Partnership funds must remain in fixed deposit pending arbitral resolution of the partners’ disputes.

The applicant and the first respondent were partners in a reconstituted firm whose partnership deed contained an arbitration clause.

The firm had obtained an arbitral award against the Tamil Nadu Highways Department in 2015, and the High Court dismissed the Department’s challenge under Section 34 in 2025.

The firm’s bank account, originally maintained with Lakshmi Vilas Bank and later transferred to DBS Bank, was debit-frozen because the bank required updated KYC documents from both partners.

The applicant sought an order requiring the first respondent to provide her KYC documents and cooperate in reviving the account, or alternatively requiring the bank to revive it subject to an indemnity.

The first respondent opposed the request, arguing that the applicant might withdraw the award proceeds before the partners’ dispute was resolved.

Whether the first respondent should be directed to provide her KYC documents to enable the firm’s bank account to be revived.

Whether the account’s funds, including amounts received under the award, should be protected against distribution pending resolution of the partners’ dispute.

The applications were brought under Section 9(1)(ii)(e) of the Arbitration and Conciliation Act, 1996, read with Order XIV Rule 8 of the Original Side Rules, seeking interim relief in connection with disputes referable to arbitration.

The Court noted that the parties’ reconstituted partnership deed provided for arbitration and that the dispute between them was therefore to be resolved by an arbitrator.

The applicant also relied on the mandatory nature of KYC requirements, but the judgment does not identify or apply a specific RBI regulation.

No precedent is cited.

The Court accepted that the account could not operate without the partners’ KYC forms and considered the first respondent’s concern that revival could enable the applicant to withdraw the award proceeds.

It balanced the need to facilitate the account’s revival against the need to preserve the firm’s funds until the partners’ dispute was arbitrated.

Accordingly, it directed the first respondent to submit her KYC forms while directing the bank not to distribute funds already in the account or amounts received pursuant to the award.

The first respondent was directed to submit her KYC forms to DBS Bank, and the bank was directed not to distribute any amounts held in the account or received from the Highways Department in compliance with the 2015 award.

The Court made no order as to costs.