High Court Sets Aside Arbitral Award in Partnership Dispute Between Parties Arbitration Petition Allowed Under Section 34 of Arbitration and Conciliation Act, 1996 Due to Procedural Irregularities

Sub Category: Bombay High Court Bench: BOMBAY

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2026-02-16 13:29:15

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Case Note & Summary

The High Court allowed an arbitration petition challenging an arbitral award in a partnership dispute -- The Court found that the arbitral tribunal committed procedural irregularities by allowing additional evidence without proper justification -- The tribunal had permitted the Respondent to lead further evidence regarding cash investment of Rs. 48 lakhs based on alleged audio recordings found years later -- The Petitioners had consented to declarations regarding partnership validity and dissolution but disputed the cash investment claim -- The Court held that the award was contrary to public policy and violated principles of natural justice -- The matter was remanded to the arbitral tribunal for fresh consideration of all issues

Headnote

The High Court of Judicature at Bombay set aside an arbitral award in a partnership dispute -- The Petition was filed under Section 34 of Arbitration and Conciliation Act, 1996 challenging an award dated April 29, 2023 -- The dispute involved Petitioners partnership firm where Respondent held 15% partnership interest -- The arbitral tribunal had allowed Sachde's claims regarding partnership validity and dissolution -- The Court found procedural irregularities in the arbitral proceedings -- The tribunal allowed additional evidence regarding cash investment without proper justification -- The Petitioners had consented to certain declarations but disputed the cash investment claim -- The Court held that the award suffered from patent illegality and violated principles of natural justice -- The matter was remanded back to the arbitral tribunal for fresh consideration

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Issue of Consideration: The Issue of Consideration was whether the arbitral award dated April 29, 2023 should be set aside under Section 34 of Arbitration and Conciliation Act, 1996 on grounds of procedural irregularities and lack of evidence

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Final Decision

The High Court allowed the arbitration petition and set aside the arbitral award dated April 29, 2023 -- The Court held that the award suffered from patent illegality and violated principles of natural justice -- The matter was remanded back to the arbitral tribunal for fresh consideration of all issues

2026 LawText (BOM) (02) 22

Arbitration Petition (L) No. 20865 of 2023

2026-02-03

Somasekhar Sundaresan, J.

2026:BHC-OS:3138

Mr. Atul G. Damle, Senior Counsel, i/b Ashish J. Dubey for Petitioners, Mr. Shanay Shah, a/w Kumar Kothari, i/b Vohuman Legal for Respondent

Jinam Arihant Realtors And Ors.

Neha Yogesh Sachde

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Nature of Litigation: Arbitration petition challenging arbitral award in partnership dispute

Remedy Sought

Petitioners sought setting aside of arbitral award dated April 29, 2023 under Section 34 of Arbitration and Conciliation Act, 1996

Filing Reason

Challenging arbitral award that allowed Respondent's claims regarding partnership validity, dissolution and accounts

Previous Decisions

Arbitral tribunal passed award dated April 29, 2023 allowing Respondent's claims -- Learned Single Judge appointed arbitral tribunal on October 14, 2021 in Section 11 proceedings

Issues

Whether the arbitral award should be set aside under Section 34 of Arbitration and Conciliation Act, 1996 Whether procedural irregularities in arbitral proceedings violated principles of natural justice Whether the arbitral tribunal properly considered evidence regarding cash investment claims

Submissions/Arguments

Petitioners argued that arbitral tribunal committed procedural irregularities by allowing additional evidence without proper justification -- Respondent argued that additional evidence was necessary to prove cash investment of Rs. 48 lakhs -- Petitioners contended that they had consented to certain declarations but disputed cash investment claim -- Respondent contended that MOU terms were not fulfilled and partnership interest subsisted

Ratio Decidendi

Arbitral awards can be set aside under Section 34 of Arbitration and Conciliation Act, 1996 when they suffer from patent illegality or violate principles of natural justice -- Procedural irregularities in allowing additional evidence without proper justification constitute violation of natural justice -- Arbitral tribunals must ensure fair procedure and proper consideration of evidence before passing awards

Judgment Excerpts

This is a Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an arbitral award dated April 29, 2023 The arbitration agreement is contained in the Partnership Deed and governs disputes and differences under the Partnership Deed The Learned Arbitral Tribunal was pleased to pass an order on July 22, 2022 allowing Sachde's request for leading further evidence on her investment in cash The Petitioners responded that the investment of Rs. 48 lakhs in cash was being categorically denied

Procedural History

Partnership formed under deed dated December 12, 2011 -- MOU executed on December 25, 2015 for Respondent's retirement -- Arbitration invoked on July 6, 2019 -- Section 11 application filed for tribunal appointment -- Learned Single Judge appointed tribunal on October 14, 2021 -- Arbitral proceedings conducted -- Award passed on April 29, 2023 -- Arbitration petition filed under Section 34 on 2023 -- Judgment pronounced on February 3, 2026