Rule 35 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Sub-rules (12) to (17) of rule 35 deal with a different problem from the earlier sub-rules: an LLP in financial trouble that may be revived. They say who may propose a revival and rehabilitation arrangement, what the application contains and when it is made, how the Tribunal admits it, how creditors decide, and what the LLP Administrator does. This article explains them as notified in 2009.
A revival and rehabilitation arrangement may be proposed where creditors holding 50 per cent or more of the debt demand payment and the LLP fails to pay within thirty days, or where a winding-up petition or a liquidator's report is before the Tribunal (rule 35(12)(i)). The application is made within 90 days (rule 35(13)(ii)). The Tribunal may admit or dismiss it within 60 days (rule 35(14)). The Administrator reports within 60 days of the admission order (rule 35(14)(c)). If creditors holding three-fourths in value resolve that revival is not possible, the Tribunal may order winding up; otherwise it may sanction the arrangement (rule 35(15)). The Administrator finishes within 180 days (rule 35(16)). The Rules have been amended since 2009.
Read this first: the 2009 text and later amendments
This article reports what rule 35(12) to (17) provided as notified on 1 April 2009. The Rules have been amended several times since, and the forms, fees and time limits may be different. The Act has also been amended. Check the current Rules and the MCA portal before acting. This article states no fee amount and no portal step. It adds no fact about the Tribunal beyond what the rule says; for the Tribunal as defined in the Act, see Section 2 of the LLP Act, Part 2.
The earlier sub-rules, on meetings, voting and confirmation of a compromise, are in the first article on rule 35. The Act's provisions on arrangements are in Section 60 and Sections 61-62. If you are facing a creditor demand or a winding-up petition, our legal dispute resolution service can advise.
Rule 35(12): when an arrangement may be proposed, and by whom
35(12)(i): the three triggers
| Trigger | As notified in 2009 |
|---|---|
| (a) | On a demand by creditors representing fifty per cent or more of the outstanding debt, the LLP has failed to pay within thirty days of service of the notice of demand, or to secure or compound the debt to the creditors' reasonable satisfaction |
| (b) | A petition for winding up is pending before the Tribunal, and the arrangement is proposed in terms of the Tribunal's directions on that petition |
| (c) | The liquidator has filed his report before the Tribunal, and the arrangement is proposed in terms of the Tribunal's directions on the report |
35(12)(ii): who applies
"Without prejudice to clause (i)", the LLP, or any creditor or partner, or, for an LLP being wound up, the Liquidator, may apply to the Tribunal for sanction of the arrangement for revival and rehabilitation.
Rule 35(13): the application
What accompanies it (13(i))
- (a) A statement of account and solvency for the immediately preceding financial year, where the application is made by the LLP.
- (b) Particulars and documents relevant to the scheme, including expected commitments (financial or otherwise) from various parties, proposed restructuring or rescheduling of debts, or any undertaking or understanding. From a bank or financial institution this is a letter; in other cases it is an affidavit of the party, or any other form the Tribunal directs.
- (c) The proposed scheme of revival and rehabilitation, including a proposal for appointment of an LLP Administrator.
Time limit (13(ii))
The application is made to the Tribunal "within 90 days from the date of expiry of demand notice or from the date of the direction of the Tribunal" referred to in sub-rule (12)(i). So the 90 days run from the expiry of the demand notice under (a), or from the Tribunal's direction under (b) or (c).
Rule 35(14): admission and the preliminary report
| Step | As notified in 2009 |
|---|---|
| (a) | Within 60 days of receipt of the application, the Tribunal "may hear all the parties concerned and admit or dismiss" it |
| (b) | If admitted, the order may provide for meetings of creditors to approve the scheme, the procedure to be followed by the Administrator (including a chairman), and other directions |
| (c) | The proposed Administrator submits a preliminary report, including the decision of the meeting, within 60 days of the order under (b) |
The word "may" in (a) leaves the Tribunal discretion. The text does not state a consequence if the Tribunal does not act within the sixty days.
Rule 35(15): the Tribunal's decision
On considering the Administrator's report and other material, if satisfied that creditors representing three-fourths in value of the amount outstanding have resolved, with or without modification, that it is not possible to revive and rehabilitate the LLP, the Tribunal may, within 60 days of receipt of the report, order:
- (a) that proceedings for winding up be initiated; or
- (b) that the LLP be wound up, or the liquidator continue; or
- (c) sanction the arrangement for revival and rehabilitation as approved by those creditors, with such modifications as it considers necessary, and make orders for continuation of the Administrator or appointment of a new one.
Two provisos follow:
- The Tribunal may consider for approval an arrangement, including another LLP Administrator, moved by the LLP in the creditors' meeting, in place of that proposed by the creditors or the Liquidator, provided it is approved by a three-fourth majority in value of creditors.
- Where the arrangement involves amalgamation with another LLP, it cannot be sanctioned unless approved, with or without modification, by a three-fourth majority of the respective partners of the transferor and transferee LLPs.
Drafting point. The opening words of rule 35(15)(i) describe a case where creditors have resolved that revival is not possible, yet clause (c) allows the Tribunal to sanction an arrangement "as approved by such creditors". The wording is hard to reconcile, and clauses (a) and (b) overlap. The text should be read with the Act and the current Rules rather than relied on for a single clean reading.
Content of the sanction order (15(ii))
The order of sanction may provide for the Administrator's powers and functions, the time within which actions are to be completed, directions to the LLP, its officers, creditors, the Administrator or any other person for implementation, and any other orders.
Rule 35(16): the Administrator's final report
The Administrator "shall complete all the actions relating to implementation" and submit a final report to the Tribunal within the time directed, "but not exceeding 180 days" of the sanction order under rule 35(15)(i).
Rule 35(17): the LLP Administrator
- (i) Appointment: from a panel maintained by the Central Government for winding up and dissolution of LLPs.
- (ii) Terms: terms and conditions, including fee, as ordered by the Tribunal. This article states no fee.
- (iii) Removal: the Tribunal may, on reasonable cause shown and for reasons recorded in writing, remove the Administrator and appoint another.
- (iv) Vacancy: in case of removal, death or incapacity, the Tribunal may appoint another.
- (v) Filing: within 30 days of the order or orders under sub-rule (15), the Administrator causes a certified copy to be filed with the Registrar concerned in the prescribed form with the fee. The time needed to get a certified copy is excluded from the thirty days.
The timeline as notified in 2009
| Stage | Period |
|---|---|
| Failure to pay on demand | 30 days from service of the notice of demand (trigger) |
| Application to the Tribunal | Within 90 days of expiry of demand notice or of the Tribunal's direction |
| Admission or dismissal | Within 60 days of receipt of the application |
| Administrator's preliminary report | Within 60 days of the admission order |
| Tribunal's order on that report | Within 60 days of receipt of the report |
| Administrator's final report | Within the Tribunal's time, not over 180 days of the sanction order |
| Filing the order with the Registrar | Within 30 days of the order, excluding time for a certified copy |
Example. Reddy Logistics LLP fails to pay creditors holding more than half of its debts within thirty days of the notice of demand. Its partners decide to propose a revival scheme. Within 90 days after the notice expires, the LLP applies to the Tribunal with its latest statement of account and solvency, the supporting commitments and a scheme proposing an Administrator. The Tribunal admits the application within 60 days and calls a creditors' meeting. The Administrator reports in 60 days. Creditors holding three-fourths in value approve a modified scheme, and the Tribunal sanctions it, directing the Administrator to complete implementation within the time set.
Practical points
- Note the three entry points and the 90-day window from the demand notice or Tribunal direction.
- Prepare the supporting documents early: solvency statement, third-party commitments and the draft scheme with a proposed Administrator.
- Remember the three-fourths in value thresholds, which apply both to creditors and, for amalgamations, to partners of both LLPs.
- Check the current Rules before relying on any of these periods.
Need help with an LLP in financial distress?
Timing is critical once a creditor demand or winding-up petition arrives. Our legal dispute resolution team can examine your options and the current procedure.
Key takeaways
- A revival arrangement may be proposed after an unmet demand from creditors holding 50 per cent or more of the debt, or when a winding-up petition or liquidator's report is before the Tribunal (rule 35(12)).
- The application is made within 90 days and carries a solvency statement, supporting particulars and the proposed scheme with an Administrator (rule 35(13)).
- The Tribunal may admit or dismiss within 60 days; the Administrator's preliminary report is due within 60 days of admission (rule 35(14)).
- Three-fourths in value of creditors is the key threshold (rule 35(15)).
- The Administrator completes work within the Tribunal's time, not over 180 days, and is drawn from a Central Government panel (rule 35(16), (17)).
- Everything is as notified in 2009; the periods may have changed.
Read next
- Rule 35: compromise or arrangement, meetings, voting and confirmation
- Rule 37: striking off the name of a defunct LLP
- Compromise and arrangement in an LLP
Disclaimer: Based on the Limited Liability Partnership Rules, 2009 as notified on 1 April 2009. The Rules have been amended several times since; current forms, fees and time limits must be checked before acting. This article is general information, not legal advice; check the official text before acting.