Delhi High Court Rules, Parties Under LLP Agreement Cannot Confer Jurisdiction On Courts

The Partner of an LLP, registered at Hyderabad, had filed a suit before a Commercial Court in Delhi against the denial of access by remaining partners to the business accounts of LLP. The District Judge allowed the petition, dismissing the challenge to territorial jurisdiction raised by the remaining partners/ defendants on the ground that the business of LLP was undertaken in Delhi, therefore, granting exclusive jurisdiction to the Courts in Delhi under the LLP Agreement is legally valid and enforceable. The remaining partners challenged the decision by filing a petition under Article 227 of the Constitution of India, before the High Court.

The counsel for the opposing partners/ petitioners before the High Court submitted that since the registered office of the LLP is located in Hyderabad, the courts in Delhi have no jurisdiction. Additionally, he contended that no cause of action had arisen within the territorial jurisdiction of courts in Delhi and therefore, and the suit cannot be maintained. The counsel placed reliance on the Supreme Court ruling in Patel Roadways Limited versus Prasad Trading Company (1994), which had held that parties cannot by consent confer territorial jurisdiction on courts which inherently lacking it. The counsel for the original plaintiff submitted that the LLP Agreement has given exclusive jurisdiction to the courts in Delhi. Also, it was contended that since the business of the LLP was carried out in Delhi, the cause of action would arise in Delhi.

The High Court observed that the plaint filed by the Partner in the case does not mention the presence of the business accounts sought to be accessed in Delhi. The court noted that a cause of action was conspicuously absent for filing the present suit in Delhi. The Court held that since the present case involved a dispute between the partners inter se, the fact that the LLP's business was carried out in Delhi would not vest the courts in Delhi with jurisdiction. Since the dispute was with respect to the business accounts of the LLP, which as per Section 34(1) of the LLP Act, 2008 are required to be maintained at the registered office, the jurisdiction to entertain the suit shall vest with the courts in Hyderabad. The court observed that even as per the provisions of the LLP Agreement the books of accounts of the LLP were required to be maintained in its registered office in Hyderabad.

Placing reliance on the Supreme Court judgment in Patel Roadways, the court observed that since no cause of action had arisen in Delhi in view of the fact that neither the books of accounts nor a subordinate office of the LLP is situated in Delhi, the parties cannot confer jurisdiction to courts in Delhi under an LLP agreement.

Allowing the petition, the court set aside the impugned order of the District Court, returning the plaint for filing before the court of competent jurisdiction.

Case Title: Aanchal Mittal & Ors. Versus Ankur Shukla

Counsel for Petitioner: Mr. K. C. Mittal , Mr.Yugansh Mittal and Mr. Sanjay Kumar, Advocates

Counsel For The Respondent: Mr.Vishal Singh, Advocate

Citation: 2022 LiveLaw (Del) 168

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