## Section 30 — Unlimited Liability in Case of Fraud
This is an exception to the limited liability principle of Section 28.
### Sub-section (1) — Unlimited Liability
Where any act is carried out by the LLP, or by any of its partners:
with intent to defraud creditors of the LLP or any other person, OR
for any fraudulent purpose,
then:
Liability of the LLP and of the partners who acted with such intent → UNLIMITED for all debts and other liabilities of the LLP.
Carve-out: Where such act is carried out by a partner, LLP shall be liable to the same extent as the partner, unless the LLP establishes that such act was carried out by the partner without the knowledge or the authority of the LLP.
### Sub-section (2) — Criminal Punishment
Every person knowingly party to such fraudulent act is punishable with:
Imprisonment up to 5 years, AND
Fine: ₹50,000 to ₹5 lakhs (₹5,000 in handwritten notes appears to be a transcription error — bare act provides ₹50,000 minimum).
### Sub-section (3) — Compensation
Where the LLP/partners/employees have conducted business in a fraudulent manner, the LLP shall, without prejudice to criminal liability, be liable to pay compensation to any person who has suffered loss or damage.
Defence for the LLP: LLP is NOT liable if the partner/employee acted without the knowledge of the LLP.
Worked example
### Example 1
Example: Mr. K, a partner of GHI LLP, intentionally deceives a supplier into extending credit by falsifying the LLP's financial statements. The other partners did not know.
Answer: Mr. K's liability is unlimited under Section 30(1). The LLP's liability is limited to the partner's extent only if the LLP proves the act was without its knowledge/authority. Mr. K also faces imprisonment up to 5 years + fine ₹50,000–₹5 lakhs.
### Example 2
Example: All partners of a small LLP collude to siphon investor money. Creditors sue for ₹50 crores while LLP has only ₹2 crores in assets.
Answer: Under Section 30(1), the colluding partners' liability is UNLIMITED. Creditors can proceed against the personal assets of all colluding partners until the full ₹50 crores is recovered.
⚠️ Common exam mistakes
Forgetting that fraud is an exception which lifts the limited liability shield entirely.
Holding the LLP automatically liable for a partner's fraud — LLP can escape by proving lack of knowledge/authority.
Quoting the minimum fine as ₹5,000 — the bare act provides ₹50,000 (handwritten notes contain a transcription slip).
Treating Section 30 as a substitute for compensation — criminal liability under 30(2) and compensation under 30(3) operate independently.
Bare-Act text Section 30 · Limited Liability Partnership Act, 2008 · click to expand
Section 30 — Unlimited liability in case of fraud:
(1) In the event of an act carried out by an LLP, or any of its partners, with intent to defraud creditors of the LLP or any other person, or for any fraudulent purpose, the liability of the LLP 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 LLP: Provided that in case any such act is carried out by a partner, the LLP is liable to the same extent as the partner unless it is established by the LLP that such act was without the knowledge or the authority of the LLP.
(2) 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 five years and with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.
(3) Where an LLP or any partner or designated partner or employee of such LLP has conducted the affairs of the LLP in a fraudulent manner, then without prejudice to any criminal proceedings which may arise under any law for the time being in force, the LLP 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 LLP shall not be liable if any such partner or designated partner or employee has acted fraudulently without knowledge of the LLP.