• 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.
Asked 1 year ago in Criminal Law from Mumbai, Maharashtra
Religion: Hindu
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'
Action can be taken against the  designate partner for his effective role. 


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.
The designated partner has acted in his individual capacity by utilising fraudulent means to usurp the funds.


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. 
If the LLP found some actionable substance there is nothing wrong in taking suo motu action.


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



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
No



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)
LLP cannot be held liable for individual's fraudulent act.



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


7. What are the legal remedies available to the investors against the LLP.
You may mention the reliefs sought for and let the court decide the same on merits. 
T Kalaiselvan
Advocate, Vellore
13985 Answers
127 Consultations
5.0 on 5.0
1. You mentioned that LLP is not liable for fraud by its designated partner (in the instant case). However, in the second last suggestion you have stated that the LLP can be implicated. Isn't there a contradiction? Can we implicate if there is no liability? 
LLP can be made as a party to the suit but as far as the relief portion is concerned, it becomes the burden of the plaintiff to prove it.



2. You have mentioned that we can seek investigation against the LLP in our reliefs. Can a criminal court order investigation against LLP. Which authority will investigate? Police? Any government body?
In a complaint with the police.


3. Will we have to make the LLP a party to the complaint if we want to seek investigation against it ?
Yes you have include them as a party in the complaint if you want to have relief against them. 


4. Assuming that L&T LLP surely had knowledge of our transaction at all material time and we don't have any proof of that, can we still accuse the LLP of having had knowledge of our transaction and seek from the Court to investigate it.
You first prefer the complaint based on your corroborated evidences if you do not have any direct evidence against the said party. 
T Kalaiselvan
Advocate, Vellore
13985 Answers
127 Consultations
5.0 on 5.0

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