LLP

Topic 66 Committee of Inspection Rule23

THE LEGAL BRIDGE

Judiciary Examination Study Material

Topic 66

Committee of Inspection

Maximum 12 Members — Creditors & Partners (Rule 23, W&D Rules 2012)

Pillar 8 — Winding Up, Dissolution & Tribunal Jurisdiction (Sections 63–65)

Module Overview

The Committee of Inspection is a supervisory body that oversees the liquidator during winding up. Governed by Rule 23 of the LLP (Winding Up and Dissolution) Rules, 2012, it comprises representatives of creditors and partners. This topic covers its constitution, powers, functioning, and significance as an oversight mechanism.

66.1 Rule 23 — Committee of Inspection

Rule 23, LLP (W&D) Rules 2012

In every winding up, the NCLT may appoint a Committee of Inspection consisting of not more than twelve members. The Committee shall consist of members from creditors and partners of the LLP in the proportion decided by the NCLT. The Committee shall assist the liquidator and may make such inspections of the books and affairs of the LLP as it thinks fit.

66.2 Composition — Key Facts

12

Maximum members

Proportional

From creditors

Proportional

From partners

NCLT

Appointed by

Composition Aspect

Details

Maximum membership

Not more than 12 members in total

Creditor representation

Elected by creditors at creditors' meeting — proportional to value of creditor claims

Partner representation

Elected by partners at partners' meeting — proportional to partners' interests

Proportion decision

NCLT determines exact proportion of creditor vs partner representation based on circumstances

Vacancy removal

Member who fails to attend 3 consecutive meetings without leave may be removed by NCLT

66.3 Powers and Functions

  • Oversight of liquidator: Committee supervises the liquidator's conduct — reviews accounts, questions decisions.
  • Sanction for significant actions: Liquidator must obtain Committee sanction (or NCLT sanction if no Committee) before selling valuable assets, bringing/settling litigation above threshold value.
  • Inspection powers: Committee members can inspect the LLP's books and records at any time during winding up.
  • Report to NCLT: Committee can report to NCLT on any matter concerning the winding up — including misconduct by the liquidator.

66.4 Significance — Why the Committee of Inspection Matters

The Committee of Inspection provides a democratic check on the liquidator's exercise of power — creditors (who have a financial stake) and partners (who have an interest in surplus distribution) together monitor the process. Without a Committee, the liquidator reports only to the NCLT, which has less granular visibility into day-to-day winding-up operations.

📌 EXAM TIP: Committee of Inspection — a "content gap" topic: (1) Rule 23, LLP (W&D) Rules 2012 — NOT the LLP Act itself; (2) Maximum 12 members; (3) Composed of creditors AND partners — proportional representation decided by NCLT; (4) Liquidator must obtain Committee sanction for significant asset sales/litigation; (5) Committee can report to NCLT on liquidator misconduct. Knowing this topic gives a competitive advantage in mains.

Key Point

Core Content

Rule 23 W&D Rules 2012

Committee of Inspection — max 12 members

Composition

Creditors + partners in proportion decided by NCLT

Oversight power

Supervise liquidator; review accounts; question decisions

Sanction required

Liquidator must get Committee sanction for significant asset sales/litigation

Inspection power

Members can inspect LLP books at any time during winding up

Report to NCLT

Committee can report liquidator misconduct to NCLT