LLP
Topic 66 Committee of Inspection Rule23
THE LEGAL BRIDGE
Judiciary Examination Study Material
Topic 66
Committee of Inspection
Maximum 12 Members — Creditors & Partners (Rule 23, W&D Rules 2012)
Pillar 8 — Winding Up, Dissolution & Tribunal Jurisdiction (Sections 63–65)
Module Overview The Committee of Inspection is a supervisory body that oversees the liquidator during winding up. Governed by Rule 23 of the LLP (Winding Up and Dissolution) Rules, 2012, it comprises representatives of creditors and partners. This topic covers its constitution, powers, functioning, and significance as an oversight mechanism. |
66.1 Rule 23 — Committee of Inspection
Rule 23, LLP (W&D) Rules 2012 In every winding up, the NCLT may appoint a Committee of Inspection consisting of not more than twelve members. The Committee shall consist of members from creditors and partners of the LLP in the proportion decided by the NCLT. The Committee shall assist the liquidator and may make such inspections of the books and affairs of the LLP as it thinks fit. |
66.2 Composition — Key Facts
12 Maximum members | Proportional From creditors | Proportional From partners | NCLT Appointed by |
Composition Aspect | Details |
Maximum membership | Not more than 12 members in total |
Creditor representation | Elected by creditors at creditors' meeting — proportional to value of creditor claims |
Partner representation | Elected by partners at partners' meeting — proportional to partners' interests |
Proportion decision | NCLT determines exact proportion of creditor vs partner representation based on circumstances |
Vacancy removal | Member who fails to attend 3 consecutive meetings without leave may be removed by NCLT |
66.3 Powers and Functions
- Oversight of liquidator: Committee supervises the liquidator's conduct — reviews accounts, questions decisions.
- Sanction for significant actions: Liquidator must obtain Committee sanction (or NCLT sanction if no Committee) before selling valuable assets, bringing/settling litigation above threshold value.
- Inspection powers: Committee members can inspect the LLP's books and records at any time during winding up.
- Report to NCLT: Committee can report to NCLT on any matter concerning the winding up — including misconduct by the liquidator.
66.4 Significance — Why the Committee of Inspection Matters
The Committee of Inspection provides a democratic check on the liquidator's exercise of power — creditors (who have a financial stake) and partners (who have an interest in surplus distribution) together monitor the process. Without a Committee, the liquidator reports only to the NCLT, which has less granular visibility into day-to-day winding-up operations.
📌 EXAM TIP: Committee of Inspection — a "content gap" topic: (1) Rule 23, LLP (W&D) Rules 2012 — NOT the LLP Act itself; (2) Maximum 12 members; (3) Composed of creditors AND partners — proportional representation decided by NCLT; (4) Liquidator must obtain Committee sanction for significant asset sales/litigation; (5) Committee can report to NCLT on liquidator misconduct. Knowing this topic gives a competitive advantage in mains. |
Key Point | Core Content |
Rule 23 W&D Rules 2012 | Committee of Inspection — max 12 members |
Composition | Creditors + partners in proportion decided by NCLT |
Oversight power | Supervise liquidator; review accounts; question decisions |
Sanction required | Liquidator must get Committee sanction for significant asset sales/litigation |
Inspection power | Members can inspect LLP books at any time during winding up |
Report to NCLT | Committee can report liquidator misconduct to NCLT |