Sanchayita Lahkar

The High Court of Karnataka Division Bench of Chief Justice N.V. Anjaria and Justice K.V. Aravind held that the interim arrangement ordered by the Commercial Court in a dispute concerning a partnership firm managing a wedding destination property was impractical and created an imbalance in the interests of the parties. The Court modified the impugned orders and appointed a mutually agreed arbitrator and a court-appointed receiver to oversee financial and operational aspects of the firm until the arbitration is concluded. The directions were issued to ensure fairness, maintain the business, and preserve partnership assets pending adjudication.

The parties involved were partners in M/s. North City Ventures, a registered partnership firm established under a deed dated 22 August 2022. The firm was engaged in operating a wedding destination business on land situated in K.G. Lakkenahalli, Dasanapura Hobli, Bengaluru North, comprising Survey Nos. 62, 9/2, and 65/1. Initially, the firm included the appellant (in COMAP Nos. 192 and 193 of 2025), along with two respondents, holding 20% and 30% shares respectively, while a third party, Girish M., also held 20%.

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On 23 August 2024, the firm was reconstituted following the retirement of Girish M. The reconstituted partnership allocated 36.67% shares each to the two respondents and 26.66% to the appellant. Disputes later arose concerning the firm’s management, prompting the appellant to issue a legal notice under Section 43 of the Indian Partnership Act, 1932, expressing an intent to dissolve the partnership and invoking the arbitration clause in the deed.

In parallel, both the appellant and the respondents filed separate applications under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim protection. The appellant’s application was registered as Com.A.A. No. 8 of 2025, while the respondents’ application was registered as Com.A.A. No. 7 of 2025. These were adjudicated by the X Additional District and Sessions Judge, Bengaluru Rural, sitting as the dedicated Commercial Court.

In Com.A.A. No. 8 of 2025, the Commercial Court passed an order on 29 March 2025 permitting the appellant to participate in the day-to-day affairs of the firm, cautioning that no partner should be excluded by misinterpreting the order. In Com.A.A. No. 7 of 2025, the order dated 24 March 2025 restrained the appellant from objecting to the respondents’ participation in the business.

The appellant contended that he solely owned the property on which the business operated and had borne all costs for developing the infrastructure. He argued that the partnership being “at will” had been dissolved through the Section 43 notice and that the respondents could no longer be allowed to manage the firm’s affairs.

Conversely, the respondents maintained that they had built and managed the entire infrastructure and brought the necessary skill and expertise into the business. They contended that the firm was not a partnership “at will,” relying on clauses requiring a three-month notice and formal retirement deed for withdrawal.

Despite their opposing claims, both parties agreed to arbitration and consented to the appointment of a mutually acceptable arbitrator and a receiver to manage financial matters. Memos suggesting preferred appointees were submitted.

The Court stated: “Whether the partnership firm is ‘at will’ or otherwise in order to apply Section 43 of the Partnership Act?” was the core issue, but found this issue arbitrable and not to be adjudicated at the interim stage.

“Whether the partnership is ‘at will’ or otherwise is also an arbitrable dispute. Having regard to the undisputed fact and the agreement between the parties to resolve the dispute regarding dissolution through arbitral proceedings, examination of the merits of the dispute… is unnecessary and would encroach upon the subject matter to be adjudicated in arbitration.”

The Court recorded the parties’ consensus: “Today, a joint memo is filed, wherein both parties have agreed to appoint Hon’ble Shri Justice V. Jagannathan, former Judge of this Court, to arbitrate the dispute.”

Recognising the need for financial oversight, the Court recorded: “One common aspect that emerges is with regard to the maintenance of accounts of respondent No.3. Both parties are in agreement for appointment of a receiver to manage the accounts of respondent No.3.”

It also acknowledged the potential for imbalance in the prior orders: “The interim arrangement directed by the Commercial Court appears to be impractical and creates an imbalance in the interests of both parties.”

On the matter of venue management, it was noted: “All bookings of the venue of respondent No.3 shall be made by both parties only through the receiver. Any bookings already made shall be brought to the notice of the receiver forthwith.”

With respect to safeguarding assets and financial transactions, the Court directed: “The Receiver shall protect the assets standing in the Appeal Schedule Properties and authorised to file Police complaint against any of the parties for any loss being caused to it.”

The Court allowed the appeals in part and modified the interim orders passed by the Commercial Court in Com.A.A. No. 8 of 2025 dated 29 March 2025 and Com.A.A. No. 7 of 2025 dated 24 March 2025.

It appointed Hon’ble Shri Justice V. Jagannathan, former Judge of the Karnataka High Court, as the sole arbitrator to adjudicate the dispute, as agreed upon by both parties through a joint memo.

The arbitrator was directed to commence the proceedings immediately, and the arbitration was to be conducted through the Bengaluru Arbitration Centre.

Further, the Court appointed Shri H.R. Srinivas, former Principal District and Sessions Judge, as the receiver by consent of both parties for the purpose of maintaining the accounts of respondent No.3.

Both parties were directed to forthwith hand over the accounts of respondent No.3 to the receiver. The receiver was instructed to maintain and share the accounts with both parties on a quarterly basis.

The Court recorded that the receiver shall act and perform in accordance with the following instructions agreed upon by both parties:

• No further event bookings shall be made by either party on the appeal schedule properties;

• Both parties shall assist the receiver in the smooth conduct of scheduled events;

• Parties shall disclose all bookings or reservations made and account for all advance or booking amounts received;

• All payments shall be made through the bank account of respondent No.3, with the receiver monitoring all financial transactions;

• All financial dealings shall be through bank accounts exclusively, and cash transactions are not permitted;

• The receiver shall be authorised to manage the bank accounts, including net banking access;

• Accounts shall be maintained through the accounts manager, and copies shall be provided to all parties;

• The receiver shall safeguard the assets located on the appeal schedule properties and is authorised to file a police complaint against any party in case of any loss;

• The receiver, in consultation with the parties and with the help of the accounts manager, shall make payments only against invoices; and

• The receiver, after consultation with the parties, shall make payment of ground rent payable to the co-owner, Mr. M. Girish, in respect of the appeal schedule properties.

The Court further directed that all future bookings of the venue operated by respondent No.3 must be made only through the receiver, and any existing bookings shall be promptly brought to the receiver’s attention.

If any services are to be rendered by respondent Nos.1 and 2 as part of such bookings, coordination shall be routed through the receiver, who shall involve himself solely in the financial aspects and not interfere in the manner of rendering such services.

It was ordered that this interim arrangement shall continue during the pendency of the arbitration proceedings before the arbitrator.

Liberty was reserved to both parties to approach the arbitrator for appropriate orders, which the arbitrator may consider independently and without being influenced by the observations made in this judgment.

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The receiver was directed to hand over the accounts to either or both parties, subject to the outcome of the arbitral award and the arbitrator’s directions.

The fee of the receiver was tentatively fixed at ₹2,00,000 per month, payable out of the rents received from the subject property.

It was clarified that the accounts shall be adjusted by the arbitrator in accordance with the outcome of the arbitral proceedings, and both parties were directed to cooperate to ensure expeditious resolution of the dispute before the arbitrator.

Advocates Representing the Parties

For the Petitioners: Sri K.N. Phanindra, Senior Advocate; Sri Prashanth Kumar D., Advocate

For the Respondents: Sri N. Basavaraju, Senior Advocate; Sri Vijay B.K., Advocate

Case Title: N.H. Gowda v. Mr. Rangarama & Others 

Neutral Citation: 2025:KHC:15329-DB

Case Number: COMAP No. 192 of 2025 C/W COMAP Nos. 193 & 199 of 2025

Bench: Justice N.V. Anjaria (Chief Justice), Justice K.V. Aravind

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