LLP Agreement Need Not Contain Arbitration Clause For Unresolved Partner Disputes: Bombay High Court

On 4 November, the Bombay High Court held that disputes between partners of a Limited Liability Partnership (LLP) can be referred to arbitration even in the absence of an express arbitration clause, provided they arise out of the LLP agreement and cannot be resolved under its terms.

Justice S.M. Modak allowed a petition filed by Prashant Vinod Vaghasiya and Nirmala Vinod Vaghasiya under Section 11(6) of the Arbitration and Conciliation Act, 1996, and appointed a sole arbitrator to resolve disputes concerning Avighnaa Infra Buildcon LLP. The Bench held:

“If there is a dispute 'arising out of limited liability partnership agreement' and it cannot be decided 'in terms of the agreement', then it shall be referred to arbitration as per provisions of Arbitration and Conciliation Act, 1996. These twin conditions have to be satisfied.”

The dispute arose from changes in the partnership structure of Avighnaa Infra Buildcon LLP, which was originally constituted under an agreement dated 15 October 2019 between Nirmala Vinod Vaghasiya and Trusha Vaghasiya.

Prashant Vinod Vaghasiya joined the LLP under an agreement dated 25 February 2020. Following its reconstitution on 10 October 2020, Nirmala and Trusha retired, Prashant continued as a partner, and Vivekanand Dhaneshwar Jha was admitted as a partner.

Disputes subsequently arose over the partnership accounts and Vivekanand's contested expulsion. Although an agreement dated 7 December 2025 allegedly settled the disputes, Prashant and Nirmala challenged its validity, contending that Nirmala had not signed it and certain spaces in the agreement remained blank.

They approached the High Court seeking appointment of an arbitrator, relying on Section 23(4), read with Entry 14 of the First Schedule to the Limited Liability Partnership Act, 2008 (LLP Act), which provides for arbitration of unresolved disputes arising from LLP agreements.

Vivekanand opposed the petition, arguing that the December 2025 agreement had settled the disputes and that the original partnership agreement conferred jurisdiction on Mumbai courts. He also contended that the arbitration notice dated 17 June 2025 had been issued only by Prashant and not by Nirmala.

Examining the statutory framework, the Court held that Entry 14 of the First Schedule provides a mechanism for referring disputes to arbitration when the LLP agreement does not provide for their resolution. It observed:

“So if there is no provision in the agreement then the issue has to be decided as per the provisions of First Schedule. First schedule contain 14 entries. It deals with the subject of sharing of profits, remuneration, the manner of taking decision amongst partners, recording of decision in minutes, modalities if competing business is carried on by any partner and so on. Entry No. 14 is relevant.”

Moreover, Justice Modak rejected Vivekanand's objection to its jurisdiction, holding that the clause conferring jurisdiction on Mumbai courts did not exclude arbitration but governed judicial remedies connected with the proceedings.

Further, the Court rejected the objection based on the December 2025 settlement agreement, observing that even an accord or satisfaction would not bar arbitration, particularly when the settlement itself was disputed. It held that Nirmala was not required to issue a separate arbitration notice and rejected the objection that the notice issued only by Prashant was insufficient.

On the scope of arbitration, the Bench clarified that Vivekanand could also raise grievances concerning his expulsion and other disputes, rather than limiting the proceedings to issues relating to partnership accounts. It appointed retired Bombay High Court Judge Justice R.D. Dhanuka as the sole arbitrator, with Mumbai as the place of sitting.

It permitted other concerned parties to seek impleadment before the arbitrator, who would decide their participation. It also directed Prashant and Nirmala, on one side, and Vivekanand, on the other, to share the arbitration costs equally, subject to the final award,

Accordingly, the High Court disposed of the petition.

Appearances for petitioners (Prashant Vinod Vaghasiya and Nirmala Vinod Vaghasiya): Advocates Anil D'Souza and Ernest Tuscano.

Appearances for respondent No. 1 (Vivekanand Dhaneshwar Jha): Advocate Shaila R. Pandey.

Appearances for respondents Nos. 2 and 3 (Akhtar Tassaduk Khan and Vidya Ashok Kakera): Advocate Jitendra Singh.

Appearances for respondent No. 4 (Surekha Suresh Narkhede): Advocate Chetan Rathod, instructed by Advocate Niraj K. Tripathi.

Appearances for intervenor-applicant (Nishant Properties and Developers Pvt. Ltd.): Advocate Arvindkumar Tiwari.