Dismissed

K.Balakoteswara Rao v. Mrs. Manne Anuradha

Telangana HC1 Apr 2021CMA/82/2021

Case brief

AI extract

What is this about?

The High Court dismissed an appeal under Section 37 of the Arbitration and Conciliation Act challenging an order dismissing a review application. The Court held the arbitrator had no jurisdiction to review his own interim order and barred the appellant from raising merits-based grievances after withdrawing a prior challenge.

What did the court decide?

Appeal dismissed; no costs.

K.Balakoteswara Rao Vs Mrs. Manne Anuradha — Arbitration | Telangana HC (2021)

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HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD

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THURSDAY, THE FIRST DAY OF APRIL TWO THOUSAND AND TWENTY ONE

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PRESENT

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THE HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO AND

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THE HONOURABLE SRI JUSTICE T.VINOD KUMAR

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C.M.A. NO: 82 OF 2021

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Appeal filed under Sections 37 of Arbitration and Conciliation Act,^{1996, against} the Order/ decree in Arb. lA No.2 of 2020 in Arb. Petition No.1 of 2020 dated 3111212020 on the file of the Court of the before Sri Devakar^{Atluri FCA sole arbitratorat} Hyderabad.

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Between:

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K.Balakoteswara Rao, S/o Sri Seetharamaiah, aged about 52^{yensr/o Flat No.0305,} Block No.29 Raintree Park, Malaysian Township KPHB Colony,^{Hyderabad-500072} It'4anaging Partner M/s M'K Estate

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..pETraoNERyAppELLANT

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AND

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Mrs. Manne Anuradha, W/o Sri lvl.Viiaya Karunakara.^{Rao Plot No.E-1'2'3, Dollor} Hills Puppalaguda, Hyderabad-500073 Partner, M/s^M.K.Estates

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Sri Divakar At-iuri, C.A. Sole Arbitrator 101,^{DoyenChambers,8-3-319/11} Yellareddyguda, Hyderabad-500073

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...RESPONDENTS/RESPONDENTS

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lA NO: 1 OF 2021

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Petition under Section 17(2)^(b) of Arbitration and Conciliation^{Act,'1996 R/w.} Section^'151 of CPC^praying that in the circumstances^{statedin the affidavit filed} therewith, the High Court may be^pleased to set aside^{the orders dated31 .12.2020} passed by the 2nd Respondent Arbitrator and consequently modify the-orders of the 2nd Respondent daled 27.11.2020 by deleting the relief^{granted to the 1" Respondent} at serial no. 6 of paragraph 8. The Appellant further^prays that the^{Hon'ble Court will} be pteased to direct the 2nd Respondent to decide the^{genuineness of the Partnership} Deed alleged to have been amended on²¹ .09.2016 to the^{Partnership Deed dated} 27.06.2015 and pass

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For the Appellant : SRI PRASAD RAO VEMULAPALLI, Advocate

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For the Respondents : NO ONE APPEARS

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The Court delivered the following : JUDGMENT

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HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO ANI)

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HONOURABLE SRI JUSTICE T.VINOD KUMAR

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Civil Miscellaneous Appeal No.82 of 2021

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JUDGMENT: (Per Hon ble SriJus/ice l,t.S Ranlachandra Rao')

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This Appeal is preferred under Section 37 of the Arbitration and Conciliation Act, 1996 (for short^,the Act') challenging the or.der dl3l-12-2020 in Arbitration Petition No.2 of 2020 passed by the sole Arbitrator.

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2, A dispute between the appellant and I't respondent had been referred to the sole Arbitrator (2nd respondent), and the said dispute had arisen between the 1'1 respondent and appellant in terms of a partnership deed dt.27-06-2015 relating ro the firm^{,M.K.Estates,,} which was later amended on2l-09-2016.

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The 1't respondent was the claimant before the Arbitrator. Several reliefs were sought by the 1't respondent before the Arbitrator.

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The l'r respondent contended that the appellant was the Managing Partner as per the terms of the partnership deed dt.27-06-2015, which was later amended on 21-09-2016; the appellant,s investment in the flrm was meager and negligent, while 1't respondent,s investment ran into around Rs. 10.00 crores and she had invested not on_ly her own funds, but also borrowed fl'om financial institutions; and that the appellant withdrew his qapital investment to meet his personal requirements and did not show any interest in the business of the firm and only acted in self-interest.

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cma 82 2

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The 1" respondent alleged that the appellant^{joinedhands with the} business rivals for his personal advantage^{and started sabotagingthe} partnership business and started refusing to cooperate with the l't respondent in selling the plots and apartments in the^{layoutdeveloped} by the flrrm. It was also alleged that the appellant, with^{a mala} fide intention, tried to usurp the sale of^{plots in the layoutdevelopedby the} firm without the consent, authority^{and knowledgeof the 1't respondent.} Certain transactions entered^{into by appellant with thirdparties are also} challenged as fraudulent by the l't^{lespondentand certain reliefswere} sought by her in the clairn^{petition filed on 12-08-2020 beforethe2nd} respondent.

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6, Later claim petition was also^{revised/amendedon 04-11-2020.}

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7 , Before the Arbitrator, the 1" respondent^{also fi1ed I.A.No.2 of 2020} under I 7 of the Act for^{the followinginterim reliefs:}

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(i) To restrain the appellant from^{claiming to be the partnerof the} firm with a direction to deliver/disclose^{/ handover the passwords} and OTPs related to Income^{Tax, Real Estate Regulatory} Authoiity^(RERA), Goods^{and ServicesTax (GST)etc.}

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(ii) To restrain the appellant from^{selling, trying to sell, market,} advertise for sale of any of^{the propefty of the firrn M.K.Estates;}

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(iii) to restrain the appellant from^{withdrawingany amounts from the} Firm account in the^{Bank,or opennew accountin the nameof the} Firm M.K.Estates;

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\1SIl.J &^{f VK..J} cNa 82²⁰²¹

-l

''t

(iv) permit the^{1't respondent/claimant to operatethe account of the} Firm and deal^{with the Bank, run the business of the Firm in her} capacitY as Partner^{of the firm;}

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(r) To restrain^{the appellant frominterfering with possession and day} to day management^{and businessof the officeand propertyof the} Firm M.K.Estates^{during pendency of Arbitration and till} adj udication;^and

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(ui)anyotherorderthatisdeemedreasonableandjustifrableinthe opinion of the^{Tribunal and in the interest ofjustice'}

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The appellant^{filed a counter thereto disputing the contentionsof} the l't respondent^{and evendenying the existence of amendedpartnership} deed.

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He alleged that^{1't respondent's husband,whowas an auditor of} the firm, managed^{the accounts and balance sheet and played fraud on the} appellant and^{that the appellant continued to hold40"h of the profits of} the t-rrm.

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The appellant^{also contended that the amendmentof the claim} statement^{was orderedby the Arbitrator without any application by} 1,'respondent^{and some ofthe reliefssought in the place of interim relief} are t'inal in^{nature such as permittingthe l't respondentto operate the} bank account,^{open bank account,to sell the propertyand the Arbitral} Tribunal had no^{jurisdiction to pass such orders'}

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__J \ "J./

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.mir 3i :^l): l

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9 An interim order was^{passedon 27'11-2020 by the 2nd respondent-}

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Arbitrator giving the following^directions:

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"1. That the appellant is restrained from claiming to be managing partner and shall not sell, advertise to sell^{any of the ploperlyof the} Firm M.K.Estates:

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That the appellantt shall deliver^{up thepasswords andOTPsrelating} to Income Tax, RERA, GST^{and other statutoryauthorities;}

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j, The appellant is restained from withdrawing any amounts of the firm from^{the Bankor} from^{openingfromnew accountor accounts in} any bank;

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That the l"'^{respondentshall not open ony new Bank accounlbut} shall continue existing^{bank account and is permitted lo operatethe} existing bank account.^{She shallmaintdinthe payments received and} expended through the^{same account and theincomeandexpenditure} shall reflect in the^{day bookand the ledger promptly.}

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That the^{income, expenditure as maintainedin the book qf accounts'} ,shall be verified and^cer rted^{by theindependentauditor in writing'} Hence, the appellant^{is restt'dined} from^{interfering withthe position} and day to day^{managementof the business and properties of the Firm} during rhe^{pendencyof the Arbitration till adiudication.}

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Any sale of^{propertyby agreement,or by executionof sale deedetc,} or mortgage or creation^{of any encumbranceover theproperty shall be} with the prior^{veriJication and approval by the independent audilorin} writing.

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The independent auditor^if finds^{any discrepancy or ony enlryof} income and expenditure,^{or any transaction of property is doublful,} shall report to the Arbitrator^{and theappellant, if the l"' respondent} -failed^{to cure the clefectwithina reasonable time allowedby the} independent auditor.

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That the independent auditor^{shall verify and certifu the transactions} in book"s and financial^{statemenlsand give his} .findings^{and reporllo} the appellantt ttnd^{the Arhitral Trihrutaliquarterl.vrcports the fir'st} report being./br^{the period starting.fi'om this date to 31, March,2021'}

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MSR,J & l^VK.I cmd'82 -2021

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Both the^{parties are at liberty to seek} further^{direclions or ordets} from^{the Arbitrator if the aboveorder or ordets are not executable' not} performed in accordance^{withthedirectionsabove'}

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Both the^{partiesate at liberty to approach the tribunalfor} modiJication, alteration^{or amendmentof the above directions' in casc} of ambiguity, impracticability^{or redundancy'}

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ll. Mr.Pavuluri^{AchuthaRamaiah,a reputed CharteredAccounlanl} having is ffice^{at Pavuluri& Co.,3'd} floor,^{Plot No 18' KavuriHills} Phase-1, Maclhapur,^{llyderabad'is proposedto be crppointedus} intlependent auditor.^{Borhthe parliesshall} file^{their obiections'if any} on his appointment^{within 3 day} from^{today,Jailing which'his} appointment shall^{standconfirmecl.His remunerationis tentulively} fixed^{at Rs.25,000/-to be charged on the rtrm's accourttThis petition} allowed accordinglY^{.. "}

¶64

The appellant^{questioned the same in C'M'A'No'483 of 2020} before this Court, but^{withdrew the sameon 02-12-2020'}

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Taking advantage^{ofClause-10oftheorderdt'27-11-2020 passed} by the leamed Arbitrator^{in ArbitrationPetition No'2 of 2020 that parties} at/e at liberty to approach^him for^{modification,alterationor amendment} of the interim directions^{givenby the Arbitratorin the event of ambiguity,} redundancy, the appellant^{filed an application to} impracticability .or review the said order.^{He wanted deletion of clause-6 in the order} dt.27-ll-2020^{passed by the Arbitratorin ArbitrationPetition No'2 of} 2020, which stated:

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"6. Any sale of property^{by agreement,or by execution oJ sale deed etc'} or mortgage or creotion^{of any encumbranceoverthe property shallbe} with the prior verification^{and approvalby the independentauditorin} writing."

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The appellant wanted^{the Arbitratorto appointtwo auditors from}

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each panel to audit the^{statementof accounts that maybe submittedby}

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cma 82 202 I

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both parties and contended that the Arbitral^{Tribunil had eredin} appointing an auditor of Arbitrator's^{choice, which is not permissible.}

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Counter was filed by l't respondent opposing^{the said application} contending that the appellant had challenged^{the order dt.27-ll-2020in} C.M.A.No.483 of 2020, and^{had withdrawn the same,that the Review} application is not bona fide and^{it amounts to forum shopping'Reliance} was also placed on the^judgment of the^{Delhi High Couft in} Development Authority^Vs. Naveen Kumarl'

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14, The leamed Arbitrator^{dismissedthe Review petition by order} dt.3t.12.2020.

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After considering the submission^{of both sides, he noted that in the} Delhi High Court^{judgment it was held that the Arbitral Tribunal hasno} powers of review unless there is sotne^{procedural lacunae .Thoughit rvas} sought to contended before^{the Arbitrator that the Delhi I-ligh Courtwas} not dealing with the interim^{award,but with a frnal award, the Arbitrator} did not agree with the^{said contention andpointed out that the Act makes} no distinction between a final^{award or an interim measure. He also} observed thai power of^{review is not an inherent power and it has to be} conferred by law either^{expresslyor by implication.It therefore rejected} the review application. It^{also observed that if the review is entertained,} the Arbitrator has to rewrite^{the entire award as any modificationwould} change entire structure of the^{interim measure ordered in the order} dt.27-1r-2020

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' 120^tu I^{o supreme(Del)2938}

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MSR,J & TVK,J cma 82²⁰²¹

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Challenging the same, this appeal^{is preferred.}

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11 , Heard Sri Prasadarao Vemulapalli, learned^counsel for^the appellant.

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Learned counsel for appellant contended that the^{2nd respondent-} Arbitrator has committed manifest error in granting reliefs under Section I 7 of the Act which had not been sought for; that the^2nd respondent had a close relationship with the husband of the l't respondent and has a bias against the appellant; and so the order dt.27-11-2020 passed by 2nd respondent and also consequential order dt.31-12-2020 passed by the 2nd respondent are liable to be set side.

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It is further contended that the 2nd respondent had committed grave error in proceeding with the arbitration without deciding the genuineness of the partnership deed alleged to have been amended on 2l-09-2016; that the 2nd respondent even furnished a false declalation under Section l2(l) olthe Act and has attracted disqualification plovided under Section l2(5) of the Act on account of misrepresentation that he has no personal relationship with either of the parties and that this goes to rhe very root of the matter.

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20, It would not be necessary for us to go into the merits of the case of the respective parties in this Appeal since the appellant had earlier filed C.M.A.No.483 of 2020 challenging the order dt.27-11-20?0 passed by thl12'd.respondent Arbitrator under Section 17 of the Act, but had I withdrawn the same without seeking any liberty to challenge it again.

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Cnln i: :Ul I

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The appellant cannot be now^{permitted to re-agitate the issues} wlrich he had opportunity to laise in^{relationto the order dt.21-11-2020} passed by 2"d respondent when he filed C.M.A.No.483 of²⁰²⁰ challenging the said order, after^{he has rvithdrawn the said CMA.}

¶84

All the contentions raised in^{the grounds of appeal practically} amount to a challenge to the^{merits of theorder'} dt.27-11-2020 including the^{allegedbias of the Arbitratorand the same} cannot be allowed to be re-agitated^{in this appeal'}

¶85

The scope of this appeal^{is conhnedto considering whetherthe} 2nd respondent Arbitrator^{had any power to review his earlierorder} dt.27-ll-2020 as^{was sought by the appellant in the review application} filed before the Arbitrator.

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The appellant^{is not able to point out any provisionin the Act or} any^judicial precedent^{empoweringthe Arbitrator to reviewhis own} older- whether it^{was an interim order or a final award.}

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The appellant^{cannot be permitted to widen the scope of the appeal} which is confined to the correctness^{ofthe orderdt.31-12-2020passedby} 2nd respondent to cover^{the issues relating to the correctness of the order} dr.27-11-2020^{passed by the Arbitrator.}

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Therefore we hold^{that the 2nd respondentArbitratordid not} commit any error of^{jurisdictionin refusingto review his earlier order} dt.27 - 1 1 -2020 in Arbitration^{Petition No.2 of 2020.}

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MSR.J & TVK,J cnra 32 ?021

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'1.

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27 . We therefore do not find any merit in the Appeal and it is

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accordingly dismissed at the admission stage. No costs.

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Consecluently, miscellaneous petitions, pending if any, shall stand

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closed.

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Sd/-K.SREENIVASA RAO JOINT REGISTRAR

//TRUE COPY//

SECTION OFFICER

The Chairman, before^{Sri Divaker Atluri, FCA SoleArbitrator}

¶101

51 A.Divaker, Chartered Accountant,^{Managing Partner,M/s. A.Madhusudana&} Co., Chartered Accountants,^{Flat No.101} ,^{Doyen Chambers, Yellareddyguda'} Ameerpet, Hyderabad-500073

¶102

One Cb to Sii Prasad^{RaoVemulapalli, Advocate (OPUC)}

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Two CD Copies

HIGH COURT

DATED:01/04/2021

ORDER

CMA.No.82 ol 2021

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C 16 JUN 2021
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DISMISSING THE CMA.

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)rl

K.Balakoteswara Rao v. Mrs. Manne Anuradha

Case brief

What is this about?

What did the court decide?

K.Balakoteswara Rao v. Mrs. Manne Anuradha

Case brief

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What did the court decide?

What the court decided

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