THE HON'BLE SRI JUSTICE A.GOPAL REDDY and THE HON'BLE SRI JUSTICE RAJA ELANGO C.M.A.No.132 of 2004 And C.R.P.Nos.236 of 2004 and 3364 of 2009 COMMON JUDGMENT: (per Hon’ble Sri Justice A. Gopal Reddy) The appeal and revisions arose out of the common order dated 24.04.2003 passed by the Principal Senior Civil Judge, Visakhapatnam, in O.P.No.4 of 1999, filed under Sections 30 and 33 of the Arbitration Act, 1940 (for short ‘the Act’), O.P.No.2 of 1999 filed under section 17 of the Act and I.A.No.206 of 2002 in O.P.No.2 of 1999 filed under Section 37 of the Act, and interconnected to each other, hence they are heard together and disposed of by this common order. The facts, gave raise to the appeal and revisions, in nutshell are as under. The appellant/revision petitioner and the first respondent are brothers. The appellant is a dealer of Hindustan Petroleum Corporation Limited (HPCL), Visakhapatnam, for sale of petrol and other allied products. He obtained licence under the name and style of M/s. R.K. Enterprises. For the said purpose, he purchased an extent of 1059 sq. meters of land in Ramakrishnapuram, Malkapuram Post, where a retail outlet has been established by HPCL. The partnership firm was constituted on 31.05.1991 between the appellant and the first respondent to run the partnership business in the name and style of M/s. R.K. Enterprises to deal with the petroleum products. The profits and losses of the firm were agreed to be shared between the appellant and the first respondent at the ratio of 55% and 45% respectively. As per Clause-13 of the Partnership Deed the firm may be dissolved by giving three months notice by either partner and the properties of the firm shall be shared by partners in profit sharing ratio and Clause-14 contains arbitration clause for resolution of disputes arising between the parties during the course of the business, in accordance with the principles laid down under the Act. As certain disputes arose between the parties with regard to sharing of profits and losses of the business, the first respondent filed O.P.No.112 of 1995 on the file of the Principal Subordinate Judge, Visakhapatnam for appointment of an arbitrator. The said O.P. was allowed appointing Sri T. Indrajee, retired District Judge, the second respondent herein, as sole arbitrator. On appointment of arbitrator, the first respondent filed claim statement contending that he made the appellant to apply dealership for the sale of petroleum products and they have purchased the property in the name of appellant for enabling him to obtain licence from HPCL. After purchase of the property necessary constructions and installations required for running of petroleum outlet were made jointly. Though initially the licence was obtained in March, 1984 from the HPCL in the name of the appellant, the business was carried in the name of M/s. R.K. Enterprises. After commencement of business, they constituted themselves as partners of the firm and carried the said business since 1.04.1985. Thereafter, both the appellant and the first respondent applied to the HPCL for regular dealership in their names as partners of the said firm. The HPCL, vide its letter dated 21.03.1991, suggested for a reconstituted partnership deed duly registered with the Registrar of Firms and submit the same to it to conclude a fresh dealership agreement with the reconstituted firm. Accordingly, the partnership was reconstituted under the partnership deed, dated 31.05.1991, registered with the Registrar of Firms on 20.11.1991, and the same was submitted to M/s. HPCL. In the reconstituted deed also, the land and the constructions thereon were shown as the property of the firm of M/s. R.K. Enterprises. On submission of the said partnership deed, a dealer owned outlet was granted to the appellant and the first respondent for carrying on the business in the name and style of M/s. R.K. Enterprises. During the course of business, the firm acquired movable assets like three cars, a Generator and other miscellaneous items like furniture, a cycle etc., apart from the immovable property where the partnership firm is carrying on business, and they were all being shown in the Income Tax returns as the assets of the firm and the total value of assets was shown more than Rs.13,00,000/- in the income tax returns. Apart from that the daily sales turnover was shown as Rs.1,25,000/- and the annual sale turnover exceeded a crore of rupees. The appellant has not paid any share in profits to the first respondent in spite of demand, but sent a notice on 2.12.1993 for dissolving the partnership firm. Hence the first respondent moved the Court below and filed claim statement claiming that he is entitled to receive Rs.4,50,000/- per year from 1.04.1991 till the business of the firm is wound up, as per the partnership deed, and after the business of the firm is wound up, he would be entitled to 45% in fixed assets and dues receivable, towards profits. The appellant herein filed counter to the claim statement contending that after the dealership was given to him by M/s. H.P.C.L, he raised constructions with his own funds, which fact was supported by the documents enclosed from Annexure-I to the counter. The dealership was issued in his favour and all the licences, that were required for selling the petroleum products, were also issued in his name. When the business was flourishing, the first respondent requested him to take him as a partner nominally by investing an amount of Rs.50,000/-. As the first respondent is his elder brother, the appellant has consented his request and took him as a partner. When the first respondent addressed a letter to M/s. H.P.C.L., requesting it not to make further supplies to the appellant, he filed a suit in O.S.No.44 of 1995 before the Principal District Munsif Court, Visakhapatnam, along with I.A.No.55 of 1995 for injunction restraining the first respondent from interfering with the business. In spite of opposition by the appellant, a receiver was appointed by the civil Court, and the same was confirmed by the III Additional District Judge, Visakhapatnam, in C.M.A.No.21 of 1995. As against the orders passed in C.M.A., the appellant moved the High Court in C.R.P.No.2321 of 1995, and obtained stay of all further proceedings against the appointment of receiver. Thereafter, the said suit was dismissed. On dismissal of the suit, connected proceedings also stood dismissed. The appellant admitted that the partnership deed was reconstituted on 31.05.1991 and the same was duly registered with the Registrar of Firms. Later the same was submitted to M/s. H.P.C.L. He also admitted in paragraph No.15 of the counter that he opened an account in the State Bank of India, in the name of M/s. R.K. Enterprises showing it as a proprietary concern. Subsequently, at the request of the first respondent, he put the said assets into the partnership business towards his share capital. The assets of the proprietary concern have become the assets of the partnership firm. Thus the assets, namely, lands purchased and constructions made thereon, have become the share capital contributed by the appellant exclusively and the same were shown as the assets of the firm in the income tax returns. When the first respondent requested the appellant to get the agreement with M/s. H.P.C.L. in their joint names facilitating him to deal with the business in the absence of the appellant, he consented to enter into agreement with M/s. H.P.C.L., in the joint names of the first respondent and himself. Later the partnership deed dated 31.05.1991 was entered into and the same was submitted to M/s. H.P.C.L. An agreement was also entered into in the joint names of the first respondent and himself on 13.12.1991. It was further stated that the profits of the every year are being merged with the capital of each partner and thus the capital is increased year after the year. The liabilities of the firm have to be taken into consideration till the date of dissolution after adjusting the liability from the assets of the firm and the balance available will be shared in agreed proportion. The arbitrator after considering the above pleas framed the following three points for determination. 1. Profits should be reckoned from what point of time till what date? 2. What is the annual profit? 3. What are the assets and liabilities of the firm? The arbitrator, after considering the oral and documentary evidence adduced by both the parties, on point No.1 held that the first respondent/claimant never complained prior to the stage of his giving evidence in the arbitration proceedings, about not settling the accounts annually and not paying his share of profits till the end of 31.03.1993. The appellant had started business in dealership with petroleum products in the name and style of M/s. R.K. Enterprises, as a proprietary concern, and subsequently, at the request of the first respondent/claimant, the appellant had put the said assets into the partnership business towards his share capital. Thus the assets, namely, lands purchased and constructions made thereon have become the share capital contributed by the appellant exclusively, and the same are shown as the assets of the firm in the income tax returns. Therefore, the first respondent is entitled to his share of profits, if any, accruing to the partnership firm on realization of the said property since there is no statutory bar of entering into partnership for dealing in petroleum products, and that the agreement is not hit by Section 23 of the Indian Contract Act as unlawful or void. Therefore, profits can be reckoned from 7.03.1994, the date when the dissolution will come into effect as per Ex.A.6-notice dated 2.12.1993, till the date of claim petition i.e., 26.07.1997. Since the first respondent contended that winding up can be gone into at a later stage, the assets and liabilities of the firm need not be gone into at present. It will be determined at the time of winding up of partnership firm. Therefore, the question that survives for determination is, what is the annual profit for which the appellant and the first respondent are entitled to. The arbitrator also observed that in the calculation memos filed by both sides, there is no controversy about the quantity of petrol and lubes received by the firm and it is only with regard to commission receivable. The calculation memo filed by the appellant based upon the commission, which is allowed by the supplier, was accepted for the said purpose. After elaborately considering the ledgers of the firm, the arbitrator held that the first respondent is not entitled to reopen the account till the end of 31.03.1993 and he is only entitled to profits in the ratio of 45% from 1.04.1993 till 26.07.1997. The appellant is also entitled to 10% interest till the date of decree or payment whichever is earlier. Questioning the award of the arbitrator, the appellant filed O.P.No.4 of 1999 under Sections 30 and 33 of the Act, for setting aside the award, whereas the first respondent filed O.P.No.2 of 1999 under Section 17 of the Act for passing of judgment and decree in terms of the award dated 14.11.1998. He also filed I.A.No.206 of 2002 under Section 37 of the Act for a direction to the arbitrator to take possession of the assets of the dissolved firm M/s. R.K. Enterprises and wind up the same under Section 48 of the Partnership Act. The learned Principal Senior Civil Judge, by the impugned order dated 24.04.2003 while dismissing O.P.No.4 of 1999 filed by the appellant, allowed O.P.No.2 of 1999 filed by the first respondent by a separate order making the award of the arbitrator dated 14.11.1998 rule of Court. The appellant filed C.M.A.No.132 of 2004 questioning dismissal of O.P.No.4 of 1999 and C.R.P.No.236 of 2004 against making the award rule of Court by allowing O.P.No.2 of 1999. However, during the pendency of O.P.No.2 of 1999 and O.P.No.4 of 1999, I.A.No.206 of 2002 was dismissed on 15.09.2004 on merits holding that the petition is not maintainable as O.P.No.2 of 1999 was already disposed of, against which the matter is pending before the High Court in appeal. Aggrieved by the said order the first respondent preferred C.R.P.No.5933 of 2004 before this Court and this Court allowed the revision setting aside the dismissal order passed by the Principal Senior Civil Judge in I.A.No.206 of 2002 remitting the matter to the lower Court to consider the matter afresh on its own merits and dispose of the same in accordance with law. Pursuant to the remand order, I.A.No.206 of 2002 was again taken up for disposal on 9.06.2009 wherein the learned Senior Civil Judge held that the award passed by the arbitrator has to be treated as preliminary decree and the same will not deprive the first respondent of the fruits of decree and the arbitrator has to take steps to resolve the preliminary decree and that he is entitled to the relief of winding up of firm, which is a consequential relief and accordingly allowed the I.A. Questioning the same, the appellant/petitioner filed C.R.P.No.3364 of 2009. Sri A. Venkataramana, learned counsel for the appellant contends that the arbitrator committed mistake in awarding profits from 1.04.1991 to 1.04.1992 and 1.04.1992 to 1.04.1993 having held that the first respondent is not entitled to reopen the accounts till the end of 31.03.1993. Therefore, awarding of profits for the said years at Rs.67,047/- and Rs.81,411/- is an error apparent on the face of record. He also contended that in the absence of any recital in the partnership deed by showing the land and the constructions made thereon are the properties of the firm, the first respondent is not entitled to 45% of share in the assets of the partnership deed. Therefore, the arbitrator travelled beyond the agreement in treating the properties of the appellant as the properties of the firm and allowing 45% share to the first respondent. He further contended that the claim for winding up and appointment of receiver in I.A.No.206 of 2002 is barred by Order 2 Rule 2 CPC., having observed that the first respondent has given up his claim for share in the property and insisted for passing of award and final profits alone, he cannot claim a share in the property before the arbitrator. Per contra, the learned counsel for the first respondent while supporting the award passed by the arbitrator contended that there is a claim before the arbitrator for profits and also for winding up of partnership firm and for allotting 45% share in profits and that the award passed by the arbitrator is only a nominal order with regard to the share of profits out of the partnership business and interest thereon, for which the first respondent is entitled to. In the I.A. filed under Sections 30 and 33 of the Act by the appellant, he has questioned the award with regard to allotment of 45% of share in profits for two years from 1.04.1991 to 1.04.1993. Since the licence does not prohibit formation of partnership, the appellant is not entitled to contend that the partnership agreement entered into is void under Section 23 of the Indian Contract Act. He further contended that the Court while exercising the power under Section 30 of the Act cannot re-appreciate the evidence or examine about the correctness of conclusions arrived by the arbitrator. Merely because other view is possible, it is not open for the Court to interfere with the award, unless it is established that the arbitrator is mis-conducted himself or the proceedings or the award had been improperly procured or otherwise invalid. For the said proposition he placed reliance on a judgment of the Supreme Court in Bhagawati Oxygen Limited v. Hindustan Copper Limited[1]. He further contended that since the conclusion made by the arbitrator, with regard to the partnership deed, was agreed by the parties, unless the arbitrator exceeds his jurisdiction, the same cannot be interfered with. For the said proposition he placed reliance on a judgment of this Court in Hindustan Shipyard Limited v. Essar Oil Limited[2]. In view of the above rival submissions, the points that arise for consideration in this appeal and revisions are – 1. Whether the award passed by the arbitrator is liable to be set aside or modified? 2. Whether the order passed by the lower Court in allowing I.A.No.206 of 2002 for taking possession of the assets of the dissolved firm M/s. R.K. Enterprises and for winding up of the same under Section 48 of the Partnership Act, is sustainable under law? Admittedly, the learned counsel for the appellant has not pointed out that the claim made by the claimants prohibits under the agreement, which contains an arbitration clause and there is no dispute with regard to the parties entering into partnership deed and later registering the same with the Registrar of Firms and that the profits, assets and liabilities of the firm will be shared by both the parties in the ratio of 55% and 45% as per the partnership deed. The only contention of the learned counsel for the appellant is that the property, i.e., 1059 sq. metres of land purchased by the first respondent where constructions have been made, is never shown as the property of the firm. Whereas the first respondent has claimed that the property was purchased with their joint efforts to facilitate the first respondent to apply dealership from M/s. H.P.C.L. and it was later shown as the property of the partnership firm. Clause 13 of the partnership deed, clearly discloses that the firm may be dissolved by giving three months notice by either partner and the properties of the firm shall be shared by the partners in profit sharing ratio. The first respondent specifically claimed that he is entitled to claim share in the profits, assets and liabilities on dissolution of the firm. The appellant categorically admitted that he started the business in dealership of petroleum products in the name of M/s. R.K. Enterprises as a proprietary concern. Subsequently at the request of the first respondent he had put in the said assets into the partnership business towards his share capital. The assets of the proprietary concern have become the assets of the partnership firm. He also admitted that the land purchased and the constructions made thereon by him have become the share capital contributed by him exclusively and the same is shown as assets of the firm in the income tax returns. Once the appellant admitted that the first respondent contributed his share in the partnership firm for purchasing the land and the constructions made thereon, which he never deny before the arbitrator, the arbitrator after considering the claims and counter claims and also the interpreted clause in the partnership deed, held that the partnership firm submitted Ex.A.22 letter to the Income Tax Office, and on Income Tax Officer’s direction to submit the information in his letter dated 13.12.1990, both the partners signed the letter under Ex.A.22 detailing the value of the properties transferred by them towards their share in the partnership business. Ex.B.11 trading and profit and loss account for the year ending 31.03.1991 evidently shows that the buildings and land are treated as firm’s property and in the assets of the firm the appellant and the first respondent have share in the ratio of 55% and 45% respectively. The arbitrator has not awarded profits as seen from the award as contended by the learned counsel for the appellant that once the arbitrator held that the first respondent is not entitled to reopen the accounts till 31.03.1993 profits cannot be awarded for the year 1.04.1991 to 1.04.1993. The arbitrator in his award reiterated the same at the end of the award holding that earlier he has held that the petitioner/respondent is not entitled to re-open the accounts till the end of 31.03.1993. Therefore, the appellant would be entitled to profits at the ratio of 45% from 1.04.1993 till 26.07.1997, after holding so he concluded the interest whether he is entitled to interest on the profits so ascertained from the said assets. As a last question whether the claimant/first respondent is entitled to claim interest for the amounts due to him, and calculated the interest on the share of profits at Rs.67,047/- for the year 1.4.1991 to 1.04.1992, and Rs.81,411/- for the year 1.04.1992 to 1.4.1993 on which 12% interest was awarded to the first respondent apart from the profits from the year 1.04.1993 to 1.04.1997. In view of the same, the contention that the arbitrator awarded profits for the said years, is devoid of any merit. We accordingly reject the said contention. It was nextly argued by the learned counsel for the appellant/petitioner that the claim for winding up is barred by Order 2 Rule 2 C.P.C. Order 2 Rule 2 C.P.C., has no application to the facts of the present case for the reason that the first respondent has filed claim statement before the arbitrator for his share of profits, which is said to be Rs.4,50,000/- per year from 1.04.1991 till the business of the firm is wound up and after winding up for 45% share in the fixed assets and dues to the firm. The further contention of the appellant is that the profits of each year were being merged with the capital of each partner and thus capital is being increased year after year. The liabilities of the firm are to be taken into consideration till the date of dissolution and after adjusting the liabilities from the assets of the firm, and the available balance was distributed among the partners. The arbitrator in his award not recorded about the relinquishment of share in the assets of the firm by the first respondent. What all the arbitrator observed as contended by the first respondent/claimant is, the assets and liabilities of the firm need not be gone into in the present proceedings. It could be determined at the time of winding up of the firm, except the annual profits, for which the first respondent is entitled to. Unless the first respondent give up his claim as contemplated under sub-rule (1) of Order 23 C.P.C., abandoning a part of claim obtaining leave, it is not open for the appellant to contend that the claim for winding up is barred by Order 2 Rule 2 C.P.C. Apart from that, the first respondent filed I.A.No.206 of 2002 in O.P.No.2 of 1999 under Section 37 of the Act, wrongly quoting Section 37 of the Act instead of Section 37 of the Indian Partnership Act, for directing the arbitrator to take possession of the assets of the dissolved firm. When O.P.No.2 of 1999 is filed under Section 17 of the Act, the Court has always power to remit the award under Section 16 of the Act where the award was left undetermined on any of the matters referred to in the arbitration. Since the arbitrator has not decided winding up of partnership firm, and had held that the assets and liabilities of the firm can be decided at the time of winding up of the firm, and the award passed is only a preliminary decree determining the rights of the parties as the genuine partner is liable to be granted profits after dissolution, the lower Court rightly allowed I.A.No.206 of 2002 directing the arbitrator to proceed with the winding up of partnership firm and distribute the assets after ascertaining the assets and liabilities of the firm, which do not suffer from any illegality warranting interference of this Court. Accordingly, the Civil Miscellaneous Appeal and the Civil Revision Petitions are dismissed. The arbitrator is entitled to proceed with the winding up proceedings and complete the same within the statutory period of four months prescribed under the Act, from the date of receipt of a copy of this order by passing an award for winding up. In the event the parties do not cooperate, it is always open for the arbitrator to move the Senior Civil Judge for extension of time for completion of winding up proceedings. There shall be no order as to costs. ___________________ (A.GOPAL REDDY,