Madras High Court Restores Dinamalar Arbitral Awards, Holds Firm Dissolution Does Not End Arbitration

The Madras High Court on 28 October restored two arbitral awards concerning the division of the Dinamalar newspaper business and its assets among family partners, holding that dissolving a partnership firm does not terminate pending arbitration proceedings or render the Arbitral Tribunal functus officio.

A Bench comprising Justices P. Velmurugan and G.K. Muthukumar allowed appeals against a Single Judge's decision to set aside parts of the arbitral awards concerning the dissolution of the family partnership firm that publishes the Tamil newspaper Dinamalar. The judges held:

“The Tribunal was not rendered functus officio merely because the Firm stood dissolved. It could continue the pending proceedings and adjudicate the disputes arising from the dissolution and the inter se rights of the partners.”

T.V. Ramasubbiyer founded Dinamalar in 1951. His five sons, R. Venkitapathy, R. Krishnamoorthy, R. Lakshmipathy, R. Raghavan and R. Sathyamurthy, became partners in the publishing firm in 1960. Under a partnership deed dated 23 March 1997, each partner held a 20% share in the firm's profits and losses.

Disputes over management, accounts, advertising revenue, assets and the Dinamalar trademark led to multiple lawsuits beginning in 2001. After a dispute over the appointment of a Receiver to manage certain newspaper editions, the parties agreed to arbitration. The High Court referred their disputes to an Arbitral Tribunal on 23 January 2007.

While arbitration was pending, Sathyamurthy issued a dissolution notice on 27 February 2012 under Clause 4 of the partnership deed and Section 43 of the Indian Partnership Act, 1932.

In its first interim award dated 28 November 2013, the Tribunal recognised each partner's one-fifth share in the firm's assets.

In its second award dated 15 March 2014, it declared the partnership dissolved from 27 February 2012 and directed the parties to preserve the assets and continue business pending settlement.

In its third award dated 29 September 2018, the Tribunal divided Dinamalar's ten editions, properties, goodwill and trademark interests among the partners. It allotted four editions to Venkitapathy, three jointly to Krishnamoorthy and Lakshmipathy, two to Raghavan's legal heirs and one to Sathyamurthy. It also issued directions on trademark use and future business operations.

On 10 August 2023, a Single Judge upheld the dissolution but set aside the consequential directions in the second award and the entire third award. The Judge questioned the Tribunal's authority to issue directions affecting third-party rights and raised concerns about the valuation of goodwill and trademark rights. The decision prompted 17 appeals under Section 37 of the Arbitration and Conciliation Act, 1996.

The Division Bench rejected the argument that dissolution extinguished the Tribunal's authority. It distinguished the settlement of a dissolved partnership's affairs from the statutory liquidation of a company.

It noted that the parties had published dissolution notices in the Dinamani newspaper on 13 March 2012 and the Official Gazette on 21 March 2012. No third party had asserted any claim over the firm's assets.

Further, the Court held that the Tribunal could consider the Dinamalar name, goodwill and trademark while settling the partners' rights under Section 55 of the Partnership Act. However, the Tribunal could not use this power to decide independent questions of trademark validity, infringement or third-party claims.

Addressing objections to the distribution and valuation of assets, it noted that the Tribunal had examined the relevant material with the assistance of a Chartered Accountant. It said:

“A party's disagreement with the findings on accounts, valuation or distribution is not, by itself, sufficient to set aside an Award.”

The judges held that requests for a further audit, fresh valuation or sale of the entire business as a single unit did not, by themselves, justify setting aside the awards. They found that the Single Judge had exceeded the limits of judicial interference under Section 34 of the Arbitration Act.

Accordingly, the High Court allowed ten appeals filed in 2024, disposed of seven appeals filed in 2025, restored the second and third interim awards and left the first award undisturbed, without imposing costs.

Appearances for appellant (R. Sathyamurthy): Senior Advocate P.S. Raman, assisted by Advocates P. Giridharan and H. Siddarth.

Appearances for respondents: Senior Advocate Chitra Sampath, assisted by Advocate T.S. Baskaran; Senior Advocate Abdul Saleem, assisted by Advocate M. Vijaya Mehanath; Senior Advocate A.L. Somayaji, assisted by Advocate S. Elam Bharathi; Senior Advocate Vijay Narayan, assisted by Advocate Prasad Vijaya Kumar; Advocates S. Shyam Kumar and R. Rachana.