Bombay HC Sends Former Dance-Studio Partners’ Dispute Over Alleged Post-Dissolution Use Of Studio Goodwill To Arbitration, Leaving Full-And-Final Settlement Defence Open

The Applicant and Respondents were partners of Feet Beat – The Studio LLP under an LLP Agreement dated 6 October 2016, which contained an arbitration clause in Clause 23.

After the partners executed a Deed of Dissolution on 25 May 2026, the Applicant alleged that the Respondents continued to use the LLP’s goodwill, social-media accounts, client connections and other resources for a similar business.

The Respondents relied on the Deed’s full-and-final-settlement clause and argued that the earlier arbitration clause no longer applied.

The Applicant also sought appointment of an arbitrator after issuing a notice invoking arbitration; the Respondents disputed the notice’s validity.

The Court framed the principal question as whether the arbitration clause in the LLP Agreement remained available after execution of the Deed of Dissolution.

Under Section 11 of the Arbitration and Conciliation Act, 1996, the Court’s referral-stage enquiry is limited to whether an arbitration agreement prima facie exists; disputed questions of accord and satisfaction and, ordinarily, limitation are for the arbitral tribunal under Section 16 (SBI General Insurance Co. Ltd. v. Krish Spinning, (2024) 12 SCC 1; Maharashtra State Electricity Distribution Company Ltd. v. R.Z. Malpani, 2026 INSC 342).

Section 21 concerns commencement of arbitral proceedings, including for limitation, and a defect or failure in the notice does not necessarily defeat referral where the dispute has otherwise been referred (Bhagheeratha Engineering Ltd. v. State of Kerala, (2026) 5 SCC 758; Unistar Metals Pvt. Ltd. v. GE Power Ltd., 2026 SCC OnLine Bom. 9163).

A later agreement may displace an earlier arbitration clause if it replaces the earlier contract and settles the rights and claims arising from it; whether it does so depends on the later document’s terms and the nature of the dispute (BKS Galaxy Realtors LLP v. Sharp Properties, 2024 SCC OnLine Bom. 3514; Hindustan Construction Co. v. Mumbai Metro One Pvt. Ltd., 2025 SCC OnLine Bom. 5299; Jayantilal Khandawala v. Iffat Ahmedi, 2015 SCC OnLine Bom. 4181).

Clause 23 of the LLP Agreement was an undisputed written arbitration agreement, and the Applicant’s allegations concerning the LLP’s goodwill, assets and business connections had a prima facie connection to rights developed under that Agreement.

Although Clause 9 of the Deed recorded that accounts were settled and no claims remained, the Deed also contemplated realisation and distribution of LLP assets and did not expressly replace the LLP Agreement or cancel its arbitration clause.

Whether the settlement barred the Applicant’s claims, and whether the alleged post-dissolution conduct gave rise to any enforceable right, were therefore matters for the arbitral tribunal—not issues to be finally decided at the Section 11 stage.

The Respondents had received and answered the notice invoking arbitration; the objection to its form did not justify refusing appointment, with any limitation issue left open for the tribunal.

The parties’ contentions on the merits were left open, including the effect of the full-and-final-settlement clause.

The pending Section 9 petition was converted into an application under Section 17 for the tribunal to decide on its merits, and the Section 11 application was disposed of.