Section 30 of LLP Act, 2008 : Section 30: Unlimited Liability In Case Of Fraud

Explanation using Example

Imagine a scenario where a Limited Liability Partnership (LLP), "TechAdventures LLP," has taken a substantial loan from a bank. One of the partners, John, intentionally inflates the company's assets and revenue in the financial statements to secure the loan. This act is carried out without the knowledge of other partners or the LLP itself.

Later, when the fraud is discovered, the bank decides to take legal action. According to Section 30(1) of the Limited Liability Partnership Act, 2008, John's liability for the debt incurred by the fraudulent act would be unlimited. This means he could be personally held responsible for repaying the entire loan. However, "TechAdventures LLP" would only be liable to the extent that they can't prove the fraud was conducted without their knowledge or authority.

Furthermore, under Section 30(2), John could face criminal charges for his actions, which might include imprisonment of up to five years and a fine ranging from fifty thousand to five lakh rupees.

Additionally, as per Section 30(3), if any party suffered a loss due to John's fraudulent conduct, such as an investor who made decisions based on the inflated financial statements, both John and "TechAdventures LLP" could be held liable to compensate for the damages, unless the LLP can demonstrate that they were unaware of John's fraudulent activities.