LLP Disputes To Be Referred To Arbitration Under Entry 14 Of First Schedule Even Absent Arbitration Clause In Agreement: Karnataka High Court
Isabella Mariam
The High Court of Karnataka Single Bench of Justice Suraj Govindaraj held that disputes arising between partners of a limited liability partnership must proceed to arbitration, as Entry 14 of the First Schedule to the LLP Act operates as a mandatory statutory mechanism for such resolution . In a petition concerning disagreements flowing from an LLP agreement, the Court noted that both sides had expressed willingness to submit the matter to arbitration but differed on the choice of arbitrator. The Court therefore allowed the request and appointed a sole arbitrator to hear and decide the dispute under the supervision of the Arbitration and Conciliation Centre.
The petitioners and the respondent had entered into a Limited Liability Partnership Agreement on 15.10.2022. The agreement did not contain an arbitration clause. Disputes subsequently arose between the partners relating to matters arising out of or in relation to the LLP arrangement. On 08.01.2024, the petitioners sent an email proposing that the matter be referred to arbitration. The respondent, through an email dated 10.01.2024, in principle agreed to a reference to arbitration but sought additional time.
Following this, on 18.01.2024, the petitioners issued a notice referring to Section 23(4) of the Limited Liability Partnership Act, 2008 and Entry 14 of the First Schedule, stating that disputes could be adjudicated by way of arbitration, and nominated an arbitrator on their behalf. The respondent replied on 05.06.2024, declining to concur with the nomination but nominating a different arbitrator of his choice.
With no consensus reached between the parties on the appointment of an arbitrator, the petitioners approached the High Court seeking the appointment of a sole arbitrator to adjudicate the disputes. The respondent, despite being served, did not appear before the Court.
The petitioners relied on statutory provisions governing the mutual rights and duties of partners under the LLP Act. Section 23(1) was relied upon with respect to rights and duties being governed by the LLP agreement, while Section 23(4) and Entry 14 of the First Schedule were invoked to state that in the absence of such agreement on a matter, disputes shall be determined as per the First Schedule, which mandates arbitration of disputes between partners arising out of the LLP agreement. The evidence before the Court consisted of the LLP agreement, email exchanges, notices, and reply notices reflecting the parties’ communications on arbitration and nomination of arbitrators.
The Court recorded that the Limited Liability Partnership Agreement “does not have an arbitration clause” and proceeded to examine Section 23 of the LLP Act. It noted that Section 23 “speaks of relationship of parties” and reproduced the statutory text in full. The Court observed that Section 23(4) provides that “in the absence of agreement as to any matter, the mutual rights and duties of the partners… shall be determined by the provisions… in the First Schedule.”
The Court then referred to Entry 14 of the First Schedule, quoting it as follows: “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.”
The Court recorded that a perusal of Entry 14 indicated that “all dispute between partners arising out of the limited liability partnership which cannot be resolved in terms of an LLP agreement shall be referred for arbitration.” It further observed that Entry 14 “is in effect a statutory and compulsory arbitration, which is required to be adhered to by the partners to a limited liability partnership.”
In reviewing the communications exchanged between the parties, the Court noted that the petitioners’ proposal for reference to arbitration “was initially agreed upon by the Respondent by way of email” and that in the reply notice, the respondent stated that “every allegation made by the Petitioners shall be countered before the arbitral tribunal as and when constituted.” The Court observed that the respondent’s only objection pertained to “the nomination made by the Petitioners” and that the respondent had “in fact nominated its own arbitrator.”
The Court stated that both Entry 14 of the First Schedule and Section 23(4), read with the willingness reflected in legal notices, warranted a reference to arbitration. It recorded that “there was no consensus which has arrived at between the parties” on the appointment of an arbitrator, leading the petitioners to approach the Court. The Court observed that the respondent had been served but “had chosen not to be represented,” enabling the matter to be considered.
The Court allowed the Civil Miscellaneous Petition and appointed “Sri. Justice K.N. Keshavanarayana, former Judge of this Court” as the sole arbitrator to arbitrate the dispute between the parties under the aegis of the Arbitration Centre attached to the Court. The Registry to “forward a copy of this order to the Director, Arbitration and Conciliation Centre for doing the needful.”
Since the order was passed in the presence of all counsel, “they shall appear before the Director, Arbitration and Conciliation Centre without requirement of any notice on 12.11.2025 at 2.30 p.m.”
Advocates Representing the Parties
For the Petitioners: Sri. Hemanth R. Rao, Advocate
For the Respondent: Respondent served; no appearance
Case Title: Maverick Motors LLP & Others v. Rohith Murthy
Neutral Citation: 2025: KHC:43884
Case Number: CMP No. 34 of 2025
Bench: Justice Suraj Govindaraj
