# Compounding of Offences under LLP Act [Section 39]
## What is Compounding?
Compounding is a mechanism by which an offence is settled by paying a sum of money instead of going through full prosecution. It saves time, cost, and reduces court burden.
## Who can Compound? (S.39(1))
Regional Director (RD) OR
Any officer not below the rank of RD authorised by the Central Government.
This power exists notwithstanding the CrPC, 1973.
## Which Offences can be Compounded?
Only offences punishable with FINE ONLY under the LLP Act.
Offences punishable with imprisonment (with or without fine) are NOT compoundable under S.39.
## Amount of Compounding Fee
The sum collected:
Maximum = amount of maximum fine for the offence
Minimum = shall NOT be lower than the minimum fine for the offence
## Repeat Offence Restriction (S.39(2))
If a similar offence was compounded earlier, no compounding is allowed if committed within 3 years from that earlier compounding.
Explanation: Any second/subsequent offence committed AFTER expiry of 3 years is deemed to be the first offence (clock resets).
## Procedure (S.39(3)–(6))
Step
Action
1
Application filed with Registrar
2
Registrar forwards it with his comments to RD
3
RD passes the compounding order
4
Intimation to Registrar within 7 days of compounding
5
If compounded before prosecution → no prosecution shall be instituted
6
If compounded after prosecution → Registrar gives notice to court → offender is discharged
## Power to Direct Filing (S.39(7))
RD, while compounding, may direct any partner / designated partner / employee to file / register any return, account or document (with normal or additional fee) within the time specified.
## Consequence of Disobeying RD's Direction (S.39(8))
If the person fails to comply with the order under S.39(7):
Maximum fine for the original offence (which was under consideration) becomes TWICE the amount of the punishment provided in the corresponding section.
## Key Takeaway
Compounding = quick settlement of fine-only offences by RD; available only once in 3 years for similar offences; non-compliance with RD's order doubles the penalty.
Worked example
### Example 1
Example 1 (Repeat Offence): XYZ LLP committed Offence A on 01-04-2022 which was compounded on 01-06-2022. The same Offence A is committed again on 01-05-2024.
Date of earlier compounding: 01-06-2022
3-year window ends on: 01-06-2025
New offence is within 3 years → CANNOT be compounded under S.39(2).
### Example 2
Example 2 (Clock Reset): Same LLP commits Offence A on 01-07-2025 (after 3 years from 01-06-2022).
This is deemed to be the first offence as per Explanation to S.39(2) → can be compounded.
### Example 3
Example 3 (Doubling under S.39(8)): RD orders Partner P to file Form X by 30-Sep with additional fee. P fails to comply. If maximum fine for the offence was ₹50,000, then under S.39(8) it becomes ₹1,00,000 (twice).
⚠️ Common exam mistakes
Confusing the threshold — compounding under S.39 is for offences punishable with FINE ONLY, not those with imprisonment.
Forgetting that the minimum compounding amount cannot be less than the minimum fine prescribed for the offence.
Missing the 7-day intimation requirement to the Registrar after compounding.
Treating the 3-year bar as a permanent bar — it resets after 3 years (Explanation to S.39(2)).
Overlooking that non-compliance with RD's direction under S.39(7) DOUBLES the maximum fine (S.39(8)).
Bare-Act text Section 39 · Limited Liability Partnership Act, 2008 · click to expand
Section 39 — Compounding of Offences:
(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the Regional Director or any other officer not below the rank of Regional Director authorised by the Central Government may compound any offence under this Act which is punishable with fine only, by collecting from a person reasonably suspected of having committed the offence, a sum which may extend to the amount of the maximum fine provided for the offence but shall not be lower than the minimum amount provided for the offence.
(2) Nothing contained in sub-section (1) shall apply to an offence committed by a limited liability partnership or its partner or its designated partner within a period of three years from the date on which similar offence committed by it or him was compounded under this section.
Explanation: any second or subsequent offence committed after the expiry of three years from the date on which the offence was previously compounded shall be deemed to be the first offence.
(3) Every application for compounding shall be made to the Registrar who shall forward the same with his comments to the RD.
(4) Intimation of compounding to be given to Registrar within 7 days.
(5) Compounding before prosecution → no prosecution shall be instituted.
(6) Compounding after prosecution → Registrar to inform court → offender discharged.
(7) RD may direct filing/registration of any return/account/document with fee.
(8) On failure to comply with the order under sub-section (7), maximum fine shall be twice the amount provided in the corresponding section.