Topic 63 Compulsory Winding Up Section64

Module Overview

Section 64 provides for compulsory winding up of an LLP by the NCLT on any of six specified grounds. This topic examines each ground, the "just and equitable" principle (the broadest and most litigated ground), the inability to pay debts ground, and the 5-year non-filing ground — a uniquely administrative basis for compulsory winding up.

Section 64 — Grounds for Compulsory Winding Up

A limited liability partnership may be wound up by the Tribunal— (a) if the LLP has decided that it be wound up by the Tribunal; (b) if for a period of more than six months the number of partners is reduced below two; (c) if the LLP is unable to pay its debts; (d) if the LLP has acted against the interests of the sovereignty and integrity of India, security of State, friendly relations with foreign States, public order, decency or morality; (e) if on application by the Registrar or any person authorised by CG, the Tribunal is of the opinion that it is just and equitable; or (f) if the LLP has made a default in filing the SoAS or annual return for any five consecutive financial years.

Ground

Section 64

Petitioner

Key Aspect

LLP's own decision for NCLT supervision

(a)

LLP itself

Partners decide voluntarily but want NCLT-supervised winding up

Below 2 partners for >6 months

(b)

Any partner; Registrar

Connects with Section 6(2) sole-partner grace period expiry

Unable to pay debts

(c)

Any creditor; partner; liquidator

21-day statutory demand; court decree unsatisfied; balance-sheet insolvency

Sovereignty/national security

(d)

Central Government; Attorney General

Extraordinary ground — serious national security or public interest threat

Just and equitable

(e)

Registrar; CG-authorised person

Broadest equitable ground — deadlock, loss of substratum, breakdown of trust

5 consecutive years non-filing

(f)

Registrar; CG

Administrative — persistent non-compliance justifies compulsory winding up

⚖ Ebrahimi v. Westbourne Galleries Ltd. [1973] AC 360 (HL)

Held: Applied to LLPs in India. Lord Wilberforce established that when an entity is formed on a personal relationship and mutual trust — a "quasi-partnership" — the court can wind it up when that relationship breaks down, even if technically solvent.

Principle: Just and equitable ground: when the personal foundation of the enterprise is destroyed, winding up is justified even if the entity is solvent.

⚖ Suresh Chandra v. Official Liquidator Delhi HC (2016)

Held: The court ordered compulsory winding up of an LLP that had not filed its SoAS for seven consecutive years — establishing that Section 64(f) persistent non-compliance is an independent, stand-alone ground requiring no showing of insolvency or fraud.

Principle: Persistent non-filing under Section 64(f) is an independent ground for compulsory winding up — no insolvency or fraud need be shown.

📌 EXAM TIP: Section 64 six grounds — mnemonic "D-P-U-A-J-N": Decision; Partners (below 2); Unable (to pay); Acts against sovereignty; Just and equitable; Non-filing (5 years). All six must be memorised for objective rounds. The "just and equitable" ground (e) is the most commonly tested in mains — mention Ebrahimi principle.

Key Point

Core Content

Section 64(a)

LLP decides to be wound up by Tribunal

Section 64(b)

Below 2 partners for >6 months

Section 64(c)

Unable to pay debts

Section 64(d)

Acts against sovereignty/national security/public order/morality

Section 64(e)

Just and equitable — Registrar or CG-authorised person applies

Section 64(f)

Non-filing of SoAS or Annual Return for 5 consecutive financial years