Section 30 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.
Limited liability in an LLP does not survive fraud. Section 30 says that where the LLP or any partner acts with intent to defraud creditors or for any fraudulent purpose, the liability of the LLP and of the partners who acted so becomes unlimited. It also provides imprisonment and fine for those knowingly party to such business, and compensation for persons who suffer loss. If you are facing, or considering, a claim of this kind, our dispute resolution service can review the facts with you.
If an act is carried out by the LLP, or any of its partners, with intent to defraud creditors or any other person, or for any fraudulent purpose, the liability of the LLP and of the partners who acted so is unlimited for all or any of the LLP's debts or liabilities (s.30(1)). Where a partner did it, the LLP is liable to the same extent unless it proves the act was without its knowledge or authority. Every person knowingly a party to such business is punishable with imprisonment up to five years and fine of not less than fifty thousand rupees, which may extend to five lakh rupees (s.30(2)). The LLP and the persons concerned must also pay compensation for loss (s.30(3)).
Section 30(1): unlimited liability
The trigger is an act carried out by the LLP or any of its partners "with intent to defraud creditors of the limited liability partnership or any other person, or for any fraudulent purpose".
When the trigger is met:
- The liability of the LLP is unlimited for all or any of its debts or other liabilities.
- The liability of the partners who acted with intent to defraud, or for any fraudulent purpose, is likewise unlimited.
Two points stand out. First, unlimited liability falls on the partners who acted, not on every partner. A partner who did not take part in the fraud is protected by section 28. Second, "intent" is the key word. Mere failure to pay, or a business that fails, is not within the sub-section on its own. The text speaks of an intent to defraud or a fraudulent purpose.
The proviso: the LLP's defence
Where a partner carries out the act, the LLP is liable to the same extent as the partner, unless it is established by the LLP that such act was without the knowledge or the authority of the LLP. The burden is on the LLP. To rely on the proviso, the LLP must show that the act was "without the knowledge or the authority" of the LLP, in the words of the proviso. The LLP's records, partner resolutions and the LLP agreement matter here.
Example. Deepak Joshi, a partner in Joshi Traders LLP, secretly sells the LLP's stock to a related party at a low price to put it out of reach of creditors. The LLP did not know of it and did not authorise it. If the LLP can establish that, the proviso protects it from liability to the same extent as Deepak. Deepak's own liability, as a partner who acted with intent to defraud creditors, is unlimited.
Section 30(2): imprisonment and fine
If any business is carried on with such intent or for such purpose as in sub-section (1), every person who was knowingly a party to the carrying on of the business in that manner is punishable with:
- imprisonment for a term which may extend to five years, and
- fine which shall not be less than fifty thousand rupees but may extend to five lakh rupees.
The words "and with fine" show that both punishments are provided. The sub-section is not limited to partners. "Every person who was knowingly a party" can include designated partners, employees, or outsiders who took part with knowledge.
Before the 2021 amendment this sub-section provided for imprisonment for a term which may extend to two years. The LLP (Amendment) Act, 2021 replaced "two years" with "five years". The fine amounts were not changed by that clause.
Section 77, as substituted by the 2021 Act, says that once Special Courts are established or designated, the Special Court referred to in clause (a) of s.67A(2) has jurisdiction and power to impose punishment under section 30. See sections 77 and 77A.
Section 30(3): compensation
Where the LLP, or any partner, designated partner or employee of the LLP has conducted the affairs of the LLP in a fraudulent manner, then, without prejudice to any criminal proceedings under any law in force, the LLP and any such partner, designated partner or employee shall be liable to pay compensation to any person who has suffered any loss or damage by reason of that conduct.
The proviso says the LLP shall not be liable if the partner, designated partner or employee acted fraudulently without the knowledge of the LLP. Note the wording: here the proviso speaks of "knowledge" only, while the proviso to s.30(1) speaks of "knowledge or authority". Read each proviso on its own words.
| Sub-section | What it provides | Who is reached |
|---|---|---|
| 30(1) | Unlimited liability for LLP debts and liabilities | The LLP and the partners who acted to defraud |
| 30(1) proviso | LLP liable to the same extent as the partner unless it proves no knowledge or authority | The LLP |
| 30(2) | Imprisonment up to five years and fine of Rs 50,000 to Rs 5 lakh | Every person knowingly party to the business |
| 30(3) | Compensation for loss or damage from fraudulent conduct | LLP, partner, designated partner or employee |
| 30(3) proviso | LLP not liable if the person acted fraudulently without its knowledge | The LLP |
Related provisions
- Whistle blowing. Section 31 lets the Court or Tribunal reduce or waive a penalty for a partner or employee who gives useful information. See section 31.
- Investigation. Section 43(1)(c) and its sub-clauses allow the Central Government to appoint inspectors where the business is conducted with an intent to defraud. See section 43.
- Fraud and the LLP's own limited liability. For the position in general, see our article on extent of liability of LLP and partners.
Practical points
- Keep clear minutes of partner decisions. If a partner acts alone and wrongly, the LLP's ability to show it had no knowledge or authority may depend on these.
- Reconcile accounts and large asset transfers at regular intervals.
- If you learn of a fraudulent act, record it, and act promptly. The proviso protects an LLP that lacked knowledge, not one that learned and ignored it.
- The offence under 30(2) applies to every person knowingly a party. Staff who follow instructions without knowing the purpose are in a different position from those who know it; the text turns on knowledge.
Need help with a fraud allegation?
Allegations of fraud against an LLP or a partner bring both civil exposure and possible prosecution, and the first documents you produce matter. Our dispute resolution team can help you gather the record and understand the position before you respond.
Key takeaways
- Fraud removes limited liability for the LLP and for the partners who acted with intent to defraud (s.30(1)).
- The LLP is liable to the same extent as the partner unless it establishes the act was without its knowledge or authority.
- Every person knowingly a party can face imprisonment up to five years and fine of Rs 50,000 to Rs 5 lakh (s.30(2)).
- The 2021 Act raised the maximum imprisonment from two years to five years.
- The LLP and the wrongdoer must pay compensation for loss, without prejudice to criminal proceedings (s.30(3)).
Read next
- Section 29: holding out
- Section 31: whistle blowing
- Whistle-blower and fraud provisions in the LLP Act
- Penalty provisions under the LLP Act: complete list
Disclaimer: Based on the Limited Liability Partnership Act, 2008 as amended by the Limited Liability Partnership (Amendment) Act, 2021, as consulted on 1 October 2026. Forms, fees and procedure are set by the LLP Rules, 2009 as amended from time to time. This article is general information, not legal advice; check the official text before acting.