Remuneration stipulated in a reconstitution deed is an absolute contractual liability of partners, independent of firm profits.

The Respondents (Existing Partners) and the Appellant (Incoming Partner) entered into a Memorandum of Understanding (MOU) on 13.02.2015 to induct the Appellant into the partnership firm, M/s. JBS Nursing Home

A formal Reconstitution Deed was executed on 13.05.2015, granting the Appellant 99% profit share and absolute management control, while promising the Respondents a fixed monthly remuneration of ₹5,04,000

Upon non-payment of this remuneration, the Respondents initiated arbitration. The Sole Arbitrator passed an award on 28.08.2019 in favor of the Respondents for ₹60,40,195 plus interest, and dismissed the Appellant’s counter-claim for older accounts

The Appellant challenged this under Section 34 of the A&C Act, which was dismissed by the Commercial Court on 17.07.2021

This appeal under Section 37 followed.

1. Whether the Arbitral Award is liable to be set aside under the limited grounds of Sections 34 and 37 of the Arbitration and Conciliation Act, 1996

2. Whether the non-payment of remuneration constituted an arbitrable dispute inter-se partners under the Reconstitution Deed, and whether the firm was a necessary party

The Court primarily applied Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, which restrict judicial interference to grounds of "patent illegality" and "public policy," excluding merit-based reviews

It relied on Associate Builders v. DDA and DMRC Ltd. v. Delhi Airport Metro Express P. Ltd., establishing that an arbitrator’s interpretation is final unless it is one that no fair-minded person would take

Additionally, the court applied Section 11 of the Indian Partnership Act, 1932, noting that mutual rights of partners are determined by contract

cited Dhansingh Prabhu v. Chandrasekar to affirm that a partnership firm has no legal existence independent of its partners

The Court found that the MOU and Reconstitution Deed were interconnected parts of a single transaction intended to transfer management to the Appellant

It rejected the Appellant's argument that the Firm (and not the partner) was liable, reasoning that under partnership law, a firm name is merely a compendious description of its partners; thus, a dispute between partners is legally valid without impleading the firm as a separate entity

The Court observed that Clause 7.1 of the Deed explicitly mandated "fixed remuneration" regardless of business status, making the Appellant's "lack of profit" defense contractually untenable

It held that the Arbitrator’s interpretation—that the Appellant had personally undertaken the liability to pay—was a plausible and reasonable view based on the evidence

Consequently, no "patent illegality" existed, as the Tribunal did not wander outside the contract but stayed within the agreed terms

It held that the Arbitrator’s findings were cogent and based on a reasonable interpretation of the contract

The Appellant was ordered to pay the awarded sum; the stay granted earlier was vacated, and the counter-claim was deemed properly dismissed as the Appellant had no right to accounts prior to its induction