Manisha Gupta v. Rajinder Kumar & Ors.

10.6. It is averred that defendant nos. 14, 15, 16 and 17 are debtors of the firm and monies are due and receivable from them by the partnership firm; however, their debt stands reduced post the death of the deceased partner for which no accounts has been rendered.

10.7. It is averred that documents available on the online portal of Goods and Services Tax (‘GST’) shows that defendant no. 1 has set up a proprietorship firm i.e., defendant no. 10 with the near identical trading name as that of the dissolved partnership firm and from the same commercial premises, without the consent of the legal heirs of the deceased partner and prior to settlement of the accounts. It is stated that defendant no. 1 has illegally appropriated the inventory of the partnership firm having a book value of Rs. 18 Crores to the said sole proprietorship firm i.e., defendant no. 10 and thus defendant no. 10 has been impleaded in the present suit. In this regard, the plaintiff relies upon the judgment of Supreme Court in M/s Crystal Transport Pvt. Ltd. v. A Fatima Fareedunisa[1] to contend that the legal heirs of the deceased partner have a right to seek accounts of the profits of defendant no. 10.

10.8. It is averred that since defendant nos. 1, 2, 3 and 4 are the puppeteers of all the transactions involving defendant nos. 5 to 17, and in order to avoid multiplicity of proceedings this comprehensive suit has been filed. It is stated that plaintiff can maintain suits against each of the aforesaid defendants separately. However, to prevent conflicting judgments and to ensure comprehensive adjudication, all the said parties have been impleaded in the present suit. Arguments on behalf of Plaintiff

11. The plaintiff contends that since the disputes between the parties is relatable to rendition of accounts of the partnership firm set up in pursuance of the partnership agreement dated 01.04.2002, upon its dissolution the disputes are commercial in nature and covered by Section 2(1)(c)(xv) of the Act of 2015. 11.[1] Mr. Manish Vashisht, learned senior counsel for the plaintiff has relies upon the judgment of the coordinate Bench of this Court in Jatin Jain v. Anuj Jain[2] to contend that the reliefs of recovery of money sought against defendant nos. 2 to 17 would be covered by Section 2(1)(c)(xv) of the Act of 2015. The relevant portion of the judgment relied upon read as 2024 INSC 859, Para 21 under:- “18. Upon a conjoint reading of the foregoing enunciation of the law by the Supreme Court, in the opinion of this court, the following inferences arise in the present case:

18.1. In legal parlance, the word ‘dispute’ has a wide meaning. It postulates the assertion of a claim by one party and its denial by the other. The word ‘relief’ is to be distinguished from ‘dispute’. Relief sought in a legal proceeding is a reference to the remedial measure claimed from the court, be it by way of declaration, recovery, specific performance and so on. In a litigation, ‘relief’ is sought in respect of a ‘dispute’.

18.2. It may be noticed that in section 2(1)(c) of the Commercial Courts Act, the Legislature specifies the kind of disputes which would be amenable to the special procedure under that special statute, which it calls ‘commercial dispute’; and in sections 6 and 7, the Legislature says that apart from being a ‘commercial dispute’, the relief sought in a commercial suit must also be of a ‘Specified Value’.

18.3. When in section 2(1)(c)(xv) of the Commercial Courts Act, the Legislature inter-alia says that a dispute arising out of a partnership agreement is also a commercial dispute, it only means that the dispute must be relatable to a partnership agreement, not that the relief sought must necessarily be under the partnership agreement.

18.4. In the present case, the plaintiffs claim recovery of money which, on the plaintiffs' own admission, is part of the sale proceeds of a property that belonged to the partnership firm, in which the late father/husband of the plaintiffs was a partner. It is the plaintiffs' contention that the partnership property was sold; part of the sale proceeds were credited to their father's/husband's account (though his personal account); and the monies were thereafter withdrawn unlawfully by the defendants.

18.5. The money claimed by way of the suit is therefore part of the sale proceeds of property which was owned by the partnership firm

18.6. The plaintiffs' contention in the suit is two-fold: 18.6.1. Firstly, that the partnership property could not have been sold without the consent of the plaintiffs' father/husband; and. 18.6.2. Secondly, that the sale proceeds thereof have been misappropriated by the defendants after having been deposited in their 2024 SCC OnLine Del 2076 father's/husband's account.

18.7. Plaintiff No. 1 himself alleges that instead of dissolving the partnership firm and distributing its assets, the defendants have clandestinely misappropriated partnership funds, in the manner as detailed in the plaint.

19. In light of the above, this court is of the view that the present suit relates to a ‘commercial dispute’ of ‘Specified Value’ within the meaning of sections 2(1)(c)(xv) and 2(1)(i) read with section 12 of the Commercial Courts Act; and is therefore maintainable as such before this court under section 7 of the Commercial Courts Act.

20. The suit is therefore required to be dealt-with as a commercial suit.” (Emphasis Supplied) 11.[2] He also relied upon the judgment of High Court of Bombay in the case of Bombay Iron & Steel Labour Board v. SBI[3] to contend that a commercial suit for recovery of money is maintainable even with respect to allegations of embezzlement of funds between parties to the contract. Arguments on behalf of Defendants

12. Mr. Anupam Srivastava, learned counsel for defendant nos. 3, 4 and 13 contends that since the allegations against the said defendants are on the grounds of embezzlement, no suit is maintainable under Section 2(1)(c)(xv) of the Act of 2015. In this regard he relies upon the judgment of coordinate Bench of this Court in IHHR Hospitality (Andhra) Pvt. Ltd. v. Seema Swami and Ors[4] 12.[1] He states that a suit under Section 2(1)(c)(xv) of the Act of 2015 can be filed only between the partners of the partnership firm. He states that the provisions of the statute have to be construed strictly and, therefore, suit would not be maintainable against non-partners. He relies upon the 2024 SCC OnLine Bom 1679 MANU/DE/4301/2022 judgment of the Supreme Court in Ambalal Sarabhai Enterprises Ltd. v. K.S. Infraspace LLP[5]. 12.[2] He has also placed on record an affidavit dated 23.08.2024 of defendant no. 13 to state that defendant no. 13 had advanced a sum of Rs.1,25,00,000/- to the partnership firm between 02.05.2019 and 08.03.2021, which was an interest-bearing loan; and an amount of Rs. 1,25,63,913/- was repaid to defendant no. 13 along with interest after deduction of Tax Deducted at Source (‘TDS’) from time to time as set out in the said affidavit.

13. Similarly, defendant nos. 2, 5, 11 and 12 have also filed their affidavits all dated 23.08.2024 on record to state that they have advanced interest-bearing loans to the partnership firm and the said loans stands repaid by the partnership firm.

14. So also, defendant no. 6 as well has filed his affidavit dated 23.08.2024 and has contended that he was an employee of the partnership firm and all credits in his account are towards his salary. He has denied the allegations of siphoning levelled against him in the suit. Analysis and findings

15. At the outset, this Court notes that in this Order the Court is only adjudicating upon the maintainability of the suit in its present form and is not opining on the merits of the averments in the plaint qua the defendants. The said issue on merits will be decided subsequently after hearing the concerned defendant.

16. For the purpose of adjudicating on the maintainability, the averments MANU/SC/1378/2019 in the plaint are being examined on a demurrer. This Court has also taken into consideration the averments made by defendant nos. 2, 5, 6, 11, 12 and 13 in their affidavits with respect to the nature of their relationship with the partnership firm.

17. Firstly, it is admitted that the partnership firm stood dissolved upon the death of late Shri Gopal Krishan Gupta and rendition of accounts between surviving partner, i.e. defendant no. 1 and the legal heirs of the deceased partner has yet not been settled. It is further admitted that the moveable and immoveable assets of the partnership firm including the monies of the firm remained at the exclusive disposal of defendant no. 1 upon dissolution of the partnership firm and the said assets have been dealt with by defendant no. 1 post the dissolution to the exclusion of the legal heirs of late Shri Gopal Krishan Gupta.

18. The entitlement of the plaintiff along with other Class-I legal heirs of late Shri Gopal Krishan Gupta i.e., defendant nos. 7, 8 and 9 to seek the rendition of accounts of the partnership firm is not in dispute.

19. It is admitted that defendant nos. 2, 5, 6, 10, 11 and 12 are all related to defendant no. 1. While defendant no. 1 is the surviving partner; defendant nos. 2, 5, 11 and 12 are the creditors of the partnership firm and had advanced interest-bearing loans to the said firm. Defendant nos. 2, 5, 11 and 12 have admittedly received part-payments from the partnership firm after the death of the deceased partner towards the repayment, which transactions have been challenged by the plaintiff in the present suit. The transactions between partnership firm and defendant nos. 2, 5, 11 and 12 are commercial in nature within the meaning of Explanation II of Section 34 of the Code of Civil Procedure, 1908 (‘CPC’) though not under Section 2(1)(c) of the Act of 2015.

20. Defendant no. 10 is the sole proprietorship firm of defendant no. 1 and as per the plaint is the beneficiary of the assets of the partnership firm. It is the stand of the legal heirs of the deceased partner that the assets have been appropriated by defendant nos. 1 and 10 without the consent of the said legal heirs of the deceased partner.

21. Defendant no. 6 admits being an employee of the partnership firm and admits receipt of amounts from the partnership firm post its dissolution. The said defendant, however, denies any wrong doing.

22. Similarly, defendant no. 4, admits receiving in his personal bank accounts, post dissolution of the firm, the amounts due and payable by a debtor of the partnership firm towards the discharge of their liability. In the considered opinion of this Court, the defendant no. 4, who is the accountant of the partnership firm, holds the said amount in trust for and on behalf of the partnership firm and, therefore, in a suit filed by the plaintiff for rendition of accounts, defendant no. 4 would be a proper and a necessary party.

23. Defendant no. 3 is admittedly the Manager of the partnership firm and husband of defendant no. 13. Defendant no. 13 as per her affidavit dated 23.08.2024 had advanced interest bearing loans to the partnership firm and has received part-payment towards repayment of the said loan even post dissolution of the firm. The transactions between partnership firm and defendant no. 13 are also commercial in nature within the meaning of Explanation II of Section 34 CPC though not under Section 2(1)(c) of the Act of 2015.

24. So also, defendant nos. 14 to 17 are the debtors of the partnership firm since their names are duly reflected under the head of Trade receivables in the unaudited balance sheet for the F.Y 2022 -2023 and in fact the transaction between the partnership firm and defendant nos. 14 to 17 falls within the definition of Section 2(1)(c)(xviii) of the Act of 2015.

25. In the aforenoted facts, it is apparent that all the defendants (other than defendant no. 1 and 10), who though are not partners in the dissolved partnership firm, have a direct privity with the partnership firm having dealt with the funds/assets of the partnership firm post its dissolution. In these facts, the legal right of the legal heirs of the deceased partner to seek verification of the transaction between the concerned defendant and the dissolved firm cannot be disputed.

26. The legal heirs of the deceased partner are entitled to satisfy itself that the part-payment to the creditors i.e., defendant no. 2, 5, 11, 12 and 13 by defendant no. 1 was due and payable. So also, the legal heirs are entitled to satisfy himself/herself that the debt recoverable from the debtors such as defendant nos. 14, 15, 16 and 17 to defendant no. 1 has been validly accounted for.

27. In view of judgment of Supreme Court in M/s Crystal Transport Pvt. Ltd. (supra) as well Sections 50 and 53 of the Indian Partnership Act, 1932 the entitlement of the legal heirs of the deceased partner to seek rendition from defendant no. 1 for the profits earned from defendant no. 10 stands established, subject to plaintiff/legal heirs proving that defendant NO. 10 has indeed used the assets of the dissolved firm.

28. In the factual matrix of this plaint, it is apparent that the defendants have dealt with the partnership firm after its dissolution and, therefore, for rendition of accounts the transactions with each of the said defendants would have to be verified. This verification would also enure to the benefit of the defendants as it would give them a valid discharge qua their transactions with the dissolved partnership firm.

29. The defendant nos. 2, 5, 11, 12 and 13 have filed their affidavits explaining that the amounts received by them post dissolution by the partnership firm was in fair discharge of amounts due and payable to them. The said explanation of the said defendants will be considered while adjudicating the suits on merits. However, it is evident that the exchange of funds between the dissolved firm and the said defendants is not in dispute and thus the Court has to verify the said claim of the defendants.

30. In these facts, where the flow of funds to and/or from the dissolved firm to the defendant nos. 2,5,11,12 and 13 and defendant no. 14 are not in dispute and this Court is concerned with the rendition of accounts of the dissolved firm, examination of the transaction between the dissolved firm and the concerned defendant would necessarily arise for consideration while granting relief of rendition of accounts to the plaintiff herein.

31. The contesting defendants do not dispute that separate proceedings can be maintained by the legal heirs of the deceased partners against them for seeking the verification of the transaction. They state, however, the verification of the said transaction cannot be clubbed with the captioned suit concerned with rendition of accounts.

32. Each transaction with a creditor/debtor of a dissolved firm is a separate and an independent transaction with the surviving partner and the legal heirs of the deceased partner. This Court would have ordinarily directed the separation of trials for each such transaction so as to not embarrass the trial, however in the facts of this case defendant nos. 2, 5, 6, 10, 11 and 12 are admittedly closely related to defendant no. 1 and the said defendants dealt with the dissolved firm despite being aware of the death of late Shri Gopal Krishan Gupta, without the consent of the legal heirs of the deceased partner. It is, therefore, prima facie not an arms-length transaction with regard to the payments made post the death of late Shri Gopal Krishan Gupta.

33. Similarly, defendant nos. 3 and 4 hold positions of trust with respect to the partnership firm, and defendant no. 13, who is the wife of defendant no. 3, has also received payments after the death of late Shri Gopal Krishan Gupta. Additionally, defendant no. 4 has inexplicably received payments in his personal account from a debtor, i.e., defendant no. 14. The action of defendant no. 14 in transferring funds to the personal account of defendant no. 4 for the discharge of debts of the dissolved firm is an irregular act that requires explanation from defendant no. 14. These transactions, prima facie, do not appear to be arm's-length transactions given the facts outlined above.

34. Thus, this Court is satisfied that the examination of transactions between the dissolved firm and the defendants would have to be adjudicated upon in this suit so as to have an effective adjudication of the claim of rendition of accounts. In fact, it would assist defendant no. 1 as well in getting a full discharge qua the legal heirs of the deceased partner if his pleas of bonafide payments to the said defendants are upheld. Thus, in the facts of this case directing the plaintiff to file separate suits qua each of the defendants will delay the adjudication of the relief of rendition of accounts and defeat the objective of expeditious trial as envisaged under the Act of

2015.

35. Defendant nos. 2 to 17 all have direct transactions as a debtor or creditor or employee with the dissolved firm. They are not a stranger to the dissolved firm. In the judgment of the coordinate Bench in IHHR Hospitality v. Seema Swami (supra) the defendant was otherwise a stranger to the plaintiff and it was in these facts that the court held that the transaction between the parties does not satisfy the test of a commercial transaction. The facts of the case in Jatin Jain v. Anuj Jain (supra) are closer to the facts of the captioned suit. In Jatin Jain v. Anuj Jain (supra) as well the legal heirs of the deceased partners were seeking rendition of accounts which had been withdrawn from the partnership account and transferred to the family members of the surviving partner.

36. Thus, in the facts of this case where the transaction of the defendants undertaken after the death of late Shri Gopal Krishan Gupta is inextricably linked with the relief of rendition of accounts of the dissolved firm, this Court is of the opinion that the suit is maintainable against the said defendants.

37. However as noted, at the outset, that no observation made in this order is an opinion expressed on the merits of the allegations made by the plaintiff against the defendants. The pleas of the concerned/contesting defendants will be examined on merits in accordance with law. The present order is only limited to opining that the suit is maintainable in its present form qua the defendants.

38. There was no submission made by counsel for defendant nos. 7, 8 and 9 and they tacitly supported the plaintiff.

39. There were no submissions made on behalf of defendant nos. 14, 15, 16 and 17. The rights and contentions of the said defendants are kept open and will be decided after the said defendants enter appearance.

40. The objection on maintainability of the suit under Commercial Courts Act, 2015 is accordingly answered in favour of the plaintiff. I.A. 11028/2024 (under Section 12A of the Commercial Courts Act, 2015 r/w Section 151 CPC seeking exemption from instituting pre-litigation mediation)

41. This is an application filed by the plaintiff under Section 12A of the Act of 2015 seeking exemption from instituting pre-litigation mediation before filing the present suit for rendition of accounts and injunction qua the dissolved firm.

42. It is stated in the plaint that another suit pertaining to the assets of the dissolved firm is already pending before this Court in CS (COMM.) 607/2023. The plaintiff herein has also filed I.A. 11026/2024 under Order XXXIX Rule 1 and 2 CPC for seeking urgent reliefs.

43. This application has been opposed by learned counsel for defendant nos. 3, 4 and 13 on the ground that the relief prayed for ought not to be granted as plaintiff has sufficient time available with her prior to the institution of the present suit to invoke pre-litigation mediation qua the said defendants. He states that the urgent reliefs prayed for in I.A. 11026/2024 already stood granted to the legal heirs of the deceased partner in CS (COMM.) 607/2023 vide order dated 21.12.2023 as a Court Receiver stood appointed for taking control of the assets of the partnership firm.

44. This application was also opposed by defendant nos. 1, 2, 5, 6, 10, 11 and 12.

45. A Division Bench of this Court in Chandra Kishore Chaurasia v. R A Perfumery Works (P) Ltd[6] while deliberating on Section 12A of the Act of 2015 has held that the question whether a suit involves any urgent interim relief is to be determined solely on the basis of the pleadings and reliefs sought by the plaintiff. The relevant paras of the judgment read as under: -

2022 SCC OnLine Del 3529 have been claimed in a suit for determining whether the same is hit by the bar of Section 12A(1) of the Commercial Courts Act, 2015. The question whether a plaintiff desires any urgent relief is to be decided solely by the plaintiff while instituting a suit. The court may or may not accede to such a request for an urgent interim relief. But that it not relevant to determine whether the plaintiff was required to exhaust the remedy of pre-institution mediation. The question whether a suit involves any urgent interim relief is not contingent on whether the court accedes to the plaintiff's request for interim relief.

34. The use of the words “contemplate any urgent interim relief” as used in Section 12(1) of the Commercial Courts Act, 2015 are used to qualify the category of a suit. This is determined solely on the frame of the plaint and the relief sought. The plaintiff is the sole determinant of the pleadings in the suit and the relief sought.

35. This Court is of the view that the question whether a suit involves any urgent interim relief is to be determined solely on the basis of the pleadings and the relief(s) sought by the plaintiff. If a plaintiff seeks any urgent interim relief, the suit cannot be dismissed on the ground that the plaintiff has not exhausted the pre-institution remedy of mediation as contemplated under Section 12A(1) of the Commercial Courts Act, 2015.”

46. The Supreme Court in its judgment in Yamini Manohar v. T.K.D. Keerthi[7] while deliberating on the dismissal by High Court of an application filed by the defendant under Order VII Rule 11 CPC for noncompliance of Section 12A of the Act of 2015 that the Commercial court while examining an application seeking exemption from pre-litigation mediation has to undertake a limited exercise and examine the pleadings of the plaint and the documents filed therewith to form an opinion whether the plaintiff is entitled to the exemption prayed for. The Supreme Court also noted the aforesaid judgment of the Division Bench of this Court. The observations of the Court at paragraph no. 10 are relevant and read as under: - “10. We are of the opinion that when a plaint is filed under the CC Act, with a prayer for an urgent interim relief, the commercial court should examine the nature and the subject-matter of the suit, the cause of action, and the prayer for interim relief. The prayer for urgent interim relief should not be a disguise or mask to wriggle out of and get over Section 12-A of the CC Act. The facts and circumstances of the case have to be considered holistically from the standpoint of the plaintiff. Non-grant of interim relief at the ad interim stage, when the plaint is taken up for registration/admission and examination, will not justify dismissal of the commercial suit under Order 7 Rule 11 of the Code; at times, interim relief is granted after issuance of notice. Nor can the suit be dismissed under Order 7 Rule 11 of the Code, because the interim relief, post the arguments, is denied on merits and on examination of the three principles, namely: (i) prima facie case, (ii) irreparable harm and injury, and (iii) balance of convenience. The fact that the court issued notice and/or granted interim stay may indicate that the court is inclined to entertain the plaint.”

47. Before adjudicating on this application, it needs to be noted that parties have extensively explored settlement and mediation in CS (COMM.) 607/2023. The said suit is listed and heard before this Court along with the captioned suit. The relevance of the mediation talks in CS (COMM.) 607/2023 cannot be ignored while considering a prayer for exemption and this has been held by another Division Bench of this Court in Amit Walia v. Shweta Sharma[8],wherein paragraph 10(m) and 22 reads as under: - “10(m) He states that by approaching the DHCMCC for pre- Institution Mediation appellant has in full, effective and valid compliance of Section 12-A of the CCA, sought settlement of dispute. According to him, there can be various other scenarios, which can be considered as full, effective and valid compliance of Section 12-A of the CCA, which the impugned judgment completely loses sight of: (2024) 5 SCC 815, 2023 SCC OnLine Del 6779.

(i) If before filing of the suit, parties themselves engage in extensive settlement talks, but the settlement talks fail and there is sufficient material put on record to demonstrate preinstitution mediation talks;

(ii) If before filing of the suit, parties engage in settlement talks with assistance of a person known to both the parties who acts as a mediator, but the settlement talks fail;

(iii) If before filing of the suit, parties engage in settlement talks with the assistance of an independent/third-party mediator, but the settlement talks fail;

(iv) If before filing of the suit, one party makes a proposal to other party to engage in settlement talks for amicable resolution of disputes, but the other party categorically refuses. …

22. The submission made by the learned counsel for the appellant as noted in paragraph (m) above highlighting the eventualities where the parties can engage themselves in settlement talks prior to the initiating litigation to contend that the same may also suffice the requirement is appealing.”

48. Keeping in view the dicta of the aforesaid judgments, this Court has perused the contents of the plaint and the averments made in the I.A. 11026/2024 seeking interim reliefs. The efforts made by parties to mediate in CS (COMM.) 607/2023 are material and relevant. Defendant no. 1 has himself pleaded that parties made several efforts to mediate, however the same failed. The failure of the said mediation talks and the continuing disputes between the parties leading to the plaintiff’s apprehension of dissipation of the available assets of the dissolved firm are relevant facts for deciding this application. This Court is satisfied that the plaintiff had prayed for urgent interim reliefs which merited seeking an exemption from undertaking pre-institution mediation. It is a matter of record that the said urgent interim reliefs were not granted however the non-grant by itself is not a ground for disallowing the exemption sought in this application.

49. Accordingly, the relief for exemption sought in this application is allowed. CS (COMM.)390/2024 and I.A. 33851/2024

50. This is an application filed by the plaintiff seeking direction to defendant no. 1 to furnish the current addresses of defendant nos. 14, 15, 16 and 17.

51. In this regard, it is noticed that no details of the defendant nos. 14, 15, 16 and 17 as required under Order VII Rule 1 CPC have been provided in the plaint. It is directed that defendant no. 1 shall furnish the requisite particulars of defendant nos. 14, 15, 16 and 17 within two (2) weeks and the plaintiff shall file an amended memo of parties within one week thereafter. Further upon steps being taken by the plaintiff, summons be issued.

52. List before on 19.03.2025, the date already fixed.

MANMEET PRITAM SINGH ARORA (JUDGE) JANUARY 07, 2025