A partner’s ordinary business does not itself authorize transfer of firm-owned immovable property.

The Petitioner was admitted as a partner of Respondent No. 1 under a Deed of Reconstitution dated 27 October 2021, with a 75% share in profits and losses.

Respondent No. 1 was engaged in property development and owned the property on which the “Park Crown” project was constructed.

The Petitioner alleged that Respondent Nos. 2 and 3 sold units without his knowledge or authority, failed to disclose transactions and accounts, and disputed his continuing status as a partner.

The Respondents asserted that unit sales were within the ordinary business of the firm and that the Petitioner had agreed to retire under a settlement.

The Petitioner applied under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim protection pending arbitration.

1. Whether the Petitioner established a basis for interim protection against Respondent Nos. 2 and 3 dealing with units in the “Park Crown” project, having regard to their authority under the partnership deed and the Indian Partnership Act, 1932.

2. Whether the alleged oral settlement and payment to the Petitioner rendered the Section 9 petition unmaintainable.

3. Whether the relief should extend to restraining all sales, or instead be limited to protecting the disputed rights and preserving relevant records without preventing the firm’s ordinary business.

Section 9 of the Arbitration and Conciliation Act, 1996 empowers the Court to grant interim measures, applying the principles of prima facie case, balance of convenience and the need for effective relief; the power is broad but relief must be reasonably necessary (Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd., (2007) 7 SCC 125; Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited, (2022) 20 SCC 178).

Under Sections 19(1) and 19(2)(g) of the Indian Partnership Act, 1932, a partner’s implied authority ordinarily binds the firm in the usual course of business, but does not, absent applicable usage or custom, include authority to transfer the firm’s immovable property.

A partner’s share of profits does not confer personal ownership of a corresponding share in each partnership asset; the partner’s interest is worked out in the firm’s net assets (Addanki Narayanappa v. Bhaskara Krishnappa, (1966) 3 SCR 400).

A reference in an arbitration clause to the repealed Arbitration Act, 1940 does not invalidate an otherwise valid arbitration agreement under Section 7 of the 1996 Act (Purushottam s/o Tulsiram Badwaik v. Anil, (2018) 8 SCC 95).

The Court also relied on Bina Murlidhar Hemdev for the principle that general management authority does not, by itself, confer authority to transfer partnership immovable property; the deed, authority granted and any relevant usage or custom must be considered.

The deed established the Petitioner’s substantial partnership interest but did not give him personal ownership of 75% of each unit or expressly require his consent for every sale.

Although unit sales may form part of a developer’s ordinary business, that fact alone did not establish authority to transfer partnership immovable property; the extent of the Respondents’ authority and the circumstances of individual transactions required examination.

The disputed sales disclosures, the Petitioner’s participation in at least one sale, and the disagreement over accounts and settlement supported limited interim protection, but did not establish that every transaction was unauthorised or that fraud had occurred.

A blanket prohibition could disrupt the project and the firm’s business.

The Court therefore balanced protection of the disputed rights against the need to permit development, requiring disclosure and preservation of transaction records while leaving the authority and validity of particular sales for determination in arbitration.

The conflicting accounts of the alleged settlement and the absence of a written retirement or reconstitution document meant that the settlement objection did not, at this stage, defeat the petition; its effect remained for the arbitral tribunal.

Pending commencement and during the arbitral proceedings, Respondent Nos. 2 and 3 were restrained from dealing with unsold units except in accordance with the Deed of Reconstitution and the Indian Partnership Act, 1932.

Before a proposed transaction, they must give the Petitioner written disclosure of the purchaser, consideration, payment terms and material terms.

Within four weeks, they must provide a statement of units sold, booked, agreed to be sold, unsold or encumbered, with the specified transaction and payment particulars and relevant documents; they must also preserve the project’s books, bank records, agreements and other relevant records.

The order did not invalidate pre-existing sale agreements or prevent continued construction and development, and all findings were prima facie, leaving the merits to the arbitral tribunal.

No order as to costs.