LIMITED LIABILITY PARTNERSHIP-PART-XXIII - (Production of documents and evidence in investigations

[Dr. Sanjiv Agarwal]

Production of documents and evidence

Section 47 of LLP Act, 2008 seeks to provide the duty of the designated partners and partners of the LLP to preserve and produce all books, papers relating to the LLP before inspector and otherwise give all assistance to the inspector for investigation. This section also seeks to empower the inspector to examine such persons on oath. This section further seeks to provide that if any person fails without reasonable cause or refuses to produce before an inspector any book or paper or furnish any relevant information or to appear before the inspector personally when required to do so or to answer any question which is put to him by the inspector under this section or to sign the notes of any examination, he shall be punishable with fine which shall not be less than two thousand rupees but which may extend to twenty-five thousand rupees and with a further fine which shall not be less than fifty rupees but which may extend to five hundred rupees for every day after the first day after which the default continues.

Scope of Statutory Provision

Sections 47 contain provisions in relation to production of documents and evidence in case of LLPs. There are six sub-sections providing for -

Sub-section	Provides for
1	duty of designated partners and partners to preserve and produce books, papers etc.
2.	power of inspector to seek information or produce books and papers before him from other entities
3.	books and papers in custody of inspector.
4.	examination on oath by inspector
5.	Penalty for contravention of provisions of section 47
6.	manner of taking notes of examination.

Duty of designated partners and partners to preserve and produce books, papers etc [Sub-section (1)]

The provisions of sub-section (1) makes the designated partners and partners liable to produce all books and papers relating to the LLP as required by the inspector. They are also required to give all assistance in connection with the investigation.

It is a statutory obligation cast upon -

(i) designated partners and

(ii) partners

of a LLP to-

(a) preserve and to produce before inspector including any person authorized by him

§ all books and papers of or relating to LLP, or

§ all books and papers of other entity which are in their custody or power

(b) give to inspector all assistance in connection with investigation which they are reasonable able to give.

Following points are relevant for sub-section (1)-

(a) duly is cast on both, partners as well as designated partners.

(b) both, preservation of books and papers and production of books and papers is required to be caused.

(c) all books and papers are included rather than prescribed books. This would include books of account, financial statements, statement of account and solvency (refer section 34, rule 24).

(d) books and papers of both, LLP as well as other entities which are in their custody are required to be produced.

(e) such books etc are required to be produced before inspector and / or his authorized person in this behalf appointed with the previous approval of the Central Government

(f) partners and designated partners are required to provide to the inspector (including his authorized person) all necessary assistance which they are reasonably able to give so as to facilitate the investigation. What is reasonable would depend upon circumstances of each case. Assistance in relation to discharge of official duties of an inspector are expected from LLP partners or designated partners.

Power of inspector to seek information or produce books and papers before him from other entities [Sub-section (2)]

The provisions of sub-section (2) provide that the inspector with the prior approval of the Central Government may require any other entity to furnish such information of produce books and papers, which are relevant or necessary for purposes of his investigation. The inspector has been given power, discretionary in nature, requiring any other entity [other than those covered in sub-section (1)] to furnish information and produce books and papers etc. before him or any person authorized by him, which he thinks necessary or relevant for the purpose of his investigation of the LLP.

The inspector shall have to obtain prior or previous approval of the Central Government for -

(a) requiring any other entity to provide information or books etc.

(b) authorizing any person on his behalf to whom information could be furnished or books etc be produced.

The important condition here is that such information and books or papers etc. should be relevant or necessary for the purpose of his investigation. Whether it is necessary or relevant for such purpose shall be determined by the inspector but of course, subject to prior approval of Central Government.

Thus, both the conditions must be satisfied, ie,

(a) its relevance or necessity for purpose of investigation, and

(b) prior approval of the Central Government.

Books and papers in custody of inspector [Sub-section (3)]

The provision of sub-section (3) provide that the inspector can keep the books and papers in his custody for 30 days and thereafter he shall return them but however, with the power to call the books and papers once again. If the certified copies of the books and papers are submitted to the inspector, he shall return the books and papers. Any books or papers produced before the inspector or his authorized representative under sub-sections (1) or (2) may be retained by the inspector and kept in his custody for a maximum period of thirty days from the date of such production and custody and shall thereafter return the same to the person or entity or LLP from whom or on whose behalf such books or papers were produced. If books and papers were produced by LLP, it should be returned to LLP and if it was produced by other entity, it should be returned to such other entity.

The inspector has the authority to retain books only up to thirty days and no extension is allowed. He is bound to return the books back after completion of thirty days, though he has power to recall those books and papers.

First proviso to sub-section provides that inspector may call for the books and papers again, if they are needed. After how much time gap those could be recalled has not been specified.

Second proviso to sub section provides that if the LLP or other entity or any other person furnishes certified copies of books and papers as produced under sub-section(2), inspector shall return the books and papers back to the concerned LLP or entity or persons. It has been specifically provided that inspector shall keep certified copies and return the original books and papers and not vice-versa .

Examination on oath by inspector [Sub-section (4)]

The provision of sub-section (4) relater to examination of persons as oath by the inspector. He may examine on oath any partner, designated partners, former partners, former designated partners and entities which has been associated with the LLP. He can also examine any other person with the prior approval of the Central Government. He may administer an oath and for that purpose may require any of those persons to appear before him personally. Whether to examine a person on oath or not is a discretion to be used by the inspector depending upon the necessity in each case. He can examine on oath and administer an oath. As such, inspector can also administer an oath and may require any of the aforesaid person to appear before him in person, ie, personally.

An inspector may examine the following persons on oath-

(a) partners of LLP, or

(b) designated partners of LLP, or

(c) any other person of LLP,or

(d) any other person of other entities.

For (c) and (d) above, inspector shall be required to take previous approval of the Central Government.

Penalty for contravention of provisions of section 47 [Sub-section (5)]

Sub-section (5) prescribes penalty for contravention of sub-section (1) or (2) or (4). The offence is considered as a continuing offence and is compoundable under section 39 of the Act.

The penalty shall be imposed if any person fails or refuses to-

a) produce books or papers etc

b) furnish information as required

c) personally appear before inspector and answer any question

d) administer an oath

e) sign notes of any examination

The fine shall be levied on any partner, designated partner or any other person. The fine may not be imposed if such person is able to show reasonable cause for such a contravention to the satisfaction of the inspector.

The fine in the form of monetary penalty is as follows-

Minimum	Rs 2000 (rupees two thousand)
Maximum	Rs 25000 (rupees twenty five thousand
Further fine	Rs 50 to Rs 500 (rupees fifty to rupees five hundred for every day after first day till the default continues).

Manner of taking notes of examination [Sub-section (6)]

The provision of sub-section (6) states that the notes of any examination under oath shall be taken in writing and signed by the person whose examination is made on oath. A copy of the notes shall be given to the person who has been examined on oath and it shall be used as evidence by the inspector in any proceedings.

When the inspector examines a person, the notes of such examination are required to be taken in writing and recorded and should be signed by person whose examination was made on oath. A copy of the note should be given to the examine and can be used as an evidence by the inspector in the investigation proceedings.

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