Topic 04 LLP Bill 2006 Legislative Journey

THE LEGAL BRIDGE

Judiciary Examination Study Material

Topic 4

LLP Bill 2006 — Legislative Journey

From Introduction in Rajya Sabha to Presidential Assent

Pillar 1 — Historical Foundation & Legislative Background

Module Overview

This topic traces the complete legislative journey of the LLP Bill from its introduction in the Rajya Sabha on December 15, 2006 to the Presidential assent on January 7, 2009, and subsequent commencement. We cover the full chronology, the Parliamentary Standing Committee process, key debates, and the final structure of the Act as enacted — with specific attention to the dates and facts that are tested in examinations.

4.1 The Complete Legislative Chronology

Dec 2006

Introduced in RS

Oct 2008

Passed by RS

Dec 2008

Passed by LS

Jan 2009

Presidential Assent

Step-by-Step Timeline

2003 — Naresh Chandra Committee I recommends LLP for service sector

2005 — J.J. Irani Committee recommends extending to small enterprises

July 2005 — Naresh Chandra Committee II submits its report; MCA gains internal consensus

December 15, 2006 — LLP Bill 2006 introduced in the Rajya Sabha by the Ministry of Corporate Affairs

2006–2008 — Bill referred to the Parliamentary Standing Committee on Finance; extensive stakeholder consultations; revised Bill prepared incorporating committee suggestions

October 22, 2008 — Revised LLP Bill 2008 passed by the Rajya Sabha

December 12, 2008 — LLP Bill passed by the Lok Sabha

December 2008 — Act formally titled "The Limited Liability Partnership Act, 2008"

January 7, 2009 — Presidential assent received → Act 6 of 2009

April 1, 2009 — LLP Act, 2008 brought into force (except Rules 32, 33, and 38–40)

May 22, 2009 — Rules 32, 33, 38–40 also brought into force

4.2 The Parliamentary Standing Committee Process

The referral of the LLP Bill to the Parliamentary Standing Committee on Finance was a critical step that transformed the Bill from its 2006 version to the more refined 2008 version. Key changes made on the Standing Committee's recommendations:

Clarification of LLP as body corporate: The Standing Committee recommended that Section 3 explicitly declare the LLP as a "body corporate" with a legal personality separate from its partners, which was made clearer in the final Act.
Strengthening designated partner provisions: The committee recommended that designated partners have clear statutory duties and that at least one must be a resident of India — incorporated in Section 7.
Conversion schedules: The detailed schedules (Schedules 2, 3, 4) for conversion from firms and companies were substantially developed during the Standing Committee stage.
Investigation powers: The Standing Committee strengthened the investigation and enforcement provisions (Sections 43–57) to prevent LLPs from being used to evade creditor obligations.

4.3 The Critical Naming Issue — "Act of 2008" or "Act of 2009"?

A Common Exam Trap

The LLP Act is formally called the "Limited Liability Partnership Act, 2008" — because Parliament passed it in December 2008. However, it received Presidential assent on January 7, 2009, making it "Act 6 of 2009" in official gazette notation.

Convention: Acts are named after the year of Parliamentary passage, not the year of assent. Thus "LLP Act, 2008" is correct despite the January 2009 assent.

Both are technically correct: "LLP Act, 2008" (popular name) and "Act 6 of 2009" (gazette number).

4.4 Structure of the Act as Enacted

The LLP Act, 2008 as enacted consists of 81 Sections, 4 Schedules, and 11 Chapters:

Chapter	Title	Key Sections
I	Preliminary — Definitions	1–2
II	Nature of LLP	3–4
III	Incorporation & Registration	5–14
IV	Partners & Their Relations	15–31
V	Form & Effect of LLP Agreement	22–23 (within Ch IV)
VI	Accounts, Audit & Annual Return	34–36
VII	Assignment & Transfer	42
VIII	Investigation	43–57
IX	Compromise/Arrangement	60–61
X	Conversion to LLP	55–59 + Schedules 2–4
XI	Winding Up & Dissolution	63–65
XII	Miscellaneous	66–81

The four Schedules are:

Schedule 1: Matters relating to the LLP agreement (default provisions if no agreement is made)
Schedule 2: Conversion of firm (registered under IPA 1932) into LLP
Schedule 3: Conversion of private company into LLP
Schedule 4: Conversion of unlisted public company into LLP

4.5 Key Debates During Parliamentary Passage

Several debates during Parliamentary passage shaped the final Act:

Debate on tax treatment: Some members argued for full tax transparency (like a UK LLP — partners taxed, not the LLP). This was rejected; India opted to tax the LLP at 30%, with a corresponding exemption for partners on LLP income.
Debate on unlimited liability for fraud: Members successfully insisted that the limited liability shield should not protect partners who commit fraud — reflected in Section 30 (unlimited personal liability for fraudulent conduct).
Opposition to foreign LLP liberalisation: Some members sought greater restrictions on foreign LLPs operating in India. The final Act (Section 59) took a middle path — Central Government empowered to make rules for foreign LLPs.

⚖ Nikhil Merchants Ltd. v. Union of India Delhi HC (2011)

Held: First significant challenge to the LLP Act's constitutionality. The court upheld the Act in its entirety, holding that Parliament had full legislative competence under Entry 43 (Incorporation, Regulation and Winding Up of Trading Corporations) and Entry 44 (Incorporation, Regulation and Winding Up of Corporations, whether trading or not) of List I of the Seventh Schedule.

Principle: The LLP Act is constitutionally valid — Parliament's competence to enact it derives from the concurrent corporate law entries in List I.

📌 EXAM TIP: Examination pattern: Fill-in-the-blanks on dates: "The LLP Act received Presidential assent on ___" (Jan 7, 2009); "The LLP Act came into force on ___" (April 1, 2009); "The LLP Bill was introduced in ___ on ___" (Rajya Sabha, December 15, 2006). These specific dates appear in objective rounds of DJS, RJS, and UPSC law-optional papers.

✔ PRACTICAL NOTE: When advising clients on LLP registration today, the foundational document is the Certificate of Incorporation issued by the Registrar under Section 12 — this is the LLP's birth certificate. The legal basis for this is traceable to the Parliamentary journey that began in December 2006 and culminated in April 2009.

Quick Revision Summary — Topic 4

Key Point	Fact / Content
Introduced in RS	December 15, 2006
Passed by RS	October 22, 2008
Passed by LS	December 12, 2008
Presidential Assent	January 7, 2009 — Act 6 of 2009
Commenced	April 1, 2009 (main provisions); May 22, 2009 (Rules 32, 33, 38–40)
Popular Name	Limited Liability Partnership Act, 2008 (year of Parliamentary passage, not assent)
Structure	81 Sections, 4 Schedules, 11 Chapters
Schedules	S.1: Default LLP Agreement; S.2: Firm→LLP; S.3: Pvt Co→LLP; S.4: Unlisted Public Co→LLP
Key Standing Committee Change	Clarified LLP as body corporate; strengthened designated partner provisions