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2025 Supreme(Online)(Kar) 24682
KARNATAKA HIGH COURT
MR. JUSTICE R. NATARAJ, J
NEIL PATEL DIGITAL LLC – Appellant
Versus
PRADEEP KUMAR RAJARATHINAM – Respondent
ARBITRATION PETITION-INTERIM MEASURE NO. 4 OF 2025
For the Appellants/Petitioners: SRI. UDAYA HOLLA, SRI. SYED SHUJATH MEHDI, SMT. MEENA V., SRI. CHRISTOPHER EDWIN
For the Respondents: SRI. UDAYA PRAKASH M., SRI. FRANCIS XAVIER
Interim measures under Section 9 require establishing a prima facie case and balance of convenience, especially in cases of unauthorized financial transactions in a partnership.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 9 - Interim measures - The petitioner sought direction for respondent to deposit misappropriated funds, citing unauthorized financial transactions that breached partnership obligations. The court affirmed that prima facie case existed, granting some interim reliefs while maintaining status quo pending arbitration. (Paras 7, 10, 11)
(B) Limited Liability Partnership - Duties and Obligations - The respondent failed to obtain necessary authorizations for significant financial transactions exceeding stipulated limits in the LLP agreement, justifying the petitioner's concerns. (Paras 9, 10)
Facts of the case:
The petitioner claimed that respondent No.1 siphoned off substantial funds from the LLP without consent, violating partnership terms outlined in their agreement dated 18.08.2022. The case involved disputes regarding unauthorized transactions and competition.
Findings of Court:
The court ordered respondent No.1 to deposit Rs.5,90,00,000/- with the court and restrained him from accessing the partnership's bank account and engaging in competing activities.
Issues: The primary issues were whether the respondent's actions constituted a breach of partnership agreement and if interim measures should be granted pending arbitration.
Ratio Decidendi: The court held a prima facie case existed due to respondent’s unauthorized transactions and potential harm to the petitioner, thus justifying the need for interim measures.
Result: Petition allowed in part.
| Table of Content |
|---|
| 1. overview of parties and legal basis (Para 1 , 2) |
| 2. petitioner's allegations against respondent (Para 3) |
| 3. respondent's defenses and counterclaims (Para 4) |
| 4. limitations on seeking interim measures (Para 5) |
| 5. criteria for interim measures under section 9 (Para 6 , 7) |
| 6. findings on respondent's management of funds (Para 8 , 9) |
| 7. court's reasoning for granting interim measures (Para 11) |
ORAL ORDER
This petition is filed under Section 9 of the Arbitration and Conciliation Act, 1996 (henceforth referred to as 'Act, 1996') seeking following reliefs:-
a. Pass an order directing Respondent No.1 to deposit the sum of INR 7.9 Crores (Rupees Seven Crores and Ninety Lakhs Only), being the amount siphoned off by the Respondent No.1 from the LLP in the LLP's Bank Account,
IN THE ALTERNATIVE
Pass an order directing Respondent No.1 to deposit the sum of INR 7.9 Crores (Rupees Seven Crores and Ninety Lakhs Only), being the amount siphoned off by the Respondent No.1 from the LLP with this Hon'ble Court in an interest bearing account;
IN THE ALTERNATIVE
Pass an order directing the Respondent No.1 to deposit a sum of INR 3,50,00,000/-, out of the amount siphoned off by the Respondent No.1 from the LLP into the account of the LLP to enable the Petitioner to meet the immediate and foreseeable operational costs and expenses of the business of the LLP, pending the final adjudication of the arbitral proceedings;
b. Pass an ad-interim order directing Respondent No.1 to disclose on affidavit the complete particulars of all his movable and immovable assets, including but not limited to bank accounts, shares, properties, investments, beneficial interests, and interests in any companies, trusts or partnerships, whether held individually or jointly or through any person or entity (including but not limited to Stan Ventures and Go Dash acting for or on his behalf) to the extent necessary to secure the Petitioner's claim and prevent frustration of the arbitral award;
c. Pass an order restraining the Respondent No.1, his family, successors, servants, agents, representatives, affiliates, and any entities under his control from alienating, disposing of, transferring, or otherwise dealing with any of his assets, to the extent necessary to secure the Petitioner's claim and prevent frustration of the arbitral award;
d. Pass an ad-interim order attaching all the assets disclosed in the Affidavit to the extent necessary to preserve the subject matter of the arbitration proceedings, until disposal of the present arbitration proceedings;
e. Pass an ad-interim injunction restraining the Respondent No.1, or any person, company, entity, subsidiary, associate, servant, agent, or person claiming through or under him, from accessing, operating, or in any manner utilizing (1) the LLP's Bank Account, including initiating or approving any transaction or withdrawal therefrom, (2) from acting for, on behalf of, or representing the LLP in any manner or capacity whatsoever, whether in commercial dealings, communications, or otherwise, (3) from using, misappropriating, exploiting, copying, or disclosing any intellectual property (defined as Petitioner's IP and Petitioner's Brand Name) owned by or licensed to the Petitioner, including but not limited to the "Neil Patel Digital" brand, software, website, source code, marketing materials, client information or any other proprietary information and (4) to strictly comply with Clause 16 of the LLP Agreement dated 18.08.2022 produced as Annexure-E and to refrain from in any manner contacting any existing clients of the LLP; from soliciting clients, employees, or vendors of the LLP, and from engaging directly or indirectly in any competing business during the subsistence of the LLP and for a period of two years thereafter; pending disposal of the present petition;
f. Pass an ad interim injunction directing the Respondent No.2 to forthwith refrain from entertaining or acting upon any instructions received from the Respondent No.1 in
