Atul Singh & Ors vs Sunil Kumar Singh & Ors

3. In order to understand the controversy raised, it is necessary to mention the basic facts of the case. The appellants herein filed Title Suit No.296 of 1998 in the Court of Sub-Judge-I, Patna, against Sunil Kumar Singh (defendant no.3) and 5 others for a declaration that the reconstituted partnership deed dated 17.2.1992 (effective from 1.4.1992) is illegal, void and without jurisdiction and was also without any intention or desire of Shri Rajendra Prasad Singh (who died after 17.2.1992) to retire from the partnership. A declaration was also sought that the plaintiffs being heirs of late Shri Rajendra Prasad Singh will be deemed to be continuing as partners to the extent of his share. It was further prayed that a decree for rendition of accounts of the firm from 1.4.1992 upto date may be passed and the defendants may be directed to pay to the plaintiffs their share of the profits of the partnership as well as interest and principal amount of unsecured loan advanced by the firm. A further relief for grant of an ad-interim injunction restraining the respondents from mismanaging and misappropriating the funds of the firm was also sought, besides appointment of a Receiver during the pendency of the suit to manage the firm.

4. The case of the plaintiffs, as set out in plaint, in brief, is as under. A partnership firm in the name and style of M/s Veena Theatres Pvt. Ltd. was formed by a deed of partnership on 25.12.1959 and the business of the firm was to book pictures with film distributors at various places and to get them screened or exhibited in the picture hall owned by M/s Veena Theatres Pvt. Ltd. The capital in the firm was invested by the members of the family of Shri Shatrughan Prasad Singh. Shri Rajendra Prasad Singh also subsequently became a partner of the firm by making investments and a deed of partnership was executed on 20.12.1972. The partnership was reconstituted on 21.5.1976, in which the share of Shri Rajendra Prasad Singh was 21% and on the death of Brij Mohan Prasad Singh, his widow Smt. Sona Devi was inducted as a partner and a fresh deed was executed on 13.1.1989 in which Shri Rajendra Prasad Singh continued to be a partner having 21% share. Shri Rajendra Prasad Singh died on 5.9.1992 leaving behind plaintiff nos.2, 3, 5 and 7, who are his grandsons, as his heirs. The wife and two sons of Shri Rajendra Prasad Singh had predeceased him. The case of the plaintiffs further is that the defendants fraudulently executed another partnership deed on 17.2.1992, in which Shri Rajendra Prasad Singh was not shown as one of the partners, though he had neither given any consent nor had expressed his desire for retiring from the partnership. The plaintiffs made a request to the defendants to give the accounts of the partnership firm and give them their share of profits, but the defendants refused to do so on the ground that they or their predecessor-in-interest viz. Shri Rajendra Prasad Singh were not partners in the partnership deed which was executed on 17.2.1992. The suit was accordingly filed on 1.8.1998 for the reliefs mentioned above.

5. The suit proceeded ex-parte against all the defendants except Birendra Kumar Singh (defendant no.2), who appeared before the trial Court and moved an application for giving time to file written statement. He also moved an application for rejecting the plaint under Order VII Rule 11 CPC on 18.9.1998, which was rejected on 16.1.2002. A review petition seeking review of the aforesaid order was filed but the same was dismissed on 29.4.2004. He, thereafter, moved an application on 3.8.2004 for referring the dispute for arbitration, but subsequently his counsel conceded that the said application was not maintainable.

6. Sunil Kumar Singh (defendant no.3), who is son of Birendra Kumar Singh (defendant no.2) did not put in appearance despite service of summons and the trial Court vide order dated 28.6.1999 directed to proceed ex-parte against him. After more than 5 years defendant no.3 moved two applications on 14.10.2004 for setting aside the order dated 28.6.1999 by which the Court had directed to proceed ex-parte against him and also sought time to file written statement. On the concession made by the plaintiffs, the order to proceed ex-parte against defendant no.3 was set aside on 3.11.2004. The defendant no.3 thereafter moved an application on 25.11.2004 under Section 34 of the Arbitration Act, 1940 praying that in view of the arbitration clause in the agreement dated 13.1.1989, the proceedings in the suit may be stayed and the matter may be referred to arbitration. The plaintiffs filed an objection to the application on 1.12.2004. On 16.12.2004, defendant no.3 filed a supplementary petition in support of his earlier petition dated 25.11.2004 reiterating the prayer for referring the dispute to arbitration. Subsequently, on 28.2.2005, defendant no.3 moved a petition purporting to be supplementary petition to the petitions dated 25.11.2004 and 16.12.2004, wherein it was averred that as the suit is of the year 1998, to avoid any chances of confusion, his earlier petitions may be treated to have been filed under Section 8 of the Arbitration and Conciliation Act, 1996. This petition was opposed by the plaintiff appellants. The trial Court dismissed the petition by the order dated 17.3.2005 mainly on the ground that as Shri Rajendra Prasad Singh (predecessor-in- interest of the plaintiffs) was not a party to the partnership deed which was executed on 17.2.1992, and as the main relief sought in the suit was that the said partnership deed dated 17.2.1992 was illegal and void, which question could only be decided by the civil Court, the dispute could not be referred to arbitration. The defendant no.3 challenged the aforesaid order by filing a Civil Revision Petition which was allowed by the High Court by the impugned order dated 4.8.2005. The operative portion of the order passed by the High Court only says that the Court below has committed error in passing the impugned order. Accordingly, the impugned order is set aside and this civil revision is allowed. No specific order making reference to arbitration was passed.

(3) Notwithstanding that an application has been made under sub- section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.

11. In view of the discussions made above, the appeal is allowed with costs and the impugned order dated 4.8.2005 passed by the High Court in Civil Revision No.1010 of 2005 is set aside.