Notes – Corporate Law- Partnership Act, 1932- Effects of non registration of partnership

Prepared by Assist. Professor Rekha Khandelwal

Complete Notes on Partnership Act 1932

Registration of Firms

Partnership Act, 1932-Chapter VII –

Non- registration of partnership firm

Registering a partnership firm is not mandatory in India and no penalty is being levied but if we talk about English law, it is mandatory to register a partnership firm and if it is not registered, a fine is imposed. Non-registration leads to a certain disability under Section 69 of the Act.

Section 69. Effect of non-registration. –

Section 69 of the Indian Partnership Act provides detailed explanation of the consequences of non- registration of partnership firm.

These are:

  •  No Lawsuit can be filed in civil court by the firm or other co-partners against the third party

If the firm is not registered, the firm or any other person on its behalf cannot sue against third party for infringement of contract that the firm has entered. In addition, the person filing the lawsuit on behalf of the firm must be registered as a partner in the register of firm.

  • No partners can claim a set-off relief.

Without registration of the firm, any steps conduct against the firm by a third party for a value greater than Rs. 100 cannot be compensated by the firm or one of its partners. Further proceedings to assert the rights arising from the contract cannot be carried out either.

  • An aggrieved person cannot sue against other partner or the firm

No legal action can be taken against the firm or any partner (or accused as a partner) unless the firm’s partner or any person is registered on its behalf. However, if the firm is dissolved, such a person can sue for the dissolution of the firm’s account and the recovery of his share in the firm’s assets.

  • A third party can sue the firm
Even if the firm is not registered,a third party can take legal action against the firm.

In other words

No need of registration of a firm in following matters.

  1. A third party can sue against the firm or any partner
  2. Partners can sue against the firm for dissolution or settlement of accounts (in case of dissolution)
  3. The power of the Official Assignees, Receiver of Court to release the property of the insolvent partner and bring an action
  4. The suit for claim or set-off does not exceed Rs. 100.
  5. Where the act is not applied.

Essential ingredients of Section 69

To apply section 69 of the Partnership Act, the following elements are necessary-

  • The firm is registered, and
  • The person suing is a partner in the firm on record

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