NCLT New Delhi Bench Rules No Provision For Waiving LLP Act Eligibility Requirements

NCLT New Delhi Bench Rules No Provision For Waiving LLP Act Eligibility Requirements

The National Company Law Tribunal (NCLT) New Delhi Bench, comprising Dr. Sanjeev Ranjan (Technical Member) and Manni Sankariah Shanmuga Sundaram (Judicial Member), has ruled that it lacks the authority to relax or waive the eligibility requirements specified under Section 43(3) of the Limited Liability Partnership (LLP) Act.

Mr. Anirudh Kumar filed an application against M/s. Hydraulics and Pneumatics India LLP under Rule 11 of the NCLT Rules, 2011, read with the proviso to Section 241 of the Companies Act, 2013. He sought a waiver from the requirement in Section 43(3) of the LLP Act, 2008, which mandates that a minimum of one-fifth of the total number of partners must file a petition for an investigation into the affairs of an LLP.

Mr. Kumar, a minority shareholder with 11.33% of shares in the Respondent LLP, did not meet the one-fifth partner threshold required for initiating an investigation. He claimed that significant financial losses were incurred due to various financial irregularities by the designated partners and argued that an investigation by the tribunal was necessary to uncover the alleged fraud.

The applicant contended that no other effective or equitable remedy was available and asserted that substantial justice required the tribunal to waive the technical requirement of Section 43(3).

The NCLT noted that Section 43 of the LLP Act outlines the conditions under which the Central Government may appoint inspectors to investigate an LLP's affairs. This provision requires either a tribunal order or a court declaration based on a petition filed by at least one-fifth of the total number of partners. The Supplementary LLP Agreement indicated that the Respondent LLP had seven partners, with the petition being filed by only one partner.

The Tribunal highlighted the absence of a specific waiver provision in the LLP Act itself. It emphasised that, in the absence of explicit statutory provisions for a waiver, it is not legally permissible to rely on the Companies Act for such a waiver. The NCLT cited the Supreme Court's ruling in Union of India & Anr. v. Deoki Nandan Aggarwal, which established that courts cannot legislate or expand the scope of existing legislation.

The bench further noted that while Section 67 of the LLP Act allows the Central Government to direct the applicability of certain Companies Act provisions to LLPs, no such notification had been issued to apply provisions from Sections 241 and 244 of the Companies Act to LLPs or proceedings under Section 43 of the LLP Act.

In conclusion, the NCLT determined that the clear legislative intent was to adhere strictly to the provisions of Section 43(3), dismissing the application on these grounds.