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Sarita Kumari   01 April 2023

School run under Trust without NOC

A and B entered into an LLP to run a school. A & B invested in the ratio of 50:50. B started the school under his own Trust 3 years back. Now, it came into picture that the school that was run was without an NOC from the Education Board/Department and therefore, B closed the school and is under process to sell all the assets that was purchased to run the school without giving access to A to check on the assets and the audits, balance sheet, profit n loss (books of accounts) etc. Moreover, B is reflecting loss of approx 90 lacs and demanding A to bear his share of the loss and pay B the amount.

What legal actions can be taken by A against B under civil law and specially with the Charity Commission?

Inputs appropriated. Thanks in advance.


 2 Replies

T. Kalaiselvan, Advocate (Advocate)     01 April 2023

Under LLP structure, liability of the partner is limited to his agreed contribution. Further, no partner is liable on account of the independent or un-authorized acts of other partners, thus allowing individual partners to be shielded from joint liability created by another partner's wrongful acts or misconduct.

Limited liability partnerships are treated as separate legal entities. This means that LLPs can own assets and incur liabilities in their own names. They can also enter into contracts and sue and be sued in their own names.

All partners of limited liability partnerships share the profits of business just as partners of regular firms. They are, however, free to decide the ratio in which they will share profits.

In a LLP a partner's liability is Limited to the extent of their capital contribution to the LLP..

The LLP has the ownership of assets that are independent of the partners. No partner owns the assets of the LLP.

The liability of the partners is limited to the contributions made by them. This means are not personally liable for any loss in the business and are liable to pay the number of contributions made by them. Only the LLP assets are liable for paying off its debts if the LLP decides on winding up.

An LLP can be dissolved voluntarily or by order of the National Company Law Tribunal (NCLT).

The concept of equity or shareholding like a company is not present in an LLP.


Dr J C Vashista (Advocate)     02 April 2023


Recognisation by State / District Eduction department is required to run a school but not NOC, isn't it ?

However, parteners must have made some compromise or arrangement before winding up LLP.

Provisions of Section 60 of the Limited Liability Partnership Act, 2008 apply to compromise or annagement of LLP which reads as:

60. Compromise, or arrangement of limited liability partnerships.

(1) Where a compromise or arrangement is proposed—

(a) between a limited liability partnership and its creditors; or

(b) between a limited liability partnership and its partners, the Tribunal may, on the application of the limited liability partnership or of any creditor or partner of the limited liability partnership, or, in the case of a limited liability partnership which is being wound up, of the liquidator, order a meeting of the creditors or of the partners, as the case may be, to be called, held and conducted in such manner as may be prescribed or as the Tribunal directs.

(2) If a majority representing three-fourths in value of the creditors, or partners, as the case may be, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Tribunal, by order be binding on all the creditors or all the partners, as the case may be, and also on the limited liability partnership, or in the case of a limited liability partnership which is being wound up, on the liquidator and contributories of the limited liability partnership:

Provided that no order sanctioning any compromise or arrangement shall be made by the Tribunal unless the Tribunal is satisfied that the limited liability partnership or any other person by whom an application has been made under sub-section (1) has disclosed to the Tribunal, by affidavit or otherwise, all material facts relating to the limited liability partnership, including the latest financial position of the limited liability partnership and the pendency of any investigation proceedings in relation to the limited liability partnership.

(3) An order made by the Tribunal under sub-section (2) shall be filed by the limited liability partnership with the Registrar within thirty days after making such an order and shall have effect only after it is so filed.

(4) If default is made in complying with sub-section (3), the limited liability partnership, and every designated partner of the limited liability partnership shall be punishable with fine which may extend to one lakh rupees.

(5) The Tribunal may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against the limited liability partnership on such terms as the Tribunal thinks fit, until the application is finally disposed of.

Winding up of LLP is also governed by Section 63 of the Act, which reads as:

63. Winding up and dissolution.

The winding up of a limited liability partnership may be either voluntary or by the Tribunal and limited liability partnership, so wound up may be dissolved.

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