An LLP is not a third party to its own LLP Agreement and can be a party to arbitration proceedings despite not being a signatory.

JUDGEMENT:

1. Whether disputes between partners of a limited liability partnership (“LLP”) and the LLP can at all be covered by the arbitration agreement contained in a limited liability partnership agreement (“LLP Agreement”) to which the LLP is not a signatory, is the short question that has arisen in this Application filed under Section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).

2. For the reasons set out below, I reject the absolute proposition canvassed by the Respondents – that because an LLP is not a signatory to the LLP Agreement, it can never be a party 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 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 jurisdiction of the arbitral tribunal created by the arbitration clause contained in the LLP Agreement can never extend to disputes that a partner may have with the LLP.

Arbitration Agreement:

7. Clause 23 of the LLP Agreement, which contains the arbitration agreement, is extracted below:

23.1 Any disputes, differences, claims and questions whatsoever which arise during the continuance of the LLP or afterwards, between the Partners or their respective representatives or between any Partner or Partners and the representatives of any other Partners relating to this Agreement or the construction or application thereof or any clause or thing herein contained or any account, valuation or division of assets, debts or liabilities to be made hereunder or as to any act, deed or omission of any Partner or as to any other matter in any way relating to the Business or affairs of the LLP or the rights, duties or liabilities of any of the Parties under this Agreement, shall in the first instance, be attempted to be resolved amicably between the disputing parties.

23.2 In the event the parties to the dispute are not able to resolve the same amicably within [30] Business Days from the date the dispute arose, the same shall be referred to the Executive Board to be decided in accordance with this Agreement.

23.3 If the Executive Board cannot resolve the dispute within 60 Business Days from the date such dispute was referred to it, the same shall be referred to arbitration in accordance with and subject to the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof for the time being in force. One arbitrator each shall be appointed by the Partners in dispute, and the third