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Legal Matters

| Updated on April 24, 2011

This column has been contributed by vakilsearch ( >www.vakilsearch.com), an online legal guidance provider. These questions have been asked on vakilsearch.com.

I am planning to incorporate an LLP. I am slightly confused about this concept of a ‘Designated Partner'. My lawyer tells me that two partners have to get a 'Designated Partner' status. Additionally, one of us has to be a resident in India. I travel to Dubai on business at least 15 days in a month. Can I wait till we bring more partners on board and then have a new partner nominated as the designated partner?

From the question, it appears that there are two people who want to start this LLP. In effect, you want to know:

a. Does the fact that you spend half the month outside India make you a non-resident?

b. Can you appoint a designated partner later?

Answer to a:

The explanation to Section 7 of the Limited Liability Partnership Act, 2008 clearly states that you are a resident of India if you have been residing in India for a period of 182 days during the immediately preceding one year. Therefore, you need to find out if you meet that criterion. If not you, at least your partner must meet that criterion. If either of you does, you satisfy the requirements of the LLP Act since it only says that one designated partner must be resident in India.

Answer to b:

Unfortunately, you cannot wait till the size of the firm grows in order to appoint a Designated Partner. Section 10 of the Limited Liability Partnership Act states that any LLP not appointing two designated partners can be punished, along with every partner, with a fine of no less than Rs 2,000 and going up to Rs 5 lakh. If at any point there is only one Designated Partner or if no Designated Partner is appointed when a vacancy arises, every partner shall be deemed to be a Designated Partner (as per Section 9)

So you cannot wait for later. You have two options:

1. Start the firm with at least one person who will be in India for 182 days in a year (who will be resident in India) and is willing to take on the responsibility of being a Designated Partner.

2. Alternatively, you or your partner can stay in India for at least 182 days so that you comply with the provisions of the Act.

We are a computer reseller based in Chennai. We have an issue with one of our suppliers who has defaulted with the supply after getting an advance from us. He is not performing the contract and we need the computers and equipment which was meant to be supplied urgently. We were advised to approach the Consumer Court. What action can we take?

Unfortunately, that option is not open to you. The Consumer Protection Act, 1986 states that a consumer “does not include a person who obtains such goods for resale or for any commercial purpose”

From the facts of your case, it seems quite clear that you wanted the goods for resale (or maybe for internal use within your premises, but nevertheless a commercial use). The Consumer Protection Act, 1986 and the Consumer Courts will not be able to grant you any relief.

However, you have a second option, which is to approach a Civil Court. Since you are based out of Chennai, you can approach the City Civil Court, Madras for recovery of price paid for goods and for damage caused to you. In your correspondence with the supplier, if he has admitted that he is liable to supply the goods to you on time, there is a special procedure (to file an application in the Civil Suit for an interim decree as per Order 12 Rule 6, Code of Civil procedure for a judgment on admissions.)

Although it may take a long time for the suit to be decided fully, the very initiation of the legal process should help you get the equipment you need, or at the very least the refund of the advance paid so you can approach an alternative supplier.

Published on April 24, 2011

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