Isabella Mariam

The High Court of Kerala Division Bench of Chief Justice Nitin Jamdar and Justice Syam Kumar V.M. on 28 November 2025 dismissed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award that dissolved a partnership operating an entrance coaching institution and distributed its assets, including goodwill. The Bench held that no ground under Section 34 was established to set aside the 2014 award, which had been affirmed by the District Court in 2016, and declined to reopen the expert valuation of goodwill or rely on income-tax materials produced for the first time in appeal. It clarified that appellate scrutiny under Section 37 is supervisory in nature, confined to examining whether the Section 34 court acted within its statutory authority.

The appellant, R. Shiju, and the respondent, V. Sunil Kumar, were partners in a coaching institution named Zephyr, formed under a 1997 partnership deed. Disputes arose when the appellant started a parallel venture titled Aspirant. The respondent invoked arbitration seeking dissolution of the partnership, settlement of accounts, and division of assets including goodwill. The appellant filed a defence asserting that the new venture did not violate any stipulation and alleged that the respondent had dominated the management and denied access to records.

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The arbitrator appointed two commissioners, George Sacariah and Kylas, to value immovable properties, and appointed Jobi as auditor to prepare accounts. Both parties submitted documents but led no oral evidence. The arbitrator passed an award directing dissolution and distribution of assets including goodwill.

The appellant filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, alleging undervaluation of goodwill, improper consideration of accounts, and reliance on commissioners unqualified to value goodwill. He further relied on subsequent income-tax proceedings to allege manipulated accounts. The district court dismissed the petition. The appellant then filed this appeal under Section 37 raising the same grounds.

The Court recorded that “the scope of interference with an arbitral award must be kept in mind” and that Section 5 restricts judicial intervention. It stated that Section 34 provides narrow grounds for setting aside an award and that “an appeal under Section 37… is not to be equated with a first appeal under the Code of Civil Procedure.”

On goodwill valuation, the Court observed that the appellant’s own defence statement showed that dissolution and settlement of accounts, including goodwill, were sought. It noted: “Goodwill is part of the property of the firm… and therefore, the goodwill formed part of the property to be determined and divided.” The Court held that even if goodwill was listed under immovable assets, “the mere use of the word ‘immovable’ … does not create any ground of challenge.”

Regarding competence of valuers, the Court recorded that Mr. Kylas held qualifications including FIE, FIV, FICA, and was a registered valuer. It noted that the commissioners “elaborated on the method adopted, namely the profit pace method.” Thus, it found no patent illegality in the arbitrator relying on their valuation.

The Court examined the appellant’s calculation of goodwill at ₹3 crores and observed: “this figure… is not supported by any formal valuation report.” It recorded that no cross-examination of the commissioners occurred and that the arbitrator was justified in preferring expert valuation over the appellant’s own computation.

On allegations of fraud supported by income-tax proceedings, the Court noted that the income-tax raids occurred during pendency of the Section 34 petition, but “at no point… did the Appellant seek to amend the application.” It further recorded that the assessment orders were under statutory appeal and “have not attained finality.” The Court stated that such material “cannot be relied upon to set aside an arbitral award which… was validly passed.”

Ultimately, the Court held that “no ground whatsoever under Section 34… to warrant interference” was demonstrated and that the arbitrator acted within his jurisdiction. It also stated that the district court “rightly rejected” challenges to the valuation and division of assets.

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The Court directed: “Accordingly, we hold that no case was made out by the Appellant to set aside the arbitral award dated 19 April 2014 under Section 34 of the Arbitration and Conciliation Act, 1996, nor has any case been made out to warrant interference in the appeal under Section 37 of the Act of 1996. The appeal is dismissed.”

Advocates Representing the Parties:

For the Appellant: Sri. Elvin Peter P.J. (Senior Advocate), instructed by Sri. R.O. Muhamed Shemeem, Smt. Naseeha Beegum P.S., Sri. Adarsh Babu C.S.

For the Respondent: Sri. K. Jayakumar (Senior Advocate), instructed by Sri. Shinod G.P. and Smt. Anju C.V.

Case Title: Shiju R. v. Sunil Kumar V.
Neutral Citation: 2025: KER:92193
Case Number: ARB.A No. 24 of 2016
Bench: Chief Justice Nitin Jamdar, Justice Syam Kumar V.M.