ARTICLE
18 May 2022

Inter-se Disputes Involving Partners In An LLP — NCLT Not The Appropriate Forum

KC
Khaitan & Co LLP

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The Delhi High Court in a recent unreported judgment in Aanchal Mittal & Ors. v. Ankur Shukla [CM (M) 1086/2021 and CM No. 42689/2021] has clarified that inter se disputes between partners...
India Corporate/Commercial Law

The Delhi High Court in a recent unreported judgment in Aanchal Mittal & Ors. v. Ankur Shukla [CM (M) 1086/2021 and CM No. 42689/2021] has clarified that inter se disputes between partners of an LLP are required to be tried as a commercial suit in terms of the Commercial Courts Act, 2015 and the National Company Law Tribunal (NCLT) is not the appropriate forum for deciding such disputes.

BRIEF FACTS AND SUBMISSIONS

One of the partners of the LLP preferred a suit before the District Judge (Commercial), New Delhi, wherein, inter alia, the plaintiff sought a declaration that it was entitled at all times to access the business accounts of the LLP and that the action of the other partners of the LLP in revoking access of the plaintiff to business dealings of the LLP was illegal and void.

The defendants in the original suit had preferred an application for rejection of the plaint which was dismissed by the District Court. The defendants being aggrieved by the order of the District Court, preferred a review application under Article 227 of the Constitution of India before a Single Bench of the High Court of Delhi.

One of the key arguments advanced by the petitioners / defendants in support of their application for rejection of the plaint, was that the Civil Courts did not have jurisdiction to try the present dispute as the jurisdiction for such disputes lay with the NCLT. This was because the definition of 'body corporate' under Section 2(1)(d) of the LLP Act, 2008 ("LLP Act") includes an LLP and Section 2(1)(u) of the LLP Act defines 'Tribunal' as the NCLT. Hence, in respect of inter se disputes between the partners of an LLP, it would be the Tribunal, being the NCLT, which would be the competent forum to try such disputes under the provisions of the LLP Act.

The plaintiff / respondent in its reply stated that the only dispute that can be tried by the NCLT under the LLP Act pertains to Sections 60, 61, 62 and 63 which relates to compromise or arrangement between the partners. As the present case did not pertain to compromise or arrangement between the partners, therefore, the jurisdiction of NCLT could not be invoked.

RULING

The Single Judge after considering the submission of the parties held that the present suit did not pertain to compromise, arrangement or reconstruction of LLPs, as provided under Sections 60, 61, 62, 63 of the LLP Act. The present suit was an inter se dispute between the partners relating to the business accounts of the LLP and would not come within the ambit of the aforementioned provisions of the LLP Act in respect of which NCLT had exclusive jurisdiction.

It was, therefore, held that merely because the definition of 'body corporate' under Section 2(1)(d) of the LLP Act includes an LLP, the same would not automatically confer jurisdiction upon the NCLT for deciding all disputes inter se the partners of an LLP.

It was further observed by the Court, that unlike Section 430 of the Companies Act, 2013 there was no bar on the jurisdiction of the Civil Courts under the provisions of the LLP Act and therefore, in terms of Section 9 of the Code of Civil Procedure, 1908 ("CPC"), the suit would be maintainable in a Civil Court.

COMMENTS

This case lays down an important positioning that inter se disputes between partners of an LLP is a commercial dispute to be tried under the Commercial Courts Act, 2015. Merely because an LLP is considered to be a 'body corporate' under the LLP Act, it cannot be equated with a company, where the jurisdiction for all disputes more often than naught lies with the NCLT and the jurisdiction of Civil Courts are barred under the provisions of section 430 of Companies Act, 2013.

It is also worth noting that Section 72 of the LLP Act, confers NCLT with only such powers and functions which are conferred under the LLP Act or any other law so existing. The exercise of jurisdiction by NCLT under the LLP Act is thus, truncated and restricted as opposed to its exercise under the Companies Act, 2013.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com

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