Chapter 12: The Limited Liability Partnership Act, 2008 - Test 2: answer key

Question 1 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. Meridian Precision LLP was incorporated on 4 May 2026 to manufacture precision components for electric-vehicle suppliers. Its incorporation document was subscribed by Kunal Rao, Meher Shah and Veda Robotics Private Limited. The LLP Agreement, executed after incorporation, allocated profits in the ratio 45:35:20, assigned procurement authority to Kunal and required unanimous consent for admission of a new partner. In June, an investor, Isha Menon, signed a letter expressing an intention to invest ₹25 lakh and was introduced to customers as a proposed partner. However, no admission was completed under the LLP Agreement. The partners also discovered that their agreement was silent on the procedure for handling a particular internal management matter. Meher claimed that the First Schedule could never apply once an LLP had executed any written agreement. Before incorporation, all three subscribers had signed a logistics contract in the proposed LLP's name. After incorporation, Kunal and Meher approved and ratified that contract, but Veda Robotics Private Limited expressly declined to ratify it. The supplier nevertheless demanded payment from the LLP. The compliance team filed the initial LLP Agreement in Form 3 on 8 June 2026. On 12 July 2026, the partners amended the contribution and profit-sharing clauses, but the amended agreement was filed in Form 3 only on 5 August 2026. The finance manager contended that only the original agreement needed to be filed and that amendments could be retained internally. The partners have sought advice on admission, contractual governance, pre-incorporation commitments and the filing deadlines.

Isha signed only a letter expressing her intention to invest and was introduced to customers as a proposed partner. She was not formally admitted under the LLP Agreement. Which statement correctly determines the status of the persons associated with Meridian Precision LLP?

1. All four persons became partners because an investment commitment and commercial representation are sufficient for admission.
2. The three subscribers became partners on incorporation, while Isha may become a partner only in accordance with the LLP Agreement. (correct answer)
3. Isha automatically became a partner when she expressed her intention to invest ₹25 lakh in the LLP.
4. Isha became a partner because every person introduced to customers as a proposed partner acquires statutory partnership rights.

Answer: B — The three subscribers became partners on incorporation, while Isha may become a partner only in accordance with the LLP Agreement.

Explanation. Under Section 22, the persons who subscribed their names to the incorporation document become partners of the LLP upon incorporation. Any other person may become a partner only by and in accordance with the LLP Agreement. Isha's investment intention and introduction to customers do not independently satisfy this statutory requirement. The primary distractor confuses a commercial representation or proposed investment with formal admission as a partner under the LLP Agreement.

Where it goes wrong. Confusing an intention to invest or a commercial introduction with statutory admission as a partner.

Authority. Section 22 of the Limited Liability Partnership Act, 2008

Question 2 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

The LLP Agreement specifies profit-sharing ratios and procurement authority but does not prescribe a procedure for a particular internal management matter. Meher argues that executing an LLP Agreement completely excludes the application of the First Schedule. Which statement correctly reflects the statutory position?

1. The First Schedule applies to every matter, even where the LLP Agreement contains an express provision.
2. The First Schedule becomes applicable only when every partner has expressly agreed to adopt it.
3. The LLP Agreement ceases to govern the partners whenever any matter is left unspecified.
4. The First Schedule determines mutual rights and duties concerning matters not covered by the LLP Agreement. (correct answer)

Answer: D — The First Schedule determines mutual rights and duties concerning matters not covered by the LLP Agreement.

Explanation. Section 23(1) provides that mutual rights and duties are governed by the LLP Agreement. However, Section 23(4) specifically provides that in the absence of agreement concerning a particular matter, the corresponding provisions of the First Schedule apply. Therefore, the Schedule supplements the Agreement to the extent of matters left uncovered. The primary distractor incorrectly assumes that executing an agreement excludes the First Schedule even where the agreement is silent.

Where it goes wrong. Assuming that the First Schedule applies only when the LLP has no written agreement whatsoever.

Authority. Section 23(1) of the Limited Liability Partnership Act, 2008; Section 23(4) of the Limited Liability Partnership Act, 2008; First Schedule to the Limited Liability Partnership Act, 2008

Question 3 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Before incorporation, all three subscribers entered into a written logistics contract intended to impose obligations on Meridian Precision LLP. After incorporation, only Kunal and Meher ratified the contract, while Veda Robotics Private Limited expressly refused to do so. Which conclusion follows under Section 23?

1. The pre-incorporation agreement cannot impose obligations on the LLP because it was not ratified by all partners after incorporation. (correct answer)
2. The pre-incorporation agreement binds the LLP because ratification by a majority of the subscribers is sufficient.
3. The pre-incorporation agreement automatically binds the LLP because all subscribers executed it before incorporation.
4. The pre-incorporation agreement binds the LLP if any one designated partner confirms it after incorporation.

Answer: A — The pre-incorporation agreement cannot impose obligations on the LLP because it was not ratified by all partners after incorporation.

Explanation. Section 23(3) permits a written agreement made before incorporation between persons subscribing their names to the incorporation document to impose obligations on the LLP, provided that it is ratified by all the partners after incorporation. Here, Veda Robotics Private Limited has expressly refused to ratify the agreement. Consequently, the statutory condition is not fulfilled. The primary distractor incorrectly treats majority ratification as sufficient when the provision specifically requires ratification by all partners.

Where it goes wrong. Replacing the statutory requirement of unanimous ratification with majority approval.

Authority. Section 23(3) of the Limited Liability Partnership Act, 2008

Question 4 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Meridian Precision LLP was incorporated on 4 May 2026. Its initial LLP Agreement was filed in Form 3 on 8 June 2026. The partners subsequently amended the Agreement on 12 July 2026, and the amended information was filed on 5 August 2026. Considering Rule 21 of the LLP Rules, 2009, which statement correctly identifies the filing position?

1. Both filings are timely because the 30-day period applies only to the initial agreement and not to subsequent amendments.
2. The initial filing is timely, but the amendment filing is delayed because amendments require filing within 15 days.
3. The initial filing is delayed, but the amendment filing is within the prescribed 30-day period. (correct answer)
4. Both filings are delayed because the Agreement and every amendment must be filed within 15 days.

Answer: C — The initial filing is delayed, but the amendment filing is within the prescribed 30-day period.

Explanation. Rule 21(1) requires filing information concerning the initial LLP Agreement in Form 3 within 30 days of incorporation. Any amendment must also be filed in Form 3 within 30 days of the change. The initial filing on 8 June is beyond 30 days from 4 May, whereas the amendment filing on 5 August is within 30 days from 12 July. The primary distractor wrongly assumes that subsequent amendments need not be filed.

Where it goes wrong. Applying the 30-day filing requirement only to the original agreement and ignoring subsequent amendments.

Authority. Section 23(2) of the Limited Liability Partnership Act, 2008; Rule 21(1) of the Limited Liability Partnership Rules, 2009

Question 5 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. Aarohan Data Systems LLP provides software implementation services to banks. Its partners are Kavya, Raghav and Nilesh. The LLP Agreement expressly permits a partner to resign by giving 15 days' written notice to the other partners and provides a formula for settling the outgoing partner's capital and profit entitlement. Kavya delivered written notice on 1 September 2026 and stated that she would cease to be a partner on 16 September 2026. The other partners accepted the notice in accordance with the Agreement. Before her exit, Kavya had separately undertaken an obligation to reimburse the LLP for a specified client-implementation expense, which remained unpaid on 16 September. The LLP's accounts on the date of cessation showed Kavya's actual capital contribution as ₹12 lakh, accumulated profits of ₹9 lakh and accumulated losses of ₹3 lakh. The Agreement did not exclude her entitlement to her share of the net accumulated profits. Kavya also demanded access to management meetings after cessation, arguing that she remained entitled to receive money from the LLP. The LLP did not notify the Registrar of her cessation within 30 days. On 25 October, a new lender negotiated with Aarohan, knew Kavya had left, and had received a copy of the partners' written confirmation of her exit. Another supplier, however, dealt with the LLP without receiving any notice of her departure and without checking the Registrar's records. The partners are divided on whether Kavya's exit immediately removes every possible consequence of her former status, whether her unpaid pre-exit obligation survives, and whether she may participate in management or claim the same rights as a continuing partner.

The LLP Agreement of Aarohan Data Systems LLP expressly permits resignation by giving 15 days' written notice. Kavya delivered notice on 1 September 2026 and sought cessation on 16 September 2026. Which conclusion correctly applies Section 24(1) to her resignation?

1. Kavya may cease on 16 September because the agreed resignation procedure governs, and the 30-day default applies in the absence of an agreement. (correct answer)
2. Kavya cannot cease on 16 September because Section 24 invariably requires at least 30 days' written notice.
3. Kavya may cease immediately because the other partners accepted her resignation without requiring any notice period.
4. Kavya cannot cease until the Registrar approves the resignation, even though the LLP Agreement prescribes an exit procedure.

Answer: A — Kavya may cease on 16 September because the agreed resignation procedure governs, and the 30-day default applies in the absence of an agreement.

Explanation. Section 24(1) permits cessation in accordance with an agreement with the other partners. The requirement of written notice of not less than 30 days applies where there is no agreement with the other partners concerning cessation. Since Aarohan's LLP Agreement expressly permits resignation on 15 days' written notice and the partners accepted the notice, Kavya may cease on the agreed date. The primary distractor incorrectly treats the 30-day period as mandatory in every situation.

Where it goes wrong. Treating the 30-day resignation notice as an absolute statutory minimum even when the partners have agreed otherwise.

Authority. Section 24(1) of the Limited Liability Partnership Act, 2008

Question 6 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Before ceasing to be a partner on 16 September 2026, Kavya had undertaken an obligation to reimburse Aarohan Data Systems LLP for a specified client-implementation expense. The reimbursement remained unpaid on her exit date. Kavya argues that cessation automatically releases her from every obligation connected with the LLP. Which statement is correct?

1. Kavya is discharged because all obligations of a partner automatically terminate upon resignation.
2. Kavya remains liable only if the LLP obtains fresh approval from the Registrar after her resignation.
3. Cessation does not by itself discharge Kavya from obligations incurred while she was a partner. (correct answer)
4. Kavya remains liable only for obligations incurred during the first 30 days after her resignation.

Answer: C — Cessation does not by itself discharge Kavya from obligations incurred while she was a partner.

Explanation. Section 24(4) specifically provides that cessation of a partner does not by itself discharge that partner from an obligation incurred while being a partner, whether the obligation is owed to the LLP, the other partners or another person. Kavya therefore remains responsible for her pre-cessation reimbursement obligation. The primary distractor incorrectly assumes that resignation extinguishes liabilities already incurred during the partner's membership.

Where it goes wrong. Assuming that resignation retrospectively cancels obligations incurred while the person was a partner.

Authority. Section 24(4) of the Limited Liability Partnership Act, 2008

Question 7 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Kavya ceased to be a partner on 16 September 2026, but Aarohan failed to notify the Registrar within 30 days. A lender negotiated with the LLP on 25 October, knowing Kavya had ceased to be a partner. Another supplier dealt with the LLP without receiving any notice of her departure. Which statement correctly applies Section 24(3)?

1. Kavya must be regarded as a continuing partner for both transactions because the Registrar was not notified.
2. Kavya must be regarded as a former partner for both transactions because her resignation was accepted internally.
3. Kavya must be regarded as a continuing partner for the lender but not for the supplier because the lender received written documents.
4. Kavya is not regarded as a partner for the lender, but may still be regarded as a partner for the supplier. (correct answer)

Answer: D — Kavya is not regarded as a partner for the lender, but may still be regarded as a partner for the supplier.

Explanation. Under Section 24(3), a former partner is regarded as still being a partner in relation to persons dealing with the LLP unless the person has notice of cessation or notice of cessation has been delivered to the Registrar. The lender had actual notice and therefore falls within the exception. The supplier had no notice, and no notice was delivered to the Registrar. Consequently, Kavya may still be regarded as a partner in relation to that supplier. The primary distractor overlooks the independent nature of the two statutory exceptions.

Where it goes wrong. Assuming that failure to notify the Registrar affects every third party identically, even where a particular person has actual notice.

Authority. Section 24(3) of the Limited Liability Partnership Act, 2008

Question 8 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

After cessation, Kavya claims her actual capital contribution and share of accumulated profits after deduction of accumulated losses. She also demands attendance and voting rights in Aarohan's management meetings because her financial entitlement has not yet been settled. The LLP Agreement does not provide otherwise. Which statement correctly determines her rights?

1. Kavya retains all management rights until the LLP pays every amount payable to her.
2. Kavya is entitled to the statutory financial settlement but has no right to interfere in the LLP's management. (correct answer)
3. Kavya loses her capital contribution and accumulated profit entitlement immediately upon cessation.
4. Kavya can participate in management meetings but cannot claim accumulated profits after cessation.

Answer: B — Kavya is entitled to the statutory financial settlement but has no right to interfere in the LLP's management.

Explanation. Section 24(5) provides that, unless otherwise provided in the LLP Agreement, a former partner is entitled to receive the capital contribution actually made and the right to share in accumulated profits after deduction of accumulated losses, determined at the cessation date. However, Section 24(6) expressly denies the former partner any right to interfere in management. The primary distractor incorrectly links an outstanding financial settlement with continuing management rights.

Where it goes wrong. Confusing an outgoing partner's economic entitlement with continuing rights to participate in management.

Authority. Section 24(5) of the Limited Liability Partnership Act, 2008; Section 24(6) of the Limited Liability Partnership Act, 2008

Question 9 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. Suryanet Engineering LLP undertakes installation and maintenance contracts for solar power projects. Its LLP Agreement authorises Devika to procure materials up to ₹8 lakh, while any purchase above that amount requires prior written approval of the other partners. The LLP informed its regular supplier, Bright Metals, of this restriction and expressly stated that Devika could not place larger orders without written approval. Despite this, Devika placed an order for ₹18 lakh. Bright Metals accepted the order knowing that the required approval had not been obtained. The LLP refused to honour the order and argued that Devika had acted beyond her authority in circumstances where the supplier knew the limitation. In a separate project, partner Salim negligently certified an unsafe installation while performing work in the ordinary course of the LLP's engineering business. A customer suffered property damage and sought compensation from both the LLP and all three partners. The LLP accepted that Salim's certification occurred during the project but argued that only Salim should bear responsibility because the conduct was his own. Devika and Rohan, the third partner, denied personal liability for Salim's negligence, pointing to the separate legal identity of the LLP. The customer argued that every partner is an agent of every other partner and that each partner must answer personally for the acts of the others. The LLP's legal adviser must distinguish an LLP's responsibility for a partner's wrongful act in the course of business, the partner's individual liability for their own wrongful conduct, and the protection available to partners who did not commit the wrongful act.

Bright Metals argues that Devika, being a partner of Suryanet Engineering LLP, acts as an agent of every other partner and can therefore create personal contractual obligations for Rohan and Salim. Which statement correctly applies the statutory principle governing the agency relationship of partners?

1. Every partner is an agent of the other partners and can bind their personal assets through authorised business transactions.
2. A partner acts as an agent of the LLP and of the other partners whenever the transaction is connected with business.
3. Every partner is an agent of the LLP for its business, but is not an agent of the other partners. (correct answer)
4. Only designated partners are agents of the LLP, while ordinary partners have no agency relationship.

Answer: C — Every partner is an agent of the LLP for its business, but is not an agent of the other partners.

Explanation. Section 26 provides that every partner of an LLP is, for the purpose of the business of the LLP, its agent but not the agent of the other partners. Therefore, Devika's status as a partner does not automatically make her an agent of Rohan or Salim. The LLP must be distinguished from its individual partners. The primary distractor incorrectly applies the mutual agency principle of an ordinary partnership to an LLP.

Where it goes wrong. Applying the mutual agency principle of the Indian Partnership Act, 1932, to an LLP.

Authority. Section 26 of the Limited Liability Partnership Act, 2008

Question 10 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Devika's purchasing authority was restricted to ₹8 lakh. Bright Metals had received written communication of this restriction and knew that the ₹18 lakh order had not received the required approval. Which conclusion is most appropriate under Section 27(1) regarding the LLP's obligation under the purchase order?

1. The LLP is not bound because Devika lacked actual authority and Bright Metals knew that she lacked such authority. (correct answer)
2. The LLP is bound because every transaction entered into by a partner automatically binds the LLP regardless of knowledge.
3. The LLP is bound because internal authority restrictions cannot be communicated to third parties under the LLP Act.
4. The LLP is not bound merely because the order exceeds ₹8 lakh, regardless of the supplier's knowledge.

Answer: A — The LLP is not bound because Devika lacked actual authority and Bright Metals knew that she lacked such authority.

Explanation. Section 27(1) provides that an LLP is not bound by an act of a partner where the partner has no actual authority and the person dealing with the partner knows that the partner has no authority or does not know or believe that the person is a partner. Both relevant conditions are satisfied here: Devika lacked authority and Bright Metals knew of that restriction. The primary distractor incorrectly assumes that partner status makes every unauthorised transaction binding on the LLP.

Where it goes wrong. Ignoring the third party's knowledge of the partner's lack of authority.

Authority. Section 27(1) of the Limited Liability Partnership Act, 2008

Question 11 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Salim negligently certified an unsafe installation while performing engineering work in the ordinary course of Suryanet Engineering LLP's business. The customer suffered property damage. The LLP argues that it cannot be liable because the negligence was committed personally by Salim. Which statement correctly determines the LLP's liability?

1. Only Salim is liable because an LLP cannot be responsible for the wrongful act of an individual partner.
2. Only the other partners are liable because Salim acted while performing his professional duties.
3. The LLP is liable only if the customer proves that all partners unanimously approved the negligent certification.
4. The LLP is liable because the wrongful act occurred in the course of its business. (correct answer)

Answer: D — The LLP is liable because the wrongful act occurred in the course of its business.

Explanation. Section 27(2) provides that an LLP is liable where a partner is liable to a person as a result of a wrongful act or omission committed in the course of the LLP's business or with its authority. Salim's negligent certification occurred while carrying out the LLP's engineering work. Therefore, the LLP is liable under this provision. The primary distractor incorrectly assumes that an LLP can never be responsible for a partner's individual wrongful conduct.

Where it goes wrong. Assuming that the personal involvement of a partner automatically excludes liability of the LLP.

Authority. Section 27(2) of the Limited Liability Partnership Act, 2008

Question 12 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

The customer seeks personal compensation from Salim, Devika and Rohan for the negligent certification. The LLP's liability under Section 27(2) is established because the act occurred during its business. Which statement correctly determines the personal liability of the individual partners under Section 28?

1. All partners are personally liable because every partner is an agent of every other partner.
2. Salim remains personally liable for his own wrongful act, but Devika and Rohan are not personally liable merely because of his conduct. (correct answer)
3. No partner can be personally liable once the LLP itself becomes liable for the wrongful act.
4. Devika and Rohan become personally liable because Salim committed the wrongful act while conducting LLP business.

Answer: B — Salim remains personally liable for his own wrongful act, but Devika and Rohan are not personally liable merely because of his conduct.

Explanation. Section 28(1) protects a partner from personal liability for an LLP obligation merely by reason of being a partner. However, Section 28(2) preserves personal liability for the partner's own wrongful act or omission and specifically excludes personal liability for another partner's wrongful act or omission. Accordingly, Salim remains personally liable for his negligence, whereas Devika and Rohan do not become personally liable merely because of their association with him. The primary distractor incorrectly applies collective personal liability.

Where it goes wrong. Confusing the LLP's liability for business-related wrongful acts with the personal liability of every partner.

Authority. Section 28(1) of the Limited Liability Partnership Act, 2008; Section 28(2) of the Limited Liability Partnership Act, 2008; Section 27(2) of the Limited Liability Partnership Act, 2008

Question 13 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Scenario. Nivara Textiles LLP operates three processing units and employs 140 workers. During an internal review, its employee, Asha, discovered that production records were being altered to conceal unsafe disposal of chemical waste. She supplied original records and e-mail correspondence to the authority investigating the LLP. The investigating officer confirmed that Asha's information was useful and materially assisted the investigation. Separately, partner Harish supplied information outside the formal investigation; the information later led to the conviction of the LLP's operations head under an applicable law. After these disclosures, Nivara's managing partner proposed to demote Asha, remove her from the compliance team and reduce her employment benefits, stating that the disclosures had embarrassed management. Harish was also threatened with suspension from LLP duties unless he withdrew his cooperation. The LLP's general counsel explained that the statutory whistle-blowing provision is not an unconditional immunity from every legal consequence and that the Court or Tribunal has a specific discretionary power concerning penalties. The managing partner nevertheless argued that only employees, and not partners, can receive protection. Another partner suggested that the Court must automatically waive every penalty whenever any information is provided, regardless of its usefulness or consequences. The LLP's governing committee requested a reasoned opinion on the persons protected, the type of information that can qualify, the authority empowered to grant relief, the discretionary nature of relief, and the prohibited forms of retaliation.

Asha supplied useful information during the investigation of Nivara Textiles LLP. The investigating officer confirmed that the information materially assisted the investigation, although the proceedings have not yet resulted in a conviction. Which statement correctly describes the relief available under Section 31(1)?

1. The LLP must automatically waive every penalty imposed on Asha immediately after receiving her information.
2. The Registrar must permanently exempt Asha from all civil and criminal proceedings connected with the LLP.
3. The Court or Tribunal may reduce the LLP's penalties but cannot grant relief concerning a partner or employee.
4. The Court or Tribunal may reduce or waive a penalty leviable against Asha because she provided useful information during the investigation. (correct answer)

Answer: D — The Court or Tribunal may reduce or waive a penalty leviable against Asha because she provided useful information during the investigation.

Explanation. Section 31(1) empowers the Court or Tribunal to reduce or waive a penalty leviable against a partner or employee where that person has provided useful information during an investigation of the LLP. A conviction is not required for this first statutory ground. However, the provision uses the word 'may', making relief discretionary rather than automatic. The primary distractor wrongly treats the provision as mandatory immunity from all legal consequences.

Where it goes wrong. Treating the discretionary power to reduce or waive a penalty as automatic immunity.

Authority. Section 31(1) of the Limited Liability Partnership Act, 2008

Question 14 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Harish, a partner of Nivara Textiles LLP, supplied information that was not given during the formal investigation. Subsequently, his information led to the conviction of the LLP's operations head under an applicable law. Which conclusion correctly applies the alternative ground specified in Section 31(1)?

1. The Court or Tribunal may reduce or waive a penalty leviable against Harish because his information led to a conviction under an applicable Act. (correct answer)
2. Harish cannot receive relief because information must always be furnished during a formal investigation conducted by an authority.
3. Harish receives automatic immunity because any information supplied by a partner necessarily attracts statutory protection.
4. Harish cannot receive relief because Section 31 applies exclusively to information leading to a conviction under the LLP Act.

Answer: A — The Court or Tribunal may reduce or waive a penalty leviable against Harish because his information led to a conviction under an applicable Act.

Explanation. Section 31(1) contains two alternative grounds for reduction or waiver of penalties. The first concerns useful information provided during an LLP investigation. The second concerns information given by a partner or employee, whether or not during an investigation, which leads to a conviction of the LLP or any partner or employee under the LLP Act or any other Act. Harish satisfies the second ground. The primary distractor incorrectly limits the provision to information supplied during formal investigations.

Where it goes wrong. Overlooking the separate statutory ground covering information supplied outside an investigation that subsequently leads to conviction.

Authority. Section 31(1) of the Limited Liability Partnership Act, 2008

Question 15 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Nivara's managing partner proposes to demote Asha, reduce her employment benefits and threaten Harish with suspension because they supplied information covered by Section 31(1). The managing partner argues that only employees receive whistle-blowing protection and that partners can be treated differently. Which statement is correct?

1. Only Asha is protected because the anti-retaliation provision does not extend to partners of an LLP.
2. Both Asha and Harish are protected against the specified forms of retaliation merely because they supplied qualifying information. (correct answer)
3. Only Harish is protected because the anti-retaliation provision applies exclusively to partners and not employees.
4. Both may be demoted or suspended because Section 31 prohibits dismissal alone and permits other discriminatory action.

Answer: B — Both Asha and Harish are protected against the specified forms of retaliation merely because they supplied qualifying information.

Explanation. Section 31(2) expressly protects both partners and employees of an LLP. Neither may be discharged, demoted, suspended, threatened, harassed or otherwise discriminated against in the terms and conditions of their LLP or employment merely because of providing information or causing information to be provided pursuant to Section 31(1). Thus, both Asha and Harish are protected. The primary distractor incorrectly restricts statutory protection to employees.

Where it goes wrong. Assuming that whistle-blowing protection under the LLP Act is restricted to employees rather than covering partners as well.

Authority. Section 31(2) of the Limited Liability Partnership Act, 2008

Question 16 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Nivara's governing committee argues that every person who supplies information about an LLP must receive automatic waiver of all penalties. Its general counsel disputes this interpretation, pointing out that Section 31 specifies eligibility conditions and a particular authority empowered to grant relief. Which conclusion most accurately reflects the provision?

1. The Registrar must waive every penalty whenever any information is supplied by a partner or employee.
2. The Central Government must grant complete immunity whenever information concerns an LLP's internal affairs.
3. The Court or Tribunal may reduce or waive an eligible penalty, subject to the statutory information-related conditions; relief is not automatic. (correct answer)
4. The LLP's designated partners may waive statutory penalties independently whenever an employee reports misconduct.

Answer: C — The Court or Tribunal may reduce or waive an eligible penalty, subject to the statutory information-related conditions; relief is not automatic.

Explanation. The power under Section 31(1) belongs to the Court or Tribunal, not the Registrar, Central Government or the LLP's designated partners acting independently. The Court or Tribunal may reduce or waive a penalty only where the prescribed information-related conditions are satisfied. The word 'may' indicates discretion, and the provision does not create an automatic waiver of all penalties or blanket immunity from other legal consequences. The primary distractor incorrectly converts a conditional discretionary power into an unconditional entitlement.

Where it goes wrong. Confusing the authority empowered to grant relief and treating the statutory discretion as a mandatory entitlement.

Authority. Section 31(1) of the Limited Liability Partnership Act, 2008

Question 17 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Scenario. Veda Kitchens LLP was incorporated on 14 August 2026 and executed its initial LLP Agreement on 20 August. It filed information concerning the Agreement in Form 3 on 15 September 2026. The partners subsequently amended the Agreement on 10 October 2026 and filed the amended information in Form 3 on 7 November 2026. No extension or special relaxation was obtained. Applying Rule 21(1) of the LLP Rules, 2009, which statement correctly identifies the filing position?

Veda Kitchens LLP was incorporated on 14 August 2026 and executed its initial LLP Agreement on 20 August. It filed information concerning the Agreement in Form 3 on 15 September 2026. The partners subsequently amended the Agreement on 10 October 2026 and filed the amended information in Form 3 on 7 November 2026. No extension or special relaxation was obtained. Applying Rule 21(1) of the LLP Rules, 2009, which statement correctly identifies the filing position?

1. The initial filing is delayed, but the amendment filing is within the prescribed 30-day period. (correct answer)
2. Both filings are within time because the 30-day period begins from the execution of the original Agreement.
3. The initial filing is timely, but the amendment filing is delayed because amendments require filing within 15 days.
4. Both filings are delayed because an LLP Agreement and every amendment must be filed within 15 days.

Answer: A — The initial filing is delayed, but the amendment filing is within the prescribed 30-day period.

Explanation. Rule 21(1) requires Form 3 information concerning the initial LLP Agreement within 30 days of incorporation, not 30 days from execution of the Agreement. The period from 14 August to 15 September exceeds 30 days. An amendment must be filed within 30 days of the actual change. The period from 10 October to 7 November is within 30 days. The primary distractor incorrectly calculates the initial deadline from the execution date.

Where it goes wrong. Calculating the initial Form 3 filing period from the agreement's execution date rather than the incorporation date.

Authority. Section 23(2) of the Limited Liability Partnership Act, 2008; Rule 21(1) of the Limited Liability Partnership Rules, 2009

Question 18 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. Partner Farah changed her legal name on 5 January 2026. She informed the LLP on 22 January 2026, and the LLP filed the prescribed notice with the Registrar on 1 February 2026. Assume that the notice contained the required particulars and was otherwise valid. Considering the separate duties imposed on a partner and on the LLP by Section 25, which statement correctly identifies compliance and the potential statutory penalty?

Partner Farah changed her legal name on 5 January 2026. She informed the LLP on 22 January 2026, and the LLP filed the prescribed notice with the Registrar on 1 February 2026. Assume that the notice contained the required particulars and was otherwise valid. Considering the separate duties imposed on a partner and on the LLP by Section 25, which statement correctly identifies compliance and the potential statutory penalty?

1. Both have complied because the partner and the LLP are allowed 30 days from the date of the change.
2. Both have contravened the provision because every change in a partner's name must be filed within 15 days.
3. The partner has complied, but the LLP has contravened the provision because its filing must occur within 15 days.
4. The partner has breached the 15-day intimation requirement, while the LLP has met its separate 30-day filing requirement. (correct answer)

Answer: D — The partner has breached the 15-day intimation requirement, while the LLP has met its separate 30-day filing requirement.

Explanation. Section 25(1) requires a partner to inform the LLP of a name or address change within 15 days. Farah informed the LLP after 17 days and therefore contravened this requirement, attracting the ₹10,000 penalty under Section 25(5). Separately, Section 25(2)(b) allows the LLP 30 days from the change to file the notice with the Registrar. Its filing on 1 February is within 30 days, so the LLP has complied with that obligation.

Where it goes wrong. Confusing the partner's 15-day intimation deadline with the LLP's separate 30-day Registrar filing deadline.

Authority. Section 25(1) of the Limited Liability Partnership Act, 2008; Section 25(2)(b) of the Limited Liability Partnership Act, 2008; Section 25(4) of the Limited Liability Partnership Act, 2008; Section 25(5) of the Limited Liability Partnership Act, 2008

Question 19 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Scenario. Rohit ceased to be a partner of Delta Engineering LLP on 1 August 2026. The LLP did not deliver notice of his cessation to the Registrar. On 10 August, a bank dealing with the LLP received written confirmation that Rohit had already ceased to be a partner. Another supplier continued dealing with the LLP without any information about his departure. Under Section 24(3), which statement correctly determines how Rohit is regarded in relation to these two parties?

Rohit ceased to be a partner of Delta Engineering LLP on 1 August 2026. The LLP did not deliver notice of his cessation to the Registrar. On 10 August, a bank dealing with the LLP received written confirmation that Rohit had already ceased to be a partner. Another supplier continued dealing with the LLP without any information about his departure. Under Section 24(3), which statement correctly determines how Rohit is regarded in relation to these two parties?

1. Rohit is regarded as a partner by both parties until the Registrar receives formal notice.
2. Rohit is regarded as a partner by the supplier, but not by the bank which has actual notice of cessation. (correct answer)
3. Rohit is regarded as a former partner by both parties because internal acceptance of resignation is sufficient.
4. Rohit is regarded as a former partner by the supplier, but a partner by the bank because it received confirmation.

Answer: B — Rohit is regarded as a partner by the supplier, but not by the bank which has actual notice of cessation.

Explanation. Section 24(3) provides that a former partner is regarded as continuing to be a partner in relation to a person dealing with the LLP unless that person has notice of cessation or notice has been delivered to the Registrar. The bank received actual written notice and therefore falls within the first exception. The supplier had no notice and the Registrar was not notified, so Rohit may still be regarded as a partner in relation to that supplier. The primary distractor overlooks actual notice as an independent exception.

Where it goes wrong. Assuming that delivery of notice to the Registrar is the only way to end a former partner's apparent status towards third parties.

Authority. Section 24(3) of the Limited Liability Partnership Act, 2008

Question 20 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. Mohan resigned from Riverstone Advisory LLP on 30 September 2026. During his membership, he had personally undertaken an obligation to indemnify the LLP for specified losses arising from his failure to complete an assigned client project. The losses were quantified and demanded on 20 October 2026. Mohan argues that he cannot be pursued because the demand was raised after his resignation. Which statement correctly determines the effect of cessation?

Mohan resigned from Riverstone Advisory LLP on 30 September 2026. During his membership, he had personally undertaken an obligation to indemnify the LLP for specified losses arising from his failure to complete an assigned client project. The losses were quantified and demanded on 20 October 2026. Mohan argues that he cannot be pursued because the demand was raised after his resignation. Which statement correctly determines the effect of cessation?

1. Mohan is discharged because every personal obligation to the LLP terminates on the effective date of resignation.
2. Mohan is liable only if the obligation was registered separately with the Registrar before his resignation.
3. Mohan's cessation does not by itself discharge the obligation incurred while he was a partner. (correct answer)
4. Mohan is discharged unless the LLP Agreement expressly repeats the indemnity after his cessation.

Answer: C — Mohan's cessation does not by itself discharge the obligation incurred while he was a partner.

Explanation. Section 24(4) specifically provides that cessation does not by itself discharge a former partner from an obligation incurred while being a partner. The provision covers obligations to the LLP, the other partners and any other person. Since Mohan undertook the indemnity obligation during his membership, his subsequent resignation does not extinguish it. The primary distractor incorrectly assumes that the date of demand, rather than the period in which the obligation was incurred, determines continuing responsibility.

Where it goes wrong. Confusing the date on which an obligation becomes payable or is demanded with the date on which the obligation was incurred.

Authority. Section 24(4) of the Limited Liability Partnership Act, 2008

Question 21 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. Priya ceased to be a partner of Horizon Consultants LLP. The LLP Agreement does not prescribe a different settlement arrangement. At the cessation date, she had contributed ₹10 lakh, while the LLP had accumulated profits of ₹8 lakh and accumulated losses of ₹2 lakh. Priya also demands voting rights until the settlement is completed. Which statement correctly applies Sections 24(5) and 24(6)?

Priya ceased to be a partner of Horizon Consultants LLP. The LLP Agreement does not prescribe a different settlement arrangement. At the cessation date, she had contributed ₹10 lakh, while the LLP had accumulated profits of ₹8 lakh and accumulated losses of ₹2 lakh. Priya also demands voting rights until the settlement is completed. Which statement correctly applies Sections 24(5) and 24(6)?

1. Priya is entitled to ₹10 lakh only and may continue voting until all settlement amounts are paid.
2. Priya is entitled to her actual capital contribution and her share in net accumulated profits, but cannot interfere in management. (correct answer)
3. Priya is entitled to the entire accumulated profits without deduction of losses and retains management rights.
4. Priya loses her capital contribution upon cessation but may participate in management until the final accounts are settled.

Answer: B — Priya is entitled to her actual capital contribution and her share in net accumulated profits, but cannot interfere in management.

Explanation. Section 24(5) entitles a former partner, unless the LLP Agreement provides otherwise, to the capital contribution actually made and the right to share in accumulated profits after deduction of accumulated losses, determined as at the cessation date. Section 24(6) separately denies the former partner any right to interfere in management. Thus, Priya retains her statutory economic entitlement but not voting or management rights. The primary distractor incorrectly treats financial settlement as a condition for retaining management rights.

Where it goes wrong. Assuming that an unpaid settlement allows a former partner to retain management or voting rights.

Authority. Section 24(5) of the Limited Liability Partnership Act, 2008; Section 24(6) of the Limited Liability Partnership Act, 2008

Question 22 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Scenario. A partner of Apex Digital LLP enters into a transaction exceeding the internal purchasing limit assigned to him under the LLP Agreement. The supplier knows that the person is a partner but has never been informed of the internal restriction and does not know that approval is missing. Which statement correctly identifies whether the LLP can invoke the specific exception under Section 27(1) to deny being bound by the transaction?

A partner of Apex Digital LLP enters into a transaction exceeding the internal purchasing limit assigned to him under the LLP Agreement. The supplier knows that the person is a partner but has never been informed of the internal restriction and does not know that approval is missing. Which statement correctly identifies whether the LLP can invoke the specific exception under Section 27(1) to deny being bound by the transaction?

1. The LLP can invoke the exception because every breach of an internal purchasing limit automatically invalidates a transaction.
2. The LLP can invoke the exception because the supplier's knowledge of partner status establishes knowledge of lack of authority.
3. The LLP can invoke the exception because the actual authority of a partner is irrelevant when dealing with outsiders.
4. The stated facts do not satisfy the knowledge condition for the Section 27(1) exception because the supplier knows he is a partner but does not know of the lack of authority. (correct answer)

Answer: D — The stated facts do not satisfy the knowledge condition for the Section 27(1) exception because the supplier knows he is a partner but does not know of the lack of authority.

Explanation. Section 27(1) requires both absence of actual authority and the specified condition concerning the third party's knowledge: the person must know that the partner has no authority or must not know or believe that the person is a partner. Here, the supplier knows that the person is a partner but has no knowledge of the restriction. Consequently, the specific statutory exception cannot be invoked on these facts. The primary distractor incorrectly equates knowledge of partner status with knowledge of restricted authority.

Where it goes wrong. Ignoring the separate requirement concerning the third party's knowledge of lack of authority.

Authority. Section 27(1) of the Limited Liability Partnership Act, 2008

Question 23 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. A partner of Zenith Maintenance LLP negligently damages a customer's equipment while performing work in the ordinary course of the LLP's business. The customer claims compensation from the LLP and all its partners. Assuming the wrongful act is established, which statement correctly distinguishes the LLP's responsibility from the personal liability of the partners who did not commit the wrongful act?

A partner of Zenith Maintenance LLP negligently damages a customer's equipment while performing work in the ordinary course of the LLP's business. The customer claims compensation from the LLP and all its partners. Assuming the wrongful act is established, which statement correctly distinguishes the LLP's responsibility from the personal liability of the partners who did not commit the wrongful act?

1. The LLP and every partner become personally liable because the customer suffered damage during LLP business.
2. Only the partner committing the wrongful act can be liable, and the LLP is protected from all claims arising from negligence.
3. The LLP may be liable for the business-related wrongful act, but other partners are not personally liable merely because of the wrong committed by that partner. (correct answer)
4. The LLP is not liable unless every partner personally participated in the wrongful act or approved it unanimously.

Answer: C — The LLP may be liable for the business-related wrongful act, but other partners are not personally liable merely because of the wrong committed by that partner.

Explanation. Section 27(2) makes the LLP liable where a partner commits a wrongful act or omission in the course of business or with the authority of the LLP. However, Section 28(1) protects partners from personal liability for LLP obligations merely because they are partners, and Section 28(2) specifically excludes personal liability for another partner's wrongful act or omission. The partner committing the wrongful act remains personally liable for their own conduct. The primary distractor incorrectly imposes collective personal liability.

Where it goes wrong. Confusing the liability of the LLP for a partner's wrongful act with personal liability of every partner.

Authority. Section 27(2) of the Limited Liability Partnership Act, 2008; Section 28(1) of the Limited Liability Partnership Act, 2008; Section 28(2) of the Limited Liability Partnership Act, 2008

Question 24 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. The partners of Silverline Research LLP executed a written LLP Agreement covering capital contributions, profit-sharing ratios and admission of new partners. It did not contain any provision on another matter concerning the mutual duties of partners. One partner argues that the statutory default rules cannot apply because the LLP Agreement already exists. Which statement most accurately applies Section 23?

The partners of Silverline Research LLP executed a written LLP Agreement covering capital contributions, profit-sharing ratios and admission of new partners. It did not contain any provision on another matter concerning the mutual duties of partners. One partner argues that the statutory default rules cannot apply because the LLP Agreement already exists. Which statement most accurately applies Section 23?

1. The First Schedule applies to the uncovered matter, while the express contractual provisions continue to govern matters addressed by the Agreement. (correct answer)
2. The First Schedule replaces the entire LLP Agreement whenever even one mutual duty has not been expressly mentioned.
3. The LLP Agreement governs every matter automatically, including matters on which the partners have not reached an agreement.
4. The First Schedule applies only if the Registrar declares the LLP Agreement invalid because it does not cover every possible matter.

Answer: A — The First Schedule applies to the uncovered matter, while the express contractual provisions continue to govern matters addressed by the Agreement.

Explanation. Section 23(1) makes the LLP Agreement the primary source governing mutual rights and duties. Section 23(4) provides that the First Schedule determines those rights and duties in the absence of an agreement concerning a particular matter. Therefore, the statutory default provisions apply only to the uncovered matter and do not displace express contractual provisions. The primary distractor incorrectly assumes that one omission invalidates or replaces the entire LLP Agreement.

Where it goes wrong. Treating the LLP Agreement and First Schedule as mutually exclusive rather than complementary.

Authority. Section 23(1) of the Limited Liability Partnership Act, 2008; Section 23(4) of the Limited Liability Partnership Act, 2008; First Schedule to the Limited Liability Partnership Act, 2008

Question 25 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. An employee of Crestline Logistics LLP provides original documents during an ongoing investigation. The investigating authority confirms that the documents are useful, but the investigation has not yet resulted in conviction of the LLP or any person connected with it. The management proposes to suspend the employee because of the disclosure. Which statement correctly applies the whistle-blowing provisions?

An employee of Crestline Logistics LLP provides original documents during an ongoing investigation. The investigating authority confirms that the documents are useful, but the investigation has not yet resulted in conviction of the LLP or any person connected with it. The management proposes to suspend the employee because of the disclosure. Which statement correctly applies the whistle-blowing provisions?

1. The employee is protected only after a conviction, because useful information during an investigation is insufficient.
2. The employee may be protected against suspension because useful information during an investigation is an independent statutory ground. (correct answer)
3. The employee is not protected because Section 31 covers partners but excludes persons employed by an LLP.
4. The employee is protected only if the Registrar has already ordered waiver of every penalty arising from the investigation.

Answer: B — The employee may be protected against suspension because useful information during an investigation is an independent statutory ground.

Explanation. Section 31(1) recognises useful information provided during an investigation as an independent ground for the Court or Tribunal to reduce or waive a penalty against a partner or employee. A conviction is not necessary for this alternative. Section 31(2) prohibits suspension, discharge, demotion, threats, harassment and other discrimination merely because qualifying information was provided. Therefore, management cannot suspend the employee merely for making this disclosure. The primary distractor incorrectly makes conviction a prerequisite for both statutory provisions.

Where it goes wrong. Assuming that whistle-blowing protection arises only after a conviction rather than upon providing useful information during an investigation.

Authority. Section 31(1) of the Limited Liability Partnership Act, 2008; Section 31(2) of the Limited Liability Partnership Act, 2008