1 ARBP NO.281.08 kambli IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.281 OF 2008 ... Abdul Mannan Chotekhan ...Petitioner v/s. Chotekhan Ghasikhan & Ors. ...Respondents And Zarina Samiullah Khan & ors. ...Respondents (Proposed) ... Mr.P.K.Samdhani, Sr.Advocate i/b S.K.Jain for the Petitioner. Mr.H.P.Pandey for Respondents Nos. 1(d) to 1(f). Mr.Padgaonkar i/b Mr.N.S.Parte for Respondents Nos.1A, A5, 1B, 1C & 3. ... CORAM: D.K.DESHMUKH, J. DATED: 8th July, 2011 P.C.: 1. By this petition filed under Section 34 of the Arbitration Act the Petitioner challenges the award made by the sole arbitrator dated 20-2-2008. 2. There was a partnership firm consisting of four partners namely (i) Abdul Mannan Chotekhan (present Petitioner); (ii) Chotekhan Ghasikhan ( He has expired during the pendency of the petition. His legal representatives have been brought on record); 2 ARBP NO.281.08 (iii)Iqbal Ahmed Hussain (Respondent No.2); (iv) Hussain Ahmad Khudabux, of whom the Respondent No.2 is an heir; 3. The dispute arose between the partners. The Petitioner, therefore, filed Suit No.4164 of 2001 in the City Civil Court for dissolution of the firm and for accounts. An Appeal From Order No.199 of 2002 came to be filed in this court and by an order made on 1st March, 2002 in that Appeal From Order, by consent of parties the disputes between the parties were referred to the arbitration of Justice Shri M.S.Jamdar (Retd.) . Justice Shri M.S.Jamdar (Retd.) made an award. That award was challenged in Arbitration Petition No.455 of 2004 by the present Petitioner. By order dated 29-8-2005 on the basis of the consent terms reached between the parties that award was set aside and the disputes were referred to Justice Mr.S.M.Daud (Retd.) Justice Daud (Retd.), the new arbitrator has made the award on 20-2-2008, which is challenged in this petition. 4. The operative part of the order of the Justice Mr.S.M.Daud (Retd.) reads as under: 3 ARBP NO.281.08 A W A R D 1. Partnership-M/s.Mohammadi Sweet Meat Mart @ J.J.Jalebi stands dissolved with effect from 04/08/2001, the date on which S.C.Suit No.4164/2001, was instituted. 2. Parties are under no obligation to render accounts or having they rendered to them. 3. Tenancy rights in the Shop No.4 in the Pradhan Building, Godown No.1 in the Amina Manzil and Godown No.2 in the Marayam Building were not ever and are not the assets of the Firm. Claimant is not entitled to 1/4th share in the value of tenancy rights of these properties. 4. The Good-will and the Firm name shall not vest in either the Claimant or the respondents. Claim of the parties to their alleged share in the compensation in the Good-will is rejected. 5. The Court Receiver stands discharged. He shall hand-over the possession of Shop No.4, and the Godowns in Amina Manzil & Maryam Building to Respondents 1 & 2, or upon their willingness, to Respondents 2 & 3. 6. Cash at hand with the Court Receiver, minus the Administrative Expenses & taxes etc. to be made over to 4 ARBP NO.281.08 Respondents 1 & 2. Claimant and Respondents would be entitled to retain whatever has come to them while running the business, as Agents of the Court Receiver. 7. Costs of the Arbitration before me, as incurred. 8. Award to become operative 60 days after its proclamation. In the meantime the existing arrangement to continue. 5. So far as Clause 1 of the operative part of the award is concerned, dissolving the firm from 4-8-2001 there is no challenge. 6. Same is the case with Clause (2) of the operative part of the award. Because the partners even before dissolution of the firm were carrying on business by rotation and they were running their business and keeping the amounts with themselves. Therefore, there is no question of nobody’s rendering the accounts. 7. So far as clause (3) of the operative part of the award is concerned, the learned arbitrator has held that Shop No.4 and Godowns Nos. 1 & 2 cannot be treated as assets of the firm for the purpose of valuation and therefore the Petitioner cannot claim 1/4th share in the value of the tenancy rights. 5 ARBP NO.281.08 8. By clause (5) of the award, the learned Arbitrator has held that as the Respondents Nos. 2 & 3 have been held to be the tenants of Shop No.4 and Godowns Nos. 1 & 2 they are entitled to be in possession of those premises and therefore the Receiver has been directed to hand over possession to them. So far as aspect of handing over possession of Shop No.4 and Godowns Nos. 1 & 2 to Respondents Nos. 2 & 3 is concerned, there is no challenge because they have been held to be the tenants of those premises. However, there is a serious challenge to the finding of the learned Arbitrator that, despite consent order dated 1-3-2002 passed by this court (Dr. D.Y.Chandrachud J.) , the Petitioner is not entitled to 1/4th share in the value of the tenancy rights of these premises. The learned Counsel for the Petitioner submits that in view of the agreement between the parties recorded in paragraph 2(iv) of the order dated 1-3-2002 the tenancy of these premises has to be considered as assets of the firm for the limited purpose of valuation. 9. The learned Counsel appearing for the Respondents Nos.2 & 3, on the contrary, submits that as the Respondents Nos. 2 & 3 are tenants of those premises, those premises cannot be considered as assets of the firm. 6 ARBP NO.281.08 10. Now, so far as this aspect of the matter is concerned, paragraph 2(iv) of the order dated 1-3-2002 reads as under: (iv)The learned Counsel are agreed that in the process of valuing the assets of the partnership, the learned Arbitrator would be at liberty to value interalia the tenancy of shop No.4 and godown Nos. 1 and 2 on the basis that these properties are the assets of the partnership. This will, however, be without prejudice to the rights and contentions of the parties in the pending suit before the City Civil Court being S.C.Suit No.1398 of 2000. It is, therefore, understood between the parties that upon a valuation being made by the learned Arbitrator of the aforesaid tenancies on the footing that they are assets of the Partnership, the Arbitration will include the aforesaid valuation in the respective shares of the partners. The share of the outgoing partner which is required to be paid by the remaining partner/partners shall be valued on the basis that it would include the share of the tenancies. 11. Learned Arbitrator has recorded his finding in this regard in paragraphs 13 and 14 of his award. They read as under: 7 ARBP NO.281.08 (13)Claimant went to the other extreme of contending that the orders passed by their Lordships Dr.Chandrachud J. and D,.K.Deshmukh, J. operate as res-judicata on the finding of the partnership’s existence, its validity, its ownership of, assets inclusive of the tenancies of Shop No.4 and Godown No.1 & 2 etc. According to Advocate S.K.Jain representing Claimant, all these questions have been concluded in his client’s favour and could not be re-agitated. (14)I have reproduced the relevant portion of the orders passed by Dr.Chandrachud J. and Justice D.K.Deshmukh, J. True, I have to take into consideration the valuation of tenancy rights as if they were assets of the partnership. This, however, does not mean that the respondents are shut-out from pleading and trying to prove the contrary. The valuation clause in the orders of Dr.Chandrachud and D.K.Deshmukh JJ. is to ensure completeness in the disputes referred to arbitration. In the orders passed, the parties have been given liberty to raise all or any plea, which they might think necessary to further their cause or foil that advanced, by their opponent. This being the position, it cannot be said that the bar of res- judicata, whether actual or constructive, operates. However, 8 ARBP NO.281.08 the factual admission given before Jamdar J. binds the parties. 12. In my opinion, it is clear from the order dated 1-3-2002 that though order was made by consent of parties and in paragraph 2(iv) of the order a clear agreement between the parties was recorded that for the purpose of valuing the assets of the firm the tenancy of the said premises is deemed to be the assets of the firm, the parties were free to take a contrary stand in proceedings pending before the Small Causes Court (Admittedly the City Civil Court is wrongly mentioned in paragraph (4). It should be Small Causes Court). At the relevant time the proceedings were pending in the Small Causes Court in relation to tenancy of aforesaid premises. Therefore, the parties were granted liberty to take a contrary stand in those proceedings to their agreement that for the purpose of valuation of the assets of the firm the tenancy of the aforesaid premises is to be taken as assets of the firm. In my opinion, therefore, the learned arbitrator was not justified in holding that there was no agreement between the parties that for the purpose of valuation of the assets of the firm the tenancy of the aforesaid premises was not to be considered as assets of the firm. That finding, in my opinion, is liable to be set aside and it has to be held that the Petitioner is entitled to 1/4th share in the value of 9 ARBP NO.281.08 tenancy of the aforesaid premises. The learned Arbitrator in his award has mentioned in paragraph 26 that if it is held that the Petitioner is entitled to 1/4th share in the valuation of the tenancy premises, then the value of his 1/4th share in leasehold, he would get Rs.45 lacs for his 1/4th interest in the Shop. Rs.35,75,000/- for Godown No.1 in Amina Manzil and Rs.27,49,000/- for the Godown No.2 in the Maryam Building. It is accordingly ordered that the Petitioner would be entitled to these amounts as his 1/4th share as the value of the tenancy rights of the aforesaid premises. Clause (3) is accordingly substituted. 13. So far as clause (4) is concerned, the learned Arbitrator has dealt with that in paragraph 27 of his award. It reads as under: 27.In relation to the Good-will, there is hardly any question of the partnership having such an asset. Each group was doing business of its own. The roaring business was because of the shop’s location, rather than anything special in the make of the products sold at the counter. Respondents do not desire the good-will and claimant has done little to advance the business except to carry on with an existing asset. 10 ARBP NO.281.08 14. It was submitted by the learned Counsel for the Petitioner that if admittedly the Shop was having roaring business, irrespective of which partner was running that shop, then it cannot be said that there is no Good-will to the business. 15. The learned Counsel appearing for the Respondents also submitted that there will be good-will to the business. However, as this has not been worked out, the award made in this regard will have to be set aside, leaving the parties to their remedies in that regard. It is accordingly so ordered. 16. So far as clause (5) is concerned, there is no challenged. The Receiver, therefore, shall hand over possession of Shop No.4 and Godown In Amina Manzil and Maryam Building to Respondents Nos. 2 & 3, after they make payment to the Petitioner as directed above. 17. So far as clause (6) of the operative part of the award is concerned, the learned Arbitrator has not given any reason for making these directions. The amount of royalty deposited by the agent of the Receiver has to be treated as the profit made by the 11 ARBP NO.281.08 partnership firm and therefore all the four partners would be entitled to the amount of royalty in equal share. It is accordingly so held and the Receiver is directed to pay the amount of royalty in deposit with him after deducting necessary expenses to the four partners in equal part. By consent of parties, it is directed that the present system of running the business by rotation as agent of the Receiver will continue to operate till the Receiver hands over possession pursuant to the the award, on Respondents Nos. 2 & 3 making payment to the Petitioner. Petition disposed of. (D.K.Deshmukh, J.)