Bombay High Court: In the present case, two appeals were filed under Section 37 of the Arbitration and Conciliation Act, 1996 (‘the 1996 Act’), one by appellant and another by Ilaben Kanubhai Vadher, who claimed to be owner of the Virar property; challenging the order dated 16-07-2024 passed by the Single Judge of this Court. The Division Bench of A.S. Chandurkar and Rajesh S. Patil*, JJ., opined that the appellate court must exercise its power with caution, respecting the findings of the trial court unless there was a clear error or a failure of justice. Thus, the Court held that there was no perversity in the impugned order dated 16-07-2024 as it was necessary to protect the Virar property because appellant did not comply with the direction and started illegal construction on the said property.
Background
Respondent 1, Appellant, and one of appellant’s relative were partners of a firm named Vinamra Developers, which carried on the business of construction. Since there were disputes and differences between the partners, of Vinamra Developers, Respondent 1 invoked the arbitration clause under the Partnership Deed dated 21-10-2016. Respondent 1, on 02-01-2018 filed a petition under Section 9 of the 1996 Act and the Single Judge of this Court passed an order recording that appellant would abide by Clauses 11 and 17 of the Partnership Deed. Thereafter, Respondent 1 filed a petition under Section 11 of the 1996 Act and on 20-01-2020, the Single Judge passed an order thereby appointing a Sole Arbitrator to decide the disputes and differences between the parties arising out of Partnership Deed and the previous status quo order had to operate until the Sole Arbitrator made and rendered his final award.
Respondent 1 filed an application under Section 17 before the Arbitral Tribunal, which was heard and disposed of by the Sole Arbitrator’s order dated 18-10-2022 and by the said order, the status-quo granted by this Court was to be equally applied to property situated at Virar, Palghar (‘the Virar property’). Appellant thus sought a review of the said order but the same was dismissed on 23-11-2023.
Respondent 1 submitted that appellant thereafter started construction activities on the Virar property, hence Respondent 1 filed a fresh petition under Section 9 of the 1996 Act, during the pendency of arbitration proceedings before the Sole Arbitrator (‘the second application’). In the meantime, appellant filed a petition under Section 37(2)(b) of the 1996 Act (‘the Section 37(2)(b) Petition’), challenging the order dated 18-10-2022 passed by the Sole Arbitrator. The Single Judge of this Court heard both the parties in the second application and the Section 37(2)(b) Petition and by order dated 16-07-2024, the Section 37(2)(b) Petition was dismissed allowed the second application filed by Respondent 1. Being aggrieved by the said order, appellant filed an appeal before this Court and another appeal was filed against the order dated 16-07-2024 before this Court, by Ilaben Kanubhai Vadher, who claimed to be the owner of the Virar property.
Counsel for appellant submitted that the Virar property was not a part of an application filed by Respondent 1 and therefore, the Sole Arbitrator and the Single Judge of this Court had gone beyond their jurisdiction and granted injunction against appellant. It was also submitted that the Single Judge misinterpreted Clauses 11 and 17 of the Partnership Deed and that these clauses at the most could be applicable to the ‘Santacruz property’. Counsel for Respondent 1 submitted that Respondent 1 was convinced by appellant to invest in the partnership firm by paying a huge amount and the said amount was transferred to purchase properties including the Virar property and thereafter, appellant started dealing with the business of the partnership firm to the detriment of Respondent 1. Thus, Respondent 1 on realizing that fraud was being played on him, filed a petition under Section 9 of the 1996 Act.
Counsel for Ilaben Kanubhai Vadher submitted that she was a widow and was now the owner of the Virar property, on which construction was carried out, and she also submitted that since her husband had died, there was no one who could clarify the position whether Rs 50 lakhs were paid to her husband or not and since the construction was carried out on the Virar property, of which she was now the owner, the Court Receiver could not be appointed.
Analysis, Law, and Decision
The Court noted that the arbitration proceedings were in progress before the sole Arbitrator, who was appointed by the consent of partners of the firm and Respondent 1, had filed two applications under Section 9 of the 1996 Act. The first application was filed prior to the arbitration proceedings which commenced before the Sole Arbitrator, and the second application was filed while the arbitration proceedings were in progress.
The Court also noted that the Sole Arbitrator had extended the status quo order to the Virar property and had directed appellant to disclose the list of all properties of the partnership firm. The Sole Arbitrator held that prima facie, appellant, had acted contrary to the spirits of the terms and conditions of Partnership Agreement. Thereafter, the Single Judge of this Court held that there were enough documents to prove that appellant had started construction on the Virar property even though there was a status quo order, hence, as an interim measure of protection to safeguard and preserve the Virar property, the Court Receiver needed to be appointed.
Thus, this Court held that there was no perversity in the impugned order dated 16-07-2024 passed by the Single Judge of this Court as it was necessary to protect the Virar property because appellant did not comply with the direction and started illegal construction on the Virar property.
The Court relied on Wander Ltd. v. Antox India (P) Ltd., 1990 Supp SCC 727, wherein the Supreme Court held that the appeals before the Division Bench were against the exercise of discretion by the Single Judge and in such appeals, the appellate court would not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion had been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. The Court opined that the appellate court must exercise its power with caution, respecting the findings of the trial court unless there was a clear error or a failure of justice.
The Court also relied on Ravinder Singh Ahluwalia v. Kuljinder Singh Ahluwalia, 2009 SCC OnLine Bom 712, wherein it was held that when a notice of dissolution of partnership was issued, then to protect assets of the partnership firm, a Court Receiver ought to be granted.
The Court, in respect to the appeal filed by Ilaben Kanubhai Vadher, stated that she could not claim that she was not aware of the order passed by the Single Judge of this Court as she had filed the appeal through appellant, who had been participating in these proceedings from the beginning.
Thus, the Court dismissed the appeals filed by appellant and Ilaben Kanubhai Vadher.
[Ambrish H. Soni v. Chetan Narendra Dhakan, 2024 SCC OnLine Bom 2820, decided on 30-08-2024]
*Judgment authored by: Justice Rajesh S. Patil
Advocates who appeared in this case:
For the Appellant: Uday Warunjikar a/w. Sumit Kate, Siddhesh Pilankar; Dhruti Kapadia.
For the Respondents: Rashmin Khandekar a/w. Pranav Nair, Anand Mishra and Akash Singh.
Buy Arbitration and Conciliation Act, 1996 HERE
