In a ruling that reaffirms the protective shell of the LLP structure, the Bombay High Court has clarified that partners of a Limited Liability Partnership cannot be saddled with personal liability under an arbitral award.
The decision came while hearing a dispute between Proteus Ventures LLP and Archilab Designs. Proteus was ordered to pay more than ₹88 lakh in unpaid dues, but the Court struck down the portion of the award that attempted to extend the liability to Proteus’ designated partners.
“An LLP is its own creature of law,” the Court observed, underscoring that obligations attached to the firm cannot automatically spill over to its partners.
The dispute stemmed from a 2018 contract where Proteus engaged Archilab to design and refurbish co-working spaces under the brand The Mesh in Mumbai and Pune. Archilab completed work worth nearly ₹3.93 crore but received only about half. After part payments, including a bounced cheque, Archilab invoked arbitration through the Council of Architecture.
In 2024, the arbitral tribunal directed both Proteus and its partners to pay the pending dues with interest, along with ₹24 lakh for hardship and mental agony. This was challenged before the High Court.
While the Court removed the finding of joint liability against individual partners, it upheld the award against Proteus itself. It also retained the damages for hardship, citing precedent that recognized such compensation in contractual disputes.
Crucially, the Court pushed back against the idea that arbitral awards must always bear the polish of a lawyer’s reasoning. The arbitrator in this case was a principal of an architecture college, and the Court found his domain expertise particularly suited for evaluating disputes over architectural design and workmanship.
“An arbitrator need not be a lawyer to be competent,” the Court emphasized, noting that the reasoning style of a “trained legal mind” is not the sole yardstick for validity.
In the end, the High Court dismissed Proteus’ challenge, upholding the award with a surgical modification: the LLP must pay, but its partners walk free of personal liability. The deposits lying with the registry were directed to be released within four weeks.