No Provision To Waive Eligibility Requirements Under Section 43(3) Of the LLP Act For Investigation: NCLT New Delhi

Section 43(3) outlines the conditions under which the Central Government may appoint inspectors to investigate the affairs of an LLP. This subsection mandates that a minimum of one-fifth of the total number of partners must file a petition for such an investigation.

Brief Facts:

Mr. Anirudh Kumar, the Applicant, 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 in the NCLT. The Applicant sought a waiver of the requirement stipulated in Section 43(3) of the LLP Act, 2008, which mandates that a minimum of 1/5th of the total number of partners must file a petition under Section 43 of the LLP Act.

The application sought exemption from this condition as the Applicant a minority shareholder with 11.33% shares in the Respondent LLP didn't meet the 1/5th requirement.

The Applicant claimed that the designated partners have caused significant financial losses to both himself and the Respondent LLP through various financial irregularities. He argued that an investigation by the tribunal is necessary to uncover the fraud committed by the designated partners.

The Applicant contended that he has no other effective or equitable remedy available and that substantial justice requires the tribunal to waive the technical requirement of Section 43(3).

Observations by the NCLT:

The NCLT noted that Section 43 of the LLP Act, 2008 outlines the conditions under which the Central Government can appoint inspectors to investigate the affairs of an LLP. This can be done if the Tribunal, either on its own motion or upon receiving an application from not less than one-fifth of the total number of partners of the LLP, orders such an investigation. Alternatively, any court can also declare that the affairs of an LLP ought to be investigated which would lead to appointment of inspectors by the Central Government.

The NCLT noted that the Supplementary LLP Agreement indicated that the Respondent LLP has seven partners. The petition was filed by only one of these seven partners. The NCLT held that there is no specific provision for such a waiver in the LLP Act itself.

It noted that in the absence of any explicit provision for a waiver within the LLP Act, it is not legally permissible to rely on the Companies Act to seek such a waiver. It held that importing provisions from another statute to deal with a petition under the LLP Act would essentially amount to rewriting the statute, which is beyond the scope of the Tribunal's authority. The NCLT referred to the decision of the Supreme Court in Union of India & Anr. v. Deoki Nandan Aggarwal where it was held that courts do not have the power to legislate or to enlarge the scope of legislation.

Further, the bench held that the inherent powers vested in a court or tribunal should be exercised sparingly and cannot be used to infer substantive powers where the statute does not prescribe them. While Section 67 of the LLP Act allows the Central Government to direct that any provision of the Companies Act shall apply to LLPs, the bench noted that no notification has been issued to extend the applicability of the proviso to Sections 241 and 244 of the Companies Act to LLPs or to proceedings under Section 43 of the LLP Act.

Therefore, it held that the absence of any specific provision empowering the Tribunal to relax or waive the eligibility requirements under Section 43 of the LLP Act indicates a clear legislative intent to strictly adhere to the provisions of this section.

Therefore, it dismissed the application.

Case Title: Mr. Anirudh Kumar vs M/s. Hydraulics and Pneumatics India LLP & ORS

Case Number: CA-133(ND)/2022 And Company Petition No. 53/45QA/ND/2022

For Applicant: Mr. Abhinav Bajaj, Mr. Saksham Jha, Ms. Geetanshi Chandna, Advs.

For Respondent: Mr. Krishnendu Datta, Senior Advocate Mr. Kunal Vajani, Mr. Kunal Mimani, Mr. Shubhang Tandon, Mr. Aman Barar, Ms. Shraddha, Advs.

Date of Judgment: 26.07.2024

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