LIMITED LIABILITY PARTNERSHIP-PART-XXVIII - (INVESTIGATION: EXPENSES & INSPECTOR'S REPORT)

[Dr. Sanjiv Agarwal]

Expenses of Investigation (Section 53)

Section 53 of LLP Act, 2008 contains the following provision in respect of expenses of investigation -

(1) The expenses of and incidental to an investigation by an inspector appointed by the Central Government under this Act shall be defrayed in the first instance by the Central Government; but the following persons shall, to the extent mentioned below, be liable to reimburse the Central Government in respect of such expenses, namely:

(a) any person who is convicted on a prosecution, or who is ordered to pay damages or restore any property in proceedings brought by virtue of section 52, may, in the same proceedings, be ordered to pay the said expenses to such extent as may be specified by the court convicting such person, or ordering him to pay such damages or restore such property, as the case may be;

(b) any entity in whose name proceedings are brought as aforesaid shall be liable, to the extent of the amount or value of any sums or property recovered by it as a result of the proceedings; and

(c) unless, as a result of the investigation, a prosecution is instituted in pursuance of section 50,

(i) any entity, a partner or designated partner or any other person dealt with by the report of the inspector shall be liable to reimburse the Central Government in respect of the whole of the expenses, unless and except in so far as, the Central Government otherwise directs; and

(ii) the applicants for the investigation, where the inspector was appointed in pursuance of the provisions of clause (a) of sub-section (1) of section 43, shall be liable to such extent, if any, as the Central Government may direct.

(2) Any amount for which a limited liability partnership or other entity is liable by virtue of clause (b) of sub-section (1) shall be a first charge on the sums or property mentioned in that clause.

(3) The amount of expenses in respect of which any limited liability partnership, other entity, a partner or designated partner or any other person is liable under sub-clause (i) of clause (c) of sub-section (1) to reimburse the Central Government shall be recoverable as arrears of land revenue.

(4) For the purposes of this section, any costs or expenses incurred by the Central! Government or in connection with the proceedings brought by virtue of section 52 shall be treated as expenses of the investigation giving rise to the proceedings.

Scope

Section 53 of the LLP Act, 2008 seeks to provide about the manner in which the expenses of an investigation by an inspector appointed by the Central Government under this Act, shall be defrayed and reimbursed. The section also seeks to provide that any amount for which a LLP or other entity is liable, shall be a first charge on the sums or property recovered by such LLP or other entity during investigation. The section further seeks to provide that the amount of expenses in respect of which any LLP, other entity, a partner or designated partner or any other person is liable to reimburse to the Central Government shall be recoverable as arrears of land revenue. The section further seeks to provide that any costs or expenses incurred by the Central Government or in connection with proceedings for recovery of damages or property brought by virtue of this Act, shall be treated as expenses of the investigation.

Section 53 deals with the provisions regarding recovery of expenses of an investigation. The expenses of investigation in the first instance shall be borne by one Central Government .

Persons liable to reimburse the expenses [Sub-section (1)]

Though Central Government shall be liable to defray the expenses of investigation by inspector in the first instance, sub-section (1) provides for persons who shall be liable to reimburse the expenses to the Central Government .

Following persons shall be liable to re reimburse expenses of investigation -

(a) any person who is convicted or who is ordered to pay damage or restore any property has to reimburse the expenses to the extent ordered by the court in the same proceedings .

(b) any entity in whose name proceedings are brought shall be liable to reimburse the expenses but liability will be limited to the extent of the amount or property recovered by it as a result of the proceedings.

(c) unless a prosecution is launched, any entity or any partner or designated partner or any other person dealt with by the report of the inspector shall be liable to reimburse the whole of expense or as the Central Government may give direction this regard.

(d) unless a prosecution is launched, the applicants for the investigation shall be liable to the extent as the Central Government may direct where investigation is u/s 43(1) (a) .

Charge on Sums [Sub section (2)]

Sub section (2) provides that amount due from any LLP or other entity under this section shall be a first charge on the sums or property mentioned in sub section (1)(b). Thus, irrespective of charge already created, such sums payable to the Central Government shall be treated as if it is secured by way of a first charge on the sums or property covered in proceedings in section 52.

Recovery as arrears of land revenue [Sub section (3)]

Recovery of liability of any LLP, entity, partner or, designation partner or other person under this section to reimburse the expenses or cost to the Central Government shall be made as arrears of land revenue. Such sums shall be recoverable by the Central Government as arrears of land revenue though the collector or revenue authorities.

Expenses Incurred by Central Government [Sub section (4)]

Sub section (4) provide that expenses and cost incurred by the Central Government or in connection with recovery proceedings under section 52 shall be treated as expenses of investigation giving rise to the proceedings and recovered accordingly.

Inspectors Report to be Evidence (Section 54)

According to section 54 of LLP Act, 2008, a copy of any report of any inspector or inspectors appointed under the provision of this Act, authenticated in such manner, if any, as may be prescribed, shall be admissible in any legal proceeding as evidence in relation to any matter contained in the report.

Section 54 seeks to provide that a copy of any report of any inspector appointed under this Act, authenticated in a manner as may be prescribed by rules, shall be admissible in any legal proceeding as evidence in relation to any matter contained in the report.

Section 54 provides evidence value to the report of investigation. A copy of any report of the inspector appointed for the purpose of investigation shall be admissible as evidence in relation to the matter contained in much report in any legal proceedings. It shall be the evidence of opinion of the inspector.

Any report means that it would include both- interim and final report. Such report shall be admissible in any proceeding civil or criminal. The report as well as material collected by inspectors, both has evidentiary value.

The report of the inspector shall be admissible in any legal proceedings as evidence only of the opinion of the inspector in relation to any matter contained in the report. The opinion expressed by the inspector in the report are not binding upon any person, as the proceedings before the inspector are not judicial. The report only disclose the findings of the inspection and opinion of the inspector: Re S. B. A. Properties Ltd. (1967) 2 All ER 615. The report of inspector is a prima facie evidence in relation to any matter contained therein: Re Armvent Ltd. (1975) 3 All E. R. 441.

Such report shall, however, be authenticated in the prescribed manner. Rule 31 prescribes the manner of authentication of investigation report.

Penalty

Specific penalties have been prescribed under section 47 and 50 for the LLP Act. Under section 47(5), contravention of sub-sections (1) or (2) or (4) of section 47 in relation to production of documents and evidence attracts penalty. Any person who fails or refuses without a reasonable cause to produce any books or paper or to furnish any information to the inspector or his authorized representative or fails to appear before inspector personally or fails to answer any question put up by inspector or fails or refuses to sign the notes of any examination, shall be punishable with fine which shall be a minimum of Rs 2000 but may extend to a maximum of Rs 25000 and a further fine of Rs 50 to Rs 500 per day in case of a continuing default. Such offence shall, however, be under compoundable section 39 of the Act.

Section 50 provides for prosecution of any person if found guilty of offence for which he is liable, arising out of investigation report. Central Government may prosecute such person or persons.

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