LLP Can Be Bound By Arbitration Clause Despite Not Being Signatory To LLP Agreement: Bombay High Court
Live LawThe Bombay High Court bench of Justice Somasekhar Sundaresan has held that the mere fact that an LLP is not a signatory to an LLP Agreement does not, by itself, preclude it from being a party to arbitration proceedings initiated between Partners under the arbitration clause of such an agreement. The Court observed that an LLP is not a “third party” to its LLP Agreement but an entity with rights and obligations vis-à-vis its partners as per the statutory scheme of the LLP Act. The Respondents objected to arbitration initiated under the LLP Agreement dated August 1, 2014, on the premise that BDO was not a signatory to the LLP Agreement Mr. Radia had been expelled from the LLP. The LLP Act makes it clear that an LLP Agreement governs the mutual rights and duties of the partners The court observed that: “It is trite law that whether a party is a necessary party or a proper party is really for 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.” The court noted that under Section 26 of the LLP Act, every partner is an agent of the LLP and under Section 27, the LLP is liable for the acts of its partners.
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Non-Signatories Bound By Arbitration Agreement If Their Actions Align With Those of Signatories: Delhi High Court
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