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Judgment
R.Raghunandan Rao, J
The applicants‟ contend as follows:
The applicants were approached by the respondents 2 to 7, for investment in a shipping business. The applicants were informed by the respondents 2 to 7 that they had constituted 1st respondent-firm, for the purpose of carrying on shipping business, and had already placed an order for a ship, which was to be delivered shortly. This ship was to be used in the business of Bunker Barge Operator and Marine Fuels Supply which would yield good results and profits.
The Respondents no.2 to 7 stated that they were raising a loan of rupees five crores for financing the purchase of the ship and some further money was also required. On the basis of these representations, the applicants agreed to invest Rs.1 crore in the said business. The respondents 2 to 7 agreed to admit the applicants as partners in the 1st respondent-firm with a share of 20% of the firm. A fresh partnership deed was executed on 11.11.2019, reconstituting the 1st respondent-firm.
In pursuance of their undertaking, the applicant No.1 invested Rs.49 lakhs and the applicant No.2 invested Rs.25 lakhs in the 1st respondent-firm. However, the 2nd to 7th respondents were unable to obtain the bank loan, for purchase of the ship, and the ship builder did not handover the ship to the 1st respondent-firm.
As the respondents 2 to 7 had failed to obtain the said bank loan and there was no possibility of further business, the applicants issued a legal notice dated 24.08.2020, dissolving the 1st respondent partnership firm and asked for refund of the amounts invested by the applicants along with interest @ 12% per annum as per Clause-4 of the partnership deed dated 11.11.2019. This legal notice was returned, in relation to three of the addressees, with the remark “door locked”. As the respondents did not respond, the applicants sent a notice dated 23.09.2020 to the respondents, invoking the arbitration clause and proposing the name of a counsel in Delhi as the sole arbitrator. After the dispatch of the notice, dated 23.09.2020, the remaining respondents, who received the notice of the applicants, replied to the notice through their advocate, by notice dated 22.10.2020, denying the contents of the notice and refusing to repay the investments of the applicants.
Clause 12 of the Partnership Agreement dated 11.11.2020 stipulated that any disputes between the parties would have to be referred to arbitration. The said clause is reproduced below:
“Any dispute or difference that may arise among the partners with respect to the construction or interpretation of this deed or any other matter relating to the partnership affairs shall be referred to Arbitration under the provision of Indian Arbitration Act”.
As the respondents did not reply to the notice dated 23.09.2020, nor take any steps for initiating the arbitration proceedings, the applicants have approached this Court.
This Court had permitted the applicants to take out personal notice by its order dated 06.08.2021. This Court, on 10.03.2022, recorded that notices had been served on respondents 2, 4, 5 and 6 while notices sent to respondents 1, 3 and 7 had not been served. The learned counsel for the applicants was permitted to take out fresh notice. On 12.04.2022, this Court recorded that the notices sent to respondents 1, 3 and 7 had been returned unserved and permitted the learned counsel for the applicants to serve notice on respondents 1, 3 and 7, by way of publication in the news paper „Indian Express‟. Proof of that application has also been placed before this Court. Despite service of notice, none of the respondents have appeared before this Court. In the circumstances, this matter was taken up for hearing and orders were reserved on 07.07.2022.
A perusal of the record shows that there is a partnership deed which contains an arbitration clause executed between the applicants on one hand and respondents 2 to 7 on the other hand. As the respondent No.1 is the firm which was reconstituted under the said agreement, the 1st respondent is also a necessary party and bound by the arbitration clause in the agreement. The respondents, despite receipt of notice invoking arbitration, have not taken any steps for appointment of an Arbitrator or initiation of arbitration proceedings. In these circumstances, it must be held that the requirements of Section 11 of the Arbitration and Conciliation Act, 1996 have been complied with.
Consequently, this application is allowed, appointing Sri Justice M.Venkata Ramana, Former Judge, High Court of Andhra Pradesh, Amaravathi, 8204 Niharika Signature Apartments, Opposite NCC Urban, Adjacent to Nasar Boys High School, Gachibouli, Hyderabad-520032 as Arbitrator for deciding the disputes raised by the applicants in the legal notices dated 24.08.2020 and 23.09.20220. The Arbitrator shall fix his fees in accordance with Schedule IV of the Arbitration and Conciliation Act, 1996.
Miscellaneous petitions, pending if any, shall stand closed.