Bright Consultants LLP is facing temporary financial difficulties and proposes a compromise with its unsecured creditors for payment of 70% of the…
CA Intermediate · Corporate and Other Laws · RTP · May 2026
Bright Consultants LLP is facing temporary financial difficulties and proposes a compromise with its unsecured creditors for payment of 70% of the outstanding dues in full settlement. An application is made before the Tribunal by one of the partners of the LLP seeking directions to convene a meeting of creditors. The Tribunal orders the meeting to be held. At the meeting, creditors representing 75% in value of the total outstanding debt vote in favour of the proposed compromise. The LLP thereafter approaches the Tribunal for sanction of the scheme. However: 1. The LLP fails to disclose in its application that an investigation proceeding is pending against it under the Limited Liability Partnership Act, 2008. 2. After obtaining the Tribunal's sanction order, the LLP does not file the order with the Registrar within 30 days. A dissenting creditor challenges the validity of the compromise on these grounds. Examine as per the provisions of the Limited Liability Partnership Act, 2008: (a) Whether the compromise can be sanctioned by the Tribunal despite non-disclosure of pending investigation proceedings?
Suggested Answer and Working Notes:
According to section 60 of the Limited Liability Partnership Act, 2008, If a majority representing three-fourths in value of the creditors, or partners, as the case may be, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Tribunal, by order be binding on all the creditors or all the partners, as the case may be, and also on the limited liability partnership, or in the case of a limited liability partnership which is being wound up, on the liquidator and contributories of the limited liability partnership: Provided that no order sanctioning any compromise or arrangement shall be made by the Tribunal unless the Tribunal is satisfied that the limited liability partnership or any other person by whom an application has been made has disclosed to the Tribunal, by affidavit or otherwise, all material facts relating to the limited liability partnership, including the latest financial position of the limited liability partnership and the pendency of any investigation proceedings in relation to the limited liability partnership. An order made by the Tribunal shall be filed by the limited liability partnership with the Registrar within thirty days after making such an order and shall have effect only after it is so filed. In the present case, Bright Consultants LLP failed to disclose the pendency of investigation proceedings. Such disclosure is mandatory. Therefore, the Tribunal cannot validly sanction the compromise unless full and true disclosure of material facts is made.
Topics: The Limited Liability Partnership Act, 2008
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