THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.147 of 2010 Date:14th June, 2011 Between: 1. P.Satya Prakash Reddy & Ors. …Applicants And 1. N.Ranga Reddy & Anr. …Respondents *** THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.147 of 2010 ORDER: This Arbitration Application has been taken out by the applicants, who are 3 in number, under Section 11(6) of the Arbitration and Conciliation Act, 1996, (for short, ‘the Act’), seeking appointment of an arbitrator for resolution of the disputes relating to the partnership deed, dated 22.12.1998. 2. The application averments in brief are: The applicants along with the respondents 1 and 2 constitute a registered partnership firm under the name and style of ‘M/s.Sirimalle Estates and Developers’ under the partnership deed, dated 22.12.1998. The 1st respondent has been managing the day-to-day affairs and accounts of the partnership firm. Each partner is entitled for 20% of the share in the profit and loss of the firm. The partnership firm entered into a development agreement-cum- general power of attorney, dated 18.08.1999 with Smt.Sunkari Srujana and two others to develop the property bearing No.6-3-667/4, situated at Punjagutta, Hyderabad. After obtaining necessary sanction for construction, the said property was developed. As per the said agreement, dated 18.08.1999, the partnership firm was allotted 60% and owners of the property were allotted 40% of the share in the said property. According to the applicants, the 1st respondent furnished the statement of accounts of the partnership firm upto 31.03.2005 and later on, he failed to furnish the accounts of the partnership firm since 01.04.2005. It is stated by the applicants that the 1st respondent has not accounted for the sale consideration received from one Mr.Subba Reddy for the sale of Flat No.103 in the said property. Likewise, the respondents have entered into so many agreements with third parties behind the back of the applicants herein. On coming to know all the said transactions, the applicants issued notice, dated 27.07.2010, invoking the arbitration clause in the partnership deed, dated 22.12.1998 proposing Sri P.Suresh Kumar Reddy, Chartered Accountant, as arbitrator for resolution of the disputes. The respondents issued a reply, dated 26.08.2010 expressing their dissent with regard to nomination of Sri P.Suresh Kumar Reddy, Chartered Accountant, as arbitrator. It is also stated in the said reply notice that there is nothing to be resolved by the arbitrator. Hence, this application by the applicants seeking the relief stated supra. 3. The respondents 1 and 2 filed counter-affidavit resisting the application. It is stated in the counter-affidavit that the application filed by the applicants is not maintainable since the original of the agreement containing arbitration clause has not been enclosed to the application. It is stated in the counter-affidavit that the developed venture was over by 2005 and the sale of all the flats was also over by June, 2005 and that the applicants were paid their share of the profits and all the accounts were settled in the year 2005 itself. Thus, the claim of the applicants is barred by limitation. Various other contentions have been made in the counter affidavit, which are not required to be referred for disposal of this application. 4. The applicants also placed on record their reply affidavit denying the allegations of the counter-affidavit. 5. Heard learned counsel appearing for the applicants and learned counsel appearing for the respondents. 6. Learned counsel appearing for the applicants submits that the partnership is ‘at will’ and the applicants exercised their option not to continue as partners of the firm by notice, dated 27.07.2010, and therefore, the cause of action arose for settlement of accounts of the partnership firm, from 27.07.2010 and in which case, the application filed by the applicants seeking appointment of arbitrator for settlement of the disputes is well within the limitation. It is also contended by him that the applicants have specifically stated in para.3 of the affidavit that the original partnership deed is in possession and custody of the 1st respondent and therefore, question of filing the original deed of partnership by the applicants along with the application does not arise. He would also contend that the partnership firm is not a necessary party to the proceeding, since Rule 175 of the Civil Rules of Practice states that for dissolution of partnership firm, it is only the partners of the partnership firm and all persons entitled to share in the profits of the partnership business are necessary parties to the proceeding and not the partnership firm. Learned counsel appearing for the applicants laid much emphasis on Rule 175 of the Civil Rules of Practice, which reads as hereunder: “Rule 175 (114) Parties:- In a suit for dissolution of partnership, or for an account of partnership dealings, all the partners, and all persons entitled to share in the profits of the partnership business, shall be made parties. The plaint may be as in Form No.38.” 7. Per contra, learned counsel appearing for the respondents contends that the application filed by the applicants without impleading the partnership firm as a party to the proceeding is not maintainable. It is also contended by the learned counsel that the cause of action for the applicants arose on 01.04.2005, since it is stated in the application that the accounts of the partnership firm have not been shown to them from 01.04.2005, in which case, the application filed by the applicants is barred by limitation. A further contention has been advanced that the application is not in accordance with Para.2(iii) of the Scheme for Appointment of Arbitrators, Andhra Pradesh, 1996. Much emphasis has been laid on Para.2(iii) of the Scheme for Appointment of Arbitrators, Andhra Pradesh, 1996, which reads as hereunder: “(iii) In case the person making the request does not have the original arbitration agreement or a copy thereof, he shall file an affidavit giving relevant facts in that behalf and request that the opposite party may be directed to produce the original or a copy thereof.” In support of her contentions, reliance has been placed on the decision of the Supreme Court in Atul Singh v. Sunil Kumar Singh[1]. 8. In reply, learned counsel appearing for the applicants submits that after filing of the application, the applicants have placed on record an affidavit, duly serving a copy of it on the respondents, seeking a direction to the respondents to place on record the original or a copy of the partnership deed, dated 22.12.1998. 9. The issue that calls for adjudication in this application is: Whether the applicants have made out a valid ground for appointment of an arbitrator for resolution of the disputes that have arisen between the parties relating to the partnership deed, dated 22.12.1998? 10. Copy of the partnership deed has been placed on record, which finds place at page No.19 of the material papers. The duration of the partnership as indicated in the partnership deed reads as hereunder: “The partnership business shall be a partnership ‘AT WILL’.” The applicants expressed their intention to withdraw from the partnership firm through a notice, dated 27.07.2010. Indisputably, the applicants are holding 20% share each in the partnership firm. Because they expressed their unwillingness to continue as partners and opted to go out from the partnership firm, their accounts have to be settled. Cause of action for settlement of accounts arose on 27.07.2010. As per the terms of the partnership deed, all disputes and questions in connection with the partnership or that deed arising between the partners or between any of them and the third party or parties may be settled by arbitration under the provisions of the Indian Arbitration Act. Such is the clause in the partnership deed, it cannot be said that the claim of the applicants is barred by limitation. Under Para.2(iii) of the Scheme for Appointment of Arbitrators, Andhra Pradesh, 1996, what is contemplated is that if the applicants are in possession of the original arbitration agreement, the same is required to be filed along with the application. The applicants have stated in para.3 of the affidavit that the original partnership deed is in possession and custody of the 1st respondent. For better appreciation, I may refer para.3 of the affidavit filed in support of the application, which reads as hereunder: “3. That the Applicants along with Respondents constituted a registered partnership firm under the name and style of M/s.Sirimalle Estates & Developers, under the partnership deed, dated 22.12.1998. The business of the firm is of developing the property and other activities. The partnership is at WILL. The Respondent No.1 and the Applicant No.1 Sri P.Satya Prakash Reddy were entrusted with the day to day management of the partnership firm. However, the Respondent No.1 alone has been managing the day to day affairs and the accounts of the Firm. Each partner is entitled to 20% share in the profit and loss of the firm. The Applicants have contributed capital from time to time. The original partnership deed is in possession and custody of Respondent No.1. A copy of the Partnership Deed, dated 22.12.1998 is filed herewith and marked as ANNEXURE-I.” Indeed, the applicants served the affidavit on the other side directing them to place on record the original of the partnership deed. It is submitted by the learned counsel appearing for the respondents across the bar that the 1st respondent is not in possession of the original partnership deed, dated 22.12.1998, in which case, it is a disputed fact that is required to be resolved as to who is in custody of the original partnership deed. Since the applicants opted to go out from the partnership firm, the accounts are required to be settled. As per the terms of the partnership deed, the settlement of disputes is by way of arbitration. In that view of the matter, I find that the applicants have made out a valid ground for appointment of an arbitrator. 11. Accordingly, the Arbitration Application is allowed. Sri Justice T.Ch.Surya Rao, Retd. Judge of High Court of A.P., is appointed as sole arbitrator, for resolution of the disputes between the parties, relating to the partnership deed, dated 22.12.1998. The arbitrator shall be at liberty to fix his own fee. No order as to costs. ______________________ B.SESHASAYANA REDDY, J. Date:14th June, 2011. cs THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.147 of 2010 Date:14th June, 2011 [1] (2008) 2 SCC 602