Bombay High Court Partially Upholds Arbitration Award, Modifies Joint Liability of LLP Partners

Court affirms arbitration award but removes joint liability of designated partners in Proteus Ventures LLP, citing limited liability principle.

In a significant ruling on September 30, 2025, the Bombay High Court upheld an arbitration award related to a dispute between Proteus Ventures LLP and Archilab Designs, with a key modification. The court affirmed the arbitrator's decision but removed the joint liability aspect concerning the designated partners of Proteus Ventures LLP, emphasizing the principle of limited liability inherent in LLP structures.

The case stemmed from an agreement dated August 16, 2018, under which Archilab Designs was contracted by Proteus Ventures LLP to perform architectural work across several projects. Disputes arose over unpaid invoices for completed work, leading to arbitration proceedings initiated by Archilab Designs. The arbitral tribunal, appointed by the Council of Architecture, awarded Archilab a sum of Rs. 88.08 lakhs, with an additional Rs. 24 lakhs for mental agony and hardship caused by Proteus Ventures LLP.

Proteus Ventures LLP challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, on several grounds, including the liability of its designated partners and the competence of the arbitrator, who was not legally trained but had domain expertise in architecture.

Justice Somasekhar Sundaresan, presiding over the case, emphasized the limited intervention permitted under Section 34, noting that the arbitrator’s expertise in architecture was appropriate for the dispute at hand. The court found the award plausible and reasonable, aligning with judicial precedents that advocate minimal interference with arbitral awards unless they are perverse or contrary to public policy.

The court acknowledged a procedural error by the arbitrator in assigning joint liability to the designated partners of Proteus Ventures LLP, contrary to the principle of limited liability in LLPs. This aspect of the award was severed to preserve its validity, allowing the award to be enforced solely against the LLP.

The court also upheld the arbitrator’s decision to apply an 18% per annum interest rate on delayed payments, as specified in the purchase order, instead of the exorbitant 2% per day rate in the original agreement. Additionally, the award of damages for mental agony was deemed consistent with legal precedents, considering the conduct of Proteus Ventures LLP throughout the dispute.

This ruling underscores the judiciary's support for arbitration as a dispute resolution mechanism, affirming the role of domain experts in arbitration and the principle of limited liability in LLPs. It also highlights the court's commitment to maintaining the integrity of arbitral awards while correcting procedural errors that could undermine their validity.

Bottom Line:

Arbitration award upheld with modification removing joint liability of designated partners of LLP. Arbitrator's expertise in architecture disputes upheld; court limits intervention under Section 34 of Arbitration and Conciliation Act, 1996. 

Statutory provision(s): Arbitration and Conciliation Act, 1996, Section 34

Proteus Ventures LLP v. Archilab Designs, (Bombay) : Law Finder Doc Id # 2786343