In a significant ruling, the Karnataka High Court, led by Justice Suraj Govindaraj, issued ex-parte injunctions under Section 9 of the Arbitration and Conciliation Act, 1996, in favour of Neil Patel Digital LLC (NPD LLC). The dispute arose from alleged breaches of a Limited Liability Partnership (LLP) Agreement between NPD LLC and Pradeep Kumar Rajarathinam, the first respondent. The core issue revolved around the violation of specific covenants in the LLP Agreement, particularly concerning the unauthorized transfer of funds exceeding stipulated limits, unauthorized appointments, and the induction of new partners without proper consent.
The LLP Agreement contained several negative covenants, including Clause 15.1H, which restricted the signing of cheques or transferring amounts exceeding ₹2.5 lakhs from the LLP's bank account. NPD LLC alleged that Respondent No. 1 had breached this clause by transferring amounts exceeding the prescribed limit, amounting to nearly ₹7.9 crores. Upon reviewing the account statements, the court found prima facie evidence supporting these allegations, leading to concerns about potential financial mismanagement and the siphoning of funds.
In response to these serious allegations, NPD LLC filed a petition under Section 9 of the Arbitration and Conciliation Act, seeking urgent interim reliefs to prevent further unauthorized actions by Respondent No. 1. The court, acknowledging the urgency and gravity of the situation, granted the following reliefs:
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Restraining Respondent No. 1 from transferring any funds from the LLP's bank account.
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Restraining the Bank (Proforma Respondent No. 2) from acting upon any instructions issued by Respondent No. 1 regarding the transfer of funds.
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Restraining Respondent No. 1 from dealing with, alienating, encumbering, or exploiting any tangible or intangible assets of the LLP.
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Permitting NPD LLC to publish a public notice of the order in relevant newspapers, notifying the general public of the restrictions imposed on Respondent No. 1.
These measures were aimed at preserving the status quo and preventing any further unauthorized actions that could potentially harm the interests of NPD LLC. The court's decision underscores the importance of adhering to contractual obligations and the serious consequences of breaching such agreements.
The legal team representing NPD LLC comprised Shiv Sapra, Partner; Christopher Edwin, Partner; Syed Shujath Mehdi, Principal Associate; and Aviral Tripathi, Associate, all from Kochhar & Co. Their prompt legal intervention played a crucial role in securing the interim reliefs granted by the court.
This case highlights the judiciary's proactive stance in addressing corporate disputes, especially those involving financial mismanagement and breaches of contractual agreements. It serves as a reminder to businesses and individuals of the critical importance of adhering to the terms and conditions set forth in partnership agreements. The court's intervention in this matter reflects its commitment to ensuring that contractual obligations are respected and that parties are held accountable for any breaches that may adversely affect the interests of others.
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