Maverick Motors LLP & Ors. Vs Rohith Murthy (Karnataka High Court)
Summary: The Karnataka High Court, in Maverick Motors LLP & Ors. Vs Rohith Murthy, Civil Miscellaneous Petition No. 34 of 2025, decided on 31 October 2025, considered whether disputes between partners of a Limited Liability Partnership (LLP) could be referred to arbitration when the underlying LLP agreement did not contain an express arbitration clause. The petitioners approached the High Court under Section 11(5) and Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of a sole arbitrator. Their claim was founded principally on Section 23(4) of the Limited Liability Partnership Act, 2008, read with Entry 14 of its First Schedule. The Court examined whether these statutory provisions independently required arbitration despite the absence of an agreed dispute-resolution clause.
The petitioners and respondent had entered into an LLP agreement dated 15 October 2022. Although the agreement regulated their partnership relationship, it contained no arbitration clause. Following the emergence of disputes, the petitioners sent an email on 8 January 2024 proposing arbitration. By email dated 10 January 2024, the respondent agreed in principle to referring the dispute to arbitration but requested additional time. The petitioners subsequently issued a notice dated 18 January 2024 invoking Section 23(4) and Entry 14 of the First Schedule to the LLP Act and nominated an arbitrator. In his reply dated 5 June 2024, the respondent disagreed with the petitioners’ nomination and proposed a different arbitrator. Thus, while the parties had contemplated arbitration, they could not agree upon the appointment.
As the disagreement remained unresolved, the petitioners filed the present civil miscellaneous petition. The respondent was served with notice but did not appear or arrange representation before the High Court. The Court proceeded to consider the petition and the statutory framework. It first acknowledged that the LLP agreement itself did not provide for arbitration. The absence of an express clause, however, did not conclude the inquiry because the First Schedule to the LLP Act supplies default rules governing matters not addressed in the LLP agreement.
Justice Suraj Govindaraj examined Section 23 of the LLP Act, 2008, which governs the relationship between an LLP and its partners. Sub-section (1) recognises that the mutual rights and duties of the partners and the LLP are ordinarily governed by their agreement. Sub-section (2) requires filing the agreement and changes with the Registrar. Sub-section (3) concerns certain pre-incorporation agreements subsequently ratified by the partners. Crucially, sub-section (4) provides that, in the absence of agreement on any matter, the mutual rights and duties of the partners and the LLP are determined by the provisions concerning that matter in the First Schedule. The Court treated this sub-section as the statutory mechanism for filling gaps in the parties’ agreement.
The Court then examined Entry 14 of the First Schedule, which provides that disputes between partners arising from an LLP agreement and incapable of resolution under that agreement shall be referred to arbitration in accordance with the Arbitration and Conciliation Act, 1996. The High Court held that the First Schedule is not merely an indicative collection of provisions. Rather, where the LLP agreement does not address a particular matter, the corresponding statutory rule governs the parties. Applying this reasoning, the Court concluded that Entry 14 creates a statutory and compulsory arbitration requirement for unresolved disputes between LLP partners where the agreement does not otherwise provide for their resolution.
The Court also considered the parties’ communications independently of the statutory framework. The respondent’s email had agreed in principle to arbitration. Further, his reply to the petitioners’ notice stated that the allegations would be contested before the arbitral tribunal once constituted. The respondent had objected to the particular arbitrator nominated by the petitioners and had proposed his own nominee. These communications demonstrated that the disagreement principally concerned the identity of the arbitrator rather than whether the dispute should be referred to arbitration. Consequently, the Court found support for reference both in the statutory arbitration framework applicable to LLP disputes and in the parties’ exchange of communications.
Allowing the petition, the Karnataka High Court appointed Justice K.N. Keshavanarayana, former Judge of the Karnataka High Court, as the sole arbitrator to adjudicate the dispute under the aegis of the Arbitration Centre attached to the High Court. The Registry was directed to forward the order to the Director of the Arbitration and Conciliation Centre. The parties were directed to appear before the Director on 12 November 2025 at 2:30 p.m., without requiring a separate notice. The decision establishes that an LLP agreement’s silence regarding arbitration does not, by itself, prevent reference of qualifying partner disputes to arbitration, because Section 23(4) and the First Schedule of the LLP Act can supply the applicable dispute-resolution mechanism.
FULL TEXT OF THE ORDER OF KARNATAKA HIGH COURT
1. The Petitioners are before this Court seeking for the following reliefs:
a. To appoint a Sole Arbitrator to adjudicate upon the disputes that have arisen between the petitioners and the respondents out of the or in relation to the LLP Agreement dated 15 October 2022 as per Section 23(4) of the LLP Act, Entry 14 of the 1st Schedule of the LLP Act.
b. Pass any other order(s) or direction(s) that this Hon’ble Court may deem fit and proper in the facts and circumstances
2. Petitioners and the respondent had entered into a Limited Liability Partnership Agreement on 15.10.2022. The said agreement does not refer to any arbitration clause. There being disputes which arose between the parties, the Petitioners vide email dated 08.01.2024 indicated that the matter could be referred to arbitration. The respondent vide his email dated 10.01.2024 in principle agreed for reference of the matter to arbitration, but had sought for some time.
3. The petitioners vide notice dated 18.01.2024 by referring to sub-section (4) of Section 23 of the Limited Liability Partnership Act, 2008 (for short, LLP Act, 2008) and Entry 14 to the first Schedule of the LLP Act, 2008 indicated that the disputes could be adjudicated by way of arbitration and had nominated its arbitrator. The respondent vide its reply dated 05.06.2024 did not concur with the nomination made by the Petitioners, but had nominated its own arbitrator.
4. It is in that background when there was no consensus which has arrived at between the parties that the Petitioners have approached this Court. Notice having been issued to the Respondent and received by Respondent, Respondent though served had chosen not to be represented. It is in the above background that the above matter had been taken up for consideration.
5. It is clear that the Limited Liability Partnership Agreement does not have an arbitration clause. Section 23 of LLP Act, 2008, speaks of relationship of parties.
6. Said Section 23 is reproduced hereunder for easy reference:
23. Relationship of partners.—(1) Save as otherwise provided by this Act, the mutual rights and duties of the partners of a limited liability partnership, and the mutual rights and duties of a limited liability partnership and its partners, shall be governed by the limited liability partnership agreement between the partners, or between the limited liability partnership and its partners.
(2) The limited liability partnership agreement and any changes, if any, made therein shall be filed with the Registrar in such form, manner and accompanied by such fees as may be prescribed.
(3) An agreement in writing made before the incorporation of a limited liability partnership between the persons who subscribe their names to the incorporation document may impose obligations on the limited liability partnership, provided such agreement is ratified by all the partners after the incorporation of the limited liability partnership.
(4) In the absence of agreement as to any matter, the mutual rights and duties of the partners and the mutual rights and duties of the limited liability partnership and the partners shall be determined by the provisions relating to that matter as are set-out in the First Schedule.
7. Subsection (1) of Section 23 deals with mutual rights and duties of the partners as contained in the agreement. Subsection (2) of Section 23 requires the said agreement to be filed with the Registrar. Subsection (3) of Section 23 relates to obligations which have been incurred prior to the incorporation of the limited liability partnership. Subsection (4) of Section 23 is a standout provision inasmuch as it provides for in the absence of agreement as to any matter, the mutual rights and duties of the partners and the mutual rights and duties of the limited liability partnership and the partners shall be determined by the provisions relating to that matter as are set out in the First Schedule. Thus, the First Schedule is not only an indicative list but is a list of matters which if not dealt with by mutual agreement under the Limited Liability Partnership Agreement, it would be dealt with in the manner as prescribed in Entry 14 of the First Schedule of LLP Act, 2008 is reproduced hereunder for reference:
“14. 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 (26 of 1996).”
8. A perusal of the above indicates 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 as per the provision of the Arbitration Conciliation Act, 1996. This Entry 14 of the First schedule is in effect a statutory and compulsory arbitration, which is required to be adhered to by the partners to a limited liability partnership.
9. Be that as it may, even the proposal made by the Petitioners for reference to the arbitration was initially agreed upon by the Respondent by way of email and even in the reply notice, the Respondent has categorically stated that every allegation made by the Petitioners shall be countered before the arbitral tribunal as and when constituted. The Respondent apparently had only an objection to the nomination made by the Petitioners and had in fact nominated its own arbitrator.
10. In that view of the matter, both on account of Entry 14 to the First Schedule read with subsection (4) of Section 23 of LLP Act as also in view of the agreement arrived at in the exchange of Legal notices, to refer the matter to arbitration, I pass the following:
ORDER
i) CMP is allowed.
ii) Sri.Justice K.N.Keshavanarayana, former Judge of this Court is appointed as a sole arbitrator to arbitrate the dispute between the parties under the aegis of Arbitration Center attached to this Court.
iii) Registry is directed to forward a copy of this order to the Director, Arbitration and Conciliation Centre for doing the needful.
iv) Since the order is passed in the presence of all the 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.
