- Case
- KARTIK RADIA v. BDO INDIA LLP AND ANR (Bombay High Court, 04-03-2025)
- Law
- Arbitration and Conciliation Act, Limited Liability Partnership Act.
Facts: Kartik Radia, a former partner of BDO India LLP ("BDO"), was expelled from the LLP. He sought to initiate arbitration based on the arbitration clause in the Limited Liability Partnership Agreement ("LLP Agreement"). BDO and its Managing Partner, Milind Kothari, objected, arguing that BDO was not a signatory to the LLP Agreement and that the disputes were personal against Kothari.
Procedural Posture: Radia filed an application under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator. The Respondents opposed the application, leading to the present judgment by the High Court of Bombay.
Issue: Can disputes between partners of an LLP and the LLP itself be covered by an arbitration agreement contained in the LLP Agreement, even if the LLP is not a signatory to that agreement?
Holding: Yes, disputes between partners of an LLP and the LLP can be covered by the arbitration agreement in the LLP Agreement, even if the LLP is not a signatory. The Court rejected the argument that the LLP is a "third party" to its own LLP Agreement.
Reasoning: The Court reasoned that an LLP Agreement is a mandatory statutory charter document governing the LLP. The LLP is not a "third party" to the LLP Agreement because the very operation of the LLP during its existence is the common commercial objective of the parties to the LLP Agreement. The court emphasized the interplay between the Limited Liability Partnership Act, 2008, and the Arbitration and Conciliation Act, 1996, requiring a purposive interpretation that furthers the objective of speedy dispute resolution. The court also noted that even in the absence of an arbitration clause in the LLP Agreement, Item 14 of the First Schedule to the LLP Act would lead to a deemed and statutory arbitration agreement for disputes among partners. The court appointed arbitrators for both parties.
