LIMITED LIABILITY PARTNERSHIP PART- XXXVI (Compromise, Arrangement or Reconstruction of LLP)

[Dr. Sanjiv Agarwal]

Power of Tribunal to enforce compromise or arrangement (Section 61)

Section 61 of the LLP Act, 2008 provides as follows - 

(1) Where the Tribunal makes an order under section 60 sanctioning a compromise or an arrangement in respect of a limited liability partnership, it

(a)         shall have power to supervise the carrying out of the compromise or an arrangement; and

(b)         may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement. 

(2) If the Tribunal aforesaid is satisfied that a compromise or an arrangement sanctioned under section 60 cannot be worked satisfactorily with or without modifications, it may, either on its own motion or on the application of any person interested in the affairs of the limited liability partnership, make an order for winding up the limited liability partnership, and such an order shall be deemed to be an order made under section 64 of this Act.

This section seeks to provide that where the Tribunal makes an order sanctioning a compromise or an arrangement in respect of a LLP, it

(a)        shall have power to supervise the carrying out of the compromise or an arrangement; and

may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement, as it may consider necessary, for the proper working of the compromise or arrangement. 

Section 61 further seeks to provide that if the Tribunal is satisfied that a compromise or an arrangement sanctioned cannot be worked satisfactorily, it may make an order for winding up of the LLP.

Section 61 contains provisions for compromise, arrangement or reconstruction of LLPs. It provides for the following-

The Tribunal shall have the power to supervise and to give direction in regard to any matter or make such modification for the proper working of compromise or arrangement and also if the Tribunal is satisfied that compromise or arrangement cannot be carried out satisfactorily with or without modification it, may order  for the winding up of LLP. [section 61(1)]

Tribunal can suo moto, or on the application of any person interested in affairs of LLP, if satisfied that a sanctioned compromise or arrangement sanctioned under section 60 can not be worked out satisfactorily, order for winding of LLP and such order shall be deemed to be an order under 64 of the LLP Act [(section 61(2)].

Additional Powers to the Tribunal [Sub-section (1)]

Sub-section (1) provides additional powers to the Tribunal in relation to order issued by it under section 60. Accordingly, after the order sanctioning a compromise or arrangement is made by the Tribunal, it shall have power to supervise the operational part of the scheme, i.e., to supervise the carrying out of the compromise or arrangement and also to alter or modify the scheme or to give directions as may be considered necessary for the proper working of the compromise or arrangement.

Thus, the Tribunal can exercise the following powers under this sub-section to supervise carrying out of compromise or arrangement to give directions on any matter as may be necessary for proper working of the compromise or arrangement to make modification in the scheme as may be necessary for proper working of the compromise arrangement.

The powers under (b) and (c) may be exercised at the time of making the order or at any time thereafter.

Power of Tribunal for Winding up [Sub-section (2)]

Sub-section (2) further empowers the Tribunal to even order for winding up of the LLP if it feels that the compromise or arrangement as sanctioned under section 60 can not be worked out satisfactorily, despite the powers under sub-section (1) of section 61.

There must exist the compelling reasons to satisfy the Tribunal that the sanctioned scheme can not be worked out, with or without modifications. Sub-section (2) also signifies the importance of sub-section (1) and sub-section (2) would ordinarily be invoked when efforts under sub-section (1) fail to give the desired results.

The order under sub-section (2) can be made in the following situations -

(a)        satisfaction of Tribunal that the compromise or arrangement can not be worked satisfactorily.

(b)        application by any person interested in affairs of LLP.

(c)        action by Tribunal, suo moto, on existence of reasons as per (a) above.

The Tribunal order for winding up under sub-section (2) shall be akin to the winding up order under section 64 of the Act. This deeming provision shall thus have effect as if winding up order has been made under section 64(f) which provides that a LLP may be wound up by the Tribunal if the Tribunal is of the opinion that it is just and equitable that the LLP be wound up.

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