The partnership and related sale deeds were deemed void due to lack of consideration, reaffirming the arbitrability of disputes arising from contractual agreements between partners.

JUDGMENT

Dated this the 17th day of December, 2025

Syam Kumar V.M., J

This Appeal is filed challenging the order dated 03 September 2022 in O.P. (Arb) No.35 of 2021 of the Principal Sub Court/Commercial Court, Kollam. The said O.P. was filed challenging the arbitration award dated 30 March 2017 of the learned Arbitrator in ARC No.7 of 2014, whereby the claim preferred by the 1^st Respondent claimant was allowed in part.

2. Appellants herein were the petitioners in the said OP (Arb).

They were Respondents 1 to 4 and 6 to 11 and legal representatives of the deceased Respondent No.12 in the ARC before the Arbitrator. Respondents were the Respondents in the O.P. and the claimant and Respondent No.5, respectively, in the ARC.

3. The subject matter of the dispute is a partnership arrangement formed to run a hotel/restaurant and a bar by the name and style ‘Hotel Alakananda’ at Kollam. The claimant started the hotel in a building erected on his 21.5 cent parcel of land. FL 3 licence to run the bar stood in the name of the claimant and was obtained by him in the year 1992. The hotel fell into financial doldrums, and to augment the resources as well as to meet the outstanding liabilities with creditors, including the Kerala Financial Corporation (KFC), the claimant, along with his wife entered into a partnership arrangement as evidenced by a partnership deed dated 01 April 1993. The deed envisaged that the capital of the firm was to be equally contributed by the partners as and when required in equal proportions, and all the assets and liabilities of the business conducted so far by the claimant was taken over by the firm thus created. After execution of the said partnership deed, two sale deeds were registered whereby the claimant and his wife, after retaining 2 of the total 15 shares, transferred the rest to the vendees who were partners of the firm. The consideration for such sale was stated in the sale deeds as to have been partly paid and the rest retained by the vendees for meeting the liabilities of the firm, including that with the Kerala Financial Corporation (KFC). The partnership underwent multiple reconstitutions during which the claimant's wife and certain other partners retired from the firm, and new persons got admitted into the partnership.

4. Suffice to say that after around 18 years of running of the partnership, which witnessed ups in the form of purchase of adjacent land to meet the parking needs of the hotel, and downs like FL3 licence getting cancelled and ensuing litigations right up to the Apex Court for reviving the same, disagreements broke out between the partners. While the claimant asserted that the other partners had failed in their obligation to meet the liabilities of the firm, including debts owed to the KFC, the rest of the partners alleged that the claimant wanted to elbow them out once the firm became profitable due to their efforts in reviving the FL3 licence. This dispute between the partners led to the invocation of the arbitration clause and appointment of an Arbitrator by this Court, who was in the course of the proceedings, substituted.

5. Before the Arbitrator, the claimant had filed a claim statement inter alia seeking to dissolve the partnership by declaring the same as non- existing and void from its inception. He contended that the partnership was entered into under undu