Kartik Radia Vs BDO India LLP & Anr. (Bombay High Court)
Summary: The Bombay High Court, in Kartik Radia Vs M/s. BDO India LLP & Anr., Commercial Arbitration Application No. 31 of 2022, decided on 4 March 2025, examined whether a limited liability partnership (LLP) could be made a party to arbitration proceedings under an arbitration clause contained in its LLP agreement when the LLP itself had not signed that agreement. Justice Somasekhar Sundaresan rejected the respondents’ absolute contention that an LLP, being a non-signatory, could never be subjected to arbitration under an agreement executed between its partners. The Court held that an LLP agreement governs the constitution, operation, rights and obligations of the LLP and its partners. Consequently, an LLP cannot be treated as an extraneous third party to the very statutory charter governing its affairs. The Court further considered the statutory arbitration mechanism contained in the First Schedule to the Limited Liability Partnership Act, 2008, and the limited jurisdiction exercised under Section 11 of the Arbitration and Conciliation Act, 1996.
The applicant, Kartik Radia, was a former partner of BDO India LLP, the first respondent. The second respondent, Milind Kothari, was its Managing Partner. Radia’s dispute arose from his expulsion from the LLP and his allegations concerning the conduct of Kothari in effecting that expulsion. He sought to initiate arbitration under the LLP agreement dated 1 August 2014. The respondents opposed the proceedings, principally arguing that BDO India LLP had not signed the agreement and therefore could not be bound by its arbitration clause. Senior Counsel representing BDO distinguished disputes among partners from disputes between a partner and the LLP. According to this submission, the arbitration clause covered only the former category, whereas Radia’s expulsion was an act of the LLP itself. Counsel for Kothari separately contended that Radia’s grievances were personal allegations against Kothari and that the invocation notice had been addressed to him rather than to BDO.
The Court examined Clause 23 of the LLP agreement, which established a multistage dispute-resolution mechanism. Clause 23.1 covered disputes arising during the continuance of the LLP or afterwards, including matters concerning the agreement’s interpretation, the business or affairs of the LLP, the conduct of partners and their rights, duties and liabilities. Clause 23.2 provided for reference to the Executive Board if amicable settlement was unsuccessful within the stipulated period. Clause 23.3 contemplated arbitration under the Arbitration and Conciliation Act, 1996, if the Executive Board failed to resolve the dispute within sixty business days. The Court held that the clause’s scope extended to interpretation and application of the LLP agreement, matters relating to BDO’s business and affairs, and rights and obligations arising from the partners’ relationship with the LLP. Since the dispute concerned Radia’s expulsion, the LLP was necessarily implicated in the controversy. The contention that such a dispute could not be arbitrated merely because BDO was not a signatory was therefore rejected.
In considering the legal position governing non-signatories, the Court referred to the Constitution Bench decision in Cox and Kings Ltd. Vs SAP India Pvt. Ltd., (2024) 4 SCC 1. The Court observed that the principles concerning non-signatories were well developed, but emphasised that the position of an LLP under its own LLP agreement was distinguishable from the conventional situation of an unrelated third party being sought to be bound by an arbitration agreement. The LLP agreement is integral to the LLP’s existence and operation. The Court compared the LLP agreement to the articles of association of a company, observing that it would be untenable to regard a company as a stranger to its own articles. Similarly, an LLP could not be regarded as a stranger to the agreement governing its affairs. The Court also observed that implied consent to arbitration may be inferred from the parties’ relationship, conduct, common subject matter and involvement in performing the underlying agreement. Nevertheless, the LLP’s statutory relationship with its agreement furnished a particularly strong reason for rejecting the respondents’ absolute objection.
The Court undertook a detailed examination of the LLP Act, 2008. Section 2(1)(o) defines an LLP agreement by reference to the mutual rights and duties of partners and their rights and duties in relation to the LLP. Section 2(1)(q) concerns the definition of a partner, while Sections 7(2)(ii), 22 and 24 were considered in relation to the statutory framework governing partners and their entry into and cessation from an LLP. The Court particularly examined Section 23, which governs the relationship between partners and between an LLP and its partners. Section 23(1) expressly contemplates an LLP agreement between partners or between the LLP and its partners. The respondents argued that these alternatives represented a conscious statutory distinction and that an agreement executed only among partners necessarily excluded the LLP from its arbitration clause. The Court rejected this interpretation, holding that the form in which the agreement was executed did not establish that the LLP was an alien to the rights and obligations created under it.
Of particular significance was Section 23(4) of the LLP Act, which provides that, in the absence of an agreement on any matter, the mutual rights and duties of partners and those between the LLP and its partners are governed by the First Schedule. The Court examined Item 1 of that Schedule, which addresses those mutual rights and duties, and Item 14, which provides for arbitration of disputes between partners arising from an LLP agreement that cannot be resolved under its terms. The Court reasoned that the statutory framework itself recognises arbitration as a mechanism for resolving disputes concerning the LLP’s affairs. It further held that even where an LLP agreement contained no arbitration clause, Item 14 could operate to create a deemed statutory arbitration agreement for disputes among partners. In such proceedings, the LLP could still be a necessary party notwithstanding its non-signatory status. The decision therefore addresses both the express arbitration clause in the agreement before the Court and the supplementary statutory mechanism under the First Schedule.
The Court also considered the scope of judicial scrutiny under Section 11 of the Arbitration and Conciliation Act, 1996. It observed that the referral court is principally concerned with the prima facie existence of an arbitration agreement, whereas detailed questions concerning the proper parties, the merits of the dispute and the arbitral tribunal’s jurisdiction ordinarily fall for consideration by the tribunal. The Court noted that an invocation notice had been issued in October 2020 and that the dispute remained before the Section 11 Court years later because of the respondents’ objections. It considered the respondents’ approach inconsistent with the purpose of arbitration as a speedy and effective alternative dispute-resolution mechanism. The Court also observed that interpreting the LLP Act and the Arbitration Act purposively was necessary to avoid rendering arbitration proceedings ineffective by excluding the LLP whose affairs formed the very subject matter of the dispute.
Several additional objections were rejected. The respondents contended that the arbitration notice had been addressed to Kothari personally and therefore could not support proceedings against BDO. The Court found that Kothari had received the notice in his capacity as Managing Partner and that a notice addressed to the Managing Partner could be regarded as notice to the LLP. It also referred to Sections 26 and 27(2) of the LLP Act concerning the agency relationship between partners and the LLP and the LLP’s liability for acts of its partners. Another objection was that Radia had already been expelled and therefore no longer qualified as a partner for purposes of invoking the arbitration clause. The Court rejected this reasoning because the very dispute concerned the legality and circumstances of his expulsion. Radia had also alleged that his expulsion was backdated: he issued a legal notice on 3 June 2019 and thereafter received an expulsion letter dated 1 June 2019. The Court expressly left such factual questions to the arbitral tribunal rather than deciding the merits at the appointment stage.
The respondents further argued that Radia had raised allegations of injury to his reputation and defamation, which were not arbitrable. The Court held that determining which claims were arbitrable and the appropriate treatment of particular claims was a matter for the arbitral tribunal. It referred to Section 16 of the Arbitration and Conciliation Act, 1996, under which the tribunal may rule upon its own jurisdiction. The Court found no justification for delaying a Section 11 application by requiring the referral court to decide these matters. It concluded that the respondents’ objections were devoid of merit and had the effect of delaying the commencement of arbitration despite the existence of an arbitration clause in the LLP agreement and the statutory provision in Item 14 of the First Schedule.
As regards the final relief, Radia had nominated Justice (Retd.) C. M. Nayar as an arbitrator, while the respondents had declined to nominate their arbitrator. The High Court accordingly appointed Justice (Retd.) Manoj Sanklecha, a former judge of the Bombay High Court, as the respondents’ nominee arbitrator, with Justice (Retd.) Gautam Patel as the alternative in the event of a conflict. The two nominated arbitrators were directed to appoint the presiding arbitrator. The Court also prescribed timelines for communication of its order, submission of the statutory disclosure under Sections 11(8) and 12(1) of the Arbitration Act, and constitution of the arbitral tribunal. It left the costs of prosecuting the application for consideration by the tribunal during the arbitral proceedings. The application was disposed of accordingly. The ruling establishes, on the statutory and contractual framework examined, that an LLP cannot avoid arbitration solely on the ground that it did not separately sign the LLP agreement governing its own operations, while leaving the merits and detailed jurisdictional questions for the arbitral tribunal.
Cases Discussed:
1. Cox and Kings Ltd. Vs SAP India Pvt. Ltd. (Supreme Court); (2024) 4 SCC 1. The Bombay High Court referred to the Constitution Bench decision concerning the circumstances in which non-signatories may be bound by an arbitration agreement. It explained that the present dispute did not require an inquiry into multiple interconnected agreements because an LLP is not a conventional third party to the statutory agreement governing its own affairs. The decision was considered while examining implied consent, the contractual relationship and the appropriate scope of scrutiny under Section 11 of the Arbitration Act.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Whether disputes between partners of a limited liability partnership (“LLP”) and the LLP can at all be covered by the arbitration agreement contained in a limited liability partnership agreement (“ LLP Agreement”) to which the LLP is not a signatory, is the short question that has arisen in this Application filed under Section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).
2. For the reasons set out below, I reject the absolute proposition canvassed by the Respondents – that because an LLP is not a signatory to the LLP Agreement, it can never be a party to proceedings initiated under the arbitration clause in such agreement.
The Parties:
3. The Applicant, Mr. Kartik Radia (“Radia”) is a former partner of BDO India LLP, which is Respondent No. 1 (“ BDO”). Mr. Milind Kothari, the Managing Partner of the LLP is Respondent No. 2 (“ Kothari”). Both Respondents present trenchant objection to arbitration initiated under the LLP Agreement dated August 1, 2014, on the premise that BDO is not a signatory to the LLP Agreement.
Issue for Consideration:
4. Radia has been expelled from the LLP. Radia’s grievances relate to his manner of treatment by the Respondents – expulsion from BDO; and the alleged high-handed behaviour and misconduct by Kothari, the Managing Partner of BDO, in effecting the expulsion. Radia seeks to initiate arbitration, which has been repelled by the Respondents. Hence this Application.
5. The Respondents’ opposition is in marginally varying tones. Mr. Gaurav Joshi, Learned Senior Counsel on behalf of BDO, asserts that Radia’s desire is to initiate arbitration proceedings against BDO, which is not a party to the arbitration agreement. Mr. Mayur Khandeparkar, Learned Counsel on behalf of Kothari, asserts that Radia’s allegations and expressions of grievances are all squarely personal against Kothari. The invocation notice is issued to Kothari, and therefore, they both submit, the invocation too is not against BDO.
6. Both the Counsel seek to draw the Section 11 Court into this issue with a view to have this Application dismissed. Mr. Joshi seeks to draw a clear distinction between: (i) disputes among the partners of the LLP; and (ii) disputes between partners and the LLP. According to him, the jurisdiction of the arbitral tribunal created by the arbitration clause contained in the LLP Agreement can never extend to disputes that a partner may have with the LLP.
Arbitration Agreement:
7. Clause 23 of the LLP Agreement, which contains the arbitration agreement, is extracted below:
23.1 Any disputes, differences, claims and questions whatsoever which arise during the continuance of the LLP or afterwards, between the Partners or their respective representatives or between any Partner or Partners and the representatives of any other Partners relating to this Agreement or the construction or application thereof or any clause or thing herein contained or any account, valuation or division of assets, debts or liabilities to be made hereunder or as to any act, deed or omission of any Partner or as to any other matter in any way relating to the Business or affairs of the LLP or the rights, duties or liabilities of any of the Parties under this Agreement, shall in the first instance, be attempted to be resolved amicably between the disputing parties.
23.2 In the event the parties to the dispute are not able to resolve the same amicably within [30] Business Days from the date the dispute arose, the same shall be referred to the Executive Board to be decided in accordance with this Agreement.
23.3 If the Executive Board cannot resolve the dispute within 60 Business Days from the date such dispute was referred to it, the same shall be referred to arbitration in accordance with and subject to the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof for the time being in force. One arbitrator each shall be appointed by the Partners in dispute, and the third arbitrator who shall be the chairperson, shall be selected by the two party-appointed arbitrators. The arbitrators shall give a reasoned decision or award, including as to the costs of the arbitration, which shall be final and binding on the Parties.
[Emphasis Supplied]
8. According to Mr. Joshi, Clause 23.1 is clear in its terms – it only covers disputes between partners, and in relation to the subjects set out in it. He would submit that the disputes at hand between Radia and BDO cannot be a dispute among partners of BDO. It is the LLP that has expelled Radia and therefore the dispute is between Radia and BDO. Therefore, he would submit, this Section 11 Application is not maintainable since disputes between Radia and BDO are not arbitrable.
9. In my opinion, such an argument is flawed. Even a plain reading of the arbitration agreement would show that the subject matter of arbitration would include any construction or application of the LLP Agreement. It would also include any matter in any way relating to the business and affairs of BDO. It also includes interpretation of any rights, duties or liabilities of any partner of BDO. This would necessarily entail BDO being a necessary party in a dispute such as the one involved in the matter at hand.
Statutory Scheme – LLP Act:
10. Indian law governing privity of non-signatories to arbitration agreements is well developed now. The law declared in Cox and Kings Ltd. Vs. SAP India Pvt. Ltd. – (2024) 4 SCC 1 is not being extracted here, to avoid prolixity. Suffice it to say, that the facts at hand do not even need one to look for any inter-connected agreements or multiple agreements relating to the same transaction. .An LLP is not a “third party” to an LLP Agreement in the manner that the concept of “third parties” is conventionally understood. Far from being extraneous to the relationship between the parties to the LLP Agreement, the running of the LLP is the very subject matter of the LLP Agreement. The conduct of the affairs of the LLP is what the partners agree upon in an LLP Agreement. An LLP is a body corporate. To incorporate an LLP, partners need to execute an incorporation document. It is a charter document akin to the Memorandum of Association in the case of companies. For an LLP to operate, its partners need to execute an LLP Agreement, which is what gives agency to the partners to operate the LLP. It is a charter document too, akin to the Articles of Association in the case of companies. The existence of an LLP Agreement is non-optional and a requirement of law. If partners do not have an LLP Agreement, or where the LLP Agreement is silent on any matter, the contents of the First Schedule of the Limited Liability Partnership Act, 2008 (“LLP Act”) would be deemed to be the LLP Agreement governing the LLP. The First Schedule to the LLP Act which is a deemed LLP Agreement is akin to the statutory articles contained in Table A in the Companies Act, 1956 and in Table F in the Companies Act, 2013.
11. Arguing that the LLP is a “third party” to the LLP Agreement is much like arguing that a company is a third party to its own Articles of Association. A company is duty-bound to act in accordance with the Articles of Association. So is an LLP duty-bound to act in accordance with the LLP Agreement. The body corporate is the very cause for the existence of such an agreement. To argue that there is no privity to the very document governing the body corporate, and that too in a Section 11 Court, is hardly a sustainable argument. Radia is the dominus litus and it is for him to choose who to make parties in his claim.
12. Whether a non-signatory has accorded implicit consent to the arbitration agreement is a matter to be inferred through the acts, conduct and circumstances including relationship between the contracting parties, the commonality of subject matter and the involvement of such party in the performance of the very contract containing the arbitration clause. The very operation of the LLP during its existence is the common commercial objective of the parties to the LLP Agreement. Therefore, I have no hesitation in holding that there is no merit at all in the argument that despite the LLP being the very subject matter of the LLP Agreement, the LLP itself is extraneous to the LLP Agreement. This issue ought not to have been a matter that detained my attention when exercising jurisdiction under Section 11 of the Arbitration Act, since the consideration of such an issue would normally fall in the domain of the Arbitral Tribunal. The need for me to discuss this issue has arisen because of the stance of the Respondents that the arbitration agreement insofar as it relates to the LLP does not exist. The scope of my review for a Section 11 Application is to examine the existence of an arbitration agreement, and owing to the trenchant objection of the Respondents, it became necessary to rule on this issue.
13. Without meaning to put too fine a point, the submission that the LLP is an alien to the LLP Agreement is totally untenable as would be seen from the very scheme of the LLP Act. That an LLP is an entity that enjoys rights against, and owes obligations to its partners, is expressly set out in Paragraph 4(ii) of the Statement of Objects and Reasons to the LLP Act. Section 2(1)(o) of the LLP Act, which defines “limited liability partnership agreement” makes it clear that the subject matter of the LLP Agreement is the determination of the mutual rights and duties of the partners, and their rights and duties in relation to the LLP. In terms of Section 2(1)(q) of the LLP Act, which defines “partner”, the very entry into and exit from an LLP is meant to be governed by the LLP Agreement. The same is the position emerging from Section 7(2)(ii) of the LLP Act; Section 22 of the LLP Act (governing entry of new partners into an LLP); and Section 24 of the LLP Act (governing cessation of a partner’s role in the LLP).
14. If Mr. Joshi and Mr. Khandeparkar are right, in every arbitration relating to an LLP among its partners, the LLP itself which would be at the core of the dispute would have to be kept out of the proceedings. Such an approach would render the arbitration nugatory and ineffective. I am afraid the contentions of the Respondents is akin to the approach they would adopt in their day-to-day professional work (BDO’s practice area includes the field of advisory services relating to fiscal statute and accounting). The regulatory framework of the LLP Act and its interplay with the Arbitration Act, requires a diametrically opposite approach of adopting purposive interpretation. Where two views are possible, the view that furthers the objective of the legislation must be adopted. Under the LLP Act, the LLP Agreement is a mandatory statutory charter document governing the very LLP that the Respondents would wish me to hold as being a non-signatory and extraneous “third party”. Under the Arbitration Act, arbitration is meant to be a speedy, effective and alternate mechanism for dispute resolution. Thanks to the approach adopted by the Respondents, a dispute that entailed an invocation notice as long ago as October 20, 2020 is still languishing in the Section 11 Court. Besides, 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, and the prima facie logic in the joinder of parties proposed by the Applicant.
Section 23 of LLP Act:
15. Mr. Joshi essentially relies on Section 23 of the LLP Act, which reads thus:
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.
[Emphasis Supplied]
16. The very subject matter of Section 23 is the relationship of the partners. Mr. Joshi’s submission is that every LLP has two options – of having an agreement only among the partners, and of having an agreement between the LLP and its partners. According to him, if an LLP has chosen the former i.e. of executing an LLP Agreement only among the partners, then there is a conscious choice of leaving the LLP out of the mix of rights and duties – thereby suggesting that the exclusion from arbitration would be a conscious choice. In my view, this is a fallacious distinction sought to be drawn, because it makes no difference to the issue. Even a bare perusal of the LLP Agreement in question, and the very scheme of the LLP Act would make such an absolute and sweeping proposition invalid. Indeed, Section 23(1) of the LLP Act may point to two types of agreement that may be executed. However, it would still make no difference for purposes of treating the LLP as an alien to the LLP Agreement. Evidently, the LLP Agreement contains various provisions that confer rights on the partners vis-à-vis the LLP and imposes obligations on the partners vis-à-vis the LLP. Mr. Joshi would submit that the existence of such provisions is irrelevant since, according to him, what is to be seen is whether the arbitration agreement was intended to bind the LLP too, or just its partners.
17. Section 23(4) of the LLP Act itself provides that if there is no agreement on any matter, then the mutual rights and duties of the partners and the mutual rights and duties of the LLP and its partners, would be governed by the First Schedule. Item 1 and Item 14 of the First Schedule merit extraction:
1. The mutual rights and duties of the partners and the mutual rights and duties of the limited liability partnership and its partners shall be determined, subject to the terms of any limited liability partnership agreement or in the absence of any such agreement on any matter, by the provisions in this Schedule.
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).
[Emphasis Supplied]
18. Under Item 1 of the First Schedule the mutual rights and duties of the LLP and its partners, subject to the LLP Agreement, is governed by the provisions of the First Schedule. Item 14 of the First Schedule provides that all disputes among partners arising out of the LLP Agreement that cannot be resolved in terms of the LLP Agreement, shall be referred to arbitration under the Arbitration Act. This is another statutory indication that the subject matter of the LLP Agreement includes duties owed by partners to the LLP and also duties owed to the partners by the LLP. This would necessarily render the LLP a necessary party to the arbitration proceedings relating to the LLP’s operations and governance, despite the LLP not being a signatory to the LLP Agreement. Therefore, even if there had been no arbitration clause at all in the LLP Agreement, the First Schedule would lead to an arbitration agreement being in existence in the eyes of law, for disputes among the partners. The analysis made above about the necessity of the LLP as a party to such proceedings and the absence of implications of the LLP not being a signatory to the arbitration agreement, would still be as valid even if the LLP Agreement had no arbitration clause at all. This is because under Item 14 of the First Schedule to the LLP Act, there would emerge a deemed and statutory arbitration agreement.
19. On the face of it, the dispute at hand relates to the expulsion of a partner from the LLP. Whether the Managing Partner alone was responsible for it and other partners acquiesced in or approved of that decision is a subject matter of merits of the dispute. Whether the expelled partner’s conduct warranted expulsion, is a question that would necessarily require examination of the injury, if any, occasioned to the LLP’s interests by such partner’s conduct for the drastic step of expulsion to be taken. Therefore, it would be simply impossible for this Court to reject this Application under Section 11 on the basis of the objections pressed into service by Mr. Joshi.
20. Mr. Khandeparkar attempts to throw another spanner in the works on the question of making a reference to arbitration. He would submit that the invocation notice dated October 10, 2020 is issued to Kothari and makes accusations about Kothari, which would show that the dispute is with the partner and not with the LLP. The upshot of this contention is that the LLP is not a necessary party to the dispute. Even a plain reading of the invocation notice addressed to Kothari would show that it was issued to him in his capacity as the Managing Partner. Therefore, to read it as a personal dispute of Radia with Kothari in his individual capacity is a misconceived contention. This argument has to be stated to be rejected. The dispute inter alia relates to expulsion of Radia. The expulsion is from the LLP. The cause for expulsion would necessarily have to relate to the injury allegedly occasioned to the LLP and to its partners, by the alleged conduct of Radia that led to the expulsion. The invocation notice may make allegations about the conduct of Kothari but that would not render the LLP as being irrelevant to the dispute at hand. A notice issued to the Managing Partner of an LLP could well be regarded as a notice issued to the LLP. In my opinion, this is a frivolous objection that deserves to be rejected. In fact, Mr. Amrut Joshi, Learned Counsel for Radia is right in his contention that under Section 26 of the LLP Act every partner is an agent of the LLP. He also rightly shows that under Section 27(2) of the LLP Act, the LLP is liable for the acts of its partners.
21. There is yet another frivolous objection – that Radia is now an expelled partner while the arbitration agreement is only meant to resolve disputes among partners. The disputes relate to the expulsion of Radia from the partnership. The act of expulsion is itself pre-conditioned on his partnership in BDO, and therefore this submission is to only be stated to be rejected. That apart, as rightly pointed out by Mr. Amrut Joshi, on the face of the record, the allegation by Radia is that the expulsion is back-dated inasmuch as Radia issued a legal notice dated June 3, 2019, after the receipt of which, he was served with a letter of expulsion dated June 1, 2019. While these are matters of merits that only the Arbitral Tribunal can examine, the objection that disputes raised by a former partner cannot be amenable to arbitration is facetious to say the least, particularly when raised in such factual context.
22. One more objection from Mr. Khandeparkar is based on Radia having made reference to the injury to his image and to his defamation at the hands of BDO and Kothari. Defamation is not arbitrable, Mr. Khandeparkar would contend. Here again, what part of the claim is arbitrable and what the approach should be, squarely falls in the domain of the Arbitral Tribunal. The Arbitral Tribunal clearly has the power to rule on its own jurisdiction under Section 16 of the Arbitration Act. Holding up a Section 11 Application on such grounds deserves to be squarely rejected.
23. In these circumstances the objections raised by the Respondents to allowing this Section 11 Application are totally devoid of merit. Despite the existence of an arbitration clause in the LLP Agreement and in Item 14 of the First Schedule, the contention that the LLP itself is extraneous to the very LLP Agreement governing the LLP, in my opinion, is untenable and frivolous. Such objections have been raised evidently to delay and frustrate the commencement of arbitration proceedings.
24. Radia has nominated Justice (Retd.) C. M. Nayar as an arbitrator. The Respondents have refused to nominate an arbitrator, which failure to nominate has led to this Application. Consequently, this Application is finally disposed of in the following terms:
A] Justice (Retd.) Manoj Sanklecha, a former judge of this Court, and failing him (due to any conflict) Justice (Retd.) Gautam Patel, also a former judge of this Court, is hereby appointed as the nominee arbitrator of the Respondents. The Presiding Arbitrator shall be appointed by the two nominated Arbitrators;
B] A copy of this Order will be communicated to the aforesaid nominee arbitrator by the Advocates for Radia within a period of one week from today;
C] The nominee arbitrator is requested to forward the statutory Statement of Disclosure under Section 11(8) read with Section 12(1) of the Act to the parties within a period of two weeks from receipt of a copy of this Order; and
D] After the nominee arbitrators have selected the Presiding Arbitrator (which they are requested to do within a period of three weeks from the time the nominee arbitrator appointed hereby assumes office), the Arbitral Tribunal shall give directions to the parties on how to proceed further in the matter.
25. Needless to say, the costs of prosecuting this Application is a matter that the Arbitral Tribunal would take into account when dealing with the merits of the matter in the course of the arbitral proceedings.
26. All actions required to be taken pursuant to this order, shall be taken upon receipt of a downloaded copy as available on this Court’s website.
