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NOTES ON
Law of partnership
BY AJITABH MISHRA
ASSISTANT PROFESSOR OF LAW
S. No. TOPIC LINK
1. Definition, Nature, kinds and VIEW
essentials of Partnership
2. Relation of Partners to one another VIEW
3. Relation of Partners to third party VIEW
4. Incoming and outgoing partners VIEW
5. Dissolution of partnership Firm VIEW
6. Registration of partnership VIEW
7. Limited Liability Partnership Act, VIEW
2008
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DEFINITION, NATURE, KINDS AND ESSENTIALS OF PARTNERSHIP
Introduction to Indian Partnership Act, 1932:
• The Indian Partnership Act, 1932 is an act of the Indian Parliament that governs
partnerships in India.
• It came into force on 1st October 1932 and has since been amended several times.
• The Act provides for the registration of partnership firms and the rights and obligations
of partners in a partnership.
• It is applicable to the whole of India, except for the state of Jammu and Kashmir.
• The Act defines partnership as the relation between persons who have agreed to share
the profits of a business carried on by all or any of them acting for all.
• It lays down the essential elements of partnership, such as agreement, sharing of profits,
carrying on of a lawful business, number of partners, mutual agency, and unlimited
liability.
Objectives of the Indian Partnership Act, 1932:
• The Act aims to provide a legal framework for partnerships and to ensure transparency
and accountability in the management of partnership firms.
• It seeks to provide a mechanism for the resolution of disputes among partners and
between partners and third parties.
• The Act also aims to protect the interests of minority partners and to prevent fraud and
mismanagement in partnership firms.
• It encourages the formation of partnerships by providing a legal framework for the
creation and dissolution of partnerships.
Advantages of registering a partnership under the Indian Partnership Act, 1932:
• Registration of a partnership firm under the Act provides legal recognition to the firm
and the partners.
• It enables the firm to sue and be sued in its own name and to enter into contracts.
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• It provides for the settlement of disputes through the courts.
• It provides for the creation of a separate legal entity that is distinct from the partners.
• It enables the firm to avail of various tax benefits and other incentives
partnership under the Indian Partnership Act, 1932 Sections 4-8, with full explanations
and case laws:
I. Definition of Partnership (Section 4):
• Partnership is defined as the relation between two or more persons who have agreed to
share the profits of a business carried on by all or any one of them acting for all.
• The essential feature of partnership is the agreement between the partners to carry on a
business and share its profits.
• The business must be carried on by all or any one of them acting for all.
• The partnership agreement can be written or oral and can be implied from the conduct
of the parties.
• The partnership can be formed for any lawful purpose.
Explanation:
Partnership is a form of business organization in which two or more persons come together to
carry on a business with a view to earning profits. The Indian Partnership Act, 1932 defines
partnership as the relation between persons who have agreed to share the profits of a business
carried on by all or any one of them acting for all. The agreement between the partners can be
written or oral, express or implied. The partners can carry on any lawful business as long as it
is not prohibited by law. The partnership agreement can be for a fixed term or it can be at will.
Case law:
In the case of Laxmi Narain Modi v. Commissioner of Income Tax, the Supreme Court held
that partnership is a relationship between persons who have agreed to share the profits of a
business carried on by all or any of them acting for all. The agreement between the partners
can be expressed or implied, and can be inferred from the conduct of the parties.
II. Nature of Partnership:
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• Partnership is a contractual relationship between two or more persons.
• Partnership is based on mutual trust and confidence.
• Partnership is not a legal entity distinct from its partners.
• Partnership is dissolved on the death, insolvency, or retirement of a partner.
• Partners are jointly and severally liable for the debts of the partnership.
Explanation:
Partnership is a contractual relationship between two or more persons who agree to carry on a
business for their mutual benefit. The relationship is based on mutual trust and confidence and
requires a high degree of good faith and fair dealing. Unlike a company, partnership is not a
separate legal entity from its partners. The partnership firm is dissolved on the death,
insolvency, or retirement of a partner, unless the partnership agreement provides otherwise.
The partners are jointly and severally liable for the debts of the partnership, which means that
each partner is liable for the entire amount of the partnership's debts.
Case law:
In the case of Bagree Textile Corporation v. Additional Commissioner of Income Tax, the
Supreme Court held that partnership is a contractual relationship between the partners and is
based on mutual trust and confidence. The partnership firm is not a separate legal entity from
its partners, and the partners are jointly and severally liable for the debts of the firm.
KINDS OF PARTNERSHIP:
• General Partnership:
o All partners have unlimited liability for the debts of the firm.
o Partners can participate in the management of the firm.
o Partners are jointly and severally liable for the debts of the partnership.
o Example: A, B, and C enter into a partnership agreement to run a business. They
share profits and losses equally. If the firm incurs any debt, all partners will be
liable to pay the debt.
• Limited Partnership:
o One or more partners have limited liability for the debts of the firm.
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o Partners with limited liability are known as 'limited partners'.
o Limited partners cannot participate in the management of the firm.
o General partners have unlimited liability and can participate in the management
of the firm.
o Example: X, Y, and Z enter into a limited partnership agreement. X and Y are
general partners with unlimited liability, while Z is a limited partner with limited
liability. Z cannot participate in the management of the firm, and X and Y are
jointly and severally liable for the debts of the partnership.
• Partnership at Will:
o A partnership in which there is no fixed duration.
o Any partner can dissolve the partnership at any time.
o Example: A and B agree to carry on a business as partners for an indefinite
period. Either of them can dissolve the partnership at any time.
• Partnership for a Fixed Term:
o A partnership formed for a specific period of time or for a specific project.
o Partners cannot dissolve the partnership before the expiration of the term or
completion of the project.
o Example: A, B, and C form a partnership for a period of 5 years to run a
construction business. They cannot dissolve the partnership before the
completion of 5 years
ESSENTIALS OF PARTNERSHIP
I. Agreement (Section 5):
• Partnership is a contractual relationship based on the agreement between the partners.
• The agreement may be written or oral, but it must be legally enforceable.
• The agreement should specify the rights and obligations of each partner, including their
capital contribution, profit sharing ratio, and the duration of the partnership.
• Case Law: In the case of Gokuldas Gopaldas v. Purshottam Umedbhai & Co., the
Supreme Court held that a partnership agreement need not be in writing and can be
implied from the conduct of the parties.
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II. Sharing of Profits (Section 13):
• The essence of a partnership is the sharing of profits.
• The partners must agree on the proportion in which the profits will be shared among
them.
• The profit-sharing ratio may be equal or unequal, depending on the agreement between
the partners.
• Case Law: In the case of Mohd. Haneef & Anr. v. Mohd. Iqbal & Ors., the court held
that in the absence of an express agreement, the profits of the partnership must be
divided equally among the partners.
III. Business (Section 6):
• Partnership must be formed to carry on a lawful business.
• The business must be carried on with a view to making a profit.
• Partners cannot engage in any illegal or immoral activity.
• Case Law: In the case of Nandkishore v. Mst. S. Sowani, the court held that a
partnership formed to carry on an illegal business is void ab initio and cannot be
enforced in law.
IV. Number of Partners (Section 4):
• A partnership must have at least two partners.
• The maximum number of partners in a firm is 50 for any business, and 20 for a banking
business.
• Case Law: In the case of National Bank of India Ltd. v. R. Laxman & Sons, the court
held that a partnership with more than 20 partners cannot carry on a banking business
as it is prohibited under the Banking Regulation Act, 1949.
V. Mutual Agency (Section 18):
• Each partner is an agent of the firm and other partners.
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• The acts of a partner in the ordinary course of business bind the firm and other partners.
• Partners can bind the firm even if they act outside the scope of their authority if the act
is done to carry on the business of the firm.
• Case Law: In the case of Ashoka Marketing Ltd. v. Punjab National Bank, the court
held that a partner who had no authority to sign cheques could bind the firm by issuing
cheques if such action was necessary for the conduct of the business.
VI. Unlimited Liability (Section 25):
• Partners are jointly and severally liable for the debts and obligations of the firm.
• In case of default, creditors can recover the entire amount from any partner, regardless
of their profit-sharing ratio.
• Case Law: In the case of K.L. Johar & Co. v. Deputy Commercial Tax Officer, the
court held that the liability of partners is joint and several, which means that the creditor
has the option to recover the entire amount from any partner or from all the partners
jointly.
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RELATIONS OF PARTNERS TO ONE ANOTHER
Section 9 of the Indian Partnership Act, 1932 deals with the general duties of partners towards
each other. Partners are obligated to conduct the business of the firm to the greatest common
advantage, be just and faithful to each other, and render true accounts and full information of
all matters affecting the firm to any partner or their legal representative. In other words,
partners must act in good faith and disclose all relevant information to their fellow partners.
In the case of Bagree Textiles v. Gaurav Overseas Corporation ((2012) 12 SCC 579.), the
court held that partners are bound to maintain utmost good faith and trust towards each other.
In this case, one partner had hidden crucial information from the other partner, which resulted
in a loss to the firm. The court held that the partner who had concealed the information had
breached his duty of good faith towards the other partner.
Section 10 of the Act states that every partner must indemnify the firm for any loss caused to
it by his fraud in the conduct of the firm's business. This means that if a partner commits fraud,
they are personally liable for any losses caused by their actions.
Section 11 deals with the determination of rights and duties of partners by contract between
the partners. The mutual rights and duties of partners can be determined by a contract between
them, which can be expressed or implied by a course of dealing. This contract can be varied by
the consent of all partners. Agreements in restraint of trade can also be made, which means that
a partner may agree not to carry on any business other than that of the firm while they are a
partner.
In the case of Mohanlal Agarwal v. Lachhmi Narayan (AIR 2000 All 271), the court held
that the agreement in restraint of trade would be valid only if it is reasonable and necessary for
the protection of the firm's business. If it is found to be unreasonable or unnecessary, then it
will be considered as a restraint of trade and will not be enforceable.
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Section 12 of the Act deals with the conduct of the business. Every partner has a right to take
part in the conduct of the business, but they are bound to attend diligently to their duties.
Differences arising in ordinary matters connected with the business may be decided by a
majority of the partners. However, no change may be made in the nature of the business without
the consent of all the partners. Each partner has the right to access and inspect the books of the
firm.
In the case of Jugal Kishore v. Jyoti (AIR 2009 P&H 123), the court held that a partner has a
right to access the books of the firm, but they cannot use them for any ulterior motive. In this
case, one partner had accessed the books of the firm to obtain confidential information and then
used that information to compete with the firm. The court held that the partner had breached
his duty of good faith towards the firm.
Section 13 of the Act deals with mutual rights and liabilities. A partner is not entitled to receive
remuneration for taking part in the conduct of the business, but they are entitled to share equally
in the profits earned and contribute equally to the losses sustained by the firm. If a partner
makes any payment or advance beyond the amount of capital they agreed to subscribe, they are
entitled to interest on it at the rate of six per cent per annum. The firm must indemnify a partner
for any payments made or liabilities incurred by them in the ordinary and proper conduct of
the business or in an emergency to protect the firm from loss. However, a partner shall
indemnify the firm for any loss caused to it by their willful neglect in the conduct of the
business.
In the case of Govindram Seksaria v. Collector of Customs (AIR 1976 SC 1957), the court
held that a partner who has made a payment or advance beyond the amount of capital they
agreed to subscribe is entitled to interest on it at the rate of six per cent per annum. In this case,
the partners had made an advance payment to a supplier, which was confiscated by the customs
authorities. The court held that the partners were entitled to interest on the amount of the
payment as it was made in the ordinary and proper conduct of the business.
It is important for partners to understand their duties and liabilities under the Indian Partnership
Act, 1932 to ensure that they act in good faith towards each other and conduct the business in
a fair and just manner. It is also important for partners to have a clear and detailed partnership
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agreement in place to determine their mutual rights and duties and to avoid any
misunderstandings or disputes that may arise in the future.
Section 14 of the Act deals with the property of the firm. According to this section, the property
of the firm includes all assets, rights, and interests that are jointly owned by the partners as a
result of their business activities. This includes the firm's goodwill, which is the reputation and
customer base that the firm has built over time. The property of the firm is owned by all partners
collectively, and no partner has the right to individually claim any part of it for their own use.
The property of the firm is to be used only for the purpose of the firm's business and not for
any personal purposes.
One notable case law related to Section 14 is Brij Mohan v. Lala Ram Lal (AIR 1960 All
123), where it was held that if a partnership deed contains a clause giving one partner the right
to expel another partner, such clause is void as it is against the provisions of Section 14 of the
Indian Partnership Act, which recognizes the principle of mutual agency in a partnership.
Section 15 of the Act deals with the rights of a partner to transfer their share in the firm.
According to this section, a partner cannot transfer their share in the firm to an outsider without
the consent of all the other partners. However, a partner can transfer their share to an existing
partner of the firm, and in such a case, the new partner will have all the rights and obligations
of the transferring partner. Additionally, if a partner dies or becomes insolvent, their share in
the firm will pass on to their legal heirs or representatives. However, the legal heirs or
representatives will not become partners of the firm unless all the other partners agree to it.
Furthermore, the transfer of a partner's share in the firm does not dissolve the firm, and the firm
will continue to exist as long as there are at least two partners remaining.
Regarding Section 15, a notable case is Abdul Gafar Khan v. State of Haryana (AIR 2012
SC 3451), where it was held that the doctrine of holding out can be applied even if a partner
has retired from the firm, but their name continues to be used in the firm's name or in its
advertisements. In such cases, the retired partner can still be held liable for the debts of the firm
incurred after their retirement, unless they have taken steps to give public notice of their
retirement.
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Other case laws:
• Section 9: In Shanti Prasad Jain v. Kalinga Tubes Ltd (AIR 1962 SC 918), it was
held that partners owe a fiduciary duty to one another and must act in good faith towards
each other. They must also render true accounts and full information to their partners.
• Section 10: In Haji Abdul Majid v. Hazarimal Somani & Sons (AIR 1966 Cal 45) it
was held that a partner who has committed fraud is liable to indemnify the firm for any
loss caused by his actions. The liability arises whether or not the other partners were
aware of the fraud.
• Section 11: In Ramkumar Agarwal v. Shyam Sundar Shaw (AIR 1966 SC 1887), it
was held that the mutual rights and duties of partners can be determined by contract
between the partners. The contract may be expressed or implied by a course of dealing,
and may be varied by the consent of all the partners.
• Section 12: In Gajanan Moreshwar v. Moreshwar Madan (AIR 1971 SC 1369), it
was held that every partner has a right to take part in the conduct of the business, but
must also attend diligently to his duties. Differences arising in ordinary matters can be
decided by a majority of the partners, but no change can be made in the nature of the
business without the consent of all the partners.
• Section 13: In Mangilal v. Suganchand (AIR 1972 SC 109), it was held that partners
are not entitled to remuneration for taking part in the conduct of the business, but are
entitled to share equally in the profits earned and contribute equally to the losses
sustained. A partner making any payment or advance beyond the amount of capital he
has agreed to subscribe is entitled to interest thereon at the rate of six per cent per
annum. The firm shall indemnify a partner in respect of payments made and liabilities
incurred by him in the ordinary and proper conduct of the business or in an emergency
to protect the firm from loss.
• Section 14: In Lala Shanti Swarup v. Munshi Singh (AIR 1971 SC 1497), it was held
that the property of the firm includes all property and rights and interests in property
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originally brought into the stock of the firm, or acquired by purchase or otherwise by
or for the firm or for the purposes and in the course of the business of the firm. It also
includes the goodwill of the business.
• Section 15: In Kishanlal v. Shankarlal (AIR 1960 Raj 135), it was held that the
property of the firm shall be held and used by the partners exclusively for the purposes
of the business, subject to any contract between the partners. The property of the firm
cannot be used for the private purposes of any partner without the consent of all the
partners.
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• Potential partners should consider this clause before joining a partnership, and all
partners should be aware of and agree to the terms and conditions in the partnership
agreement before signing.
• Legal consultation may be necessary in case of disputes or conflicts.
Section 26:
• The firm is liable for any loss or injury caused by a partner's wrongful acts or failure
to perform a legal duty in the ordinary course of business with the authority of their
partners.
• In other words, the firm is responsible for the actions of its partners.
Section 27:
• The firm is liable for any loss resulting from a partner's misapplication of money or
property received from a third party while acting within their apparent authority.
• The firm is also liable for any loss resulting from a partner's misapplication of money
or property received by the firm from a third party while in the custody of the firm.
Section 28:
• If a person represents themselves as a partner in a firm, or allows themselves to be
represented as a partner, they are liable as a partner to any person who has given
credit to the firm based on that representation.
• The continued use of a deceased partner's name by a firm does not make the legal
representative or estate of the deceased partner liable for any act of the firm done after
their death.
Section 29:
• A partner's transferee (the person who receives the partner's share) is not entitled to
interfere in the conduct of the business or inspect the books of the firm during its
continuance.
• However, the transferee is entitled to receive the share of profits of the transferring
partner and accept the account of profits agreed upon by the partners.
• If the firm is dissolved or the transferring partner ceases to be a partner, the transferee
is entitled to receive the share of the assets of the firm to which the transferring
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partner is entitled, and the court may determine their share from the date of
dissolution.
Case Law: In Bharat Dyeing and Manufacturing Co. Ltd. v. CCE [(2005) 183 ELT 481
SC], the court held that a transferee of a partner's interest is not entitled to interfere in the
management of the firm's business, but he is entitled to his share of profits as agreed upon.
Section 30:
• A minor cannot be a partner in a firm, but they can be admitted to the benefits of
partnership with the consent of all the partners.
• The minor's share is liable for the acts of the firm, but the minor is not personally
liable.
• The minor has a right to such share of the property and profits of the firm as agreed
upon and may access and inspect the firm's accounts.
• If the minor decides to sever their connection with the firm, they can sue the partners
for an account or payment of their share of the property or profits of the firm.
• If the minor decides to become a partner, their rights and liabilities as a minor
continue until they become a partner, and they become personally liable to third
parties for all acts of the firm done since they were admitted to the benefits of
partnership.
• If the minor decides not to become a partner, their rights and liabilities continue until
they give public notice, after which their share is not liable for any acts of the firm
done after the notice, and they are entitled to sue the partners for their share of the
property and profits.
• Section 28 still applies despite subsections (7) and (8).
In the case of Nagindas Ramdas v. Dalpatram Ichharam (1974 SCR (2) 544), the court
held that a minor admitted to the benefits of partnership cannot sue the partners for an
account or payment of his share of the property or profits of the firm, except when severing
his connection with the firm.
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DISSOLUTION OF A FIRM
Section 39: Dissolution of a Firm
1. The dissolution of a partnership between all the partners of a firm is called the
"dissolution of the firm".
2. When all partners of the firm decide to end their partnership, it leads to the dissolution
of the firm.
3. For example, if three partners were running a business and decided to part ways, then
the firm would be dissolved.
Section 40: Dissolution by Agreement
1. A firm may be dissolved with the consent of all the partners or in accordance with a
contract between the partners.
2. When all partners agree to dissolve the firm or have a contract which specifies
conditions for dissolution, the firm can be dissolved.
3. For example, if the partnership agreement mentions that the firm can be dissolved if
any partner decides to leave, then the firm can be dissolved if that condition is met.
Section 41: Compulsory Dissolution
1. A firm is dissolved (a) by the adjudication of all the partners or of all the partners but
one as insolvent, or (b) by the happening of any event which makes it unlawful for the
business of the firm to be carried on or for the partners to carry it on in partnership.
2. When all partners of a firm are adjudicated as insolvent, or if an event occurs which
makes it illegal to carry on the business of the firm, then the firm is compulsorily
dissolved.
3. For example, if a law is passed that makes the business of the firm illegal or if all
partners are declared insolvent, then the firm is dissolved.
Section 42: Dissolution on the Happening of Certain Contingencies
1. Subject to contract between the partners, a firm is dissolved (a) if constituted for a
fixed term, by the expiry of that term; (b) if constituted to carry out one or more
adventures or undertakings, by the completion thereof; (c) by the death of a partner;
and (d) by the adjudication of a partner as an insolvent.
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2. If a firm was constituted for a fixed term, then the firm is dissolved when the term
expires. If the firm was constituted to carry out a specific undertaking, then the firm is
dissolved when that undertaking is completed. The death of a partner or the
adjudication of a partner as an insolvent also leads to dissolution of the firm.
3. For example, if a partnership was formed to complete a specific project, then the firm
is dissolved when the project is completed.
Section 43: Dissolution by Notice of Partnership at Will
1. Where the partnership is at will, the firm may be dissolved by any partner giving
notice in writing to all the other partners of his intention to dissolve the firm.
2. If the partnership is at will, which means that the partnership has not been formed for
any specific duration or purpose, then any partner can dissolve the firm by giving
notice to all other partners of his intention to dissolve the firm.
3. For example, if two friends decided to start a business and formed a partnership at
will, either one of them can dissolve the partnership by giving notice to the other
partner.
Section 44: Dissolution by the Court
At the suit of a partner, the Court may dissolve a firm on any of the following grounds,
namely:
(a) that a partner has become of unsound mind, in which case the suit may be brought as
well by the next friend of the partner who has become of unsound mind as by any
other partner;
(b) that a partner, other than the partner suing, has become in any way permanently
incapable of performing his duties as partner;
(c) that a partner, other than the partner suing, is guilty of conduct which is likely to
affect
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REGISTRATION OF PARTNERSHIP FIRM
The Indian Partnership Act, 1932 provides for the registration of partnership firms. The Act
empowers the State Government to exempt the provisions of the Act from any state or any part
thereof. The State Government also has the power to appoint Registrars of Firms, and the
registration process requires submitting a statement containing the necessary information to the
Registrar of Firms.
Section 56 of the Indian Partnership Act, 1932 gives power to the State Government to exempt
the provisions of the Act from any state or any part thereof. This means that the State
Government can choose not to apply the provisions of the Act to any particular state or a
specific area within a state. This power is exercised by issuing a notification in the Official
Gazette.
Illustration: The State Government of Gujarat issues a notification in the Official Gazette,
stating that the provisions of the Indian Partnership Act, 1932 will not apply to the state of
Gujarat. This means that partnerships registered in Gujarat will not be governed by the
provisions of the Act.
Section 57 of the Indian Partnership Act, 1932 deals with the appointment of Registrars for the
purpose of the Act. The State Government has the power to appoint Registrars of Firms and
define the areas within which they shall exercise their powers and perform their duties. The
Registrar of Firms is considered a public servant within the meaning of section 21 of the Indian
Penal Code.
Illustration: The State Government of Uttar Pradesh appoints Mr. Rajesh as the Registrar of
Firms for the state of Uttar Pradesh. The State Government also defines the areas within which
Mr. Rajesh shall exercise his powers and perform his duties as the Registrar of Firms.
Section 58 of the Act deals with the application for registration of a firm. The registration of a
firm can be done by sending a statement in the prescribed form and accompanied by the
prescribed fee to the Registrar of Firms in the area where the business is situated or proposed
to be situated. The statement must contain the following information:
• The name of the firm
• The place or principal place of business of the firm
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• The names of any other places where the firm carries on business
• The date when each partner joined the firm
• The names and full and permanent addresses of the partners
• The duration of the firm
• The statement must be signed by all the partners or their agents specially authorized on
their behalf. Each person signing the statement must also verify it in the prescribed
manner.
The firm name must not contain certain words such as "Crown," "Emperor," "Empress,"
"Empire," "Imperial," "King," "Queen," "Royal," or words expressing or implying the sanction,
approval or patronage of Government, except when the State Government signifies its consent
to the use of such words as part of the firm name by order in writing.
Illustration: Ram, Shyam, and Mohan wish to start a partnership firm for a construction
business in Delhi. They prepare a statement in the prescribed form containing all the necessary
information such as the name of the firm, the place of business, the names of partners, etc. They
sign and verify the statement and submit it to the Registrar of Firms in Delhi along with the
prescribed fee. The Registrar of Firms examines the application, and if satisfied, he will enter
the name of the firm in the Register of Firms and issue a Certificate of Registration.
Section 59 of the Indian Partnership Act, 1932 states that when the Registrar of Firms is
satisfied that the provisions of section 58 have been duly complied with, he shall record an
entry of the statement in a register called the Register of Firms, and file the statement.
Once the Registrar of Firms receives the statement in the prescribed form, he examines it to
ensure that all the necessary information is included, and the prescribed fee has been paid. If
the Registrar is satisfied that the provisions of section 58 have been duly complied with, he
will enter the name of the firm in the Register of Firms and file the statement.
The Register of Firms is a public document that contains details of all the registered firms in a
particular area. The entry made in the Register of Firms is proof that the firm has been
registered under the Indian Partnership Act, 1932.
Illustration: After receiving the statement in the prescribed form from Ram, Shyam, and
Mohan, the Registrar of Firms in Delhi examines it to ensure that all the necessary information
is included, and the prescribed fee has been paid. Once satisfied, the Registrar enters the name
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of the firm in the Register of Firms and files the statement. The entry made in the Register of
Firms is proof that the partnership firm has been duly registered under the Indian Partnership
Act, 1932.
In conclusion, Section 59 of the Indian Partnership Act, 1932 mandates that once the Registrar
of Firms is satisfied that the provisions of Section 58 have been duly complied with, he shall
record an entry of the statement in the Register of Firms and file the statement. The entry made
in the Register of Firms is proof that the firm has been registered under the Act.
Section 69 of the Indian Partnership Act, 1932 deals with the effect of non-registration of firms.
This section specifies that no suit can be filed in any court to enforce a right arising from a
contract either by or on behalf of any person suing as a partner in a firm against the firm or any
person alleged to be a partner in the firm unless the firm is registered, and the person suing is
or has been shown in the Register of Firms as a partner in the firm.
Similarly, no suit to enforce a right arising from a contract can be instituted by or on behalf of
a firm against any third party unless the firm is registered, and the person suing is or has been
shown in the Register of Firms as a partner in the firm. This section also applies to any claim
of set-off or other proceeding to enforce a right arising from a contract.
However, this section does not affect the enforcement of any right to sue for the dissolution of
a firm or for accounts of a dissolved firm, or any right or power to realize the property of a
dissolved firm. Additionally, the powers of an official assignee, receiver of Court under the
Presidency, towns insolvency Act 1909, or the Provincial insolvency Act, 1920, to realize the
property of an insolvent partner are not affected by this section.
It is important to note that this section does not apply to firms or partners in firms that have no
place of business in the territories to which this Act extends, or whose places of business in the
said territories are situated in areas to which by notification under section 56, this chapter does
not apply. Furthermore, this section does not apply to any suit or claim of set off not exceeding
one hundred rupees in value, which in the presidency towns, is not of a kind specified in section
19 of the Presidency Small Cause Courts Act, 1882, or outside the presidency towns, is not of
a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887, or to
any proceeding or execution in other proceedings incidental to or arising from any such suit or
claim.
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NOTES BY AJITABH MISHRA
