Chapter VII - Financial Disclosures
Section 39
Section 39: Compounding of LLP offences
A fine-only LLP Act offence may be compounded by the authorised official under Section 39, subject to its eligibility, payment and procedural conditions.
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Need advice on Section 39?
This article is for general information. Refer to the Limited Liability Partnership Act, 2008 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), the Regional Director or any other officer not below the rank of Regional Director authorised by the Central Government may compound any offence under this Act which is punishable with fine only, by collecting from a person reasonably suspected of having committed the offence, a sum which may extend to the amount of the maximum fine provided for the offence but shall not be lower than the minimum amount provided for the offence.
(2) Nothing contained in sub-section (1) shall apply to an offence committed by a limited liability partnership or its partner or its designated partner within a period of three years from the date on which similar offence committed by it or him was compounded under this section. Explanation.—For the removal of doubts, it is hereby clarified that any second or subsequent offence committed after the expiry of the period of three years from the date on which the offence was previously compounded, shall be deemed to be the first offence.
(3) Every application for the compounding of an offence shall be made to the Registrar who shall forward the same, together with his comments thereon, to the Regional Director or any other officer not below the rank of Regional Director authorised by the Central Government, as the case may be.
(4) Where any offence is compounded under this section, whether before or after the institution of any prosecution, intimation thereof shall be given to the Registrar within a period of seven days from the date on which the offence is so compounded.
(5) Where any offence is compounded before the institution of any prosecution, no prosecution shall be instituted in relation to such offence.
(6) Where the compounding of any offence is made after the institution of any prosecution, such compounding shall be brought by the Registrar in writing, to the notice of the court in which prosecution is pending and on such notice of the compounding of the offence being given, the offender in relation to which the offence is so compounded shall be discharged.
(7) The Regional Director or any other officer not below the rank of Regional Director authorised by the Central Government, while dealing with the proposal for compounding of an offence may, by an order, direct any partner, designated partner or other employee of the limited liability partnership to file or register, or on payment of fee or additional fee as required to be paid under this Act, such return, account or other document within such time as may be specified in the order.
(8) Notwithstanding anything contained in this section, if any partner or designated partner or other employee of the limited liability partnership who fails to comply with any order made by the Regional Director or any other officer not below the rank of Regional Director authorised by the Central Government, under sub-section (7), the maximum amount of fine for the offence, which was under consideration of Regional Director or such authorised officer for compounding under this section shall be twice the amount provided in the corresponding section in which punishment for such offence is provided.
Introduction
The 2021 amendment replaced Section 39. Compounding is confined to offences punishable with fine only, and the applicant must account for a similar offence compounded within the preceding three years. An application goes to the Registrar, while the Regional Director or authorised officer decides the proposal. The consequences differ depending on whether prosecution has begun.
Key takeaways
Fine-only offences
An offence carrying imprisonment is outside subsection (1)'s stated compounding power.
Repeat bar
A similar offence by the same LLP or person within three years after compounding cannot be compounded under subsection (1).
Application route
Apply to the Registrar, who forwards the application and comments to the authorised decision-maker.
Seven-day intimation
After compounding, the Registrar must be informed within seven days.
Test eligibility
Identify the alleged LLP Act offence and confirm that its punishment is fine only. Compare the same LLP's or person's prior compounding record for a similar offence within three years.
Prepare the application
Make the compounding application to the Registrar with the offence particulars, factual record and prior compounding history. The Registrar forwards it with comments.
Address an order
The authorised official may require a return, account or document to be filed or registered within a specified period on payment of applicable fee or additional fee. Track that direction; subsection (8) attaches a doubled maximum fine consequence to noncompliance.
Complete post-order steps
Give the Registrar intimation within seven days after compounding. If prosecution is pending, ensure the Registrar's written notice reaches the court so the statutory discharge step can occur.
Practical preparation
Before and after a compounding application:
- Confirm fine-only offence and three-year similar-offence history.
- Apply through the Registrar.
- Record the amount, order and any filing direction.
- Send seven-day intimation and address any pending prosecution.
Practical checklist
Do
- Preserve the prior compounding and offence history for the same person or LLP.
- Calendar the seven-day intimation and any directed filing deadline.
Avoid
- Do not assume an offence punishable with imprisonment is compoundable under this section.
- Do not overlook a similar offence compounded within the preceding three years.
Illustrative example
Hypothetical: eligible fine-only default
An LLP seeks to compound a fine-only offence and has no similar offence compounded during the prior three years.
Check offence
Confirm the provision is punishable only with a fine and calculate its minimum and maximum.
Apply
Submit an application to the Registrar for forwarding to the authorised official.
Comply
Pay the ordered amount, meet any document direction, and intimate the Registrar within seven days.
Outcome
- If compounded before prosecution, subsection (5) bars prosecution for that offence. A pending prosecution follows subsection (6)'s court-notice and discharge route.
Glossary
- Compounding
- Resolution of an eligible fine-only offence through the statutory payment and procedure in Section 39.
- Regional Director
- The official named in Section 39, or an authorised officer of at least that rank, who may compound an eligible offence.
- Similar offence
- The type of prior offence relevant to the subsection (2) three-year restriction.
Frequently asked questions
Can an offence carrying imprisonment be compounded under Section 39?
Subsection (1) is limited to an offence under the Act punishable with fine only.
Where is the application made?
To the Registrar, who forwards it with comments to the Regional Director or other authorised officer of the required rank.
What happens after an offence is compounded?
The Registrar must be informed within seven days. The prosecution consequence depends on whether compounding happened before or after prosecution began.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026