Facts of the Case

This is a partnership and arbitration-law dispute, not a GST case — a GST show cause notice against the firm is mentioned only as one of several allegations of financial mismanagement. The appellant, Usha Kumari Akkinapalli, and respondent No. 1, Gangisetty Kuresh Kumar, were partners (along with others) in M/s ALNKV Developers, a real estate firm formed under a partnership deed dated 25.05.2013, in which the appellant held a 51% majority share. After the death of the firm's managing partner (respondent No. 1's father), respondent No. 1 allegedly took unilateral control of the firm's affairs, was accused of misappropriating about Rs. 9.1 crore through bank accounts without reflecting it in the firm's books, of not sharing account books or IT returns, and the firm was issued a show cause notice by the GST Commissioner for allegedly collecting but not remitting GST. The appellant filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 seeking an injunction restraining respondent No. 1 from operating the firm's bank accounts, which the Trial Court dismissed. The appellant challenged that dismissal in this appeal under Section 37 of the Act.

Issues Involved

  1. Whether the appellant was entitled to an interim injunction restraining the respondent from operating the firm's bank accounts pending resolution of the underlying arbitration petition.
  2. How the firm's day-to-day financial obligations, including statutory dues, should be managed while the dispute over managing-partner authority remained unresolved.

Petitioner's Arguments

  • The Trial Court erred in holding that no partner was empowered to operate the firm's accounts, since access was necessary to pay employee salaries, statutory dues, and maintain the firm's property.
  • The impugned order effectively froze the firm's accounts and brought its business to a standstill.
  • As the majority stakeholder (51%), the appellant should be permitted to operate the accounts.

Respondent's Arguments

  • Under the partnership deed, only managing partners were empowered to manage the firm's affairs, and until the deceased partner's legal heirs were inducted, respondent No. 1 alone was authorised to operate the accounts.
  • The appellant, being a permanent resident of the USA, could not be permitted to operate the accounts.

Court Order / Findings

  • The Court agreed with the Trial Court that neither party could unilaterally operate the firm's bank accounts until the partners jointly decided on induction of new managing partners.
  • Noting that a freeze on the accounts would cause default in paying employee salaries and statutory dues and disrupt the firm's ongoing business (including a leased commercial building), the Court modified the order to appoint an independent chartered accountant, from the panel attached to the Official Liquidator's office, to operate the firm's bank accounts.
  • The chartered accountant was empowered to verify and clear cheques, pay salaries and day-to-day expenses, and pay pending and current statutory dues (with interest where applicable), drawing a monthly remuneration of Rs. 10,000 excluding GST plus reimbursement of expenses.
  • The bank was directed to honour cheques signed by the appointed chartered accountant until the main arbitration petition (A.O.P. No. 14 of 2022) was decided.
  • The appeal was partly allowed on these terms, without costs.

Important Clarification

The GST show cause notice against the firm was cited only as evidence of alleged mismanagement by respondent No. 1 — the Court did not examine or rule on the firm's GST liability. The chartered accountant's remuneration being quoted 'excluding GST' is likewise just a billing detail, not a GST ruling.

Sections Involved

  • Arbitration and Conciliation Act, 1996 — Sections 9 and 37 (interim measures and appeal)
  • Indian Partnership Act, 1932 — principles governing managing partners' authority

Decision – In Favour of

Partly allowed in favour of the appellant, to the extent of appointing an independent chartered accountant to manage the firm's accounts pending final resolution of the arbitration; the underlying dispute over control of the firm remains pending.

Case Details

Court: High Court for the State of Telangana at Hyderabad  |  Case No.: Civil Miscellaneous Appeal No. 19 of 2023  |  Coram: Hon'ble Sri Justice T. Vinod Kumar and Hon'ble Smt. Justice P. Sree Sudha  |  Date: 28 April 2023

Link to Download the Order

Click here to view/download the full order

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.