No 'Perversity': Kerala High Court Upholds Arbitral Award Dissolving 'Zephyr' Coaching Institute

The Kerala High Court on 28th November, 2025 dismissed an appeal sought to challenge an arbitral award that dissolved a coaching partnership firm, ruling that courts can neither re-examine expert valuations nor can the parties introduce fresh evidence at the appellate stage under section 34 and 37 of the Arbitration and Conciliation Act, 1996. A Division Bench of Chief Justice Nitin Jamdar and Justice Syam Kumar V.M. held that “no case whatsoever under Section 34” was established to set aside the award passed in 2014 and affirmed by the District Court in 2016. Emphasising the limited scope of judicial interference, the Bench reiterated that the appellate power under Section 37 is “akin to that of superintendence”, confined merely to examining whether the court acted within its statutory limits. The dispute arose from a Partnership Deed entered into between R. Shiju and V. Sunil Kumar, who were jointly running a Trivandrum-based entrance coaching venture called 'Zephyr', since 1997. Following disputes mainly concerning Shiju's parallel coaching firm called “Aspirant”, the arbitration clause was invoked by Sunil Kumar. An award was passed on 19th April 2014, ordering the dissolution of the partnership and directing the distribution of assets, including goodwill valued at 75 Lakhs. Shiju challenged the arbitral award seeking to set it aside which was dismissed by the District Court on March 23, 2016, stating that none of the grounds under section 34 of the act were satisfied. Aggrieved, Shiju sought for an appeal under section 37 of the Arbitration and Conciliation Act, 1996. Shiju's Counsel argued that the Court accepted a “grossly undervalued goodwill”, stating that it should have been assessed at about ₹3 crores and that goodwill could not be clubbed with immovable property. Contentions also included the lack of expertise of two valuers to evaluate goodwill. They also argued that 2019 modifications to Section 34 were prospective, thereby enabling the parties to place new evidence on the record. On the contrary, Adv. Jayakumar appearing for Sunil Kumar, argued that goodwill formed a part of the firm's assets under Section 14 of the Partnership Act, that both valuers were competent experts and their reports were allowed without any objection. He stated that no other expert opinion supporting the ₹3-crore claim was provided and that income-tax proceedings remained pending, lacked finality, and were never put before either the arbitrator or the Section 34 court. The High Court rejected all grounds for appeal and noted that “Goodwill is part of the property of the firm that had to be valued and distributed along with other assets.” The Court also upheld the expertise of the Commissioners and that arbitrator was entitled to rely on it, especially when no oral evidence or expert valuation to support his claim was provided by the appellant, Shiju. The ₹3-crore figure, the Bench held, was “unsupported by any formal valuation report”. Re-affirming the District Court's decision, the Court held, “Thus, when the Arbitrator had to choose between the Appellant's own calculations and the report of the Commissioners appointed by consent to value the goodwill, the Arbitrator chose to rely on the valuation report of the Commissioner”. On alleged tax violations, the court held that “such material, not yet final and contested and placed on record for the first time in an appeal under Section 37, cannot be relied upon to set aside an arbitral award which, as we have already found, was validly passed”. Reiterating limited judicial interference, the Court ruled that an appellate court only has the power to verify whether the Court empowered under Section 34 abused its powers. Here, the District Judge examined every issue and appropriately rejected to re-appreciate valuation evidences. “An appeal under Section 37 of the Act of 1996 is not to be equated with a first appeal under the Code of Civil Procedure, and its power is more akin to that of superintendence. It cannot be said that the District Court, in exercise of its powers under Section 34 of the Arbitration and Conciliation Act, 1996, either committed any perversity or failed to exercise the powers vested in it to set aside the award. No case was made out to warrant interference in the appeal under Section 37.” Finding no perversity, patent illegality or fraud, the Court rejected to interfere, thereby dismissing the appeal. Case Title: Shiju R v. Sunil Kumar VCitation : 2025 LiveLaw (Ker) 801 Case No.: Arb.A No. 24/2016 Coram: Chief Justice Nitin Jamdar & Justice Syam Kumar V.M. Decision Date: 28 November 2025 For Appellant: Sr. Adv. Elvin Peter P.J., R.O. Muhamed Shameem, Adarsh Babu C.S and Naseeha Begum. For Respondent: Sr. Adv. K. Jayakumar, Shinod G.P and Anju C.V. Click Here To Read/Download Order

No 'Perversity': Kerala High Court Upholds Arbitral Award Dissolving 'Zephyr' Coaching Institute

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