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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 ..... arty to proceedings initiated under the arbitration clause in such agreement. The Parties: 3. The Applicant, Mr. Kartik Radia ("Radia") is a former partner of BDO India LLP, which is Respondent No. 1 ("BDO"). Mr. Milind Kothari, the Managing Partner of the LLP is Respondent No. 2 ("Kothari"). Both Respondents present trenchant objection to arbitration initiated under the LLP Agreement dated August 1, 2014, on the premise that BDO is not a signatory to the LLP Agreement. Issue for Consideration: 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 Radi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including as to the costs of the arbitration, which shall be final and binding on the Parties. [Emphasis Supplied] 8. According to Mr. Joshi, Clause 23.1 is clear in its terms - it only covers disputes between partners, and in relation to the subjects set out in it. He would submit that the disputes at hand between Radia and BDO cannot be a dispute among partners of BDO. It is the LLP that has expelled Radia and therefore the dispute is between Radia and BDO. Therefore, he would submit, this Section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the acts, conduct and circumstances including relationship between the contracting parties, the commonality of subject matter and the involvement of such party in the performance of the very contract containing the arbitration clause. The very operation of the LLP during its existence is the common commercial objective of the parties to the LLP Agreement. Therefore, I have no hesitation in holding that there is no merit at all in the argument that despite the LLP being the very subject matter of the 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. Wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Arbitral Tribunal to decide while the scope of jurisdiction of the Section 11 Court is to examine the prima facie existence of the arbitration agreement, and the prima facie logic in the joinder of parties proposed by the Applicant. Section 23 of LLP Act: 15. Mr. Joshi essentially relies on Section 23 of the LLP Act, which reads thus: 23. Relationship of partners.- (1) Save as otherwise provided by this Act, the mutual rights and duties of the partners of a limited liability partnership, 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 rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Schedule. 14. All disputes between the partners arising out of the limited liability partnership agreement which cannot be resolved in terms of such agreement shall be referred for arbitration as per the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996). [Emphasis Supplied] 18. Under Item 1 of the First Schedule the mutual rights and duties of the LLP and its partners, subject to the LLP Agreement, is governed by the provisions of the First Schedule. Item 14 of the First 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the LLP. In my opinion, this is a frivolous objection that deserves to be rejected. In fact, Mr. Amrut Joshi, Learned Counsel for Radia is right in his contention that under Section 26 of the LLP Act every partner is an agent of the LLP. He also rightly shows that under Section 27 (2) of the LLP Act, the LLP is liable for the acts of its partners. 21. There is yet another frivolous objection - that Radia is now an expelled partner while the arbitration agreement is only meant to resolve disputes 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 faceti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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