Synopsis

The appellant (a private limited company) was inducted as an incoming partner into a partnership firm running a nursing home. Under a memorandum of understanding and a subsequent reconstitution deed, the appellant took over 99% of the profits and complete management, agreeing to pay a fixed monthly remuneration to the existing partners irrespective of the firm’s profitability. When the appellant stopped paying, arbitration was invoked. The arbitrator awarded the unpaid remuneration. The appellant’s challenge under Section 34 of the Arbitration Act was dismissed by the commercial court. In this appeal under Section 37, the appellant argued that the dispute was not arbitrable (since the partnership firm was not a party) and that the arbitrator had rewritten the contract. The division bench dismissed the appeal, holding that a partnership firm has no separate legal existence, the arbitrator’s interpretation of the contract was plausible and not patently illegal, and the scope of interference under Sections 34 and 37 is extremely limited.

Court: High Court of Karnataka at Bengaluru

Coram: Hon’ble Mrs. Justice Anu Sivaraman and Hon’ble Ms. Justice Tara Vitasta Ganju (Division Bench)

Date of Judgment: 30th April 2026

Citation: 2026:KHC:24495-DB

Core Law: Arbitration and Conciliation Act, 1996 – Sections 34 and 37; Commercial Courts Act, 2015 – Section 13(1A); Indian Partnership Act, 1932 – Sections 11, 12, 13.

1. Heading of the judgment

High court of karnataka at bengaluru

Commercial appeal no. 147 of 2021

M/s. sahasra gastroenterology and obesity clinic private limited (appellant) vs. Dr. jaya balasundaram and others (respondents)

Coram: hon’ble mrs. justice anu sivaramaran and hon’ble ms. justice tara vitasta ganju

Reserved on: 25th march, 2026; pronounced on: 30th april, 2026

2. Legal framework

Major laws and provisions involved:

• Arbitration and conciliation act, 1996 – sections 34 (application to set aside arbitral award), 37 (appealable orders), section 16 (competence of arbitral tribunal)

• Commercial courts act, 2015 – section 13(1a) (appeal from commercial court orders)

• Indian partnership act, 1932 – sections 11, 12, 13 (mutual rights and duties of partners determined by contract)

• Indian contract act, 1872 – principles of interpretation of contracts

Subject matter of the judgment:

Whether an arbitral award directing an incoming partner (a company) to pay fixed monthly remuneration to existing partners (under a reconstitution deed) can be set aside under Section 34 on grounds of (i) lack of arbitrability due to non-joinder of the partnership firm, (ii) misinterpretati

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