Suppression of financial records justifies an arbitrator’s best judgment assessment of partnership profits.

The Petitioner (Khan) and Respondent (Alka) were partners in M/s Saras Developers.

According to the last admitted partnership deed dated October 22, 1997, Alka held an 80% share and Khan held 20%.

Between 2002 and 2003, four deeds were purportedly executed—including a Retirement Deed—which significantly diluted Alka’s stake and ultimately recorded her retirement.

Alka challenged these deeds as forged and fabricated after discovering them via a Right to Information (RTI) application in 2005.

On April 24, 2008, Alka issued a dissolution notice and invoked arbitration.

The Arbitral Tribunal passed an award on March 7, 2015, declaring the disputed deeds void, holding Alka remained an 80% partner, and directing Khan to pay Rs. 7,39,72,584 based on a "best judgment assessment" of the firm’s sales proceeds.

Khan challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, alleging the claim was barred by limitation and the quantification was perverse.

Alka filed a contempt petition alleging Khan willfully disobeyed interim orders passed under Section 17 regarding the non-alienation of firm assets.

1. Whether the Respondent's claim for dissolution and rendering of accounts was barred by the law of limitation.

2. Whether the Arbitral Tribunal committed patent illegality or perversity in its finding that the Respondent remained an 80% partner until the date of dissolution.

3. Whether the Arbitral Tribunal’s quantification of the Respondent’s share, based on sales turnover rather than income tax returns, was perverse or ignored vital evidence.

4. Whether the Petitioner is liable for contempt under Section 27 of the Arbitration and Conciliation Act for violating interim protective orders.

Section 34 of the Arbitration and Conciliation Act, 1996, which restricts judicial interference to instances of "patent illegality" or "perversity" that go to the root of the matter.

Article 5 of the Limitation Act, which stipulates a three-year period for a suit for an account and a share of the profits of a dissolved partnership, running from the date of dissolution.

Sections 11 and 48 of the Indian Partnership Act, 1932, regarding the determination of partner rights and the mode of settlement of accounts upon dissolution.

Sections 17 and 27 of the Arbitration Act (post-amendment) as interpreted by the Supreme Court, affirming that willful disobedience of an Arbitral Tribunal’s interim orders constitutes contempt of court.

The Court found that the Arbitral Tribunal’s finding on forgery was supported by substantial evidence, including the Registrar of Firms' refusal to record the disputed deeds and disciplinary action against the notary involved.

On the issue of quantification, the Court held that Khan’s deliberate non-participation in the arbitration and his refusal to produce audited books of accounts entitled the Tribunal to make a "best judgment assessment".

The Court rejected Khan’s reliance on tax returns, noting that tax compliance documents do not supersede the mercantile reality of sales turnover, which Khan himself had admitted was a "matter of record".

Regarding limitation, the Court clarified that since the firm was a "going concern" until the 2008 dissolution notice, the three-year period under Article 5 began only then; profits accrued over the life of the partnership are not individually time-barred as long as the claim for accounts is filed within three years of dissolution.

Regarding contempt, the Court noted that Khan executed "Deeds of Confirmation" for flat sales in blatant violation of the Tribunal's 2010 and 2012 protective orders.

The Court held that the Petitioner could not benefit from his own subversion of the arbitral process by withholding financial evidence.

On the Contempt Petition, the Court found Khan’s conduct contumacious.

To purge the contempt and avoid criminal charges/imprisonment, the Court directed Khan to deposit the entire awarded amount plus interest with the Registry within six weeks.

Failure to deposit will result in the framing of criminal charges.

Costs were deferred pending compliance.