The court in command shall be careful when intervening with the arbitrator’s Interim Orders: Calcutta HC Preserves Deceased LLP Partner’s Share
APO 65 of 2023
Case: Concrete Developers LLP v Gaurav Churiwal and Ors
Appearance
Petitioner: Mr. Abhrajit Mitra, Sr. Adv.
Respondent : Mr. Ratnanko Banerji, Sr. Adv
CORAM: Hon’ble Justice Moushumi Bhattacharya
Order Dated: 24.11.2023
Introduction
The High Court of Calcutta recently contended that a Court exercising powers under Section 37 of the Arbitration & Conciliation Act, 1996 (“1996 Act”) must be circumspect in its interference with interim orders of an arbitrator.
Facts of the Case
The present appeal, filed under section 37 of The Arbitration and Conciliation Act, 1996, is from an order passed by a learned sole arbitrator The impugned order is an interim order and was passed in an application filed by respondent no. 1/claimant under section 17(1) of the 1996 Act whereby the appellant was directed to deposit Rs. 6 crores in a separate interest-bearing account in the name of the Limited Liability Partnership (LLP) namely Concrete Developers LLP.
he LLP was constituted according to an Agreement dated 24.11.2015 to develop a high-end real-estate project – “Raghu Estates” in Alipore, Kolkata. The project had a developer’s allocation of 16 flats of the total number of flats constructed for the project.
Upon considering the submissions made on behalf of respondent no. 1 / claimant and the appellants in the context of the claimant’s prayer for directing the appellants to set apart Rs. 6,41,73,413.00/- being the total balance about Pawan Kumar Churiwal’s shares (the father of the claimant) as on 12.1.2021, the learned arbitrator was of the view that the claimant and/or the other legal heirs of the deceased partner, Pawan Kumar Churiwal are entitled to accounts and a share in the profits in the LLP. The appellants were accordingly directed to keep a sum of Rs. 6 crores apart in a separate interest-bearing account in the name of the LLP. The appellants were also directed to furnish the particulars of accounts to the claimant and to maintain the accounts till disposal of the arbitration. Counsel submits that an order for securing a particular amount of money can only be made concerning an “amount in dispute” whereas the impugned order is based on equitable considerations which cannot be done under the provisions of the 1996 Act. Counsel submits that the claimant’s section 17 application did not contain any prayer for securing any particular amount and that the impugned order is also contrary to section 24(5) of the LLP Act, 2008 which restricts the entitlement of a person to the share of a deceased partner to the capital contribution of the former partner and the former partner’s share in the accumulated profits of the LLP. Counsel further submits that the impugned order suffers from an absence of reasons as to the basis of the direction on the appellant to set Rs. 6 crores apart and is also contrary to the arbitrator’s findings in the 10th sitting. Counsel further submits that the claimant’s conduct in the arbitration was inequitable and that the impugned order is patently illegal and perverse.
Counsel submits that the object and purpose of section 17 is to preserve the value of the share of the deceased partner at the time of his demise so that the claimant’s share is not frittered away by the other partners who are in control of the appellant LLP. It is submitted that the appellant and the other partners were siphoning away profits from the sale of flats during the arbitration.
Analysis of the court
The facts and circumstances that were presented before the learned arbitrator or were disclosed in fits and spurts by the appellant / surviving partners fully justify the impugned interim order There can be no jurisdictional objection to the impugned order as the Act of 1996 grants the arbitral tribunal plenary powers to pass such orders for preserving the dispute in the arbitration. The order also does not suffer from any factual or legal infirmity and is certainly not arbitrary or perverse. The Court’s view is supported by the reasons given above.
Taking into account the legal position, the case law on the subject, and the particular facts in the present matter, the Court is accordingly of the view that the impugned order does not call for any interference.
The aforesaid applications are accordingly dismissed. There shall be no order as to costs.
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Written By
Kaulav roy chowdhury