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Home › Arbitration: LLP Statutory Reference
Bombay High Court · 4 November 2026

The Arbitration Clause Nobody Signed: LLP Disputes and Entry 14 of the First Schedule

In Prashant Vinod Vaghasiya v. Vivekanand Dhaneshwar Jha, the Bombay High Court appointed a sole arbitrator for partner disputes in an LLP whose agreement contained no arbitration clause — because the LLP Act supplies one by default.

Most Section 11 petitions begin with an arbitration clause. This one began with its absence. The LLP agreement of Avighnaa Infra Buildcon LLP said nothing about arbitration; its jurisdiction clause pointed to the courts at Mumbai. Yet on 4 November 2026, in Prashant Vinod Vaghasiya & Anr. v. Vivekanand Dhaneshwar Jha & Ors. (Commercial Arbitration Petition No. 37 of 2026), Justice S.M. Modak of the Bombay High Court appointed a former judge of that court as sole arbitrator — because Section 23(4) of the LLP Act, 2008 reads the First Schedule into every silent LLP agreement, and Entry 14 of that Schedule mandates arbitration of partner disputes.

The dispute

The petitioners and the first respondent had been, at different points, partners of an LLP constituted under an agreement of October 2019, supplemented twice in 2020. The quarrels were classically internal: a claim to accounts stretching back years, the first respondent’s contested expulsion from the LLP, and a disputed “settlement” of 7 December 2025 that one petitioner never signed and which contained blanks. The first petitioner invoked arbitration by notice dated 17 June 2025; when no tribunal emerged, a petition under Section 11(6) of the Arbitration and Conciliation Act followed.

The structural problem: none of the three agreements contained an arbitration clause, and Clause 33 conferred jurisdiction on the courts at Mumbai.

How the statute filled the gap

Section 23(4), LLP Act. Where the LLP agreement does not provide for a matter, the First Schedule governs the mutual rights and duties of the partners. Silence, in LLP law, is not a vacuum — it is a default setting.
Entry 14, First Schedule. Disputes between partners arising out of the LLP agreement which cannot be resolved in terms of the agreement shall be referred to arbitration under the 1996 Act. The court stressed the two statutory conditions — “these twin conditions have to be satisfied” — and found both met: the disputes arose out of the agreement, and the agreement offered no internal mechanism to resolve them.
Section 21 notice by one claimant sufficed. The invocation notice issued by the first petitioner alone was no defect; the notice’s function is to fix the commencement of arbitration and stop limitation, not to assemble every potential party.
Appointment. A former judge of the Bombay High Court was appointed sole arbitrator, with the seat at Mumbai and costs shared equally, subject to the award.

Objections raised, and where they went

ObjectionOutcome
No arbitration clause in the LLP agreementIrrelevant — Entry 14 of the First Schedule applies by force of Section 23(4) where the agreement is silent.
Clause 33 confers exclusive jurisdiction on Mumbai courtsGoverns court proceedings under the Arbitration Act; does not exclude arbitration. Seat fixed at Mumbai.
Disputes settled — accord and satisfaction“Even if there is accord/satisfaction it will not bar an arbitration” — especially where the settlement’s validity is itself disputed.
Non-signatory seeking impleadmentLeft to the tribunal: it “would be full empowered to examine this issue in the first instance.”

What this means for LLPs and their partners

Audit your LLP agreement. If it is silent on dispute resolution, arbitration is already your forum — whether the partners know it or not. Firms that would prefer court litigation must say so expressly, to the extent the Act permits departure from the Schedule.
Statutory arbitration is real arbitration. The reference, once made, proceeds under the 1996 Act like any contractual arbitration — interim measures, disclosure, award and challenge included.
Settlement documents need execution discipline. A half-signed settlement with blanks resolved nothing and barred nothing; it merely added a dispute. Accord-and-satisfaction defences belong to the tribunal, not the Section 11 court.
Expulsion fights go to arbitrators. Contested removals of partners — among the commonest LLP disputes — fall squarely within Entry 14 when the agreement provides no resolution mechanism of its own.
The Section 11 court’s role remains confined to a prima facie view; everything else — accounts, expulsion, the December 2025 settlement, the non-signatory’s position — now belongs to the sole arbitrator. For Delhi practitioners, the decision is a useful reminder that the LLP Act’s First Schedule operates identically everywhere: the arbitration clause many LLPs never drafted has been sitting in the statute since 2008.

Frequently Asked Questions

How can there be arbitration without an arbitration agreement?

Through statute. Section 23(4) of the LLP Act provides that where the LLP agreement is silent on any matter, the First Schedule applies. Entry 14 of that Schedule requires disputes between partners arising out of the LLP agreement, which cannot be resolved in terms of the agreement, to be referred to arbitration under the Arbitration and Conciliation Act 1996. The Schedule supplies the clause the parties never wrote.

Did the Mumbai jurisdiction clause exclude arbitration?

No. The court held, following the settled position on exclusive jurisdiction clauses, that the clause conferring jurisdiction on Mumbai courts governs the court proceedings connected with the arbitration — it does not displace the statutory reference itself. It also anchored the seat: the court recorded that the place of the arbitration would be Mumbai.

What happened to the settlement the respondents relied on?

A disputed settlement document of December 2025 — unsigned by one petitioner and containing blanks — was raised as accord and satisfaction. The court held that even an accord and satisfaction does not bar reference to arbitration, particularly where the settlement’s own validity is contested; that dispute itself belongs before the arbitrator.

Can a non-signatory be added to such an arbitration?

The question is for the tribunal in the first instance. An intervenor company sought impleadment, and the court — consistent with current Supreme Court doctrine on non-signatories — left the issue to the arbitral tribunal, recording that the tribunal would be fully empowered to examine it.

Note: This article is general information about the law and is not legal advice. It does not create an advocate-client relationship. The position stated is as at 14 November 2026 and may have changed since. Readers should verify any provision or decision referred to against the official text and seek advice on their own circumstances.