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TMI Blog2025 (3) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary party to the arbitration proceedings relating to the LLP's operations and governance, despite the LLP not being a signatory to the LLP Agreement. Therefore, even if there had been no arbitration clause at all in the LLP Agreement, the First Schedule would lead to an arbitration agreement being in existence in the eyes of law, for disputes among the partners. The dispute at hand relates to the expulsion of a partner from the LLP. Whether the Managing Partner alone was responsible for it and other partners acquiesced in or approved of that decision is a subject matter of merits of the dispute. Whether the expelled partner's conduct warranted expulsion, is a question that would necessarily require examination of the injury, if any, occasioned to the LLP's interests by such partner's conduct for the drastic step of expulsion to be taken. Therefore, it would be simply impossible for this Court to reject this Application under Section 11. The upshot of this contention is that the LLP is not a necessary party to the dispute. Even a plain reading of the invocation notice addressed to Kothari would show that it was issued to him in his capacity as the Managing Partner. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Radia has been expelled from the LLP. Radia's grievances relate to his manner of treatment by the Respondents - expulsion from BDO; and the alleged high-handed behaviour and misconduct by Kothari, the Managing Partner of BDO, in effecting the expulsion. Radia seeks to initiate arbitration, which has been repelled by the Respondents. Hence this Application. 5. The Respondents' opposition is in marginally varying tones. Mr. Gaurav Joshi, Learned Senior Counsel on behalf of BDO, asserts that Radia's desire is to initiate arbitration proceedings against BDO, which is not a party to the arbitration agreement. Mr. Mayur Khandeparkar, Learned Counsel on behalf of Kothari, asserts that Radia's allegations and expressions of grievances are all squarely personal against Kothari. The invocation notice is issued to Kothari, and therefore, they both submit, the invocation too is not against BDO. 6. Both the Counsel seek to draw the Section 11 Court into this issue with a view to have this Application dismissed. Mr. Joshi seeks to draw a clear distinction between: (i) disputes among the partners of the LLP; and (ii) disputes between partners and the LLP. According to him, the jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 11 Application is not maintainable since disputes between Radia and BDO are not arbitrable. 9. In my opinion, such an argument is flawed. Even a plain reading of the arbitration agreement would show that the subject matter of arbitration would include any construction or application of the LLP Agreement. It would also include any matter in any way relating to the business and affairs of BDO. It also includes interpretation of any rights, duties or liabilities of any partner of BDO. This would necessarily entail BDO being a necessary party in a dispute such as the one involved in the matter at hand. Statutory Scheme - LLP Act: 10. Indian law governing privity of non-signatories to arbitration agreements is well developed now. The law declared in Cox and Kings Ltd. Vs. SAP India Pvt. Ltd. - (2024) 4 SCC 1 is not being extracted here, to avoid prolixity. Suffice it to say, that the facts at hand do not even need one to look for any inter-connected agreements or multiple agreements relating to the same transaction. An LLP is not a "third party" to an LLP Agreement in the manner that the concept of "third parties" is conventionally understood. Far from being extraneous to the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LLP Agreement, the LLP itself is extraneous to the LLP Agreement. This issue ought not to have been a matter that detained my attention when exercising jurisdiction under Section 11 of the Arbitration Act, since the consideration of such an issue would normally fall in the domain of the Arbitral Tribunal. The need for me to discuss this issue has arisen because of the stance of the Respondents that the arbitration agreement insofar as it relates to the LLP does not exist. The scope of my review for a Section 11 Application is to examine the existence of an arbitration agreement, and owing to the trenchant objection of the Respondents, it became necessary to rule on this issue. 13. Without meaning to put too fine a point, the submission that the LLP is an alien to the LLP Agreement is totally untenable as would be seen from the very scheme of the LLP Act. That an LLP is an entity that enjoys rights against, and owes obligations to its partners, is expressly set out in Paragraph 4(ii) of the Statement of Objects and Reasons to the LLP Act. Section 2 (1) (o) of the LLP Act, which defines "limited liability partnership agreement" makes it clear that the subject matter of the LLP Agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the mutual rights and duties of a limited liability partnership and its partners, shall be governed by the limited liability partnership agreement between the partners, or between the limited liability partnership and its partners. (2) The limited liability partnership agreement and any changes, if any, made therein shall be filed with the Registrar in such form, manner and accompanied by such fees as may be prescribed. (3) An agreement in writing made before the incorporation of a limited liability partnership between the persons who subscribe their names to the incorporation document may impose obligations on the limited liability partnership, provided such agreement is ratified by all the partners after the incorporation of the limited liability partnership. (4) In the absence of agreement as to any matter, the mutual rights and duties of the partners and the mutual rights and duties of the limited liability partnership and the partners shall be determined by the provisions relating to that matter as are set-out in the First Schedule. [Emphasis Supplied] 16. The very subject matter of Section 23 is the relationship of the partners. Mr. Joshi's submission is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Schedule provides that all disputes among partners arising out of the LLP Agreement that cannot be resolved in terms of the LLP Agreement, shall be referred to arbitration under the Arbitration Act. This is another statutory indication that the subject matter of the LLP Agreement includes duties owed by partners to the LLP and also duties owed to the partners by the LLP. This would necessarily render the LLP a necessary party to the arbitration proceedings relating to the LLP's operations and governance, despite the LLP not being a signatory to the LLP Agreement. Therefore, even if there had been no arbitration clause at all in the LLP Agreement, the First Schedule would lead to an arbitration agreement being in existence in the eyes of law, for disputes among the partners. The analysis made above about the necessity of the LLP as a party to such proceedings and the absence of implications of the LLP not being a signatory to the arbitration agreement, would still be as valid even if the LLP Agreement had no arbitration clause at all. This is because under Item 14 of the First Schedule to the LLP Act, there would emerge a deemed and statutory arbitration agreement. 19. On the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s among partners. The disputes relate to the expulsion of Radia from the partnership. The act of expulsion is itself pre-conditioned on his partnership in BDO, and therefore this submission is to only be stated to be rejected. That apart, as rightly pointed out by Mr. Amrut Joshi, on the face of the record, the allegation by Radia is that the expulsion is back-dated inasmuch as Radia issued a legal notice dated June 3, 2019, after the receipt of which, he was served with a letter of expulsion dated June 1, 2019. While these are matters of merits that only the Arbitral Tribunal can examine, the objection that disputes raised by a former partner cannot be amenable to arbitration is facetious to say the least, particularly when raised in such factual context. 22. One more objection from Mr. Khandeparkar is based on Radia having made reference to the injury to his image and to his defamation at the hands of BDO and Kothari. Defamation is not arbitrable, Mr. Khandeparkar would contend. Here again, what part of the claim is arbitrable and what the approach should be, squarely falls in the domain of the Arbitral Tribunal. The Arbitral Tribunal clearly has the power to rule on its own jur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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