CHAPTER XII

COMPROMISE, ARRANGEMENT OR RECONSTRUCTION OF LIMITED LIABILITY PARTNERSHIPS.

35. (1) An application under sub-section (1) of section 60 for an order convening a meeting of creditors or partners or creditors and partners shall be supported by an affidavit. A copy of the proposed compromise or arrangement shall be annexed to the affidavit as an exhibit thereto. The affidavit in support thereof shall be in Form 20.

(2) Where the limited liability partnership is not the applicant, a copy of the summons and of the affidavit shall be served on the limited liability partnership, or, where the limited liability partnership is being wound-up, on its liquidator, not less than 14 days before the date fixed for the hearing of the summons. The summons shall be in Form 21.

(3)(a) Upon the hearing of the summons or any adjourned hearing thereof, the Tribunal shall, by order, unless it thinks fit for any reason to dismiss the summons, give such directions as it may think necessary in respect of the following matters:

(i) determining the creditors and/or of partners whose meeting or meetings have to be held for considering the proposed compromise or arrangement;

(ii) fixing the time and place of such meeting or meetings;

(iii) appointing a chairman for the meeting or chairmen for the meetings to be held;

(iv) fixing the quorum and the procedure to be followed at the meeting or meetings, including voting by proxy;

(v) determining the values of the creditors and/or the partners, , as the case may be, whose meetings have to be held;

(vi) notice to be given of the meeting or meetings and the advertisement, if any, of such notice;

(vii) the time within which the chairman of the meeting is to report to the Tribunal the result of the meeting; and

(viii) such other matters as the Tribunal may deem necessary.

(b) The order made under clause (a) shall be in accordance with the rules as may be laid down in this behalf.  

(4) (i) Voting by proxy shall be permitted, provided a proxy in Form 26 duly signed by the person entitled to attend and vote at the meeting is filed with the limited liability partnership at its registered office not later than 48 hours before the meeting.

(ii) Where a body corporate which is a partner or creditor of a limited liability partnership, authorizes any person to act as its representative at the meeting of the partners or creditors of the limited liability partnership, as the case may be, a copy of the authorization of such person to act as its representative at the meeting, and certified to be a true copy by a designated partner or other authorised officer of such body corporate, shall be lodged with the limited liability partnership at its registered office not later than 48 hours before the meeting.

(5) The notice of the meeting to be given to the creditors and/or partners, shall be in accordance with the rule laid down in this behalf, and shall be sent to them individually by the chairman appointed for the meeting, or, if the Tribunal so directs, by the limited liability partnership (or its Liquidator), or any other person as the Tribunal may direct, by post under certificate of posting to their last known address not less than 21 clear days before the date fixed for the meeting. It shall be accompanied by a copy of the proposed compromise or arrangement alongwith statement showing material interest of the designated partners, if any, and a form of proxy.

(6) The notice of the meeting shall be advertised, if so decided by the Tribunal, in such newspapers and in such manner as the Tribunal may direct.

(7) Every creditor or partner entitled to attend the meeting shall be furnished by the limited liability partnership, free of charge and within 48 hours of a requisition made for the same, with a copy of the proposed compromise or arrangement.

(8) The chairman appointed for the meeting or the limited liability partnership or other person directed to issue the advertisement and the notices of the meeting shall file an affidavit not less than 7 days before the date fixed for the holding of the meeting or the holding of the first of the meetings, as the case may be, showing that the directions regarding the issue of notices and the advertisement have been duly complied with. In default thereof, the summons shall be posted before the Tribunal for such orders as it may think fit to make.

(9) The chairman of the meeting, or where there are separate meetings, the chairman of each meeting shall, within the time fixed by the Tribunal, or where no time has been fixed, within seven days after the conclusion of the meeting, report the result thereof to the Tribunal. The report shall state accurately the number of creditors or the partners, as the case may be, who were present and who voted at the meeting either in person or by proxy, their individual values and the way they voted.

(10) (i) Where the proposed compromise or arrangement is agreed to, with or without modification, as provided in sub-section (2) of section 60, the limited liability partnership, or its Liquidator, as the case may be, shall, within seven days of the filing of the report by the chairman, present a petition to the Tribunal for confirmation of the compromise or arrangement:

Provided that where a compromise or arrangement is proposed for the purposes of, or in connection with, a scheme for the reconstruction of any limited liability partnership or the amalgamation of any two or more limited liability partnerships, the petitioner shall pray for appropriate orders and directions under section 62.

(ii) Where the limited liability partnership fails to present the petition under clause (i) for confirmation of the compromise or arrangement as aforesaid, it shall be open to any creditor or partner as the case may be, with the leave of the Tribunal, to present the petition for confirmation and the limited liability partnership shall be liable for the costs thereof.

(iii) Where no petition for confirmation of the compromise or arrangement is presented to, or where the compromise or arrangement has not been approved by the requisite majority under sub-section (2) of section 60 and consequently no petition for confirmation could be presented, the report of the chairman as to the result of the meeting made under sub-rule (9) shall be placed for consideration before the Tribunal for such orders as may be necessary.

(11) An order made by the Tribunal as mentioned in sub-section (3) of section 60 and sub-section (3) of section 62 shall be filed with Registrar concerned in Form 22 along with fee as mentioned in Annexure ‘A’.

Explanation.- In computing the period of 30 days from the date of order, the requisite time for obtaining a certified copy of order shall be excluded.

(12) (i) An arrangement for revival and rehabilitation of any LLP may be proposed, -

(a) where on a demand by the creditors of the LLP representing fifty per cent or more of its outstanding amount of debt the LLP has failed to pay the debt, within thirty days of the service of the notice of demand or to secure or compound it to the reasonable satisfaction of the creditors; or

(b) where a petition for winding up of a LLP is pending before the Tribunal, in terms of the directions given by the Tribunal on the winding up petition; or

(c) where the liquidator has filed his report before the Tribunal, in terms of directions given by the Tribunal on the report of the Liquidator.

(ii) Without prejudice to clause (i), the LLP or any creditor or partner of the LLP, or in the case of a LLP which is being wound up, the Liquidator, may make an application for sanction of the arrangement for revival and rehabilitation before the Tribunal.

(13) (i) An application under sub-rule (12) shall be accompanied by-

(a) a statement of account and solvency of LLP for the immediately preceding financial year, in case the application under sub-rule (12) is made by the LLP;

(b) particulars and documents relevant to the scheme\ including commitments whether financial or otherwise expected from various parties or, proposed restructuring or rescheduling of the debts, or any undertaking or understanding, in case from bank or financial institution through a letter or in any other case through an affidavit of concerned party or parties, or in any other form as may be directed by the Tribunal; and

(c) proposed scheme of revival and rehabilitation of the LLP including proposal for appointment of an LLP Administrator.

(ii) An application under sub- rule (12) shall be made to the Tribunal within 90 days from the date of expiry of demand notice or from the date of the direction of the Tribunal referred to under clause (i) of sub-rule 12.

(14) (a) Within 60 days of receipt of an application under sub-rule (12), the Tribunal may hear all the parties concerned and admit or dismiss the application;

(b) where the Tribunal admits the application, it may make an order to that effect and make provisions in such order, for all or any of the following matters:-

(i) holding of meetings of the creditors for approval of scheme proposed for revival and rehabilitation of LLP;

(ii) procedure to be followed by the LLP Administrator proposed in the scheme in connection with holding of the meeting including the appointment of chairman for such meeting;

(iii) any other direction(s) or order(s) as may be considered necessary.

(c) The LLP Administrator proposed in the scheme shall submit his preliminary report including the decision of the meeting to the Tribunal within 60 days of order made under clause (b) of sub-rule 14.

(15) (i) On consideration of the report of the LLP Administrator under clause (c) of sub-rule (14), and other materials available, if the Tribunal is satisfied that the creditors representing three-fourths in value of the amount outstanding against that LLP have, with or without modification of the scheme, resolved that it is not possible to revive and rehabilitate the LLP, the Tribunal may, within 60 days of the receipt of such report, order –

(a) that the proceedings for the winding up of the LLP be initiated; or

(b) the LLP be wound up, or the liquidator to continue; or

(c) sanction the arrangement for revival and rehabilitation of LLP as approved by such creditors with such modifications as may be considered necessary by the Tribunal, and make orders for continuation of the LLP Administrator or appointment of a new LLP Administrator:

Provided that Tribunal may consider for its approval, the arrangement for revival and rehabilitation including the proposal for appointment of any other LLP Administrator moved by the LLP in the meeting of the creditors, in place of the arrangement proposed by the creditors or the Liquidator, provided the arrangement is approved by three-fourth majority, in value, of creditors.

Provided further that where the arrangement of revival and rehabilitation relates to amalgamation of the LLP with any other LLP, no such scheme shall be sanctioned by the Tribunal unless the said scheme is approved with, or without modification by three-fourth majority of respective partners of transferor and transferee LLPs.

(ii) The order of sanction of the arrangement by the Tribunal under clause (i) may make provisions, for all or any of the following matters:-

(a) powers and functions of the LLP Administrator;

(b) the time period within which various actions proposed in the arrangement to be completed;

(c) any such direction to the LLP or its officers or to the creditors, or to the LLP Administrator or to any other person, as may be considered necessary, for the purpose of implementation of the arrangement of revival and rehabilitation; and

(d) any other order or orders as may be considered necessary.

(16) The LLP Administrator shall complete all the actions relating to implementation of the revival and rehabilitation arrangement and submit his final report before the Tribunal within such time directed by the Tribunal but not exceeding 180 days of the order under clause (i) of subrule (15);

(17) (i) The LLP administrator shall be appointed from a panel maintained by the Central Government for winding up and dissolution of LLPs.

(ii) The terms and conditions of the appointment including fee of LLP Administrator shall be such as may be ordered by the Tribunal.

(iii) The Tribunal may, on a reasonable cause being shown and for reasons to be recorded in writing, remove the LLP Administrator and may appoint another LLP Administrator.

(iv) In case of removal, death or incapacity of the LLP Administrator, the Tribunal may appoint another LLP Administrator.

(v) The LLP administrator shall, within 30 days of the making of order or orders under sub-rule (15) cause certified copy thereof to be filed with the Registrar concerned in Form 22 along with fee as mentioned in Annexure ‘A’.

Explanation.- In computing the period of 30 days from the date of order, the requisite time for obtaining a certified copy of order shall be excluded.