• Property fraud

There is a development agreement between 'L&T LLP' and 'Prime' for development of a real estate project.


'L&T LLP' is an LLP having partners Nailesh, Sailesh , Dhanpat and Sreekant . Nailesh and Shreekant are designated partners of LLP.


'Prime' is a registered partnership firm with partners Nailesh , Sailesh and Dhanpat.


Note: Nailesh , Sailesh and Dhanpat are common partners in both LLP and partnership firm.


L&T only has rights to sell flats in the project. 'Prime' does not have rights to sell. It has certain obligations to fulfil towards L&T with respect to the project.


Nailesh (designated partner of LLP) in connivance with Sailesh and Dhanpat illegally sells flats to potential investors in the project by claiming to be a designated partner in the LLP and misrepresenting to investors that 'Prime' has right to sell flats in the project. He shows them certain fake documents manufactured for the purpose of satisfying the investors. Nailesh illegally issues allotment letter in the name of 'Prime' promising possession of flats within 36 months and accepts payments in the bank account of Prime and usurps the money in criminal conspiracy with Dhanpat and Sailesh.


Later, when the investors are not handed over the flats, investors write to L&T explaining everything. L&T LLP informs the investors that the sale made by Nailesh is illegal. Investors bring a case of cheating, criminal breach of trust, forgery and criminal conspiracy against 'Prime' and its three partners. Investors ask the LLP what action, if any, the LLP has taken against its fraudulent partners Nailesh, Sailesh and Dhanpat. L&T LLP simply informs the investors that it has nothing to do in the matter but once again terms the sale of flats by Nailesh as illegal and asks investors to resolve their grievances with Prime directly.

Queries:

1. Can a criminal case be brought against the LLP  since its designated partner played an active role in influencing public to invest their money into 'Prime'

2. Is the LLP deemed to have knowledge of the fraudulent acts of Nailesh and others by virture of the fact that Nailesh is a designated partner in the LLP.

3a. Is the LLP suo moto bound to take action against its partners once it has been informed by the public that its designated partners has committed fraud. L&T LLP is a subsidiary of L&T Group, a public limited company. 

3b. Who are the legal obligations of a public limited company if its detects fraud by its managing director/ designated partner

4. Is the LLP also liable  if it does not complain to any authority about the breach and has not taken any steps to pre-empt anticipated breach? Can the LLP in such case be said to be aiding / shielding the fraudulent partners

5. Is the LLP also liable for the wrongful act or fraud of its partner which causes loss or injury to any third parties (Note: no money was brought into the LLP's account)

6. What kind of investigation can be brought against the LLP to investigate the role of LLP in the fraud

7. What are the legal remedies available to the investors against the LLP.