Arbitrator Cannot Invalidate Admitted Retirement Deed Without Recording Clear Finding Of Fabrication Or Manipulation: Delhi High Court

The Delhi high Court has dismissed an appeal under section 37 of the Arbitration and Conciliation Act ("Arbitration Act") and upheld an order passed by a Single Judge setting aside an arbitral award which had declared retirement deed of a partner as null and void. A Division bench comprising Justice Navin Chawla and Justice Madhu Jain held that once signatures on the retirement deed were admitted, the arbitral tribunal was not justified in invalidating the deed without returning a finding of fabrication or manipulation. It further held that the arbitral tribunal could not rely on extraneous circumstances to negate a duly executed document. Background: The dispute arose out of inter se conflicts among partners of M/s Rajendra Iron Mart. After the demise of earlier partners, Shri Brajendra Khandelwal (“Appellant”) was admitted into the partnership after execution of a new partnership deed. The respondents claimed that the appellant had retired from the firm by executing a Retirement Deed and submitting Form V before the Registrar of Firms. The appellant contended that his signatures were obtained on blank papers and later misused to fabricate the Retirement Deed and related documents. The Arbitrator accepted the appellant's claim and declared the retirement deed and subsequent partnership deed to be illegal and void. The award was subsequently set aside by a Single Judge under section 34, prompting the appellant to approach the High Court under section 37. The appellant argued that the arbitrator had duly considered the issue of manipulation and circumstances surrounding the retirement deed and therefore the Single judge exceeded its jurisdiction by re-appreciating the evidence as an appellate court. Findings: Rejecting the contention, the court noted that the appellant had admitted signatures on both the retirement deed and the statutory form V filed before Registrars of Firms. It further noted that the arbitrators had himself noted that a person already litigating with partners would not easily sign on blank papers. Despite this, the court ruled that the arbitrator did not return a categorical finding that the retirement deed was fabricated, manipulated or printed after signatures were obtained. “The learned Arbitrator did not give any specific finding on this claim of the appellant. On the other hand, the learned Arbitrator had in fact agreed that no person will sign a blank document if such person is having prior litigation with the other. Therefore, though not specifically stating that the plea of the appellant that he had signed on blank papers on which Retirement Deed was printed later, the Arbitrator seems to have accepted the same.”, the court observed. Instead, the arbitrator to declare the deed as null and void relied on other circumstances such as absence of public notice of retirement, alleged inconsistency in witness testimony regarding the manner and timing of the execution of the Retirement Deed and non-production of financial records of the firm before the arbitrator, the court observed. It further held that once the foundation of the appellant's claim that his signatures were obtained on the blank papers was not proved, the arbitrator misdirected himself by relying on collateral considerations to invalidate an otherwise admitted document. The court held that “however, the learned Arbitrator then went on to discuss other extraneous circumstances on the basis of which he holds that the appellant had not signed the Retirement Deed on 19.01.2010. The same in our view was extraneous to the claim of the appellant. Once it is found that the Retirement Deed has been signed by the appellant after it had been printed, it was for the appellant to show the circumstances under which it was signed and prove the grounds on which it would stand vitiated. The learned Arbitrator had therefore, completely misdirected himself.” Accordingly, the court dismissed the present appeal holding that the arbitrator cannot invalidate an otherwise admitted document by relying on external considerations. Case Title: Shri Brajendra Khandelwal Versus M/S Rajendra Iron Mart & Ors. Case Number: FAO(OS) (COMM) 194/2022 & CM APPL. 32863/2022, CM APPL. 22098/2025 Order Date: 22/12/2025 For Appellant: Mr.S. S. Sastry, Mr.Rahul Kumar and Anand, Advs. For Respondents: Mr.Pawanjit S. Bindra, Sr. Adv. with Mr.Vinayak Marwah, Adv. Click Here To Read/Download Order

Arbitrator Cannot Invalidate Admitted Retirement Deed Without Recording Clear Finding Of Fabrication Or Manipulation: Delhi High Court

Mohd Malik Chauhan

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