THE KERALA HC HELD A LIMITED LIABILITY PARTNERSHIP CAN FORM A PARTNERSHIP WITH ANY OTHER PERSON OR INDIVIDUAL

9th April 2021

Facts

A partnership deed was executed between an LLP and an individual. But the registrar refused to register the partnership because LLP cannot form a partnership with a firm. This was challenged before the Kerala HC.

The Petitioner contended that a partnership and an LLP are not prohibited under the Partnership Act and that LLP is a legal entity, as defined under the LLP Act, and it is separate from its partners.

Respondent filed a statement stating that some of the provisions of the Limited Liability Partnership Act 2008 are inconsistent with that of the Indian Partnership Act, 1932, pertaining to the liability. According to the respondent, Section 25, 26 and 49 of the Indian Partnership Act, 1932 makes the partners jointly and severally liable with all the other partners and also severally liable for the acts of the firm, of which such person is a partner. At the same time, under Section 28 of the LLP Act, the liability of the partner is restricted; such a provision runs contrary to Section 25 and 49 of the Indian Partnership Act.

Decision

Section 4 of the Partnership Act permits the Constitution of a partnership between one or more persons. In this case, the partnership deed was executed between an individual and an LLP, a body corporate coming within the definition of “person”. The respondent shall reconsider the petitioner's request for registration and take appropriate action on the same within one month.

Author: Papiha Ghoshal

PC: business jagron