Bombay HC held that Section 23(4) of the LLP Act mandates arbitration for disputes between designated partners and LLPs.
Bombay HC Enforces Mandatory Arbitration Under LLP Act
The Bombay High Court has ruled that Section 23(4) of the Limited Liability Partnership Act, 2008, creates a statutory mandate for arbitration in disputes between designated partners and the LLP, making civil suits in such matters non-maintainable.
The provision requires disputes relating to the interpretation, application, or violation of the LLP agreement to be referred to arbitration. The Court held this is a substantive bar, not merely procedural, and parties cannot bypass it by filing suits for declarations or injunctions.
Where a statutory mechanism for dispute resolution exists, it must be followed exclusively.
Practitioners must advise clients to invoke arbitration promptly in LLP-related disputes. Courts are likely to stay civil proceedings and refer matters to arbitration under this provision. This strengthens alternative dispute resolution mechanisms in corporate practice.
Citations
- LLP Act, 2008, Section 23(4)