CONCEPT PAPER ON LIMITED LIABILITY PARTNERSHIPS EXPLANATORY NOTES
INTRODUCTION
1. The main purpose of this Concept Paper (hereinafter referred to as ‘The Paper’) is to create a basic framework, which will facilitate the creation of a new legal entity in India viz. the limited liability partnership ("LLP"). The essential feature of an LLP is that it combines the organisational flexibility and tax status of a partnership with limited liability for its partners. An LLP is a body corporate having perpetual succession and separate legal entity.
2. The paper is only an approach to the introduction of a bill in the Parliament and has not been vetted by the Legislative Department, Ministry of Law.
3. The aim of this paper is only to provoke critical examination of the provisions contained in this paper by all chambers of commerce, business organizations, professional bodies, academicians and persons connected with corporate sector. 4. The Ministry will feel rewarded if it stimulates widest possible public debate so that the bill as and when introduced in the Parliament will duly take into account the various points of view.
5. The Ministry invites suggestions for improvement of the paper. Once the concepts are frozen after public debate and completion of consultation process, necessary changes will be proposed and finalized. Thereafter, the Limited Liability Partnership Bill will be framed for introduction in the Parliament.
6. It will be appreciated if the suggestions are given, in a tabular form, against each section. All suggestions must, however, reach the Ministry (by post addressed to Shri B M Anand, Joint Director, Ministry of Company Affairs, Room No 539, A Wing, Shastri Bhawan, New Delhi or by e-mail at[email protected]) latest by 31-12-2005.
7. These explanatory notes have been made to assist the reader in understanding the paper and need to be read in conjunction with the paper. However, they are not meant to be a comprehensive description of the paper.
BACKGROUND
8. The idea that there should be the opportunity in India to organise as an LLP emerged out of the Report of the Naresh Chandra Committee on Regulation of Private Companies and Partnership and Report of the Expert Committee on Company Law (Dr. J. J. Irani Committee).
9. In India, businesses mainly operate as companies, sole proprietorships and partnerships. Each of these is subject to different regulatory and tax regimes reflecting their organisation and ownership. Introducing LLPs as a new business structure would fill the gap between business firms such as sole proprietorship and
partnership which are generally unregulated and Limited Liability Companies which are governed by the Companies Act, 1956.
In addition to an alternative business structure, LLPs would foster the growth of the services sector. The regime of limited liability partnership will provide a platform to small and medium enterprises and professional firms of Company Secretaries, Chartered Accountants, Advocates etc. to conduct their business/profession efficiently which would in turn increase their global competitiveness.
10. The Indian Partnership Act, 1932 sets out special rules relating to the liability of partners to persons dealing with them. A partner acts as the agent of the firm and of other partners for the purpose of the business of the firm. Further, every partner is liable, jointly and severally, with all the other partners, for all acts of the firm done while he is a partner.
11. The unlimited liability for partners in case of general partnerships has become an increasing cause for concern in the light of general increase in the incidence of litigation for professional negligence, the size of claims and the risk to a partner's personal assets when a claim exceeds the sum of the assets of the partnership. The ‘unlimited liability’ of partners has been the chief reason why partnership firms of professionals, have not grown in size to successfully meet the challenges posed today by international competition, WTO, GATS etc.
As an alternative corporate business vehicle, limited liability partnership goes some way towards addressing these concerns. A limited liability partnership has unlimited capacity and provides the internal flexibility of a partnership i.e. by allowing the partners to adopt whatever form of internal organisation they prefer while at the same time limiting their liability with respect to the LLP to their individual
contributions.
12. The Concept paper comprises of divided in sixteen chapters and five schedules as under:
Chapters
1. Chapter I – Preliminary 2. Chapter II – Applicability 3. Chapter III – Incorporation 4. Chapter IV – Partnership 5. Chapter V - Extent and Limitation of Liability 6. Chapter VI - Duties and Standards of Conduct 7. Chapter VII – Contributions 8. Chapter VIII Financial Disclosures 9. Chapter IX – Taxation 10.Chapter X -Assignment and Transfer of Partnership Rights 11.Chapter XI – Investigation
12.Chapter XII - Conversion to Limited Liability Partnership 13.Chapter XIII - Foreign Limited Liability Partnership 14.Chapter XIV – Amalgamation, Merger and Demerger of Limited Liability Partnerships 15.Chapter XV - Winding Up and Dissolution
16.Chapter XVI - Miscellaneous Schedules
1. First Schedule – Default provisions for limited liability partnerships. 2. Second Schedule Conversion from firm to limited liability partnership. 3. Third Schedule -Conversion from private company to limited liability partnership. 4. Fourth Schedule - Conversion from unlisted public company to limited liability partnership. 5. Fifth
Schedule – Penalties. 14. COMMENTARY ON CHAPTERS Chapter I - PreliminaryThe preliminary chapter contains the provisions relating to short title, commencement and extent of the proposed Act and the definitions of key terms used in the paper. Chapter II - Applicability
An LLP is a body corporate having perpetual succession and a legal personality of its own. It shall have at least two partners but there is no limit on the maximum
number of partners that it can have. If at any time the number of partners of an LLP falls below two and the business is carried on for more than six months, a person who is a partner of the LLP during the time that it so carries on business after those six months and is cognizant of this fact shall be liable jointly and severally with the LLP for the obligations of the LLP incurred during that period.
Any individual or body corporate may be a partner in an LLP. An LLP being a body corporate, the law relating to partnerships is generally not applicable to a limited liability partnership. Similarly, any change in the partners does not affect the existence, rights and liabilities of the LLP.
Every LLP shall ensure that it has a manager who is an individual and is resident in India. The role of a manager is to perform the administrative and filing duties of the LLP and will be held personally liable for all penalties imposed on the LLP unless he satisfies the Tribunal that he should not be held liable. Further, in all cases where the manager is liable the LLP shall also be liable to the same extent for such defaults. The particulars of such person, his consent to act as a manager and any change of manager shall be lodged with the registrar in the prescribed manner and form. A manager need not be a partner of the LLP. However, if no manager is appointed, each partner who is resident in India shall be treated as a manager. The LLP shall appoint another person as the manager within sixty days from the date on which a person ceases to be a manager.
Chapter III - Incorporation
To form an LLP, there must at the outset be at least two persons who are associated for carrying on a lawful business with a view to profit and who subscribe their names to a document called an "incorporation document".
The incorporation document must be delivered to the Registrar in the prescribed form and manner. A statement must also be delivered to the Registrar that there has been compliance with all the requirements of this Act and Regulations with respect to incorporation and matters precedent and incidental thereto. The statement must be made by a subscriber to the incorporation document and by either an advocate, or a Company Secretary, or a Chartered Accountant in whole time practice in India, who is engaged in the formation of the LLP.
The incorporation document must contain information such as the name of the LLP, its proposed business, address of its registered office, the name, address and photographs of the persons who are to be its partners and manager (s) on
incorporation. If a person makes a statement under Section 8 (1) (c) that he knows to be false or does not believe to be true he shall be punishable under the Act. When the registrar receives the incorporation document he will retain and register it. Once the documents have been registered, the registrar will issue a certificate that
the LLP is incorporated by the name specified in the incorporation document. A statement that is delivered under section 8(1) (c) may be accepted by the registrar as sufficient evidence that the requirement in section 8(1) (a) has been complied with. The certificate issued by the registrar is an evidence that all the requirements have been complied with.
Every LLP is required to have a registered office in India to which all communications will be made and received. Any change in the registered office shall be intimated to the Registrar.
An LLP, shall by its name has the power to sue and being sued, hold and dispose property, have a common seal and to do and suffer such other acts as bodies corporate may lawfully do and suffer.
Every LLP is required to have either the words “limited liability partnership” or the acronym “LLP” as the last words of its name. An LLP shall not be allowed to register with a name, which is undesirable or identical to a name of any other LLP or body corporate or to a registered trade mark, or a trade mark which is subject of an application for registration, of any other person under the Trade Marks Act, 1999. The name shall be printed on all its invoices and official correspondence along with a statement that it is registered with limited liability.
Chapter IV – Partnership
The first partners of an LLP are those who sign the incorporation document. After incorporation, any person may become a partner of an LLP by agreement with the existing partners.
The rights and duties of the partners of an LLP to one another and to the LLP are governed by the provisions of any agreement between the partners. In case, a matter has not been specifically dealt with in the agreement, the provisions set out in the First Schedule shall apply. Certain particulars contained in the LLP agreement as may be prescribed and any changes made therein shall be filed with the Registrar. A person may cease to be a partner by death, dissolution of the LLP or in accordance with any agreement with the other partners of the LLP. Where there is no agreement a partner may cease to be a partner by giving 30 days notice to the other partners. However, a person shall be regarded as a partner, in relation to any person dealing with the LLP unless the third person has notice that the former partner has ceased to be a partner or a notice in this regard has been delivered to the Registrar. Moreover, a former partner shall continue to be liable for the acts done in his tenure.
Where a person ceases to be a partner of an LLP, a person entitled to his share in consequence to death or insolvency may not interfere with the management or administration of the LLP, but may receive any amount to which he is entitled. Where a person becomes or ceases to be a partner, the manager of the LLP shall within thirty days from the date on which the partner becomes or ceases to be a partner notify the registrar in the prescribed form and manner. In case of admission of a partner, a statement by the incoming partner that he consents to be a partner should also be filed in the prescribed form and manner. Similarly where there is any
change in the name or address of a partner, the same shall be notified. If a person ceases to be a partner and believes that the LLP shall not lodge the statement with the Registrar, he shall himself lodge it.
Chapter V - Extent and Limitation of Liability
Each partner of the LLP is an agent of the LLP but not of other partners. Therefore, a partner shall be held personally liable for his own wrongful act or omission, but will not be liable for the wrongful act or omission of any other partner of the LLP. An LLP is however, not bound by the actions of a partner where that partner has no
authority to act for the LLP, and the person dealing with the partner is aware of this or does not know or believe that the partner was in fact a partner of the LLP.
Further, where a partner of an LLP is liable to a person for a wrongful act or omission in the course of business of the LLP or with its authority, the LLP will be liable to the same extent as the partner. An LLP being a separate legal entity is liable for an obligation arising in contract or otherwise and the liabilities of the LLP shall be met out of its property.
A partner will not be held personally liable, directly or indirectly for an obligation of the LLP, solely by reason of being a partner of the limited liability partnership. However, this liability shield will be withdrawn in case of an act carried out by a LLP with the intent to defraud creditors or for any other fraudulent purposes.
Chapter VI - Duties and Standards of Conduct
This chapter deals with the duties and standards of conduct of partners. The more important of these provisions include obligations of loyalty, due care and good faith.
Chapter VII - Contributions
This chapter deals with the form and liability of partner’s contribution. Chapter VIII - Financial Disclosures
A limited liability partnership is required to maintain proper books of accounts at its registered office relating to its affairs for each year of its existence on accrual basis and according to the double entry system of accounting. An LLP shall take
reasonable precautions to maintain the records so as to prevent loss or destruction, falsification of entries and facilitate detection and correction of inaccuracies. If default is made in complying with these provisions, the manager shall be punishable under the Act.
The manager of an LLP shall lodge with the Registrar a declaration as to whether in his opinion the LLP appears to be able to pay its debts in the normal course of business or not. The declaration is to be lodged within 15 months of registration and subsequently every financial year at intervals of not more that 15 months. If the manager fails to lodge the declaration or makes a declaration without having
reasonable grounds for his opinion, he shall be punishable under the Act. Further, if any person makes a statement or furnishes information to a manager that is false or
misleading in a material particular, then that person shall also be punishable under the Act.
The Registrar shall have the power to call for further information as he may require and any person, who fails to comply with any summons or requisition of the
Registrar or provides false information, shall be punishable under the Act. He shall also have the powers to enforce the lodging or filing of any return, account or other document. Further, the Registrar may destroy any document lodged, filed or
registered with it, if it is no longer necessary or desirable to retain the same.
Regulations to the Act shall prescribe the offences which may be compounded by the Central Government under this Act.
A limited liability partnership shall take all reasonable precautions to maintain the records it is required to maintain under sub-section (1) of section 27 in a manner so as to prevent loss or destruction thereof prevent falsification of entries and facilitate detection and correction of inaccuracies.
Chapter IX - Taxation
This chapter ensures that the partners of an LLP which is carrying on a business with a view to profit are treated for the purposes of income tax and capital gains tax as if they were partners carrying on a business in partnership, despite the fact that an LLP is a body corporate. It also provides that the property of the LLP shall be treated for those purposes as property of its partners. This ensures that partners will be
individually liable to tax on their share of the profits of the trade, profession or business carried on by the LLP.
Further, the assets of the LLP shall be treated as assets held by the partners for the purpose of taxing capital gains. This ensures that the partners of the LLP, rather than the LLP itself, will be liable to tax for capital gains on the disposal of LLP assets. The chapter brings LLPs in line with the approach adopted for partnerships, which
similarly treats assets as held by the partners rather than by the partnership. Chapter X - Assignment and Transfer of Partnership Rights This chapter deals with the partner’s transferable interest. A partner’s economic rights, which include the rights of the partner to a share of the profits and losses of the partnership and to receive distributions in accordance with the limited liability partnership agreement, are freely transferable. However, a transfer in whole or in part of the transferable interest does not imply the partner’s disassociation or dissolution and winding up of the LLP’s activities. Further, they do not entitle the assignee to participate in the management or conduct of the LLP’s activities or access information concerning the LLP’s transactions. Moreover, the non-economic rights of a partner shall not be transferable unless specified by the LLP Agreement.
Chapter XI - Investigation
This chapter deals with the investigation of the affairs of a limited liability partnership.
Chapter XII - Conversion to Limited Liability Partnership
This chapter contains provisions which provide for the conversion from firm, private company and unlisted public company to a limited liability partnership. The Second Schedule contains provisions for conversion from firm to LLP; the Third Schedule contains provisions for conversion from private company to LLP and the Fourth Schedule provides for conversion from unlisted public company to LLP.
Chapter XIII - Foreign Limited Liability Partnership
This chapter deals with the foreign limited liability partnership. The Regulations shall make provisions about the features of foreign limited liability partnership.
Chapter XIV – Amalgamation, Merger and Demerger of Limited Liability Partnerships
This chapter deals with the amalgamation, merger and demerger of limited liability partnerships. The Regulations shall make provisions for the same.
Chapter XV - Winding Up and Dissolution
This chapter deals with the winding up and dissolution of limited liability
partnerships. The winding up of a limited liability partnership may be either voluntary or by the Tribunal. The Regulations shall make provisions for the winding up and dissolution of limited liability partnerships.
Chapter XVI - Miscellaneous
This chapter deals with business transaction of partner with partnership, application of company law etc., electronic filing service, penalties, application of other laws, enabling provision for Regulations, powers of Registrar, offences by limited liability partnerships, jurisdiction of the Tribunal and general penalties.
CONCEPT PAPER ON LIMITED LIABILITY PARTNERSHIP CONTENTS
Sr.
No Particulars PageNo.
1 Chapter I –
Preliminary 1
2 Section 1 Short title, commencement and extent.
1
3 Section 2 Definitions 1
4 Chapter II –
Applicability 2
5 Section 3 Limited Liability Partnership 2 6 Section 4 Non-applicability of
partnership law 2
8 Section 6 Minimum and Maximum
Number of Partners 3
9 Section 7 Manager 3
10 Chapter III –
Incorporation 4
11 Section 8 Incorporation Document 4 12 Section 9 Incorporation by Registration 4
13 Section 10 Registered Office 5
14 Section 11 Powers 5
15 Section 12 Names of limited liability
partnerships 5
16 Section 13 Publication of name and limited liability 6 17 Chapter IV
-Partnership 7
18 Section 14 Partner 7
19 Section 15 Relationship of Partners 7 20 Section 16 Cessation of partnership
interest 7
21 Section 17 Registration of changes in
partners 8
22 Chapter V - Extent and Limitation of Liability
9
23 Section 18 Partner as agent 9
24 Section 19 Extent of liability of the
limited liability partnership 9 25 Section 20 Extent of liability of a
partner 9
26 Section 21 Unlimited liability in case of fraud
9 27 Section 22 Liability for personal acts 10 28 Chapter VI - Duties
and Standards of Conduct
10
29 Section 23 Duties of Partners 10 30 Section 24 General Standards of
Partner's Conduct 10 31 Chapter VII
-Contributions 11
32 Section 25 Form of Contribution 11 33 Section 26 Liability for Contribution 11 34 Chapter VIII
-Financial Disclosures
11
35 Section 27 Maintenance of records 11 36 Section 28 Annual declaration of
solvency 11
further information
38 Section 30 Penalty for providing false information to the Registrar 12 39 Section 31 Composition of offences 12 40 Section 32 Destruction of old records 13 41 Section 33 Enforcement of duty to make
returns
13 42 Section 34 Keeping of limited liability
partnership records 13 43 Chapter IX
-Taxation 14
44 Section 35 Income Tax and Capital Gains 14 45 Chapter X -Assignment and Transfer of Partnership Rights 14
46 Section 36 Partner's transferable interest
14 47 Section 37 Transfer of partner's
transferable interest 14 48 Chapter XI
-Investigation 14
49 Section 38 Investigation of the affairs of a limited liability partnership14 50 Section 39 Application by partners to be
supported by evidence and power to call for security.
15
51 Section 40 Firm, body corporate or association not to be appointed as inspector.
15
52 Section 41 Power of inspectors to carry out investigation into affairs of related entities, et.
16
53 Section 42 Production of documents and
evidence. 16
54 Section 43 Seizure of documents by
inspector. 17
55 Section 44 Inspectors' report 18
56 Section 45 Prosecution. 18
57 Section 46 Application for winding up of limited liability partnership or other entity
18
58 Section 47 Proceedings for recovery of damages or property. 19 59 Section 48 Expenses of investigation. 19 60 Section 49 Inspectors' report to be
evidence.
20 61 Chapter XII –
Limited Liability Partnership
62 Section 50 Conversion from firm to
limited liability partnership 20 63 Section 51 Conversion from private
company to limited liability partnership
20
64 Section 52 Conversion from unlisted public company to limited liability partnership
20
65 Chapter XIII - Foreign Limited Liability Partnership
20
66 Section 53 Foreign Limited Liability
Partnership 20
67 Chapter XIV – Amalgamation,
Merger and Demerger of Limited Liability Partnerships
20
68 Section 54 Amalgamation, Merger and Demerger of Limited Liability Partnerships 20 69 Chapter XV -Winding Up and Dissolution 21
70 Section 55 Winding Up and Dissolution 21 71 Chapter XVI
-Miscellaneous 21
72 Section 56 Business Transactions of Partner with Partnership
21 73 Section 57 Application of Company Law 21 74 Section 58 Electronic filing service 21
75 Section 59 Penalty 22
76 Section 60 Application of other laws not
barred 22
77 Section 61 Power to make regulations 22 78 Section 62 Power to remove difficulties 22 79 Section 63 Power of Registrar to strike
defunct limited liability partnership off register
23
80 Section 64 Offences by limited liability partnerships
24 81 Section 65 Jurisdiction of the Tribunal 24 82 Section 66 General penalties 24 83 FIRST SCHEDULE DEFAULT PROVISIONS FOR
LIMITED LIABILITY PARTNERSHIPS
25
84 SECOND SCHEDULECONVERSION FROM FIRM TO LIMITED LIABILITY– 26
PARTNERSHIP 85 THIRD SCHEDULE CONVERSION FROM
PRIVATE COMPANY TO LIMITED LIABILITY PARTNERSHIP
29
86 FOURTH SCHEDULE CONVERSION FROM
UNLISTED PUBLIC COMPANY TO LIMITED LIABILITY PARTNERSHIP
32
87 FIFTH SCHEDULE PENALTIES 35
88 LLP REGULATIONS
2006 39
CONCEPT PAPER ON LIMITED LIABILITY PARTNERSHIPS Chapter I
Preliminary 1. Short title, commencement and extent.
(1) This Act may be called the Limited Liability Partnerships Act, 2006. (2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
(3) It extends to the whole of India. 2. Definitions.
In this Act, unless the context otherwise
requires,-(1) "address" in relation to a partner of a limited liability partnership, means-(a) if an individual, his usual residential address, and
(b) if a body corporate , address of its registered office;
(2) “Appellate Tribunal” means the National Company Law Appellate Tribunal constituted under the Companies Act, 1956;
(3) “body corporate” means a company as defined in section 3 of the Companies Act, 1956 and includes:
(a) a limited liability partnership registered under this Act; (b) a limited liability partnership incorporated outside India; and (c) a company incorporated outside India
but does not include-(i) a corporation sole;
(ii) a co-operative society registered under any law relating to co-operative societies; and
(iii) any other body corporate (not being a company as defined above), which the Central Government may, by notification in the Official Gazette, specify in this behalf;
(4) "business" includes every trade, profession and occupation;
(5) “chartered accountant” means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act; (6) “company secretary” means a company secretary as defined in clause (b) of sub-section (1) of sub-section 2 of the Company Secretaries Act, 1980 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(7) "court" means court as defined under the Companies Act, 1956;
(8) "economic rights" means the rights of the partner to a share of the profits and losses of the partnership and to receive distributions in accordance with the limited liability partnership agreement;
(9) “financial year” means in relation to a limited liability partnership, the period in respect of which any profit and loss account of the limited liability partnership is made up, and shall not be less than six months but not exceed fifteen months. (10) “foreign limited liability partnership" means a partnership that is
1. formed, registered or incorporated outside India which, after the commencement of this Act, establishes a place of business within India; and
2. formed, registered or incorporated outside India which have, before the
commencement of this Act, established a place of business within India and continue to have an established place of business within India at the commencement of this Act; and
3. which if incorporated in India, would be a limited liability partnership within the meaning of this Act.
(11) "incorporation document" shall be construed in accordance with section 8; (12) "limited liability partnership" has the meaning given to it by section 3;
(13) "limited liability partnership agreement" means any written agreement of the partners as to the affairs of a limited liability partnership and the conduct of its business;
(14) “manager” in relation to a limited liability partnership, means any person (whether or not a partner of the limited liability partnership) who is concerned in or takes part in the management of the limited liability partnership;
(15) "modification" shall include the making of additions and omissions; (16) "name" in relation to a partner of a limited liability partnership, means-(a) if an individual, his forename, middlename and surname, and
(b) if a body corporate, its registered name;
(17) "partner" in relation to a limited liability partnership, means any person who has been admitted as a partner in the limited liability partnership in accordance with the limited liability partnership agreement;
(18) “register” means any register kept and maintained under this Act; (19) "Registrar" means Registrar as defined in the
Companies Act, 1956;
(20) “Tribunal” means the National Company Law Tribunal constituted under the Companies Act, 1956.
Chapter II Applicability 3. Limited Liability Partnership.
(1) A limited liability partnership is a body corporate which is formed by being incorporated under this Act and which has legal entity separate from that of its partners.
(2) A limited liability partnership shall have perpetual succession.
(3) Any change in the partners of a limited liability partnership shall not affect the existence, rights or liabilities of the limited liability partnership.
4. Non-applicability of partnership law.
Except as otherwise provided by this Act or any other enactment, the law relating to partnerships shall not apply to a limited liability partnership.
5. Partners.
6. Minimum and Maximum Number of Partners.
(1) Every limited liability partnership shall have at least two partners. (2) If at any time the number of partners of a limited liability partnership, is
reduced, below two, and the limited liability partnership carries on business for more than six months while the number is so reduced, a person who is a partner of the limited liability partnership during the time that it so carries on business after those six months and is cognizant of the fact that it is carrying on business with fewer than two partners shall be liable jointly and severally with the limited liability partnership for the obligations of the limited liability partnership incurred during that period. (3) A limited liability partnership may have any number of partners.
7. Manager.
(1) Every limited liability partnership shall have a manager who is an individual and is resident in India.
(2) For the purpose of sub-section (1), resident in India includes a person who has been staying in India for a continuous period of not less than twelve months
immediately preceding the date of his appointment as a manager and who has come to stay in India,
(a) for taking up employment in India, or
(b) for carrying on a business or vocation in India.
(3) Every limited liability partnership shall within 30 days ensure that the
particulars of every person who acts as manager of the limited liability partnership, his consent to act as such and any change of manager are lodged with the Registrar in such manner and form as may be prescribed.
(4) If the incorporation document specifies who is to be a manager -(a) that person shall be the manager on incorporation, and
(b) if no manager is appointed, each partner resident in India shall be deemed to be a manager.
(5) Every limited liability partnership shall appoint a person as manager within sixty days from the date on which a person ceases to be a manager.
(6) A manager shall be —
(a) answerable for the doing of all acts, matters and things, as are required to be done by the limited liability partnership; and
(b) personally liable to all penalties imposed on the limited liability partnership for any contravention of those sections unless he satisfies the Tribunal that he should not be so liable.
(7) If a limited liability partnership contravenes any sub-section of this section, the limited liability partnership and every partner of the limited liability partnership shall be punishable under the Act.
Chapter III Incorporation 8. Incorporation Document.
(1) For a limited liability partnership to be
incorporated-(a) two or more persons associated for carrying on a lawful business with a view to profit must have subscribed their names to an incorporation document,
(b) there must have been delivered to the Registrar of the State in which the
registered office of the limited liability partnership is to be situate, the incorporation document in a manner as may be prescribed, and
(c) there must have been so delivered a statement in the prescribed form, made by either an advocate, or a Company Secretary, or, a Chartered Accountant, who is engaged in the formation of the limited liability partnership and by anyone who subscribed his name to the incorporation document, that all the requirements of this Act and Regulations thereunder have been complied with, in respect of incorporation and matters precedent and incidental thereto.
(2) The incorporation document must-(a) be in a form as may be prescribed,
(b) state the name of the limited liability partnership,
(c) state the proposed business of the limited liability partnership;
(d) state the address of the registered office of the limited liability partnership, (e) state the name and address of each of the persons who are to be partners of the limited liability partnership on incorporation,
(f) state the name and address of the person (s) who is/are to be manager (s) of the limited liability partnership on incorporation;
(g) be accompanied by the photographs of the persons who are to be partners and manager(s) of the limited liability partnership.
he-(a) knows to be false, or
(b) does not believe to be true, he shall bepunishable under the Act. 9. Incorporation by Registration.
(1) When the requirements imposed by clause (b) and (c) of sub-section (1) of section 8 have been complied with, the Registrar shall retain the incorporation document and, unless the requirement imposed by clause (a) of that sub-section has not been complied with, he shall within a period of 14
days-a. register the incorporation document, and
b. give a certificate that the limited liability partnership is incorporated by the name specified in the incorporation document.
(2) The Registrar may accept the statement delivered under clause (c) of sub-section (1) of section 8 as sufficient evidence that the requirement imposed by clause (a) of that sub-section has been complied with.
(3) The certificate shall be signed by the Registrar and authenticated by his official seal.
(4) The certificate is conclusive evidence that the requirements of sub-section 2 of section 8 are complied with and that the limited liability partnership is incorporated by the name specified in the incorporation document.
10. Registered Office.
(1) Every limited liability partnership shall have a registered office to which all communications and notices may be addressed and where they shall be received. (2) A document may be served on a limited liability partnership or a partner or manager thereof by sending it by post under a certificate of posting or by registered post or by any other mode, which may be prescribed, or by leaving at its registered office.
(3) A limited liability partnership may change the address of its registered office by lodging with the Registrar notice of such change in such manner and form as may be prescribed and any such change shall take effect only upon such lodgment.
(4) A person guilty of an offence under sub-section (3) shall be punishableunder the Act.
11. Powers.
of-(a) suing and being sued;
(b) acquiring, owning, holding and developing or disposing of property, both movable and immovable;
(c) having a common seal; and
(d) doing and suffering such other acts and things as bodies corporate may lawfully do and suffer.
12. Names of limited liability partnerships.
(1) Every limited liability partnership shall have either the words “limited liability partnership” or the acronym “LLP” as the last words of its name.
(2) No limited liability partnership shall be registered by a name which, in the opinion of the Central Government is
-(a) undesirable;
(b) identical or too nearly resembles to that of any other limited liability partnership or body corporate or to a registered trade mark, or a trade mark which is subject of an application for registration, of any other person under the Trade Marks Act, 1999. (3) A person may apply in the prescribed manner to the Registrar for the
reservation of a name set out in the application as —
(a) the name of a proposed limited liability partnership; or
(b) the name to which a limited liability partnership proposes to change its name. (4) Upon receipt of an application under sub-section (3) and on payment of the prescribed fee, the Registrar may, if he is satisfied that the name to be reserved is not one which may be rejected on any ground referred to in sub-section (2), reserve the name for a period of three months from the date of intimation by the Registrar. (5) Notwithstanding anything contained in this section, where the Central
Government is satisfied that a limited liability partnership has been registered (whether through inadvertence or otherwise and whether originally or by a change of name) under a name which —
(a) is a name referred to in sub-section (2); or
(b) so nearly resembles the name of any other limited liability partnership or body corporate or other name as to be likely to be mistaken for it, the Central
Government may direct the limited liability partnership to change its name, and the limited liability partnership shall comply with the direction within three months after the date of the direction or such longer period as the Central Government may allow.
(6) Any person may apply, in a manner as may be prescribed, to the Registrar to give a direction to any limited liability partnership, on a ground referred to in sub-section (5), to change its name.
(7) The Registrar shall not consider any application under sub-section (6) to give a direction to a limited liability partnership on the ground referred to in sub-section (5) (b) unless the Registrar receives the application within twelve months from the date of registration of the limited liability partnership under that name.
(8) Any limited liability partnership which fails to comply with a direction given under sub-section (5) shall be punishable under the Act.
(9) Any limited liability partnership may change its name by lodging with the Registrar notice of such change in such manner and form as may be prescribed. 13. Publication of name and limited liability.
(1) Every limited liability partnership shall ensure that its invoices and official correspondence bear the following:
(a)the name and registration number of the limited liability partnership; and (b) a statement that it is registered with limited liability.
(2) Any limited liability partnership which contravenes sub-section (1) shall be punishable under the Act.
Chapter IV Partnership 14. Partner.
(1) On the incorporation of a limited liability partnership its partners are the persons who subscribed their names to the incorporation document.
(2) Any other person may become a partner of a limited liability partnership by and in accordance with an agreement with the existing partners.
15. Relationship of Partners.
(1) Except as far as otherwise provided by this Act or any other enactment, the mutual rights and duties of the partners of a limited liability partnership, and the mutual rights and duties of a limited liability partnership and its partners, shall be governed by agreement between the partners, or between the limited liability partnership and its partners.
(2) The contents as may be prescribed in Regulations and form part of limited liability partnership agreement and any changes made therein shall be filed with the Registrar in the manner and form as may be prescribed.
(3) An agreement in writing made before the incorporation of a limited liability partnership between the persons who subscribe their names to the incorporation document may impose obligations on the limited liability partnership as a pre-incorporation agreement, provided such agreement is ratified by all the partners after the incorporation of the limited liability partnership.
(4) In the absence of agreement as to any matter, the mutual rights and duties of the partners and the mutual rights and duties of the limited liability partnership and the partners shall be determined by any provision relating to that matter as is set out in the First Schedule.
16. Cessation of partnership interest.
(1) A person may cease to be a partner of a limited liability partnership in accordance with an agreement with the other partners or, in the absence of
agreement with the other partners as to cessation of being a partner, by giving 30 days notice to the other partners of his intention to resign as partner.
(2) A person may also cease to be a partner of a limited liability partnership by his death or by dissolution of the limited liability partnership firm.
(3) Where a person has ceased to be a partner of a limited liability partnership, the former partner is to be regarded (in relation to any person dealing with the limited liability partnership) as still being a partner of the limited liability partnership unless-(a) the person has notice that the former partner has ceased to be a partner of the limited liability partnership, or
(b) notice that the former partner has ceased to be a partner of the limited liability partnership has been delivered to the Registrar.
(4) A partner's disassociation from the limited liability partnership does not by itself discharge the partner from any obligation to the limited liability partnership or to the other partners which he incurred while being a partner.
(5) Where a partner of a limited liability partnership ceases to be a partner, unless otherwise provided in the limited liability partnership agreement, the former partner or a person entitled to his share in consequence of the death or insolvency of the former partner, shall be entitled to receive from the limited liability partnership an amount —
(a) equal to the former partner’s capital contribution to the limited liability
partnership and his right to share in the accumulated profits of the limited liability partnership after the deduction of losses of the limited liability partnership; and (b) determined as at the date the former partner ceased to be a partner.
(6) For the avoidance of doubt, a former partner or a person entitled to his share in consequence of the death or insolvency of the former partner shall not interfere in the management of the limited liability partnership.
17. Registration of changes in partners. (1) A limited liability partnership must ensure
that-(a) where a person becomes or ceases to be a partner, notice is delivered to the Registrar within 30 days, and
(b) where there is any change in the name or address of a partner, notice is delivered to the Registrar within 30 days.
(2) A notice delivered under sub-section (1)-(a)shall be in a form as may be prescribed, and
(b)shall be signed by the manager of the limited liability partnership and authenticated in a manner as may be prescribed, and,
(c) if it relates to admission of partner, shall contain a statement by the incoming partner that he consents to becoming a partner, signed by him and authenticated in a manner as may be prescribed.
(3) If a limited liability partnership fails to comply with sub-section (1), the manager shall be punishable under the Act.
(4) Any person who ceases to be a partner of a limited liability partnership may himself lodge with the Registrar the statement referred to in sub-section (2) if he has reasonable cause to believe that the limited liability partnership will not lodge the statement with the Registrar.
Chapter V
Extent and Limitation of Liability 18. Partner as agent.
Every partner of a limited liability partnership is the agent of the limited liability partnership, but not of other partners.
19. Extent of liability of the limited liability partnership.
(1) A limited liability partnership is not bound by anything done by a partner in dealing with a person
if-(a) the partner in fact has no authority to act for the limited liability partnership in doing a particular act, and
(b) the person knows that he has no authority or does not know or believe him to be a partner of the limited liability partnership.
(2) The limited liability partnership is liable if a partner of a limited liability
partnership is liable to any person as a result of a wrongful act or omission on his part in the course of the business of the limited liability partnership or with its authority.
(3) An obligation of the limited liability partnership whether arising in contract or otherwise, is solely the obligation of the limited liability partnership.
(4) The liabilities of the limited liability partnership shall be met out of the property of the limited liability partnership.
20. Extent of liability of a partner.
(1) A partner is not personally liable, directly or indirectly for an obligation referred to in sub-section (3) of section 19 solely by reason of being a partner of the limited liability partnership.
(2) Sub-section (3) of section 19 and sub-section (1) of this section shall not affect the personal liability of a partner for his own wrongful act or omission, but a partner shall not be personally liable for the wrongful act or omission of any other partner of the limited liability partnership.
21. Unlimited liability in case of fraud.
(1) In the event of an act carried out by a limited liability partnership, or any of its partners, with intent to defraud creditors of the limited liability partnership or any other person, or for any fraudulent purpose, the liability of the parties shall be unlimited for all or any of the debts or other liabilities of the limited liability partnership.
(2) Where any business is carried on with such intent or for such purpose as mentioned in sub-section (1), every person who was knowingly a party to the carrying on of the business in the manner aforesaid shall be punishable under the Act.
22. Liability for personal acts.
A partner shall have unlimited liability for his or her personal acts which are not done for and on behalf of the limited liability partnership, and were committed in his or her personal capacity.
Chapter VI
Duties and Standards of Conduct 23. Duties of Partners.
A partner shall discharge his duties to the limited liability partnership and the other partners under this Act or under the partnership agreement and exercise any right consistent with the obligation of good faith.
24. General Standards of Partner's Conduct.
(1) The fiduciary duties that a partner has to the limited liability partnership and the other partners are the duties of loyalty and due care as specified under sub-section (2) and (3).
(2) A partner's duty of loyalty to the limited liability partnership shall include: (a) to account to the limited liability partnership and hold as trustee for it any property, profit, or benefit derived by the partner in the conduct and winding up of the limited liability partnership's activities or derived from a use by the partner of limited liability partnership property, including the appropriation of a limited liability partnership opportunity;
(b) to refrain from competing with the limited liability partnership in the conduct or winding up of the limited liability partnership's activities; and
(c) refrain from dealing with the limited liability partnership in the conduct or winding up of the limited liability partnership's activities as or on behalf of a party having an interest adverse to the limited liability partnership.
(3) A partner’s duty of due care to the limited liability partnership and the other partners in the conduct and winding up of the limited liability partnership's activities is to refrain from engaging in grossly negligent or reckless conduct and from
contravening any of the provisions of this Act and any other law for the time being in force.
Chapter VII Contributions 25. Form of Contribution.
A contribution of a partner may consist of tangible or intangible property or other benefit to the limited liability partnership, including money, services performed, promissory notes, other agreements to contribute cash or property, and contracts for services performed or to be performed.
26. Liability for Contribution.
(1) A partner's obligation to contribute money or other property or other benefit or to perform services for a limited liability partnership shall be as per the partnership agreement.
(2) A creditor of a limited liability partnership, which extends credit or otherwise acts in reliance on an obligation described in that agreement, without notice of any compromise under this sub-section, may enforce the original obligation against such partner.
Financial Disclosures 27. Maintenance of records.
(1) The limited liability partnership shall maintain proper books of accounts relating to its affair for each year of its existence on accrual basis and according to the double entry system of accounting, and shall maintain the same at its registered office for a period as may be prescribed.
(2) If default is made in complying with sub-section (1), the manager shall be punishable under the Act.
28. Annual declaration of solvency.
(1) Every limited liability partnership shall lodge with the Registrar a declaration by its manager that in his opinion, the limited liability partnership either —
(a)appears as at that date to be able to pay its debts as they become due in the normal course of business; or
(b) does not appear as at that date to be able to pay its debts as they become due in the normal course of business.
(2) The declaration referred to in sub-section (1) shall be lodged not later than 15 months after the registration of the limited liability partnership and subsequently once in every financial year at intervals of not more than 15 months.
(3) Notwithstanding sub-section (2), the Registrar may, on application by a limited liability partnership and if he thinks fit, grant an extension of time for the lodging of the declaration referred to in sub-section (1).
(4) If a limited liability partnership fails to lodge the declaration referred to in sub-section (1) within the time or extended time referred to in sub-sub-sections (2) and (3), the manager shall be punishable under the Act.
(5) A manager who makes a declaration referred to in sub-section (1) (a) without having reasonable grounds for his opinion, shall be punishable under the Act; and (6) Any person who, in connection with a declaration made under this section, makes a statement or furnishes information (whether directly or indirectly) to a manager that is false or misleading in a material particular, when he knows or ought reasonably to have known that the statement or information is false or misleading in a material particular, shall be punishable under the Act.
(7) If an offence under this section is committed with an intent to defraud creditors of the limited liability partnership or for a fraudulent purpose, the offender shall be punishable under the Act .
(1) In order to obtain such information as the Registrar may consider necessary for the purposes of carrying out the provisions of this Act, the Registrar may —
(a)require any present or former partner or manager of a limited liability partnership to answer any question in writing which the Registrar may consider necessary to ask for the purposes specified in this sub-section; or
(b) summon that person to appear before him or an inspector or any other public officer whom the Registrar may designate to answer any such question orally. (2) The Registrar may further require the person referred to in sub-section (1) to make such further declaration or supply such further particulars as the Registrar may require.
(3) Any person who, without lawful excuse, fails to comply with any summons or requisition of the Registrar under this section shall be punishable under the Act. 30. Penalty for providing false information to the Registrar.
Any person who makes any statement or furnishes any information to the Registrar under the provisions of this Act which is false in any material particular or by reason of the omission of any material particular and which he either knows or has reason to believe is false, shall be punishable under the Act.
31. Composition of offences.
(1) The Central Government may, compound any offence under this Act which is prescribed as a compoundable offence by collecting from a person reasonably suspected of having committed the offence a sum which may extend to the amount of the maximum fine that is prescribed for the offence, or a sum prescribed under the Act, whichever is lower.
(2) The Central Government may make regulations to prescribe the offences which may be compounded.
32. Destruction of old records.
The Registrar may destroy any document lodged, filed or registered with the Registrar and which has been microfilmed or converted to electronic form if in his opinion it is no longer necessary or desirable to retain the document.
33. Enforcement of duty to make returns. (1) If any person is in default in complying with —
(a) any provision of this Act or of any other law which requires the lodging or filing in any manner with the Registrar of any return, account or other document or the giving of notice to him of any matter; or
(b) any request of the Registrar to amend or complete and resubmit any document or to submit a fresh document, and fails to make good the default within 14 days after the service on the person of a notice requiring it to be done, Tribunal may, on application by the Registrar, make an order directing that person or (if that person is a corporation) any officer of the body corporate to make good the default within such time as is specified in the order.
(2) Any such order may provide that all the costs of and incidental to the
application shall be borne by that person or by any officer of the body corporate who is responsible for the default if that person is a body corporate.
(3) Nothing in this section shall limit the operation of any other provision of this Act or any written law imposing penalties (in respect of any default referred to in this section) on that person or an officer of a body corporate if that person is a body corporate.
34. Keeping of limited liability partnership records.
(1) A limited liability partnership shall take reasonable precautions to maintain the records it is required to maintain under sub-section (1) of section 27 in such a manner so as to
(a) prevent loss or destruction thereof; (b) prevent falsification of entries;
(c) facilitate detection and correction of inaccuracies.
(2) If a default is made in complying with sub-section (1), the manager shall bepunishable under the Act.
Chapter IX Taxation 35. Income Tax and Capital Gains.
(1) For the purposes of taxation, any activity carried on by a limited liability partnership with a view to profit shall be treated as carried on in partnership by its partners (and not by the limited liability partnership as such) and, accordingly, the property of the limited liability partnership shall be treated for those purposes as property of the partners.
(2) Where a limited liability partnership carries on a trade or business with a view to
profit-(a) assets held by the limited liability partnership shall be treated for the purposes of tax in respect of capital gains as held by its partners; and
(b) any dealings by the limited liability partnership shall be treated for those purposes as dealings by its partners in partnership (and not by the limited liability partnership as such),in respect of capital gains accruing to the partners of the limited liability partnership on the disposal of any of its assets shall be assessed and charged on them separately.
Chapter X
Assignment and Transfer of Partnership Rights 36. Partner's transferable interest.
A partner's economic rights in the limited liability partnership are freely transferable in accordance with section 37. Non-economic rights of a partner are not transferable unless specified by the limited liability partnership agreement.
37. Transfer of partner's transferable interest.
A transfer in whole or in part of a partner's transferable interest is permissible and does not by itself cause the partner's disassociation or a dissolution and winding up of the limited liability partnership's activities and does not entitle the assignee to participate in the management or conduct of the limited liability partnership's activities, nor access information concerning the limited liability partnership's transactions.
Chapter XI Investigation
38. Investigation of the affairs of a limited liability partnership.
(1) The Central Government may appoint one or more inspectors to investigate the affairs of an LLP and to report on them in such manner as it may direct.
(2) The appointment shall be made if, Tribunal, either suo moto, or on an application received from not less than one fifth partners of LLP, by order, declares that the affairs of LLP ought to be investigated;
(3) The appointment may be
made:-(a) on the basis of the report of the Registrar to the effect that the affairs of LLP ought to be investigated;
(b) on the application (alongwith supporting evidence and security amount as may be prescribed) of not less than one fifth of total number of partners of LLP;
(c) if LLP, by a resolution passed, declares that the affairs of the LLP ought to be investigated; and
(d) if in the opinion of the Central Government/Tribunal, there are circumstances suggesting
(i) that the business of the limited liability partnership is being conducted with an intent to defraud its creditors, partners or any other persons, or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive or unfairly prejudicial to some or any of its partners, or that the limited liability partnership was formed for any fraudulent or unlawful purpose;
(ii) that the partners of LLP have been guilty of fraud, misfeasance or other
misconduct towards the limited liability partnership or towards any of its partners; or (iii) that the partners of the limited liability partnership have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the remuneration payable to a manager of the limited liability partnership.
39. Application by partners to be supported by evidence and power to call for security.
An application by partners of the limited liability partnership shall be supported by such evidence as the Tribunal may require for the purpose of showing that the applicants have good reason for requiring the investigation; and the Central Government may, before appointing an inspector, require the applicants to give security, for such amount as may be prescribed, for payment of the costs of the investigation.
40. Firm, body corporate or association not to be appointed as inspector. No firm, body corporate or other association shall be appointed as an inspector. 41. Power of inspectors to carry investigation into affairs of related entities, etc.
(1) If an inspector appointed by the Central Government to investigate the affairs of the limited liability partnership thinks it necessary for the purposes of his
investigation to investigate also the affairs of an entity which has been associated in the past or is presently associated with the limited liability partnership or any
present or former partner or manager of the limited liability partnership, the inspector shall have the power to do so and shall report on the affairs of the other entity or partner or manager, so far as he thinks that the results of his investigation thereof are relevant to the investigation of the affairs of the limited liability
partnership.
(2) In the case of any entity or partner or manager referred to in sub-section (1), the inspector shall not exercise his power of investigating into, and reporting on, its or his affairs without first having obtained the prior approval of the Central
Provided that before according approval under this sub-section, the Central
Government shall give the entity or partner or manager a reasonable opportunity to show cause why such approval should not be accorded.
42. Production of documents and evidence.
(1) It shall be the duty of the manager and partners of the limited liability partnership,
-(a) to preserve and to produce to an inspector or any person authorised by him in this behalf with the previous approval of the Central Government, all books and papers of, or relating to, the limited liability partnership or, as the case may be, or of relating to the other entity, which are in their custody or power; and
(b) otherwise to give to the inspector all assistance in connection with the investigation which they are reasonably able to give.
(2) The inspector may, with the previous approval of the Central Government, require any entity other than an entity referred to in sub-section (1) to furnish such information to, or produce such books and papers before, him or any person
authorised by him in this behalf with the previous approval of that Government as he may consider necessary if the furnishing of such information or the production of such books and papers is relevant or necessary for the purposes of his investigation. (3) The inspector may keep in his custody any books and papers produced under sub-section (1) or sub-section (2) for six months and thereafter shall return the same to the limited liability partnership, other entity or individual by whom or on whose behalf the books and papers are produced:
Provided that the inspector may call for the books and papers if they are needed again:
Provided further that if certified copies of the books and papers produced under sub-section (2) are furnished to the inspector, he shall return those books and papers to the entity or person concerned.
(4) An inspector may examine on oath
(a) any of the persons referred to in sub-section (1) ; and
(b) with the previous approval of the Central Government, any other person, in relation to the affairs of the LLP, as the case may be ; and may administer an oath accordingly and for that purpose may require any of those persons to appear before him personally.
(5) If any person fails without reasonable cause or refuses
(a) to produce to an inspector or any person authorised by him in this behalf with the previous approval of the Central Government any book or paper which it is his duty under sub-section (1) or sub-section (2) to produce ; or
(b) to furnish any information which it is his duty under sub-section (2) to furnish ; or
(c)to appear before the inspector personally when required to do so under sub-section (4) or to answer any question which is put to him by the inspector in pursuance of that sub-section ; or
(d) to sign the notes of any examination, he shall be punishable under the Act.
(6) Notes of any examination under sub-section (4) shall be taken down in writing and shall be read over to or by, and signed by, the person examined, and may thereafter be used in evidence against him.
43. Seizure of documents by inspector.
(1) Where in the course of investigation, the inspector has reasonable ground to believe that the books and papers of, or relating to, limited liability partnership or other entity or partner or manager of such limited liability partnership may be destroyed, mutilated, altered, falsified or secreted, the inspector may make an application to the Magistrate of First Class or, as the case may be, the Metropolitan Magistrate, having jurisdiction for an order for the seizure of such books and papers. (2) After considering the application and hearing the inspector, if necessary, the Magistrate may by order authorise the inspector
(a) to enter, with such assistance, as may be required, the place or places where such books and papers are kept ;
(b) to search that place or those places in the manner specified in the order ; and (c) to seize books and papers he considers necessary for the purposes of his investigation.
(3) The inspector shall keep in his custody the books and papers seized under this section for such period not later than the conclusion of the investigation as he considers necessary and thereafter shall return the same to the concerned entity or person from whose custody or power they were seized and inform the Magistrate of such return:
Provided that the inspector may, before returning such books and papers as aforesaid, place identification marks on them or any part thereof.
(4) Save as otherwise provided in this section, every search or seizure made under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1898, relating to searches or seizures made under that Code. 44. Inspectors' report.
(1) The inspectors may, and if so directed by the Central Government shall, make interim reports to that Government, and on the conclusion of the investigation, shall make a final report to the Central Government. Any such report shall be written or printed, as the Central Government may direct.
(2) The Central Government
(a) shall forward a copy of any report (other than an interim report) made by the inspectors to the limited liability partnership at its registered office, and also to any other entity or person dealt with or related to the report;
(b) may, if it thinks fit, furnish a copy thereof, on request and on payment of the prescribed fee, to any person or entity related to or affected by the report; (c) may also cause the report to be published.
45. Prosecution.
If, from the report it appears to the Central Government that any person in relation to the limited liability partnership or in relation to any other entity whose affairs have been investigated, been guilty of any offence for which he is liable, the Central Government may, after taking such legal advice as it thinks fit, prosecute such person(s) for the offence; and it shall be the duty of all partners, manager and other employees and agents of the limited liability partnership or other entity, as the case may be, to give the Central Government all assistance in connection with the
prosecution which they are reasonably able to give.
46. Application for winding up of limited liability partnership or other entity. If any such limited liability partnership or other entity is liable to be wound up under this Act or any other legislation for the time being in force, and it appears to the Central Government from any such report as aforesaid that it is expedient to do so by reason of any such circumstances as are referred to in sub-clause (i) or (ii) of clause (d) of sub-section (3) of section 38, the Central Government may, unless the limited liability partnership or entity is already being wound up by the Tribunal cause to be presented to the Tribunal by any person authorised by the Central Government in this behalf, a petition for the winding up of the limited liability partnership or entity on the ground that it is just and equitable that it should be wound up. 47. Proceedings for recovery of damages or property.
(1) If from any such report as aforesaid, it appears to the Central Government that proceedings ought, in the public interest, to be brought by the limited liability
partnership or any entity whose affairs have been investigated,
(a) for the recovery of damages in respect of any fraud, misfeasance or other misconduct in connection with the promotion or formation, or the management of the affairs, of such limited liability partnership or such other entity; or
(b) for the recovery of any property of such limited liability or such other entity, which has been misapplied or wrongfully retained;
the Central Government may itself bring proceedings for that purpose in the name of such limited liability partnership or such other entity.
(2) The Central Government shall indemnify such limited liability partnership or such other entity against any costs or expenses incurred by it in, or in connection with, any proceedings brought by virtue of sub-section (1).
48. Expenses of investigation.
(1) The expenses of and incidental to an investigation by an inspector appointed by the Central Government under this Act shall be defrayed in the first instance by the Central Government; but the following persons shall, to the extent mentioned below, be liable to reimburse the Central Government in respect of such expenses:
(a)any person who is convicted on a prosecution, or who is ordered to pay damages or restore any property in proceedings brought by virtue of section 47, may, in the same proceedings, be ordered to pay the said expenses to such extent as may be specified by the Tribunal convicting such person, or ordering him to pay such damages or restore such property, as the case may be;
(b) any entity in whose name proceedings are brought as aforesaid shall be liable, to the extent of the amount or value of any sums or property recovered by it as a result of the proceedings ; and
(c) unless, as a result of the investigation, a prosecution is instituted in pursuance of section 45,
(i)any entity, a partner or manager or any other person dealt with by the report of the inspector shall be liable to reimburse the Central Government in respect of the whole of the expenses, unless and except in so far as, the Central Government otherwise directs; and
(ii)the applicants for the investigation, where the inspector was appointed in pursuance of the provisions of sub-section (2) of section 38, shall be liable to such extent, if any, as the Central Government may direct.
(2) Any amount for which a limited liability partnership or other entity is liable by virtue of clause (b) of sub-section (1) shall be a first charge on the sums or property mentioned in that clause.
(3) The amount of expenses in respect of which any limited liability partnership, entity, a partner or manager or any other person is liable under sub-clause (i) of clause (c) of sub-section (1) to reimburse the Central Government shall be recoverable as an arrear of land revenue.
(4) For the purposes of this section, any costs or expenses incurred by the Central Government or in connection with proceedings brought by virtue of section 47 (including expenses incurred by virtue of sub-section (2) thereof) shall be treated as expenses of the investigation giving rise to the proceedings.
