Topic 67 Dissolution LLP Section65

THE LEGAL BRIDGE

Judiciary Examination Study Material

Topic 67

Dissolution of LLP

Section 65 — Removal from Register, Pari Passu & 5-Year Restoration

Pillar 8 — Winding Up, Dissolution & Tribunal Jurisdiction (Sections 63–65)

Module Overview

Dissolution is the final act in an LLP's life — it removes the LLP from the register and terminates its existence as a legal entity. This topic covers the dissolution process following winding up, the pari passu principle in asset distribution to creditors, the consequences of dissolution, and the restoration mechanism under Section 75(4).

67.1 Section 65 — Dissolution of LLP

Section 65

When the affairs of the limited liability partnership have been completely wound up, the liquidator shall make an application to the Tribunal for the dissolution of the limited liability partnership. The Tribunal shall dissolve the LLP, and the Registrar shall, on receiving notice from the Tribunal, strike off the name of the LLP from the register. The dissolution shall be complete when the Registrar has effected the striking off.

67.2 Two Dissolution Routes

Route	Process	Forum	End Result
Post-winding up (Section 65)	Liquidator applies to NCLT after completing winding up; NCLT dissolution order; Registrar strikes off	NCLT → Registrar	Dissolution complete on Registrar's striking off
Strike-off by Registrar (Section 75)	Registrar strikes off defunct LLP; show-cause notice; no response = strike-off	Registrar	LLP struck off; restorable within 5 years

67.3 Pari Passu Distribution — The Core Principle

The pari passu principle (Latin: "with equal step") governs distribution to unsecured creditors — all unsecured creditors of the same class are paid proportionally and equally from available assets:

Illustration: If LLP has Rs. 50 lakhs after paying secured/preferential creditors and Rs. 1 crore in unsecured claims → each unsecured creditor gets 50 paisa per rupee of their claim.
No preference: Pari passu prevents "first come, first served" distribution — all equal creditors are treated equally regardless of when they filed claims.
Partners rank last: Partners receive capital and profit entitlements ONLY after ALL creditors are paid in full.

67.4 Consequences of Dissolution

Consequence	Details
LLP ceases to exist	No legal personality — cannot sue, be sued, or own property
Partners' liability ends	All LLP obligations extinguished on dissolution
Unsatisfied creditors	Remaining debt discharged on dissolution — unsecured creditors bear the loss
Pending litigation	Generally abates on dissolution
Restoration within 5 years	Section 75(4) — can be restored on application to Registrar or NCLT

67.5 Restoration After Dissolution — Section 75(4)

By Registrar: On LLP application — if struck off due to administrative default; LLP demonstrates it was not actually defunct.
By NCLT: If creditor or partner shows LLP was carrying on business at time of strike-off, or just and equitable to restore for pursuing a claim or asset.
5-year window: Application must be made within 5 years of the dissolution/strike-off date.
Retrospective effect: Restoration is retrospective — the entity is deemed to have NEVER been struck off. All rights, assets, and obligations are revived.

⚖ Arunima Textiles Ltd. v. Registrar of Companies SC (Applied to LLP by analogy) (2012)

Held: When a company (and by analogy, an LLP) is restored to the register, it is deemed to have never been dissolved — restored as if the dissolution had not occurred. All contracts, assets, and rights exercisable before dissolution are revived.

Principle: Restoration is retrospective — entity deemed never struck off; all rights, assets, and obligations revived.

📌 EXAM TIP: Dissolution: (1) Section 65: liquidator applies to NCLT → NCLT order → Registrar strikes off; (2) Pari passu: unsecured creditors paid proportionally; (3) Partners rank LAST; (4) 5-year restoration window (Section 75(4)); (5) Restoration is retrospective — entity deemed never dissolved; (6) Restoration by Registrar (admin default) or NCLT (just and equitable).

Key Point	Core Content
Section 65	Liquidator applies to NCLT → dissolution order → Registrar strikes off
Pari passu	Unsecured creditors paid proportionally from available assets — equal treatment
Partners rank	Last — after ALL creditors paid in full
Restoration	Within 5 years (Section 75(4))
Who restores	Registrar (admin defaults) or NCLT (just and equitable)
Restoration effect	Retrospective — entity deemed never struck off; all rights revived