[LLP Act] Partners Bound To Refer Disputes To Arbitration Even Without Such Clause In Agreement Under Entry 14 Of First Schedule: Karnataka HC

The Karnataka High Court has said that Entry 14 of the First Schedule of the Limited Liability Partnership Act 2008 is in effect a statutory and compulsory arbitration, which is required to be adhered to by the partners in a limited liability partnership.For Context: Entry 14 of the First Schedule of LLP Act, 2008 reads thus: 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).The petitioner Maverick Motors LLP and the respondent Rohith Murthy had entered into a Limited Liability Partnership Agreement on 15.10.2022. The said agreement did not refer to any arbitration clause. There being disputes which arose between the parties, the Petitioners vide email dated 08.01.2024 indicated that the matter could be referred to arbitration. The respondent vide his email dated 10.01.2024 in principle agreed for reference of the matter to arbitration, but had sought for some time. The petitioner then nominated its arbitrator, which was accepted by the respondent, but had nominated its own arbitrator. Since there was no consensus reached between the parties, the petitioners approached the court seeking for appointment of an arbitrator. Justice Suraj Govindaraj said, “All disputes between partners arising out of the limited liability partnership which cannot be resolved in terms of an LLP agreement shall be referred for arbitration as per the provision of the Arbitration Conciliation Act, 1996. This Entry 14 of the First schedule is in effect a statutory and compulsory arbitration, which is required to be adhered to by the partners to a limited liability partnership.” Noting that even the proposal made by the petitioners for reference to the arbitration was initially agreed upon by the respondent by way of email and even in the reply notice, the court said that the respondent has categorically stated that every allegation made by the petitioners shall be countered before the arbitral tribunal as and when constituted. It said, “The Respondent apparently had only an objection to the nomination made by the Petitioners and had in fact nominated its own arbitrator.” Following which, it allowed the petition and appointed Justice K.N.Keshavanarayana, former Judge of this Court is appointed as a sole arbitrator to arbitrate the dispute between the parties under the aegis of Arbitration Center attached to this Court. Appearance: Advocate Hemanth R Rao for Petitioners.Citation No: 2025 LiveLaw (Kar) 380Case Title: Maverick Motors LLP & Others AND Rohith Murthy Case No: CIVIL MISC. PETITION NO. 34 OF 2025 Click Here To Read/Download Order

[LLP Act] Partners Bound To Refer Disputes To Arbitration Even Without Such Clause In Agreement Under Entry 14 Of First Schedule: Karnataka HC

Mustafa Plumber

Tags