LIMITED LIABILITY PARTNERSHIP PART-XXXXVIII - POWER TO MAKE RULES AND REMOVE DIFFICULTIES

[Dr. Sanjiv Agarwal]

Power to make rules (Section 79)

Section 79 of LLP Act, 2008 seeks to confer upon the Central Government the power to make rules for carrying out the provisions of this Act.  The section seeks to enumerate the various matters in respect of which such rules may be made. The section further seeks to provide that every rule made under the provisions of this Act is required to be laid before both the Houses of Parliament.

Section 79 confers powers to the Central Government to make rules for carrying out the provisions of the LLP Act. The power, though general in nature, also specifies various matters (39) on which rules may be prescribed and notified.

Memorandum regarding Delegated Legislation to the LLP Act states that section 79 confers power upon the Central Government to make rules for carrying out the purpose of the Act.

The meaning of the Act should not be derived from the forms prescribed by the Government under the rule making powers vested in it by the Act. Scheduled forms are always dangerous guides to the meaning of the Act. [Ma Tin v Maung Aye AIR 1941 Rang 135 (140)].

Rules framed under the Act can not save the Act as they are made by a subordinate authority which is not the legislature [State of Bombay v United Motors (India) Ltd. AIR 1953 (SC) 252]

Sub-section (1)

This sub-section generally empowers the Central Government to make rules for carrying out the provision of LLP Act. The rules have to be framed by way of notification and such notification shall be published in the Official Gazette.

Sub-section (2)

Sub-section (2) specifies particular matters (39 in number) on which Central Government may prescribe rules. The rules on these matters have been specified without prejudice to the generality of the provision which means that Central Government can notify rules on other matters not specifically specified in sub-section(2).

These rules  may be in relation to inter alia, to provide for form and manner of prior consent to be given by designated partner under sub-section (3) of section 7; form and manner of particulars of every individual agreeing to act as designated partner of LLP under sub-clause (4) of clause 7; conditions and requirements for appointment of an individual as Designated Partner under sub-clause (5) of clause 7; manner of filing the incorporation document and payment of fee payable thereof with the Registrar under item (b) of sub-clause (7) of clause 11; form of statement to be filed under item (c) of sub-clause (1) of clause 11; form of incorporation document under item (a) of sub-clause (2) of clause 1!; other information to be contained in the incorporation document under item (g) of sub-clause (2) of clause 11; mode of serving the documents on a LLP or a partner or a designated partner and the form and manner in which any other address may be declared by the LLP under sub-clause (2) of clause 13; the form and manner of notice to the Registrar and conditions in respect of change of registered office under sub-clause (3) of clause 13; the form and manner of application and amount of fee payable to the Registrar under sub-clause (1) of clause 16; manner in which names will be reserved by the Registrar under sub-clause (2) of clause 16; manner in which an application may be made for change of name under sub-clause (1) of clause 18; form and manner of notice of change of name of LLP and the amount of fees payable under clause 19; form and manner of filing of LLP Agreement or any change in such agreement with the Registrar and the amount fee payable under sub-clause (2) of clause 23; form of notice, the amount of fee payable and the manner of authentication of the statement under items (a), (b) and (c) of sub-clause (3) of clause 25; manner of accounting and disclosure of monetary value of contribution of a partner under sub-clause (2) of clause 32; books of account and the period of their maintenance under sub-clause (1) of clause 34; form of statement of Account and Solvency under sub-clause (2) of clause 34; form, manner and time of filing of statement of account and solvency and the amount of fee payable under sub-clause (3) of clause 34; the manner in which the accounts of a LLP shall be audited under sub-clause (4) of clause 34; form and manner of filing of annual return under sub-clause (3) of clause 35; manner and amount of fee payable for inspection of incorporation documents, names of the partners, Statement of Account and Solvency and annual return under clause 36; destruction of documents by Registrar under clause 40; the amount required as security under item (a) of sub-clause (3) of clause 43; the amount of security to be given under clause 44; fee payable for furnishing a copy under item of sub-clause (2) of clause 49; manner of authentication of report of inspector under clause 54; manner and form of particulars about conversion under proviso to sub-clause (1) of clause 58; provisions in relation to establishment of place of business by foreign LLPs within India and regulatory mechanism and composition under clause 59; manner of calling, holding and conducting meeting under sub-clause (1) of clause 60; provisions in relation to winding up and dissolution of LLPs under clause 65; manner and conditions for filing a document electronically under sub-clause (1) of clause 68; manner for striking off the names of LLPs from the register of LLPs by the Registrar under clause 75; medium and form of statement containing particulars and amount of fee payable on the statement under sub-paragraph (a) of paragraph 4 of the Second Schedule; manner and form of particulars about conversion under proviso to paragraph 5 of the Second Schedule; form and manner of the statement and the amount of fee payable on the statement under sub-paragraph (a) of paragraph 3 of the Third Schedule; manner and form of particulars about conversion under proviso to paragraph 4 of the Third Schedule; form and manner of the statement and amount of fees payable under sub-paragraph (a) of paragraph 4 of the Fourth Schedule; manner and form of particulars about conversion under proviso to paragraph 5 of the Fourth Schedule; any other matter which is to be, or may be, prescribed in respect of which provision is to be, or may be, made by rules.

Central Government has issued following set of Rules-

(a) LLP Rules comprising of 40 rules and 32 forms on various matters of LLP Act.

(b) LLP (Winding up and Dissolution) Rules comprising of 310 rules on winding up and dissolution of LLPs.

Sub-section (3)

Sub-section (3) provides that all rules made under the LLP Act shall be laid before both the houses of Parliament for a total period of thirty days. Such laying of the rules shall be soon after such rules are made and the period of thirty days should be the days when house is in session. Thus, laying of rules (notifications) could be thirty days in one or more sessions but such sessions should be successive ones. When rules are issued but Parliament is not in session, such rules may be laid before the Parliament in first session after the rules are made. Once the rules are so laid, if the Parliament decides that the subject rules need not be made, such rules shall be annulled. If the Parliament agree that rules shall have effect after the suggested modifications, the rules, as modified shall be notified and only modified rules shall be effective.

In the event, the rules as laid in the Parliament are modified or annulled, then such modification or annulment will not effect the validity of acts previously done under the rule. Thus, parliamentary approval of the rules is mandatory for having legality valid rules.

Power to remove difficulties (Section 80)

Section 80 of LLP Act, 2008 seeks to confer power upon the Central Government to make provision, by order published in the Official Gazette, to remove difficulties which may arise in giving effect to the provisions of this Act and such order to be issued only within a period of two years from the date of the commencement of this Act. The section seeks to provide that the orders made under this clause shall be required to be laid before both the Houses of Parliament.

According to memorandum regarding delegated legislation, section 80 of the Act empowers the Central Government to remove, by order, any difficulty which may arise in giving effect to the proposed legislation. It has been provided that no such order shall be made after the expiry of a period of two years from the date of commencement of the proposed legislation. It has also been provided that a copy of every such order made shall be laid before each House of Parliament.

The notification issued under sub-clause (1) of sections 67, 78 and rules made under sub-clause (2) of section 79 shall be laid before each House of Parliament.

Sub-section (1)

Central Government is empowered to remove difficulties in giving effect to the provisions of LLP Act by issuance of order. Such order should be issued within a period of two years from the commencement of the Act and published in the Official Gazette.

Thus, if two years have elapsed since the commencement of the Act, section 80 can not be used by the Central Government. If the provisions of the Act commence on different dates, the first date of commencement of such provisions shall be taken into consideration for this purpose. The purpose of the order should be remove difficulties in enforcement of the provisions and it should not be inconsistent with the provision of the Act.

Sub-section (2)

Sub-section (2) provides that every order made under sub-section (1) by the Central Government shall be laid before both the houses of the Parliament, as soon as it has been made. Thus, if Parliament is in session when order is made, it should be laid in the houses forth with.

If the Parliament is not in session, such order shall be laid in the houses of Parliament in the first session of the Parliament held after the issuance of order.

The notifications issued under sections 67(1), 78(1) and 79(2) shall be laid before both houses of the Parliament. Accordingly, the notifications so issued shall be placed before the houses for a period of thirty days comprised in one or more sessions.