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

Kiran LLP has two partners, Farhan and Geeta. Farhan, acting within the scope of the LLP business, commits a fraud on a customer, Mr Jain, without Geeta's knowledge. Mr Jain claims against the LLP and Geeta personally. Which statement correctly states the legal position under the LLP Act, 2008?

The LLP is liable for Farhan's wrongful act done in the course of its business, while Geeta is not personally liable merely because she is a partner. A partner is an agent of the LLP, not of other partners, so one partner's act does not bind another personally.

  1. AThe LLP is liable, and Geeta is not personally liable merely because she is a partnerCorrect
  2. BOnly Geeta is liable because she is the designated partner
  3. CNeither the LLP nor Farhan is liable because fraud is outside the agency
  4. DGeeta is jointly and severally liable with Farhan for the fraud

Explanation

A partner is the agent of the LLP, not of other partners. The LLP is liable for wrongful acts of a partner done in the course of its business. The LLP is not liable only if the partner had no authority and the other party knew it. Geeta is not personally liable for Farhan's independent act, while Farhan remains personally liable for his own wrongful act and, for fraud, the liability is unlimited.

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