EXTEND AND LIMITATIONS OF LIABILITY OF LLP AND PARTNERS

1. Section 26. Partner as an agent.

a. Every partner of a limited liability partnership is, for the purpose of the business of the
limited liability partnership, the agent of the limited liability partnership, but not of
other partners.
2. Section 27. The extent of liability of limited liability partnership.
a. (1) A limited liability partnership is not bound by anything done by a partner in dealing
with a person if
i. (a)the partner in fact has no authority to act for the limited liability partnership
in doing a particular act; and
ii. (b) the person knows that he has no authority or does not know or believe him
to be a partner of the limited liability partnership.
b. (2) The limited liability partnership is liable if a partner of a limited liability partnership is
liable to any person as a result of a wrongful act or omission on his part in the course of
the business of the limited liability partnership or with its authority.
c. (3) An obligation of the limited liability partnership whether arising in contract or
otherwise, shall be solely the obligation of the limited liability partnership. (4) The
liabilities of the limited liability partnership shall be met out of the property of the
limited liability partnership.
3. Section 28. The extent of liability of partner.—
a. (1) A partner is not personally liable, directly or indirectly for an obligation referred to in
sub-section (3) of section 27 solely by reason of being a partner of the limited liability
partnership.
b. (2) The provisions of sub-section (3) of section 27 and sub-section (1) of this section shall
not affect the personal liability of a partner for his own wrongful act or omission, but a
partner shall not be personally liable for the wrongful act or omission of any other
partner of the limited liability partnership.
4. Section 29. Holding out.—
a. (1) Any person, who by words spoken or written or by conduct, represents himself, or
knowingly permits himself to be represented to be a partner in a limited liability
partnership is liable to any person who has on the faith of any such representation given
credit to the limited liability partnership, whether the person representing himself or
represented to be a partner does or does not know that the representation has reached
the person so giving credit:
Provided that where any credit is received by the limited liability partnership as a result
of such representation, the limited liability partnership shall, without prejudice to the
liability of the person so representing himself or represented to be a partner, be liable
to the extent of credit received by it or any financial benefit derived thereon.
b. (2) Where after a partner's death the business is continued in the same limited liability
partnership name, the continued use of that name or of the deceased partner's name as
a part thereof shall not of itself make his legal representative or his estate liable for any
act of the limited liability partnership done after his death.
5. 30. Unlimited liability in case of fraud.—
 a. (1) In the event of an act carried out by a limited liability partnership, or any of its
partners, with intent to defraud creditors of the limited liability partnership or any other
person, or for any fraudulent purpose, the liability of the limited liability partnership and
partners who acted with intent to defraud creditors or for any fraudulent purpose shall
be unlimited for all or any of the debts or other liabilities of the limited liability
partnership:
Provided that in case any such act is carried out by a partner, the limited liability
partnership is liable to the same extent as the partner unless it is established by the
limited liability partnership that such act was without the knowledge or the authority of
the limited liability partnership.
b. Where any business is carried on with such intent or for such purpose as mentioned in
sub-section (1), every person who was knowingly a party to the carrying on of the
business in the manner aforesaid shall be punishable with imprisonment for a term
which may extend to two years and with fine which shall not be less than fifty thousand
rupees but which may extend to five lakh rupees.
c. (3) Where a limited liability partnership or any partner or designated partner or
employee of such limited liability partnership has conducted the affairs of the limited
liability partnership in a fraudulent manner, then without prejudice to any criminal
proceedings which may arise under any law for the time being in force, the limited
liability partnership and any such partner or designated partner or employee shall be
liable to pay compensation to any person who has suffered any loss or damage by
reason of such conduct:
Provided that such limited liability partnership shall not be liable if any such partner or
designated partner or employee has acted fraudulently without knowledge of the
limited liability partnership.
6. Section 31. Whistle blowing.—
a. (1) The Court or Tribunal may reduce or waive any penalty leviable against any partner
or employee of a limited liability partnership, if it is satisfied that—
i. (a) such partner or employee of a limited liability partnership has provided
useful information during investigation of such limited liability partnership; or
ii. (b) when any information given by any partner or employee (whether or not
during investigation) leads to limited liability partnership or any partner or
employee of such limited liability partnership being convicted under this Act or
any other Act.
b. (2) No partner or employee of any limited liability partnership may be discharged,
demoted, suspended, threatened, harassed or in any other manner discriminated
against the terms and conditions of his limited liability partnership or employment
merely because of his providing information or causing information to be provided
pursuant to sub-section (1)

7. The partners in an LLP have a limited liability. Unlike in Partnership, where a

partner is also liable for the acts of other partners, in an LLP, a partner is not
liable for another partner’s act. No partner would be liable for independent or
unauthorised acts of the other partners or for their misconduct. Every partner of
 an LLP, for the purpose of business of the LLP is the agent of the LLP, but not
of the other partners.[xxiii] The LLP is liable if a partner of a limited liability
partnership is liable to any person as a result of a wrongful act or omission on
his part in the course of the business of the limited liability partnership or with
its authority.[xxiv] An obligation of the limited liability partnership whether
arising in contract or otherwise, shall be solely the obligation of the limited
liability partnership.[xxv] A partner cannot be made liable for the obligations of
the limited liability partnership. A partner is not personally liable, directly or
indirectly for an obligation of LLP solely by reason of being a partner of the
LLP.[xxvi] The liabilities of the LLP shall be met out of the property of the
limited liability partnership.[xxvii] The partnership firm would be liable to the
full extent of its assets, while the partner would be liable only to the extent of
their agreed contribution. But these protections do not affect the personal
liability of a partner for his own wrongful act or omission.[xxviii] An LLP is
not bound by anything done by a partner in dealing with a person if the partner
in fact has no authority to act for the LLP in doing a particular act and the
person knows that he has no authority or does not know or believe him to be a
partner of the LLP.[xxix]
8. The mutual rights and duties of the partners and the mutual rights and duties of
the LLP and its partners shall be determined on the basis of LLP agreement
between the partners, or between the limited liability partnership and its
partners.[xxx] If there is no agreement as to any matter, the mutual rights and
duties of the partners and the mutual rights and duties of the LLP and its
partners shall be determined by the provisions relating to that matter as set out
in the First Schedule.[xxxi] So, according to section 23(4) of the Act, if there is
no LLP agreement between partners then the terms of mutual rights and duties
will be decided according to First Schedule. It is the First Schedule which
ensures the cordial and fiduciary relation and reliable environment among
partners inter se and between LLP and partners.
a.