arbp1394-10.doc 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.1394 OF 2010 Mr.Khilari Ram Sharma & Ors .. Petitioners Versus Shashi T. Nair & Anr .. Respondents Mr.D.H.Mehta a/w Rajmani Varma & Navdeep Vora i/by N.Vora & Associates for the petitioners. Mr.M.P.S.Rao a/w Jaideep Mitra i/by MZM Legal for the respondents. CORAM: S.C.DHARMADHIKARI, J. DATE : 22nd FEBRUARY 2011 P.C. . This petition under section 9 of the Arbitration and Conciliation Act, 1996 seeks interim measures pending adjudication of disputes between the heirs and legal representatives of the deceased Krishna Sharma, who was stated to be the partner at one time alongwith the respondents in the partnership firm M/s.Hercules arbp1394-10.doc 2 Forging. 2 It is stated that the respondents approached the late Smt.Krishna Sharma with a proposal to carry on business in partnership and accordingly, a partnership deed dated 2nd March 1988 was prepared and executed. 3 The partnership deed stated that the business of the partnership shall be carried on from Bhandup and a factory on a plot of land at Ambarnath. The partnership is stated to be at will. 4 In the partnership deed, reliance is placed on clause 26 which states that the surviving partners shall be entitled to continue and carry on business in partnership with the heirs and legal representatives of the deceased partner and if such heirs, legal representatives or successor decide not to carry on business, then, the surviving partners may carry on business of partnership after working out and paying the dues of the deceased to her heirs, legal representatives or successor, as the case may be. In the petition it is arbp1394-10.doc 3 alleged that the said Smt.Krishna Sharma was an active lady but after sometime she developed health problems. Her health problems started from 2003 after a brain hemorrhage. Her condition deteriorated. She was unable to visit the partnership firm’s office. She was carrying on day to day activities only with the help of the petitioners and a driver. She had cut-off herself because of her health problems. She eventually passed away at the age of 80 years on 29th November 2009. 5 It is stated that it is because of efforts of Smt.Krishna Sharma that the partnership could acquire the plot at Ambarnath. Therefore, after the death of Smt.Krishna Sharma the petitioners requested the respondents that they be inducted as partners in terms of clause 26 of the deed dated 2nd March 1988 but the respondents avoided and ultimately came out with a version that the deed of partnership dated 29th January 2004 is the governing and applicable deed. During the lifetime of the deceased Smt.Krishna Sharma this deed was executed. In this deed there is nothing like clause 26. On the other hand, the surviving partners can carry on business of arbp1394-10.doc 4 accounts being drawn and payment of dues of the deceased partner being made. In such circumstances, the petitioners have challenged the deed dated 29th January 2004. It is stated that the deed was allegedly executed when Smt.Krishna Sharma was completely bedridden. She was discharged from hospital on 29th November 2003. For about four to five months thereafter i.e till the end of March 2004 she was bedridden and completely under the care of the petitioners. There was no occasion for her to go and execute any documents much less sign it in presence of a Notary allegedly on 29th January 2004. Therefore, the partnership deed dated 29th January 2004 is not a genuine but a got-up and fabricated document. No reliance can be placed thereon. It is also contended that Smt.Krishna Sharma had 37.50% share. If really Smt.Krishna Sharma had no claim or the heirs could not have made any claim against the respondents, there was no occasion for the respondents to have stated in the letter dated 4th June 2010 that the statement of accounts prepared and finalised show that a sum of Rs.23,62,820/- is payable to Smt.Krishna Sharma’s heirs. Assuming that clause 14(a) of the partnership deed dated 29th January 2004 can be relied arbp1394-10.doc 5 upon, it is clear that the reliance thereon is not bonafide. In such circumstances and when the document itself is questionable, this Court should not permit the respondents to rely on the subsequent deed but go by the amended clause 26 of the partnership deed dated 2nd March 1988. It is submitted by Mr.Mehta that which of the deeds would prevail and what is the entitlement of the petitioners is a matter to be decided by the arbitrator. The petitioners have taken necessary steps inasmuch as they have filed application under section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator and that application is pending. In these circumstances, the Court would have normally appointed a receiver because it is just and convenient to do so. Instead, the ad-interim order should be confirmed as that does not prevent the respondents from carrying on the business of the partnership subject to the arbitral reference. For all these reasons, he submits that a prima facie case is made out and the petition be made absolute accordingly. 6 On the other hand, Mr.Rao, learned senior counsel arbp1394-10.doc 6 appearing for the respondents invited my attention to the affidavit in reply and submitted that the first partnership deed is of 1988, whereas, the second partnership deed is of 29th January 2004. Mr.Rao submits that Smt.Krishna Sharma died on 29th November 2009. For a period of five years and more this partnership deed has not been questioned. It was not questioned by her during her lifetime nor did any of the petitioners came forward and raised an issue about its genuineness. Inviting my attention to a letter which has been addressed by the petitioners, it is submitted that in this letter which is a notice dated 19th February 2010 given by an advocate engaged by the petitioners, what has been stated is that the respondents with ulterior motive and with a intention to wrongly deprive the legal representatives of their share, executed a deed of partnership dated 29th January 2004 contrary to the earlier partnership agreement and the same was registered with the office of Joint Sub-Registrar, Kurla (Chembur), Mumbai. In para 9 of this letter is stated that latest registered deed of partnership dated 29th January 2004 was disclosed by both of the respondents to the petitioners after the demise of Smt.Krishna Sharma. In these arbp1394-10.doc 7 circumstances, according to Mr.Rao the claim now put forward is clearly an afterthought and is intended to deprive the respondents from enjoying the fruits of the subsequent partnership deed and carrying on business thereunder. For all these reasons, the claim is not bonafide and there is no prima facie case made out. More so, when the valuation of the plot at Ambarnath is as per the valuation arrived by the MIDC. The claim of Smt.Krishna Sharma has been computed at Rs.23 lakhs and odd. That sum can be deposited in the Court. Once that is secured and that is the only entitlement of the petitioners, then, the Court should vacate the ad-interim injunction and dismiss the petition. 7 With the assistance of Mr.Mehta and Mr.Rao, I have perused the petition and the annexures thereto and all affidavits on record. The issue as to whether the partnership deed dated 2nd March 1988 with clause 26 thereunder or the subsequent deed dated 29th January 2004 are the governing deeds must be decided independently by the arbitrator. Which of the clauses must prevail or are subsisting is the core issue between the parties. The arbp1394-10.doc 8 petitioners seek an opportunity to prove their version that the subsequent deed of 2004 is fabricated and got up document. Assuming that it is genuine, whether, the clauses are indeed conflicting or not cannot be decided at this stage. It is not proper for me to express any opinion at this stage as that would prejudice both sides. The petitioners have pointed out in the petition that they are the only heirs and legal representatives of the deceased Smt.Krishna Sharma. There is no dispute that she was a partner in the partnership firm carrying on business under the name and style M/s.Hercules Forgings. The other partners were the respondents. The petitioners are the husband, married daughter and son of the deceased. About the petitioner No.3, Mr.Rao has stated that his activities and his conduct would show that he is a known criminal. At his instance, the present proceedings have been instituted. That also need not detain me because from the record atleast at this stage there is no dispute that a partnership deed dated 2nd March 1988 was entered into between the respondents and late Smt.Krishna Sharma. That the said deed had a clause which is relied upon, namely, clause 26 and also had a arbitration agreement incorporated thereunder is arbp1394-10.doc 9 undisputed. In terms of this clause, the death of a partner would not result in dissolution of the partnership firm but the legal representatives or heirs are to be taken up as partners and unless they decide not to become the partners, then, the payments have to be made. 8 The petitioners have pointed out that Smt.Krishna Sharma was active from 1988 till 2003. Thereafter she suffered brain hemorrhage and was hospitalised. She was on medication and thereafter could hardly move around except with the assistance of the family members. She was ailing for a long time and eventually expired on 29th November 2009 at the age of 80 years. 9 It is alleged in para 19 of the petition that after the demise of Smt.Krishna Sharma the respondents removed all the documents, petty cash books, statutory registers and other records from the Firm’s Bhandup office and thereafter the petitioner No.3 made inquiries and came to know from the State Bank of India that the Firm’s bank account was frozen to the liability of Rs.8 lakhs and a arbp1394-10.doc 10 fresh bank account was opened with the ICICI bank, Station Road, Ambarnath and that is how the petitioners got alerted and they corresponded with the respondents. In para 22 of the petition this is what is stated: “22. It may be noted that during her life time the said late Smt.Krishna Sharma had not informed to any of the petitioners about the said alleged partnership deed dated 29th January 2004. What more surprises to the petitioners is that after late Smt.Krishna Sharma was discharged from the hospital on 25th November 2003, for about four to five months thereafter i.e till the end of March 2004, she was bed ridden, completely under the care of the petitioners, therefore there is no question of said late Smt.Krishna Sharma executing any document in the month of January 2004. The petitioners have every reason to believe that the said purported deed of partnership dated 29th January 2004 is not the genuine document or the same was arbp1394-10.doc 11 fraudulently procured or fabricated and forged a document which could not have been voluntarily executed out of free will of the said deceased. The said purported deed of partnership is null and void.” 10 In answer to these allegations in the petition, an affidavit has been filed on behalf of the respondents and the respondent No.1 in the said affidavit has stated that the statement made that second/subsequent deed of partnership dated 29th January 2004 is not genuine but fabricated is false and untenable. It is stated that one Mr.M.P.Sharma had witnessed the execution of this document. The signatures are sought to be compared on both deeds and reliance is also placed on an affidavit of Mr.M.P.Sharma. This affidavit is dated 31st January 2011. It is alleged that there is no proof that the deceased Smt.Krishna Sharma was ailing and bedridden for about four to five months from 24th November 2003. Therefore, it cannot be believed that she was unaware of the execution of the deed of partnership dated 29th January 2004 and her senses were not functioning properly. It is stated that all this is an afterthought and arbp1394-10.doc 12 the petitioners’ version keeps on shifting as is evident from the correspondence carried on by them. If there is a registered deed of partnership, then, this Court should not proceed to accept the version of the petitioners particularly when the deed is dated 29th January 2004 and the deceased expired in November 2009. After making allegations against the petitioners and particularly petitioner No.3, what has been stated is that the respondents have been ready and willing to supply documents and accounts and pay the share of the deceased to the heirs but the allegations that have been made have forced them to contest the proceedings and bring out the true facts on record. 11 After a perusal of these materials and particularly the fact that the Arbitral Tribunal is yet to decide as to which of the deeds would be the governing deed, whether clause 26 of the deed dated 2nd March 1988 stands superseded by clause 14(a) of the deed dated 29th January 2004, then, it would not be proper to vacate the ad- interim order as prayed. If the petitioners are entitled to recover some amounts as the correspondence would indicate, then, nothing arbp1394-10.doc 13 prevented the respondents from remitting the undisputed sum. Although, a statement is now made that the respondents are ready and willing to deposit the same in the Court, however, from February 2010 there has been correspondence. The correspondence has been carried out by the respondents themselves. The statement which is relied upon is made in the letter dated 4th June 2010. However, that sum was never forwarded and the offer now made cannot, therefore, be accepted straightway. When the parties are before the Court and are asserting their rights to have the arbitrator appointed and the dispute referred for adjudication to the said Arbitral Tribunal, then, all the more it would not be proper to vacate the ad-interim injunction. That cannot be vacated only on the basis of the statement made today in the Court by Mr.Rao. Further, I am of the opinion that a prima facie case is made out by the petitioners inasmuch as from the record it appears that there has been correspondence between the parties. There has been a dispute raised through out about the deed of January 2004. From the statements made in the letter and particularly from the portion at page 74, it cannot be assumed that the petitioners have never questioned the arbp1394-10.doc 14 deed of January 2004. The petitioners did not change their version and have maintained through out that they became aware of such a deed only when correspondence commenced post death of Smt.Krishna Sharma and that too in January 2010. There has been nothing pointed out, save and except, the statements of Mr.M.P.Sharma made on affidavit of 31st January 2011 that Smt.Krishna Sharma was aware of and had been a party to the deed of 29th January 2004. The only statement made is on the basis of this affidavit. A copy of the deed which is annexed to the petition has been relied upon to show that Smt.Krishna Sharma had signed it. However, it has been pointed out to me that the signature of Smt.Krishna Sharma at page 68 is stated to be witnessed by two persons and one of whom is an advocate residing in Borivali (E). Further, the said deed is stated to be attested by advocate Mr.K.S.Lambat. However, nothing has been pointed out from the record by which it could be stated that these two persons who are independent witnesses have attributed the knowledge of this document to Smt.Krishna Sharma. On the other hand from the letter dated 16th February 2010 addressed by the petitioner No.3 to the 1st arbp1394-10.doc 15 respondent, it is clear that the petitioners have been asking for details and particularly the new deed. It was alleged in the letter dated 16th February 2010 that the new deed was prepared on 29th January 2004, got registered from the Registrar’s office, Kurla on the same date but the notary stamps were of 7th February and 9th February 2004 and an explanation was sought in that behalf. The reply to this letter dated 16th February 2010 shows that the version of the respondents is that the registered deed of partnership dated 29th January 2004 does not enable the petitioners to assert their right to carry on business in partnership in place of Smt.Krishna Sharma. The questions were not answered but reliance was only placed on clause 14 of the deed dated 29th January 2004. An allegation was made that the petitioner No.3 purchased some materials worth Rs.7 lakhs from M/s.Hercules Forgings but he has not paid the money outstanding. That is how the further letter dated 19th February 2010 came to be addressed and the correspondence thus continued. 12 In such circumstances, I am of the opinion that the petitioners have made out a prima facie case to the extent of the arbp1394-10.doc 16 interim injunction. The petitioners have also pointed out as to how balance of convenience is in their favour. As far as irreparable loss is concerned, the business of the partnership has not been stopped. The receiver is not appointed as I find that it is not just and convenient to do so. However, by mere grant of interim injunction the respondents are not prevented from carrying out business and all the more when it can be clarified that the injunction does not prevent them from utilising the Firm’s assets in their ordinary and regular course of business. In these circumstances, the request to vacate the ad-interim order cannot be granted. The petition is made absolute in terms of the ad-interim order dated 5th January 2011. The injunction in terms of prayer clause (b) stands confirmed. Once it is confirmed in terms of the order dated 5th January 2011 and the words “dealing with” have been deleted, then, all the more with the clarification that this will not prevent the respondents from carrying on the business of M/s.Hercules Forgings and deal with the assets in the ordinary and regular course of business, would sufficiently protect the claims of both sides. arbp1394-10.doc 17 13 In the light of the above discussion, the petition is made absolute in the aforementioned terms. It is clarified that this Court has not expressed any opinion on the rival versions but has only narrated them to point out that there is a arguable question and the request to vacate the ad-interim injunction cannot be granted. All contentions of the parties are kept open. Since an apprehension is expressed by Mr.Rao that if the Court has made petition absolute in terms of the ad-interim order and particularly an injunction in terms of prayer clause (b), then, despite the clarification given today the bank accounts cannot be operated, it is clarified that when the Court has permitted the respondents to deal with the partnership assets and properties in their ordinary and regular course of business it goes without saying that even the bank accounts can be operated by them. Therefore, the injunction in terms of the ad-interim order and particularly prayer clause (b) stands modified to this extent. Needless to further clarify that the petitioners are at liberty to seek such directions for production and disclosure of documents relating to partnership business by making an appropriate application before the Arbitral Tribunal. Further, if the petitioners desire during the arbp1394-10.doc 18 course of proceedings to secure the undisputed sum of Rs. 23,62,000/- and odd, then, nothing prevents them from making appropriate application before the Arbitral Tribunal. (S.C.DHARMADHIKARI, J)