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HIGH COURT OF JUDICATURE AT MADRAS
C. SARAVANAN, J.
Saurab Jain - Appellant
Versus
M/s. Remedi Speciality Medicines LLP & Ors. For the Petitioner: U. Vijay Metha, Advocate. - Respondent
Arb. O.P. (Com.Div.) No. 545 of 2023
Decided On : 09-01-2024
Arbitration - Limited Liability Partnership - Appointment of Sole Arbitrator
Fact of the Case:
The petitioner, a partner in a Limited Liability Partnership (LLP), filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a Sole Arbitrator to adjudicate upon disputes arising from the LLP Agreement and to inspect the LLP's books of accounts.
Finding of the Court:
The Court found that there was an arbitrable dispute between the petitioner and the respondents as the respondents were not furnishing details and/or paying any dividends, and therefore appointed an arbitrator to adjudicate the inter se dispute between the parties.
Issues: The issues revolved around the arbitrability of the dispute, the requirement of prior notice before a partner ceased/exited from the LLP, and the applicability of Section 24 of the Limited Liability Partnership Act, 2008.
Ratio Decidendi: The Court held that the absence of a thirty-day prior notice before the partner ceased/exited from the LLP did not preclude the existence of a dispute between the parties, and that it was not mandatory for the petitioner to exit from the Partnership Firm for raising a dispute with the respondents.
Final Decision: The Original Petition was allowed, and the Court appointed an arbitrator to adjudicate the dispute, leaving the parties to bear their own costs.
JUDGMENT
(Prayer: Original Petition is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, praying for appointment of a Sole Arbitrator to adjudicate upon the disputes arisen between the petitioner and the respondents under the LLP Agreement dated 02.03.2016 and inspect, scrutinize and verify the books of accounts of the LLP and determine the amounts payable to the petitioner upon retirement as per the terms of the LLP and to direct the respondents to pay cost of the petition.)
1. This Original Petition has been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, for appointment of a Sole Arbitrator.
2. The petitioner is a confounding partner of the first respondent M/s.Remedi Speciality Medicines Limited Liability Partnership (LLP), which was registered as a Limited Liability Partnership Firm vide LLP Agreement dated 02.03.2016 under the provisions of the Limited Liability Partnership Act, 2008.
3. The other partner who had joined with the petitioner in forming the first respondent Partnership Firm exited and the second, third and fourth respondents have stepped in as the new partners. It appears that after the second, third and fourth respondents become the partners, the petitioner has not received the books of accounts, remuneration under the aforesaid LLP Agreement dated 02.03.2016.
4. The dispute between the petitioner and the respondents is arbitrable in terms of Clause 40 of the said LLP Agreement, which reads as under:-
"40. All disputes between the partners or between the Partner and the LLP arising out of the limited liability partnership agreement which cannot be resolved in terms of this agreement shall be referred for arbitration as per the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996)."
5. The petitioner has issued two notices to the respondents. The first notice was issued on 04.08.2023 whereby, the petitioner has called upon the respondents to furnish the books of accounts. The second notice was issued on 12.09.2023.
6. According to the learned counsel for the respondents, the details have been furnished.
7. The petitioner has thereafter invoked Section 21 of the Arbitration and Conciliation Act, 1996 and has called upon the respondents to consent for appointment of Arbitrator to which, there is no reply.
8. The learned counsel for the respondents would submit that this Original Petition is premature inasmuch as the LLP Agreement dated 02.03.2016 and the Supplemental Agreement dated 01.04.2021 contemplate a prior notice of thirty days before the partner ceased/exited from the first respondent Partnership Firm.
9. It is submitted that till date, no notice has been issued as is contemplated under Clause 32 of the LLP Agreement dated 02.03.2016.
10. That apart, the learned counsel for the respondents has relied on Section 24 of the Limited Liability Partnership Act, 2008 to state that the present Original Petition is premature.
11. I have considered the arguments advanced by the learned counsel for the petitioner and the learned counsel for the respondents.
12. Even though the petitioner has not issued thirty days prior to the notice as is contemplated under Clause 32 of the LLP Agreement dated 02.03.2016, it cannot be said that there is no dispute between the petitioner and the respondents. It is not mandatory for the petitioner to exit from the Partnership Firm for raising a dispute with the respondents.
13. The e-mail sent by the petitioner to the Chartered Accountant of the first respondent Partnership Firm to furnish the books of account has also been responded by the Chartered Accountant in the negation by stating that as per the protocol, sharing of financial details of clients will be done only to designated person in the concern and therefore the information called for cannot be furnished.
14. It is clear that there is an arbitrable dispute between the petitioner and the respondents herein as the respondents are not furnishing details and/or
The main legal point established in the judgment is that the absence of a prior notice before a partner ceased/exited from the LLP does not preclude the existence of a dispute between the parties, an....
The Court emphasized the importance of upholding the Arbitration Agreement and the availability of arbitration as a remedy for future disputes.
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.
The main legal point established in the judgment is that the bar imposed under Section 69 of the Partnership Act, 1932, does not apply to arbitration proceedings under the Arbitration and Conciliatio....
The main legal point established is that if a contract contains an arbitration clause and the Arbitrator has not been appointed, the High Court is required to appoint an Arbitrator for resolution of ....
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