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CA Foundation · Business Laws · The Limited Liability Partnership Act, 2008

Rohan and Sana are the only partners of Kaveri Exports LLP, a registered LLP. Sana, while dealing with a client, commits a fraud without Rohan's knowledge or authority. Which statement is correct?

Sana is personally liable for her own fraud, and the LLP is liable if she acted in its business. Rohan is not personally liable, because a partner in an LLP is an agent of the LLP and not of the other partners, and limited liability does not protect fraud.

  1. ARohan is personally liable for Sana's fraud because all partners are agents of each other
  2. BSana alone is personally liable for her fraudulent act, and the LLP is also liable if she acted in the course of its business; Rohan is not personally liable for itCorrect
  3. CNeither Sana nor the LLP is liable because an LLP has limited liability
  4. DOnly the LLP is liable and Sana has no personal liability

Explanation

A partner is the agent of the LLP, not of other partners, so Rohan is not liable for Sana's unauthorised wrongful act. The LLP is liable if she acted in the course of its business, but Sana remains personally liable for her own fraud, as limited liability does not shield wrongdoing. The first option wrongly applies the mutual agency rule of ordinary firms.

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