LIMITED LIABILITY PARTNERSHIP PART- XXXX - (Filing, Offences and Penalties)

[Dr. Sanjiv Agarwal]

Chapter 14 of the LLP Act, 2008  covers Section 66 to Section 81. Section 66 provides that a partner may lend money and transact business with LLP like any other person. Section 67 provides that the Central Government may make any provision of the Companies Act, 1956, applicable to LLPs by way of notification. Section 68 provides that any document to be filed with the Registrar can be filed electronically and that an extract of any document signed digitally would be admissible as evidence. Section 69 provides that any documents not filed with the Registrar within the prescribed time can be filed later with the additional fee. Section 70 provides that an LLP or its partner or designated partner may be subjected to twice the prescribed fine in case of second offence or subsequent offence. Section 71 provides that the provisions of LLP Act are in addition to the provisions of other applicable Acts to an LLP. Section 72 provides that an appeal for the Tribunal's decisions shall lie with the Appellate Tribunal and 73 provides that non compliance of an order passed by Tribunal shall be a punishable offence and entail a penalty also. Section 74 prescribes general penalty for offences under the Act. Section 75 provides power to the Registrar to strike off the name of the defunct LLPs from the Register. Section 76 provides that in case of an offence committed by connivance of partners or designated partners of LLP, such partners as well as LLP shall be proceeded against and punished accordingly. Section 77 provides that the Judicial Magistrate of the First Class shall have power to try offence under this Act. Section 78 grants power to the Central Government to alter schedules to the Act and Section 79 grants power to make rules for carrying out provisions of this Act by way of notification. Section 80 empowers the Central Government to issue an order to remove difficulties under the LLP Act with 2 years of its enactment. Section 81 contains some transitional provisions whereby reference to Tribunal may be construed as reference to the Company Law Board or High Court as specified and also reference to the Appellate Tribunal may be construed as reference to High Court.

Business Transactions of Partner with Limited liability Partnership (Section 66)     

According to section 66, a partner may lend money to and transact other business with the limited liability    partnership and has the same rights and obligations with respect to the loan or other  transactions as a person who is not a partner.

This section seeks to provide that a partner may lend money to and transact other business with the LLP and that he shall have the same rights and obligations with respect to the loan or other transactions as a person who is not a partner.

Transactions of Partners and LLP

The partner of a LLP stands at the same footing as a non-partner in respect of his transactions with LLP. Between partners and LLP, the partners-

(a)                can lend money to LLP

(b)                can do business and transact with LLP.

(c)                Shall have same rights and obligations with respect to (a) and (b) above (loans or other transactions) as that of a person who is not a partner of LLP.

Under section 66, a partner of a LLP is entitled to make a valid contract with a LLP of which he  is a partner on the same lines as in a company. LLP is considered as a body corporate having distinct legal entity from those of its partners. In case of a partnership firm, a partner is considered as an agent of the firm and such relationship is not allowed.

However, section 23(3) of the LLP Act, defines the relationship of partners. Sub section (3) provides that an agreement in writing made before the incorporation between the persons who subscribed their names to the incorporation document may impose obligations on the LLP. These obligations are enforceable if the agreement is ratified by all the partners after the incorporation of LLP.

Attention of readers of this article is also drawn to First Schedule of the Act which contains provisions relating to mutual rights and duties of partners and LLP and its partners in absence of any agreement.

Application of the Provisions of the Companies Act(Section 67)

Section 67 of the LLP Act, provides that Central Government can issues notifications for application of the provisions of the Companies Act, 1956 to the LLPs . Accordingly,

 (1)      The Central Government may, by notification in the Official Gazette, direct   Application that any of the provisions of the Companies Act, 1956 specified in the notification-

(a)        shall apply to any limited liability partnership; or

(b)        shall apply to any limited liability partnership with such exception modification and adaptation, as may be specified, in the notification.

(2)       A copy of every notification proposed to be issued under sub-section (1) shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of the notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by both the Houses.

Section 67   seeks to empower the Central Government, to direct, by notification in the Official Gazette, that any of the provisions of the Companies Act, 1956 shall apply to any LLP or shall apply to any LLP with such exception, modification and adaptation as may be specified in the notification. The clause further seeks to provide that such notification shall be laid in draft before each House of Parliament for a total period of thirty days and shall be subject to such modification as may be approved by both the Houses.

Section 67 confer on the Central Government the power to apply the provisions of the Companies Act, 1956 as appropriate, by notification with such changes or modifications as deemed necessary. However, such notifications shall be laid in draft before each House of Parliament for a total period of 30 days and shall be subject to any modification as may be approved by both Houses.

According to Memorandum regarding Delegated Legislation, section 67 of the Act confers power upon the Central Government to give directions, by notification in the Official Gazette, that any of the provisions of the Companies Act, 1956 shall apply to any LLP or shall apply to any LLP with such exception,, modification and adaptation as may be specified in the notification.

Issue of Notifications [Sub-section (1)]

The Central Government may be notification, direct that any provision of the Companies Act, 1956 shall apply to LLP or shall apply with such exception, modification and adaptation as the Central Government may specify in the notification.

Thus, Central Government shall decide and notify the provisions of the Companies Act, 1956 which shall directly apply to LLPs  or shall apply with specified exception, modification or adaptation. This shall be done by way of a notification in the Official Gazette. The issuance of notification under sub-section (1) shall be subject to conditions stipulated in sub-section (2) and thereafter, it shall be final.

Notification to be laid in Parliament [Sub-section (2)]

Sub-section (2) requires that issuance of notification proposed under sub-section(1) shall be laid before both the houses of the Parliament for a total period of thirty days spread in one or more successive sessions. If both the houses agree in disapproving the notification, such notification shall not be issued. If both the houses agree to approve the notification with modifications, then the notification shall be issued in the modified form after the modifications agreed upon by both the houses of the Parliament have been carried out.

The important condition is that both the houses must agree to the notification or its changes or modifications. What is to be laid before the houses is the draft of the proposed  notification. If there is no modification suggested by both the houses of the Parliament, the approval of both houses can be presumed by the Central Government.

 

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