LLP can Form a Partnership Firm with an Individual or Other Persons: Kerala High Court [Read Judgment]

LLP - Partnership Firm - Kerala High Court - Taxscan

The Kerala High Court held that Limited Liability Partnership (LLP) can form a partnership firm with an individual or other persons.

The Petitioner claims to be the designated partner of Sleeplock LLP which is a limited liability partnership registered under the Limited Liability Partnership Act, 2008. The Sleeplock LLP formed a partnership firm along with one Gourav Raj in the name and style of M/s. Morning Owl Sleep Solutions. A partnership deed was executed accordingly. The said deed was submitted for registration before the respondent.

The respondent rejected the same on the ground that LLP cannot be a partner of a firm. Petitioner has stated that the partnership is formed in order to carry out the business of processing, manufacturing, trading, importing, exporting, distribution and sales of furnished and semi-furnished mattress, latex form cores, pillows, rubberised coir, coconut rubber, other rubber and coir products, through retail outlets and through online platforms.

The Petitioner claims that a partnership along with an LLP is not prohibited under the Partnership Act and that LLP is a legal entity, as defined under the LLP Act and it is separate from its partners. It has perpetual succession and is having a common seal. Under Section 14 it is capable of suing and being sued, on its registration. It is also capable of acquiring, developing or disposing of movable or immovable properties.

Therefore, the petitioner claims that the LLP is liable to be treated as a person and there cannot be any objection for registering a partnership with an LLP which is a person. It is stated that the said LLP has been given Certificate of Incorporation.

The respondent has filed a statement reiterating his stand in the impugned order. It is stated that some of the provisions of the Limited Liability Partnership Act 2008 are inconsistent with that of the Indian Partnership Act, 1932, pertaining to the liability. According to the respondent, Section 25, 26, and 49 of the Indian Partnership Act, 1932 makes the partners be jointly and severally liable with all the other partners and also severally liable for the acts of the firm, of which such person is a partner.

The single judge bench of Justice P.V.Asha noted that Section 4 of the Partnership Act permits the Constitution of a firm or partnership between one or more persons. In this case, the partnership deed was executed between an individual and an LLP which is a body corporate having a legal entity and coming within the definition of “person”.

“The individual liability of the partners of LLP would not be relevant when the LLP itself would have liability independent of the liability of the partners. Therefore, the difference in the provisions under the Partnership Act relating to the liability of the firm or the individual partners would not stand in the way of the constitution of a partnership with an LLP,” the court added.

The court directed the respondent to reconsider the request of the petitioner for registration and to take appropriate action on the same within a period of one month.

Subscribe Taxscan Premium to view the Judgment

Support our journalism by subscribing to Taxscan AdFree. We welcome your comments at info@taxscan.in

taxscan-loader