O.M.P. No.269/2010 Page 1 of 50 17 * IN THE HIGH COURT OF DELHI AT NEW DELHI + Date of Decision: 24.09.2010 % O.M.P. 269/2010 LALIT KUMAR ..... Petitioner Through: Mr. Harish Malhotra, Senior Advocate with Mr. Rajender Agarwal and Mr. Tanuj Khurana, Advocates. versus ANIL KUMAR ..... Respondent Through: Mr. A. K. Singla, Senior Advocate with Mr. Ajay Malhotra and Ms. Hema Arora, Advocates. CORAM: HON'BLE MR. JUSTICE VIPIN SANGHI 1. Whether the Reporters of local papers may be allowed to see the judgment? : No 2. To be referred to Reporter or not? : Yes 3. Whether the judgment should be reported in the Digest? : Yes VIPIN SANGHI, J. (Oral) 1. This petition has been preferred under section 9 of the Arbitration and Conciliation Act, 1996 (the Act) by the petitioner to seek the following reliefs: “(a) appoint a receiver in the above case with the direction to the receiver to immediately O.M.P. No.269/2010 Page 2 of 50 take possession of 2436, Ajmal Khan Road, Karol Bagh, New Delhi-110005 and to seal the same and to keep the keys in his custody till such time the affairs of the partnership firm are totally wound up and both the parties are paid their respective due shares and the award is made by the arbitral tribunal in this regard; (b) restrain the respondent, its representatives, nominee etc. from in any manner creating any third party interest and parting with possession in respect of shop No. shop No.2436, Ajmal Khan Road, Karol Bagh, New Delhi-110005 in favour of anyone except in favour of the petitioner; (c) restrain the respondent, his representatives, nominee(s) etc. from in any manner carrying on the business by utilizing the assets of the partnership firm and the trading name of the partnership firm „D C Fashion‟ at shop No.2436, Ajmal Khan Road, Karol Bagh, New Delhi – 110005, or at any place or places either directly or indirectly either in his name or in the name of any firm or company including his or his wife company D.C. Creations Pvt. Ltd., till the award is made by the arbitral tribunal in this regard;” 2. The petitioner and the respondent are real brothers. The parties along with their mother Smt. Kamla Devi purchased the property bearing No.2435-2438, Gali Nos.10 & 11, Ajmal Khan Road, Karol Bagh, New Delhi-110005 vide registered sale deed dated 04.03.1993. 3. The parties and their mother entered into a partnership deed dated 12.08.1997 to carry on retail business in textiles, clothing and garments such as shirts, suits, dupattas, sarees, dress materials etc. in O.M.P. No.269/2010 Page 3 of 50 partnership under the name and style of M/s. Dal Chand Gupta & Co. in the premises bearing No.2436, Ajmal Khan Road, Karol Bagh, New Delhi, which is a part of the aforesaid larger property bearing No.2435- 2438, Ajmal Khan Road, Karol Bagh, New Delhi. 4. The business taken over by the partnership was, in fact, the business left by the late father of the parties, late Sh. Dal Chand Gupta, which the father was carrying out in the name of his proprietary concern M/s Dal Chand Gupta under the trade name DCM Retail Store. Upon the demise of the mother of the parties on 18.01.2004, the partnership was reconstituted with the petitioner and the respondent as the two partners on 20.01.2004. The entire business carried on by the erstwhile partnership firm was taken over by the new partnership firm and the name of the firm also remained unchanged. Both the parties had equal shares in the newly constituted firm. 5. According to the petitioner, Smt. Kamla Devi, the mother of the parties left a Will dated 19.12.2003, whereunder she bequeathed her share in the property bearing No.2435-2438, Ajmal Khan Road, Karol Bagh, New Delhi equally in favour of the parties herein. Consequently, it is the case of the petitioner that he and the respondent have 50% share each in the aforesaid properties. 6. The petitioner further states that various improvements were made in the premises wherein the partnership business was being O.M.P. No.269/2010 Page 4 of 50 carried, to remain upto date with the changing trends. The partnership firm started trading in the name and style of “D.C. Fashion” and this name became the brand and trade name of the partnership firm. The firm also installed the ICICI Bank Credit Card Machine/Terminal in the trade name “D.C. Fashion” and the receipts from the sales made through the said credit card machine were directly credited to the bank account of the partnership firm, namely Dal Chand Gupta & Co. maintained with the ICICI Bank, Karol Bagh Branch. 7. The petitioner alleges that the wife of the respondent started interfering in the partnership business being carried on in property bearing No.2436, Ajmal Khan Road, Karol Bagh and this led to differences between the parties. The petitioner, it appears, lodged a police complaint with the allegation that he apprehended danger to his life and liberty and sought police action against the respondent and his wife. The petitioner further states that the respondent started restraining the petitioner from entering the said shop every now and then and even took control of the business in the said shop. 8. It is the further submitted by the petitioner that he came to know that the respondent had opened a bank account in the name of D.C. Fashion by showing himself to be the proprietor of the said firm bearing Account No.600800301000298 with Vijaya Bank, Karol Bagh O.M.P. No.269/2010 Page 5 of 50 Branch and similarly opened another bank account with HDFC Bank, Karol Bagh Branch bearing Account No.04392560004226. 9. It is further alleged by the petitioner that the respondent started illegal misappropriation of stocks and property of the partnership concern and diverted the same in his proprietary business stated under the name and style of “D.C. Fashion”. The petitioner alleges that the respondent is carrying on the business of the partnership firm by treating the same as his own proprietary concern by using the same trade name, assets, stocks and the goodwill of the partnership and has illegally diverted and converted the property of the partnership concern to his own personal use. 10. The petitioner further alleges that proper accounts of the firm have not been drawn and taken since 01.04.2006. The petitioner also alleges siphoning of the partnership business funds and assets by the respondent by diverting them to his own proprietary business. 11. Since the partnership deed dated 20.01.2004 contained an arbitration agreement for resolution of inter se disputes between the parties, the petitioner preferred a petition under section 9 of the Act before the Court of the Senior Civil Judge, Tis Hazari Courts, Delhi seeking the following reliefs: “a) Pass necessary ex parte orders and directions thereby restraining the respondent O.M.P. No.269/2010 Page 6 of 50 from carrying on the sole proprietorship business from premises No. shop No.2436 Ajmal Khan Road, Karol Bagh, New Delhi, under the business name of „DC Fashion‟ to the detriment of the business of the partnership firm whether directly or through his wife, children, representatives, workmen, employees, agents, attorney holders etc. b) Pass necessary ex parte orders and directions thereby restraining the respondent from obstructing the entry of the petitioner to the premises No. shop No.2436 Ajmal Khan Road, New Delhi, wherein partnership business has been running and has been conducted under the terms and conditions incorporated in the Partnership Deed dated 20th January, 2004; c) Pass necessary ex parte orders and directions thereby restraining the respondent from interfering with the participation of the petitioner in the partnership business from the premises No. shop No.2436, Ajmal Khan Road, Karol Bagh, New Delhi in any manner whether directly or through his employees, wife, children, agents, workmen, attorney holders etc.” 12. In those proceedings, the respondent appeared upon issuance of notice and took the stand that the partnership between the petitioner and the respondent had been dissolved w.e.f. 01.04.2008. The respondent claimed that he was in exclusive possession of the shop in question through his proprietary concern “D.C. Fashion”. He further alleged that the shop in question was never under the possession of the partnership firm. O.M.P. No.269/2010 Page 7 of 50 13. The petitioner submits that even though he had not received any notice of dissolution of the partnership firm allegedly served by the respondent, he was agreeable to the dissolution of the partnership firm. The petitioner submits that this stand of his was communicated to the respondent in a reply filed by the petitioner to an application moved by the respondent before the learned Senior Civil Judge on 19.08.2009. 14. In the meantime, the respondent preferred a petition under section 11(6) of the Act before this Court for appointment of an arbitrator since the parties could not mutually agree upon an arbitrator. On 28.08.2009, this Court allowed the arbitration petition and appointed Mr. Justice V.S. Aggarwal (Retd.) as the sole arbitrator to adjudicate upon the disputes between the parties. 15. The petitioner states that after the arguments were heard by the learned Senior Civil Judge on the application seeking appointment of a Receiver, the respondent moved yet another application alleging that the said proceedings had become infructuous as the respondent had stopped the business activities of “D.C. Fashion” of which he was the proprietor, and that the premises had been let out to a company known as “D.C. Creation Pvt. Ltd.” and that the said company was carrying on its own business in the premises. O.M.P. No.269/2010 Page 8 of 50 16. Vide order dated 08.09.2009, the Senior Civil Judge allowed the application preferred by the petitioner to seek the appointment of a Receiver and appointed Ms. Anu Arora, Advocate as the Receiver. The Receiver was directed to take over the premises in question and the stocks and registers, and other items in the said shop. It was directed that the premises would remain under the control of the Receiver and none of the parties would interfere with the same, and the parties were directed to cooperate in the winding up of the business. The Receiver was directed to keep the premises under her lock and key and to provide the key to the arbitrator along with her report. 17. The petitioner further alleges that the Receiver sought to execute the order on 09.09.2009. However, the respondent locked the shop premises and vanished from the site. It appears that the Receiver then sealed the premises on the same day. My attention is drawn to the letter dated 09.09.2009 addressed by the receiver to the SHO, Karol Bagh Police Station, wherein the receiver recorded that she has sealed the shop bearing No.2436, Ajmal Khan Road, Karol Bagh, New Delhi on the same day. 18. The respondent preferred an appeal against the order appointing the Receiver passed by the learned Senior Civil Judge. The petitioner alleges that on 03.10.2009, the respondent, without taking O.M.P. No.269/2010 Page 9 of 50 permission from the Court, broke open the seal put by the Receiver. The petitioner then preferred a contempt petition alleging willful disobedience of the order passed by the learned Senior Civil Judge. 19. The appeal preferred by the respondent against the order of the Senior Civil Judge was disposed of on 08.01.2010. The said appeal was allowed and the order appointing the Receiver was set aside on the ground that the learned Civil Judge was not competent to try the proceedings under section 9 of the Act, since the value of the dispute was beyond the pecuniary jurisdiction of the learned Senior Civil Judge. It was further held that since the arbitrator had been appointed, the petitioner herein ought to have moved the arbitrator for the said relief and not the Court. 20. The petitioner then preferred a petition under Article 227 of the Constitution of India before this Court being C.M. (Main) No.284/2010. The said CM (Main) No.284/2010 was disposed of by this Court on 05.05.2010. This Court observed that the learned ADJ could have disposed of the appeal preferred by the respondent herein on the short ground of lack of pecuniary jurisdiction of the Senior Civil Judge without discussing the merits of the case. The Court further observed that despite the order of the learned ADJ, the right of the petitioner to approach the High Court with a petition under section 9 of the Act remained intact. The observations made by the learned Senior Civil O.M.P. No.269/2010 Page 10 of 50 Judge and by the learned ADJ in the proceedings above referred to, were to be treated as non-est and not to influence the decision of any Court in the application that may be moved by the petitioner under section 9 of the Act. 21. Thereafter, the petitioner has preferred the present petition before this Court on or about 08.05.2010. 22. The submission of Mr. Harish Malhotra, learned senior counsel for the petitioner is that the conduct of the respondent has been absolutely dishonest. Firstly, by use of might, the respondent prevented the petitioner from participating in the partnership business. Despite the petitioner‟s police complaint, the petitioner was kept out of the partnership business. He submits that the respondent clandestinely opened another bank account in the name of “D.C. Fashion” showing himself to be the sole proprietor and usurped the partnership business completely without even dissolving the partnership which existed between him and the petitioner. All the stocks, goodwill, furnitures & fixtures and other assets of the partnership firm were misappropriated and converted to personal use by the respondent. 23. Mr. Malhotra submits that the entire property bearing No.2435-2438, Ajmal Khan Road, Karol Bagh, New Delhi is owned in equal shares by the petitioner and the respondent after the demise of O.M.P. No.269/2010 Page 11 of 50 their mother, by virtue of the Will dated 19.12.2003. The partnership business was being carried on only in one of the shops bearing No.2436, Ajmal Khan Road, Karol Bagh, New Delhi. 24. Mr. Malhotra submits that even if the dissolution of the firm w.e.f. 01.04.2008, as alleged by the respondent, were to be accepted, the respondent had no right to use the name, goodwill, stocks and assets of the partnership for his own exclusive benefit and to continue the business of the partnership in his own proprietary name. Mr. Malhotra submits that the so-called letting out of the shop to M/s. D.C. Creations Pvt. Ltd. is completely a sham transaction and a fraudulent modus operandi adopted by the respondent to apparently distance himself from the continuing business being carried on in the shop in question. Mr. Malhotra points out that the company M/s D.C. Creations Pvt. Ltd. was incorporated only on 24.08.2009. The address of the said company furnished was 2436, Ajmal Khan Road, Karol Bagh, New Delhi i.e. the premises in which the partnership business was being conducted. He submits that according to the respondent, the lease was created in favour of “D.C. Creations Private Limited” only on 01.09.2009. He submits that if the respondent had no concern with the said company, there was no question of the address of the partnership‟s showroom being given as that of the said company, even before the so-called letting of the premises on 01.09.2009. Mr. Malhotra submits that the so called company “M/s D.C. Creations O.M.P. No.269/2010 Page 12 of 50 Private Limited”, in fact, continued with the same business as was being carried out by the partnership concern, which was subsequently usurped by the respondent. He places reliance on photographs taken on 05.09.2009 which shows that the same business was carried on uninterruptedly with the same decor and under the same name i.e. “D.C. Fashion”. It is, therefore, submitted that the respondent has clearly resorted to a fraudulent exercise on paper to distance himself from the ongoing business in the premises, whereas it is respondent himself who is carrying on the business under the garb of the sham lease deed purportedly executed in favour of the company M/s D.C. Creations Private Limited. 25. He submits that steps to incorporate the said company were initiated by none other than the respondent. However, it appears that during the course of its incorporation, the respondent realized the need to distance himself from the said company and therefore, introduced his wife and son as the shareholders and directors of the said company. He submits that D.C. Creations Pvt. Ltd. is, in fact, the alter ego of the respondent and the respondent has merely sought to create a façade to not only defraud the petitioner, but also for the purpose of creating hyper technical defence and to pull wool over the eyes of the Court and the arbitrator. O.M.P. No.269/2010 Page 13 of 50 26. Mr. Malhotra submits that the shop in question had been directed to be sealed by the Court of the Senior Civil Judge vide order dated 08.09.2009. The Receiver appointed by the learned Senior Civil Judge had put her seal on 09.09.2009. No order for desealing had been passed. The respondent, however, took illegal possession of the shop even before the appeal preferred by the respondent was allowed by the Appellate Court on 08.01.2010. On 05.10.2009 the petitioner lodged a complaint with the SHO, Karol Bagh Police Station that the seal put by the receiver had been broken by the respondent. Mr. Malhotra submits that the conduct of the respondent in taking the law into his own hands needs to be taken into account by this Court as well, while considering the prayers made in this petition. 27. Mr. Malhotra has also drawn my attention to the various credit card transaction slips of the year 2005 to submit that the trade name under which the partnership was carrying on its business was “D.C. Fashion”. He also relies on the advertisements published by the partnership firm dated 11.12.2004 and 01.01.2005 in Hindustan Times, West Delhi Life with the trading name “D.C. Fashion”. That is the same name that the respondent claims to have adopted for running his proprietary concern from 01.04.2008 onwards. 28. Mr. Malhotra submits that the petitioner is entitled to restrain the respondent and his representatives from carrying on any similar O.M.P. No.269/2010 Page 14 of 50 business in the name of the firm, or from using any of the property of the firm for his own benefit until the affairs of the firm have been completely wound up. He further submits that the affairs of the firm have never been wound up; accounts have never been settled; assets have never been distributed and the liabilities have never been discharged. The respondent could not, therefore, appropriate to himself the goodwill, stocks, fixtures, furnitures and other assets of the firm. He submits that the goodwill of the partnership firm resides in the name of “D.C. Fashion” as also the place of business. Mr. Malhotra in support of his submissions has placed reliance on the following decisions: (a) Addanki Narayanapa & Anr. v. Bhaskara Krishnappa (dead) and thereafter his heirs & Ors. AIR 1966 SC 1300 (b) Rajinder Singh & Ors. v. Kartar Singh & Ors. 2001 V AD (Delhi) 1107 (c) Ashok Kumar Mittal v. Ashwani Kapoor & Anr. AIR 2005 Delhi 323 (d) Ganpat Rai & Anr. v. Abnash Chander & Anr. AIR 1973 Jammu & Kashmir 74 29. In support of his submission that this petition is maintainable and that merely because the arbitral tribunal has been constituted, the jurisdiction of this Court to entertain a petition under Section 9 is not O.M.P. No.269/2010 Page 15 of 50 denuded, he places reliance on “NHAI v. M/s China Coal Construction Group Corpn.” AIR 2006 Delhi 134. 30. Mr. Singla, learned senior counsel for the respondent, has opposed the petition. He submits that the petitioner started his business under the name and style of “D.C.G. Fabs Pvt. Ltd.” in a premises situated in the City Square Mall, Rajouri Garden, New Delhi. He submits that, though in the said business, the respondent or his family members have no share or interest, the premises in which the said business is being carried on is jointly owned by wives of the parties and their respective sons. He further submits that the said business was set up from the funds of the partnership firm M/s Dal Chand Gupta & Co. 31. Mr. Singla submits that the accounts of the partnership firm Dal Chand Gupta and Co. were last signed by the petitioner for the period ending 31.03.2006. According to the respondent the petitioner had stopped attending to the partnership business since 20.01.2007. Thereafter, the audited accounts had been prepared for the financial years ending 31.03.2007 and 31.03.2008. 32. Mr. Singla submits that the petitioner filed a civil suit being CS(OS) No.1668/2007 in this Court against the wife and son of the respondent to restrain them from interfering in his business being carried on in the City Square Mall. After the filing of the said suit, a O.M.P. No.269/2010 Page 16 of 50 meeting took place between the parties and other family members in February, 2008, wherein it was decided to dissolve the partnership firm M/s Dal Chand Gupta and Co. w.e.f. 31.03.2008, and it was further decided that the respondent would continue with the business at the premises No.2436, Ajmal Khan Road, Karol Bagh, New Delhi as the proprietor thereof. 33. Mr. Singla submits that the petitioner had never raised any dispute regarding the said accounts for the financial years ending 31.03.2007 or 31.03.2008. He submits that the petitioner has, till date, not raised any claim in any proceedings much less before the sole arbitrator appointed by this Court, namely, Mr. Justice V.S. Aggarwal (Retd.). He further submits that the shop in question was never intended to be a partnership asset. This was also expressly provided for in the partnership deed between the parties. He submits that since the partnership business came to an end on 31.03.2008, the respondent being one of the co-owners was entitled to take over the possession and to carry on his proprietary business therefrom. He further disputes that the mother of parties late Smt. Kamla Devi, upon her demise, had bequeathed her share in the property bearing Nos.2435-3438, Gali Nos.10 & 11, Ajmal Khan Road, Karol Bagh, New Delhi upon the petitioner and the respondent. He submits that the share of late Smt. Kamla Devi had fallen to the share of all her legal heirs i.e. the parties herein and the three daughters. He submits that O.M.P. No.269/2010 Page 17 of 50 all the co-owners, except the petitioners, had let out the said premises to M/s D.C. Creations Private Ltd. by a registered lease deed w.e.f. 01.09.2009. Mr. Singla submits that the petitioner cannot seek any relief in these proceedings in relation to the said shop as it was not a partnership asset. The petitioner is also not entitled to claim any relief in respect of the lease transaction entered into between the co-owners and M/s D.C. Creations Pvt. Ltd. as the said transaction is beyond the scope of the arbitration agreement contained in the partnership deed between the parties. The said lessee M/s D.C. Creations Pvt. Ltd. is also not a party to these proceedings. 34. Mr. Singla submits that the partnership had been wound up and the accounts had been taken and no dispute had been raised in relation thereto. Mr. Singla submits that even though the petitioner sought to invoke the arbitration agreement vide letter dated 03.08.2009 proposing to nominate Mr. G.P. Thareja as the sole arbitrator, the petitioner did not raise any dispute with regard to the accounts as finalized for the financial years ending 31.03.2007 and 31.03.2008. Mr. Singla relies on the reply sent by the respondent dated 08.08.2009 to the letter of invocation sent by the petitioner dated 03.08.2009. 35. Mr. Singla further argues that none of the prayers made by the petitioner in the present petition can be granted in the facts of the O.M.P. No.269/2010 Page 18 of 50 present case. The possession of shop No.2436, Ajmal Khan Road,