2025 (6) TMI 1187 - AT - Companies Law

Limited Liability Partnership Probe: One-Fifth Partner Rule Affirmed, Mandatory Threshold Upheld for Triggering Investigative Proceedings

The SC examined key issues regarding investigation petitions under the LLP Act, 2008. The court upheld the mandatory requirement of one-fifth partners for ... Waiver of condition contained under section 43(3) of of LLP Act, 2008 stipulating requirement of minimum of 1/5th of total number of partners to file a petition under Section 43 of the LLP Act - whether in the absence of any specific provision for waiver in the LLP Act is it not permissible under law to rely upon Companies Act, to seek waiver? - HELD THAT:- Admittedly impugned order does not discuss merits and is passed only on eligibility criteria. Both the Ld. Senior counsels are ad-idem to say the Ld. NCLT was though right in saying the provisions of Section 242 and 244 would not be applicable in the facts of the case as have not been incorporated per Section 67 of the LLP Act, yet admitted the merits of the company petition have not been discussed in the impugned order, though per respondent the merit was never argued. Nevertheless to the limited effect viz eligibility criteria the impugned order does not require any interference but admittedly it does not discuss if the company petition contains such information as to enable the Tribunal to take a suo moto action per section 43(1)(a) of LLP Act. Thus with consent this appeal is disposed off by maintaining the impugned order but in case a petition is filed in future before the Ld. NCLT, the Ld NCLT may examine as to if the facts exist to exercise its suo moto power by examining its contents thereof and the impugned order shall not come in the way. Appeal disposed off. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal include:Whether the condition under Section 43(3) of the LLP Act, 2008 requiring at least one-fifth of the total partners to file a petition for investigation can be waived by invoking provisions of the Companies Act, 2013, specifically Section 241 and Rule 11 of the NCLT Rules.Whether the NCLT erred in dismissing the Company Application and Company Petition solely on the ground of non-fulfillment of the eligibility criteria (one-fifth partners requirement) without examining the merits or the substance of the allegations raised in the petition.Whether the NCLT is mandated under Section 43(1)(a) of the LLP Act to examine the contents of the petition to determine if the facts warrant suo moto investigation, even when the eligibility criteria for filing the petition are not met.The applicability and interplay of procedural provisions under the LLP Act, 2008 vis-`a-vis the Companies Act, 2013 and the NCLT Rules, particularly concerning waiver of eligibility and examination of petitions for investigation.The extent of the Tribunal's power to condone delay in filing appeal and grant exemption from filing certified copies of impugned orders.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Waiver of Eligibility Condition under Section 43(3) of LLP Act by Invoking Companies Act ProvisionsRelevant legal framework and precedents: Section 43(3) of the LLP Act mandates that a petition for investigation must be filed by at least one-fifth of the total number of partners. The appellant sought to invoke Rule 11 of the NCLT Rules read with the proviso to Section 241 of the Companies Act, 2013, which allows for waiver of certain procedural conditions in company petitions, to bypass this eligibility threshold.Court's interpretation and reasoning: The Tribunal held that since the LLP Act does not contain any specific provision permitting waiver of the eligibility requirement, it is impermissible to rely on the Companies Act provisions for such waiver. The Tribunal emphasized the principle of statutory interpretation that provisions of one statute cannot be imported to override or circumvent clear conditions in another statute unless expressly permitted. The Tribunal noted that Section 67 of the LLP Act excludes the applicability of Sections 242 and 244 of the Companies Act (which correspond to Sections 241 and 242) to LLPs, reinforcing the inapplicability of the Companies Act waiver provisions.Application of law to facts: The appellant's reliance on the Companies Act provisions was therefore rejected, and the dismissal of the petition on the ground of non-fulfillment of the one-fifth partners criterion was upheld.Treatment of competing arguments: The appellant argued that the NCLT should have exercised discretion to waive the eligibility condition to enable investigation. The Tribunal, however, found no legal basis for such waiver under the LLP Act and declined to extend the Companies Act provisions by analogy.Conclusion: The eligibility condition under Section 43(3) of the LLP Act is mandatory and cannot be waived by invoking the Companies Act provisions.Issue 2: Whether the NCLT Should Have Examined Merits of the Petition Despite Eligibility DeficiencyRelevant legal framework: Section 43(1)(a) of the LLP Act empowers the Tribunal to appoint inspectors suo motu or on an application by not less than one-fifth of partners if it declares that the LLP's affairs ought to be investigated. The appellant contended that the Tribunal should have examined the allegations to determine whether a suo motu investigation was warranted, notwithstanding the eligibility issue.Court's interpretation and reasoning: The Tribunal observed that the impugned order dismissed the petition solely on eligibility grounds without addressing the merits or substance of the allegations. Both parties agreed that the merits were not argued before the NCLT. The Tribunal noted that while the eligibility condition is mandatory, the Tribunal retains suo motu power to order investigation if facts warrant it.Key evidence and findings: The impugned order did not analyze the factual allegations or consider whether the petition contained sufficient information to trigger suo motu investigation under Section 43(1)(a).Application of law to facts: The Tribunal held that the impugned order's dismissal on eligibility grounds does not preclude the filing of a fresh petition. In any future petition, the NCLT must examine whether the facts justify suo motu action by scrutinizing the petition's contents.Treatment of competing arguments: The appellant argued for a merits-based examination despite eligibility non-compliance. The respondent maintained that the eligibility condition was a threshold requirement. The Tribunal balanced these views by upholding the eligibility requirement but allowing for suo motu examination in future proceedings.Conclusion: The NCLT was correct in dismissing the petition on eligibility grounds but must examine merits in future petitions to determine if suo motu investigation is warranted. The impugned order does not bar such examination.Issue 3: Applicability of Sections 242 and 244 of Companies Act to LLP ProceedingsRelevant legal framework: Sections 242 and 244 of the Companies Act relate to reliefs available to members and powers of the Tribunal in company matters. Section 67 of the LLP Act excludes the application of these provisions to LLPs.Court's interpretation and reasoning: The Tribunal reaffirmed that these sections are not applicable to LLP proceedings, and hence, the appellant cannot rely on them to seek relief or waiver under the LLP Act.Conclusion: Sections 242 and 244 of the Companies Act have no application in LLP matters by virtue of Section 67 of the LLP Act.Issue 4: Condonation of Delay and Filing Exemptions in AppealRelevant legal framework: Section 5 of the Limitation Act, 1963 allows condonation of delay for sufficient cause. Rules 11 and 31 of the NCLAT Rules, 2016 govern procedural aspects including filing of appeals and exemption from filing certified copies.Court's interpretation and reasoning: The Tribunal allowed the appellant's application for exemption from filing certified copies subject to filing within two weeks and condoned the delay of 15 days in filing the appeal, considering the reasons