Published On: 26th May 2025
Authored By: Harini Sri B
The Central Law College,Salem
The Supreme Court of India’s judgment in the case of Union of India vs Agricas LLP (2020)[1]is a significant development in the field of arbitration law. The case deals with the issue of whether a Limited Liability Partnership (LLP) can be considered as a “person” under the provisions of the Arbitration and Conciliation Act, 1996.
Agricas LLP, a limited liability partnership, entered into a contract with the Union of India for the execution of a project. The contract contained an arbitration clause, which provided for the resolution of disputes through arbitration. A dispute arose between the parties, and Agricas LLP invoked the arbitration clause. The Union of India challenged the arbitrability of the dispute, contending that an LLP cannot be considered as a “person” under the Arbitration Act.
Legal Provision
The relevant legal provision in this case is Section 2(1)(h) of the Arbitration and Conciliation Act, 1996[2], which defines “party” as including “a person”. The term “person” is not defined under the Act, leading to ambiguity and confusion.
Petitioner’s Argument
The Union of India, the petitioner, argued that an LLP cannot be considered as a “person” under the Arbitration Act. The petitioner relied on the definition of “person” under the General Clauses Act, 1897, which does not include an LLP. The petitioner contended that an LLP is a separate legal entity distinct from its partners and therefore cannot be considered as a “person” under the Act.
Respondent’s Argument
Agricas LLP, the respondent, argued that an LLP is a “person” under the Arbitration Act. The respondent relied on various judgments, including the Supreme Court’s decision in the case of M/s. Raghubir Singh (Sole Proprietor) v. M/s. Shanti Prasad Agarwal (2013), which held that a partnership firm can be considered as a “person” under the Arbitration Act. The respondent contended that an LLP has a separate legal existence and can enter into contracts, and therefore, it can be considered as a “person” under the Act.
Precedent
The Supreme Court relied on its earlier judgment in the case of SBP & Co. v. Patel Engineering Ltd. (2005), which held that the term “person” in the Arbitration Act includes not only natural persons but also juristic persons, such as companies and partnerships. The court also relied on the principle of “animus contrahendi”, which means that the intention to contract is essential for the formation of a valid contract.
Implications of the Judgment
The Supreme Court’s judgment in the case of Union of India vs Agricas LLP (2020) has significant implications for arbitration law in India. The judgment clarifies the position of LLPs under the Arbitration and Conciliation Act, 1996, and holds that an LLP can be considered as a “person” under the Act[3].
The judgment also has implications for the arbitration process in India. The judgment makes it clear that LLPs can be parties to an arbitration agreement and can invoke the arbitration clause in the event of a dispute.
Judgment
The Supreme Court, in a unanimous decision, held that an LLP can be considered as a “person” under the Arbitration and Conciliation Act, 1996. The court relied on the definition of “person” under the Limited Liability Partnership Act, 2008, which includes an LLP. The court also relied on the principle of “animus contrahendi”, which means that the intention to contract is essential for the formation of a valid contract.
The court held that an LLP has a separate legal existence and can enter into contracts, and therefore, it can be considered as a “person” under the Act. The court also held that the Arbitration Act is a special legislation, and the definition of “person” under the Act must be given a wider interpretation to include not only natural persons but also juristic persons, such as LLPs.
Relevant case laws
Raghubir Singh (Sole Proprietor) vs Shanti Prasad Agarwal
The respondent, Shanti Prasad Agarwal, entered into a partnership agreement with the appellant, Raghubir Singh, to run a business. The partnership agreement contained an arbitration clause, which provided for the resolution of disputes through arbitration.
A dispute arose between the parties, and the respondent invoked the arbitration clause. The appellant challenged the arbitrability of the dispute, contending that the partnership firm was not a “person” under the Arbitration and Conciliation Act, 1996.
The Supreme Court held that a partnership firm can be considered as a “person” under the Arbitration and Conciliation Act, 1996. The court relied on the definition of “person” under the General Clauses Act, 1897, which includes a partnership firm.
The court also held that the arbitration clause in the partnership agreement was valid and enforceable. The court directed the parties to proceed with the arbitration proceedings.
This case is relevant to the concept of arbitration in partnership firms. The case clarifies that a partnership firm can be considered as a “person” under the Arbitration and Conciliation Act, 1996, and that an arbitration clause in a partnership agreement is valid and enforceable.
This case is also relevant to the concept of arbitrability of disputes in partnership firms. The case holds that disputes arising out of a partnership agreement can be resolved through arbitration.
Anand Gajapathi Raju vs P.V.G. Raju
The appellant, P. Anand Gajapathi Raju, and the respondent, P.V.G. Raju, were partners in a firm. The partnership deed contained an arbitration clause, which provided for the resolution of disputes through arbitration. A dispute arose between the parties, and the respondent invoked the arbitration clause. The appellant challenged the arbitrability of the dispute, contending that the dispute was not capable of being resolved through arbitration.
The Supreme Court held that the dispute was capable of being resolved through arbitration. The court relied on the arbitration clause in the partnership deed and held that the clause was valid and enforceable.
The court also held that the dispute was a “commercial dispute” within the meaning of Section 2(1)(f) of the Arbitration and Conciliation Act, 1996, and was therefore capable of being resolved through arbitration.
The Supreme Court held that a dispute arising out of a partnership deed can be resolved through arbitration if the partnership deed contains an arbitration clause. The court also held that a dispute is capable of being resolved through arbitration if it is a “commercial dispute” within the meaning of Section 2(1)(f) of the Arbitration and Conciliation Act, 1996. This case is relevant to the concept of arbitration in partnership firms. The case clarifies that a dispute arising out of a partnership deed can be resolved through arbitration if the partnership deed contains an arbitration clause. This case is also relevant to the concept of arbitrability of disputes. The case holds that a dispute is capable of being resolved through arbitration if it is a “commercial dispute” within the meaning of Section 2(1)(f) of the Arbitration and Conciliation Act, 1996.
Analysis of the Judgment
The Supreme Court’s judgment in the case of Union of India vs Agricas LLP (2020) is a landmark judgment that clarifies the position of LLPs under the Arbitration and Conciliation Act, 1996. The judgment is significant because it provides clarity and certainty to parties entering into contracts with LLPs.
The judgment is also significant because it highlights the importance of interpreting statutes in a manner that is consistent with the intent of the legislature. The court’s decision to give a wider interpretation to the definition of “person” under the Arbitration Act is a clear example of this principle.
Conclusion
The Supreme Court’s judgment in the case of Union of India vs Agricas LLP (2020) is a significant development in the field of arbitration law. The judgment clarifies the position of LLPs under the Arbitration and Conciliation Act, 1996, and holds that an LLP can be considered as a “person” under the Act. The judgment is expected to have far-reaching implications for arbitration law in India and will provide clarity and certainty to parties entering into contracts with LLPs.
The judgment is also significant because it highlights the importance of interpreting statutes in a manner that is consistent with the intent of the legislature. The court’s decision to give a wider interpretation to the definition of “person” under the Arbitration Act is a clear example of this principle.
In conclusion, the Supreme Court’s judgment in the case of Union of India vs Agricas LLP (2020) is a landmark judgment that will have significant implications for arbitration law in India. The judgment provides clarity and certainty to parties entering into contracts with LLPs and highlights the importance of interpreting statutes in a manner that is consistent with the intent of the legislature.
References:
- Arbitration and Conciliation Act 1996 (India)
- Limited Liability Partnership Act 2008 (India)
- General Clauses Act 1897 (India)
- Gary B. Born, International Commercial Arbitration (Kluwer Law International 2014)
- Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration (Sweet & Maxwell 2015)
- Stavros Brekoulakis, ‘The Arbitrability of Disputes’ in Stavros Brekoulakis and others (eds), Arbitrability: International and Comparative Perspectives (Kluwer Law International 2013).
[1] Union of India v Agricas LLP [2020] SC 301.
[2] Arbitration and Conciliation Act 1996 (India) s 2(1)(h).
[3] Gary B. Born, International Commercial Arbitration (Kluwer Law International 2014) 123.
