IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE P.BHAVADASAN THURSDAY, THE 11TH JUNE 2009 / 21ST JYAISHTA 1931 FAO.No. 103 of 2006() --------------------- IA.NO.2357/2005 IN OS.396/2005 OF ADDL.SUB COURT,KOTTAYAM APPELLANT/DEFENDANT/RESPONDENT: --------------------------------------------------- A.T. JOSE, ADAYANOR HOUSE, KIDANGOOR P.O., KOTTAYAM, MANAGING PARTNER HEWITIC AUTO INDUSTRIES, S.H. MOUNT NATTASSERY, KOTTAYAM. BY ADV. SRI.B.KRISHNA MANI RESPONDENT: PLAINTIFF/PETITIONER: ------------------------------------ K.A. KALAM, BUSINESSMAN, T.C.8/1335/4, KAILAS LINE, THIRUMALA P.O. THIRUMALA VILLAGE, THIRUVANANTHAPURAM PARTNER, HEWITIC AUTO INDUSTRIES, S.H. MOUNT, NATTASSERY, KOTTAYAM. ADV. SRI.RAM MOHAN.G. SRI.G.P.SHINOD SRI.MANU V. THIS FIRST APPEAL FROM ORDERS HAVING BEEN FINALLY HEARD ON 11/06/2009, THE COURT ON THE SAME DAY, DELIVERED THE FOLLOWING: P.R. RAMAN & P. BHAVADASAN, JJ. = = = = = = = = = = = = = = = = = = = = FA.O. 103 OF 2006 = = = = = = = = = = = = = = = DATED THIS, THE 11TH DAY OF JUNE, 2009. J U D G M E N T Raman, J. This is an appeal arising out of a order appointing a receiver. 2. The appellant is the defendant in the suit. The suit is one for dissolution of partnership. The contention set up by the defendant was that since there is an arbitration clause in the partnership deed, the suit itself is not maintainable. 3. As per the averments made in the affidavit filed along with the petition seeking to appoint a receiver, the plaintiff/ petitioner was one of the partners of the firm Hewitic auto Industries, S.H. Mount, Nattasserry, a partnership firm registered under the Partnership Act as per the partnership deed dated 6.9.2002, that the first and second plaintiff contributed Rs. 5 lakhs as partners and the defendant Rs. 10 lakhs, who is the Managing Partner. It was however provided that the profit and loss has to be shared in the ratio 1:1:2. The business of the firm is the manufacture of auto spring and other allied items. Due to misappropriation of funds by the FAO 103/2006 :2: defendant, the plaintiff decided to retire; but later on based on negotiation, his intention to retire was withdrawn and continued. But the defendant continued to mismanage and misappropriate the accounts and even sold the products of the firm. No accounts have been maintained in spite of the demand made by the plaintiff. Therefore, if the defendant is allowed to continue to act in the same manner that will cause further loss and injury besides causing financial loss. It is based on those allegations that a receiver was sought to be appointed. 4. The defendant resisted the contentions but admitted the partnership and also the partnership deed. He denied the allegation of mismanagement misappropriation. He also denied that there was no proper account. There are other averments in the written statement as to the manner in which the firm was run and how the firm went into bad days and suffered financial loss. According to the defendant, since the plaintiff expressed his willingness to retire from the firm, as per negotiation among the partners the firm was decided to be continued by incorporating new partners. Accordingly, Rs. 5 lakhs was received from one Mr. George Joseph and Silvy George as earnest money as per agreement dated 7.9.2004 for including Silvy George into the partnership. The defendant never tried to shift any machinery which was pledged to the Kerala Financial Corporation. The factory and office building are constructed and FAO 103/2006 :3: machineries are erected by obtaining loan from the Kerala Financial Corporation. Huge amounts raised from various sources is invested in the business and the defendant has mortgaged 44 cents of property worth over Rs. 50 lakhs to the Kerala Financial Corporation for availing the loan. The plaintiff is not interested in sharing the burden of the business and huge amounts are due to the firm from the distributors and dealers. So if the firm is dissolved or if a receiver is appointed, it will cause irreparable loss and injury to the defendant and the very existence of the firm. 5. The court below, however, after considering the rival contentions, thought it fit to order appointment of a receiver. It is against the said order that the appeal has been filed. This appeal itself is of the year 2006 and this Court, while admitting the appeal, has granted a stay which was extended from time to time. More than three years have elapsed thereafter. Thus, the order appointing the receiver is not brought into force by virtue of the said order passed by this Court and the plaintiff has not brought to the notice of this court any misappropriation or mismanagement of the property during the pendency of this appeal and sought modification or cancellation of the stay order. The fact being thus stated, status quo as on today has to continue unless there are strong reasons of such misappropriation or mismanagement is alleged. A running concern like an industry cannot be allowed to be run by appointing a third party receiver FAO 103/2006 :4: which should not be in the interest of either parties. The court could have perhaps appointed the defendant himself as the receiver making him accountable to the court for the receipts and expenditure especially when the defendant is a partner and it is a continuing business, he is entitled to do the business along with the plaintiff. But it is the plaintiff who expressed his desire to retire from the partnership. In such circumstances, we do not think that the appointment of a receiver as such is required to be made to preserve the properties of the firm. 6. learned counsel appearing on behalf of the respondent submitted that there was a settlement of the dispute between the parties and that the appeal itself has become infructuous. be that it may, so long as there is no lis pending for consideration even as according to the respondent plaintiff, it is only proper that status quo is allowed to continue. In such circumstances, we make the interim stay absolute and allow this appeal. P.R. RAMAN, JUDGE. P. BHAVADASAN, JUDGE. KNC/-