Authority: High Court of Judicature at Madras

Order Date: 28 August 2026

Case Overview

  • Parties: Appellants K. Babu and Meera Babu vs. Respondents G. G. Srinivasan and M/s Venkateswara Diagnostic Centre (proprietrix Mrs. J. Buvanasankari).
  • Background: The parties operated the medical diagnostic business under the partnership "Venkateswara Diagnostic Centre" from 01‑04‑2002. The partnership property was jointly purchased in 2009.
  • Retirement: The first respondent retired effective 31‑05‑2016 under a Memorandum of Understanding (MoU) dated 31‑05‑2016, which required the respondent to execute a Retirement Deed and the appellant to assume all liabilities.
  • Arbitration: Dispute over non‑execution of Clause 1.7 (release of 50 % share) led to arbitration (A.F.No.59 of 2018). The Sole Arbitrator awarded the appellants on 16‑05‑2019.
  • Challenge: Respondents filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996. The Madras High Court Single Judge set aside the award on 20‑12‑2019, invoking patent illegality (Section 34(2A)) on grounds not pleaded (non‑execution of Retirement Deed, non‑compliance with Clause 1.3, and provisos to Clause 1.7).
  • Appeal: The appellants filed an intra‑Court appeal under Section 37 (O.S.A.No.69 of 2020 and C.M.P.No.2537 of 2020). Counsel for appellants argued that the Single Judge exceeded its jurisdiction and introduced new grounds, contrary to Supreme Court precedents (e.g., McDermott International Inc. v. Burn Standard Co. Ltd., Ssangyong Engineering & Construction Co. Ltd. v. NHAI, MMTC Ltd. v. Vedanta Ltd.).
  • Respondents contended the Single Judge correctly applied patent‑illegality, citing the MoU’s requirement for a Retirement‑cum‑Reconstitution Deed and the absence of a balance sheet under Clause 1.3.
  • The Court examined extensive jurisprudence on Sections 34 and 37, emphasizing that judicial interference is limited to the statutory grounds and that the arbitral tribunal is the master of evidence and contract interpretation.

Final Outcome

  • The Court set aside the 20‑12‑2019 order of the Single Judge.
  • The arbitral award dated 16‑05‑2019 in favour of the appellants is confirmed.
  • The intra‑Court appeal is allowed; no order as to costs; the connected miscellaneous petition is closed.

Topics: Arbitration, Court Judgment