court to refer the matter to the Arbitrator to decide whether the plaintiffs are entitled to the amount or not as per the partnership deed dated 1.4.1997 as per Section 8(1) of Arbitration and Conciliation Act. It is not in dispute that the plaintiffs filed a counter in the said application opposing the request of the defendants 1 to 3 and 5. The said petition is still pending for consideration by the trial Court. The said petition in I.A. No. 185 of 2003 is not the subject-matter of any of the three matters pending before this Court.
7. The learned Counsel for the contesting defendants contended that as per Clause 15 of the partnership deed, the dispute between the parties is to be referred to an Arbitrator and therefore the suit is not maintainable. It is his contention that when there is an arbitration agreement, the Civil Court has no jurisdiction to entertain the suit and pass any interim orders. It is his contention that even though there is retirement agreement, still Clause 15 of the partnership deed binds the parties and therefore the dispute involved in the suit is liable to be referred to for arbitration. The learned Counsel for the plaintiffs contended that after retirement agreement was entered into between all the partners, the partnership deed including Clause 15 in the said deed ceased to operate and the contesting defendants cannot request the trial Court to refer the suit dispute for arbitration. At this juncture, it is pertinent to point out that the retirement agreement is not on record. It is in the custody of the contesting defendants. All its terms are not known to the Court at this stage.
8. The learned Counsel for the contesting defendants relied upon some decisions in support of his contentions. This Court in a decision reported in Gousia Javed v. Jagdish Pershad Associates, , whereunder an agreement various amounts were borrowed, they were not paid, there was an amicable settlement and the amount was settled, in discharge of the said amount, cheques were issued, the cheques were dishonoured and where a suit for recovery of the amount covered by the settlement was filed, held that the suit for recovery of the amount covered by the said settlement would be a suit based on original agreement which provided for an arbitration clause and was liable to be stayed under Section 34 of Arbitration Act, 1940, pending reference of the matter to the Arbitrator. The Apex Court in F.C.I. v.
Yadav Engineer & Contractor, AIR 1982 SC 1302, held that the conduct of the defendant contesting interlocutory orders or filing application for setting aside ex parte interim injunction does not disentitle him from claiming stay of the suit under Section 34 of Arbitration Act, 1940. The Apex Court in Damodar Valley Corporation v. K.K. Kar, , held that the question whether there had been a full and final settlement of a claim under the contract was itself a dispute arising upon or in relation to or in connection with the contract. It also held that a claim for damages was a dispute or difference which arose between the respondent and the appellant and was upon or in relation to or in connection with the contract, and the reference to the Arbitrator by the respondent was not barred. In Kalpana Kothari v. Sudha Yadav, , the Apex Court explained the scope and object of Section 8 of the New Act and Section 34 of the Old Act. In P. Anand Gajapathi Raju v. P.V.G. Raju, AIR 2000 SC 1886, the Apex Court held that a reference under Section 8 of New Act can be made even during the pendency of the appeal. The Apex Court in Vishnu Chandra v. Chandrika Prasad, , considered and decided the effect of retirement of a partner on the partnership agreement.
9. We are of the considered opinion that there is no need for this Court to refer to the principles of law as well as the facts in any of the above decisions for the disposal of these three matters pending before this Court. It is already noticed that a petition in LA. No. 185 of 2003 filed by the contesting defendants under Section 8 of the New Act is pending consideration before the trial Court. The trial Court has to consider in the said application whether Clause 15 of the partnership deed still survives and binds the parties even after the parties have entered into a fresh agreement, namely, retirement agreement permitting the plaintiffs to retire from the partnership firm by 1.9.2003.
10. The learned Counsel further contended that as the contesting defendants filed a petition under Section 8 of Arbitration and Conciliation Act, 1996, they cannot disclose their stand or defence in the suit. This contention also need not be decided by us for disposal of any of the matters pending before this Court.
11. As far as the two revision petitions are concerned, final orders are not yet passed by the trial Court. It is not shown that the impugned orders are passed by the trial Court exercising a jurisdiction not vested in it by law. The learned Counsel for the contesting defendants relied upon a decision of Apex Court reported in Padam Sen v. State of U.P., , wherein it was held that the Civil Court exercising its inherent powers under Section 151 CPC, cannot appoint a commissioner to seize account books in possession of the plaintiff on ground of defendant’s apprehension that they would be tampered with. As the interim applications are still pending before the trial Court, it is open for the contesting defendants relying upon this decision or any other provision or decision request the trial court to dismiss the application filed for appointment of the commissioner to take inventory of the accounts, etc.,
from the custody of the first defendant firm.
12. The learned Counsel for the contesting defendants relied upon a decision of Apex Court reported in Syed Dastagir v. T.R. Gopalakrishna Setty, , holding that to gather a true spirit behind a plea, the entire pleadings should be read as a whole. In the plaint the plaintiffs pleaded that their signatures on the retirement agreement were obtained by undue influence of 4th defendant. Even after making such a plea, the plaintiffs filed the suit to recover a particular sum from the other partners on the ground that at the time of retirement of the plaintiffs from the partnership firm, the other partners agreed to pay the said amount. This contention is not relevant for the disposal of any of the matters pending before this Court.
13. The learned Counsel for the contesting defendants relied upon a decision of Apex Court reported in A. Venkatasubbiah Naidu v. S. Challappan and Ors., . It is relied upon to show that an appeal against ex parte order of injunction is maintainable. There is no dispute that an appeal can be filed by the aggrieved party even against an ex parte order of injunction. In the appeal only one ground is raised. The said ground is that the trial Court failed to appreciate the partnership deed in proper manner and granted an injunction without looking into Clause 15 of partnership deed and the trial Court has no jurisdiction to number the suit in view of Clause 15 of the partnership agreement. No other ground is mentioned in the appeal questioning the ex parte order of injunction passed by the trial Court. We are unable to accept the contention that in view of Clause 15 of the partnership deed providing for settlement of the disputes by a sole Arbitrator, the civil Court has no jurisdiction to entertain the suit and pass interim orders. We give below the reasons for our conclusion.
14. In this regard it is necessary to refer to the provision in Section 9 of Arbitration and Conciliation Act, 1996. The said provision reads as follows:
“Section 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 authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.
The above provision clearly indicates that even before or during arbitral proceedings, a party is entitled to apply to a Court for an interim measure of protection in respect of the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement, for securing the amount in dispute in the arbitration, for the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration. It also entitles a party to obtain interim injunction or appointment of a receiver
from a civil Court. This provision, therefore, clearly indicates that the civil Court has jurisdiction to entertain any civil suit even in cases where there is an arbitration agreement and pass necessary interim orders as envisaged in Section 9 of the Arbitration and Conciliation Act, 1996. If either of the parties to any contract with an arbitration clause does not refer or take steps to refer the disputes to arbitration, the law does not bar either of them to have a recourse to a civil Court and seek appropriate remedies. If the Legislature wanted to bar the jurisdiction of civil Court in cases arising out of a contract with an arbitration clause, it would not have inserted a specific provision like Section 9 in the above Act empowering the civil Court to grant certain interim orders. If a party to the arbitration agreement wants the matter to be decided by arbitration, then, as laid down in Section 8(1) of the Act, he can request the civil Court by filing appropriate application under Section 8 of the above Act to refer the parties to arbitration. As already noticed the contesting defendants have already exercised their right by filing a petition in. I.A. No. 185 of 2003 before the trial Court. That petition will be decided by the trial court in accordance with law. As the sole ground raised in the grounds of appeal that the civil Court has no jurisdiction to entertain the suit is not tenable, there are no other reasons for this Court to set aside the ex parte order of injunction granted by the trial Court. It is always open for the contesting defendants to contest the injunction application on any of the grounds open to them and seek dismissal of the said application on merits. We do not find any merits in the appeal or in the two revisions.
15. In the result, the appeal as well as the two revisions are dismissed, but in the circumstances without costs. The trial Court is directed to dispose of I.A. No. 185 of 2003 as well as the other interim applications pending before it as expeditiously as possible.
2.5.2003 After the order is pronounced, the learned Counsel for the appellant sought ‘leave’ of this Court to prefer appeal to the Supreme Court. We do not see any substantial issue which requires the grant of ‘leave’ to the appellant to approach the Supreme Court. The request is therefore rejected.

One thought on “Chandra Shipping And Trading … vs Beerapalli Chenchu Subba Reddy … on 2 May, 2003 Equivalent citations: 2003 (4) ALD 572, 2004 55 SCL 501 AP

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