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Microlesson · 5-min read

Compromise or Arrangement of LLP (Section 60)

## Section 60 — Compromise or Arrangement (C/A) of LLP

### Sub-section (1) — Calling of Meeting

Where a C/A is proposed between:

  • LLP and its creditors, OR
  • LLP and its partners,

on application of:

  • LLP, or
  • any creditor or partner, or
  • in case of LLP under winding up — the Liquidator,

the Tribunal may order a meeting of creditors/partners to be called, held and conducted in the prescribed manner.

### Sub-section (2) — Sanction of C/A

A C/A is binding if:

1. Majority representing 3/4th in value of creditors/partners present and voting agree to the C/A, AND

2. The C/A is sanctioned by the Tribunal by order.

Once sanctioned, it binds:

  • All creditors / partners / LLP / liquidator / contributories.

### Disclosure Requirement

No order of sanction shall be made unless Tribunal is satisfied LLP has disclosed:

  • All material facts including latest financial position, AND
  • Pendency of any investigation proceedings.

### Sub-section (3) — Filing with RoC

  • Tribunal's order shall be filed with RoC within 30 days of making it.
  • The order takes effect only after filing.

Penalty for non-filing:

  • LLP: ₹10,000 + ₹100/day, max ₹1 lakh
  • Every DP: ₹10,000 + ₹100/day, max ₹50,000

### Sub-section (4) — Stay of Proceedings

After application is made, Tribunal may stay the commencement or continuation of any suit/proceeding against the LLP, on terms it thinks fit, until the application is finally disposed of.

Worked example

### Example 1

Example: An LLP proposes a C/A with creditors. At the meeting, creditors holding 70% in value agree. Is the C/A binding?

Answer: No. Section 60(2) requires majority representing 3/4th in value (i.e. 75%). 70% is insufficient. Even if value threshold is met, Tribunal sanction is mandatory.

### Example 2

Example: Tribunal sanctions a C/A on 1st April. LLP files the order with RoC on 5th May (35 days later).

Answer: Filing is delayed beyond 30 days. Penalty: LLP ₹10,000 + ₹100/day (max ₹1L); each DP ₹10,000 + ₹100/day (max ₹50K). Importantly, the order takes effect ONLY upon filing.

⚠️ Common exam mistakes

  • Quoting 'majority in number' — the test is 3/4th in value.
  • Believing Tribunal order is effective from date of sanction — effective only from date of filing with RoC.
  • Forgetting the disclosure of pending investigation as a sanction prerequisite.
Reference: Section 60 — Limited Liability Partnership Act, 2008
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