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CA Intermediate · Corporate and Other Laws · The Limited Liability Partnership Act, 2008

Anita and Bharat are partners in an LLP with a written LLP Agreement. Bharat, acting within his authority, signs a contract for the LLP, but he had also committed fraud on the counterparty in doing so, without Anita's knowledge. Under the LLP Act, 2008, which statement is correct?

The LLP is liable to the same extent as the wrongdoing partner, and Bharat is personally liable for his own fraud, but Anita is not personally liable merely because she is a partner. The LLP Act protects a partner from the independent acts of other partners.

  1. AAnita is personally liable for Bharat's fraud because she is a partner
  2. BBharat alone is liable for his own wrongful act, while the LLP is liable to the same extent as Bharat; Anita is not personally liable merely for being a partnerCorrect
  3. COnly the LLP is liable and Bharat has no personal liability
  4. DNeither the LLP nor Bharat is liable because LLP has limited liability

Explanation

A partner is not personally liable for another partner's wrongful act or omission. The LLP is liable to the same extent as the partner who acted in the course of its business. The liability of Bharat for his own fraud is not shielded, so he is also personally liable. Making Anita liable ignores the separate liability principle.

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