registered.

The partnership business is regulated under Indian Partnership Act, 1932 which
prescribes two types of partnership firms:
• Unregistered firms, and
• Registered firms.
An Unregistered firm is formed by entering into an agreement between two competent
persons, known as partners, where the firm is not registered with the registrar of the firms.
Whereas the firms which subsequently get registered with the registrar of the firms by
submitting the copy of partnership deed is known as Registered Partnership Firm.

LAWS GOVERNING REGISTERED PARTNERSHIP FIRM

Chapter VII (Section 56-71) of the Indian Partnership Act, 1932 deals with Registration
of partnership firms. The act does not make the registration of partnership firm compulsory in
India nor does the act imposes any penalties for non- registration . However, certain
disabilities
are provided in section-69 of the act for unregistered firms and their partners. The procedure
for registration is very simple and the disadvantages of non- registration are so great that
generally the partners of a firm would like to get the firm registered.
AN OVERVIEW OF SECTION 56-71:
• Sec. 56: Power to exempt from application of this Chapter.
• Sec. 57: Appointment of Registrars.
• Sec. 58: Application of Registration.
• Sec. 59: Registration.
• Sec. 60: Recording alterations in firm name or principal place of business.
• Sec. 61: Noting of closing and opening of branches.
• Sec. 62: Noting of changes in names and addresses of partners.
• Sec. 63: Recording of changes in and dissolution of the firm & Recording of
withdrawal of a minor.
• Sec. 64: Rectification of mistakes.
• Sec. 65: Amendment of Register by order of Court.
• Sec. 66: Inspection of Register and filed documents.
• Sec. 67: Grant of Copies.
• Sec. 68: Rules of evidence.
• Sec. 69: Effect of non-registration.
• Sec. 70: Penalty for furnishing false particulars.
• Sec. 71: Power to make rules.
Section 56 talks about the power of the State Government to exempt the application of
chapter VII in that particular state or to any part of it.
NOTE: State can do so by 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 states that-

1. An application should be submitted in a prescribed form to the registrar of firms. The
 submitted application should contain the following particulars-
• Name of the firm
• Location of the firm
• Name of all other places where the business is carried out by the firm
• Names and addresses of the partners in the firm
• Duration of partnership
• The date of joining of each partner of the firm
The application should be signed by all the partners.
2. The required fee is to be deposited to the registrar of firms.
3. After approval of the application, the registrar issues certificate of registration.
However, registration is deemed to be completed as soon as an application with the
prescribed fee and in prescribed form with necessary details concerning the particulars of the
partnership is delivered to the registrar. The recording of an entry in the register of firms is a
routine duty of registrar. Registration may also be effected even after a suit has been filed by
the firm but in that case, it is necessary to withdraw the suit first and get a firm registered and
file a fresh suit.

ESTABLISHMENT OF PARTNERSHIP FIRM

To establish a partnership firm, partnership deed in writing is to be created. As per the
partnership act, the partners may also orally enter into partnership agreement. Partnership
deed is the constitution of the firm which determines the relationship of the partners with the
firm as well as relationship of the partners amongst themselves.
CONTENTS OF PARTNERSHIP DEED
1. NAME OF FIRM-
The name of the firm should not be similar to the name of the other firm or company. So, we
must be cautious while deciding the name of the firm and the nomenclature must be unique.
If the name of the firm is similar to the firm which already might have got its trademark
registered may file a suit in future claiming that you cannot run the business with the same
name because in such a case the business of the claiming firm might be hampered. Name of
the firm shall not contain any of the following words- King, Queen, Emperor, Royal,
Empress, Crown etc. or words implying the sanction, approval or patronage of the
government except when the state government signifies it’s consent to the use of such words
as part of the firm name by order in writing.
2. OBJECT OF THE FIRM-
All the business or object which the firm enters into or deals with will have to be specified
and should be clearly mentioned in the partnership deed.
3. PLACE OF BUSINESS-
The address of the office of the firm has to be clearly mentioned in the deed.
4. NAMES AND ADDRESSES OF PARTNERS-
Names and addresses of all the partners working with the firm are needed to be mentioned.
5. DATE OF COMMENCEMENT-
The date on which business is going to commence is also required to be mentioned in the
deed.
6. DURATION OF PARTNERSHIP-
It can be defined on the basis of the will of the partners. Till the time partners of the firm
want to continue with the firm they can do so as per their own choice. Duration of partnership
also depends on the completion of the project for which the partnership is created, if so
created.
7. CAPITAL CONTRIBUTION-
Initial capital contribution by each partner is to be stated in the partnership deed. If the
partners have equally contributed then all the partners will be entitled to receive equal profits
and if any of the partner contributes more capital to the firm then such partner is entitled to
receive more profits as compared to other partners of the firm.
8. PROFIT & LOSS SHARING RATIO-
The profit and loss sharing ratio as decided amongst the partners is to be mentioned means in
what proportion the profit earned by a firm is divided amongst the partners or in what
proportion the loss occurred is shared by the partners. Generally, the partner who invests
more capital is entitled to more profit.
9. RATE OF INTEREST ON CAPITAL INVESTMENT-
The rate of interest on capital investment should be specified and the rate of interest charged
on withdrawal of amount should also be specified.
10. SALARY, COMMISSION TO PARTNERS-
Salary and commission provided to the partners of the partnership firm have to be specified
in the partnership deed.
11. RESPONSIBILITY AND DUTIES OF PARTNERS–
Responsibilities and duties of the partners working with the firm is to be defined clearly as
per the departments allotted to them so that there is no confusion regarding the roles of the
partners.
12. METHOD OF PREPARING ACCOUNTS AND AUDIT–
This is also required to be stated in the deed.
Under Section 59 of the Act, 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 the Register of Firms and issue a Certificate of Registration. The entry made
in the Register of Firms is proof that the firm has been registered under the Act. If the
statement of any firm is not sent to the registrar within specified time as specified in sub
section (1A) of section 58, the firm may be registered after payment of penalty of rupees
hundred per year for the delay of its registration.
Recording of Alteration in Firm Name and Principal Place of Business (Section 60)
When an alteration is made-
• In the firm name or
• In the location of the principal place of business of a registered firm.
NOTE: Subsequent alteration as alteration in the name, place, constitution, etc., of the firm
that may occur during its continuance should also be registered.
Noting of Closing and Opening of Branches (Section 61)
When a registered firm discontinues business at any place or begins to carry on business at
any place-
Any partner or agent of the firm may send intimation thereof to the registrar, who shall make
a note of such intimation in the entry relating to the firm in the Register of Firms and shall
file the intimation along with the statement relating to the firm filed under section 59.
How the Change in The Name and Address of Partners is Made? (Section 62)
When any partner in a registered firm alters his name or permanent address-
An intimation of the alteration may be sent by any partner or agent of the firm to the registrar,
who shall deal with it in the manner provided in the manner provided in section 61.
Rectification of Mistakes (Section 64)
The registrar shall have power at all times to rectify any mistake in order to bring the entry in
the register of firms relating to any firm into conformity with the documents relating to that
firm filed under this chapter.
Amendment of Register by order of Court (Section 65)—
Sometimes as a consequence of a decision relating to a registered firm, the need for
amendment in the entry in the Register of Firms may arise. In such a case, the Court deciding
any matter relating to a registered firm has been empowered by Section 65 to direct the
Registrar to make any amendment in the entry of the Register of Firms as may become
necessary as a consequence of the decision.
Inspection of documents and grant of copies (Sections 66 & 67)
The Register of Firms shall be open to inspection by any person on payment of such fees as
may be prescribed. Moreover, all statements, notices and intimations filed under this Chapter
shall be open to inspection, subject to such conditions and payment of such fee as may be
prescribed.If any person is interested in having a certified copy of any entry or portions
thereof in the Register of Firms, he can have the same from the Registrar on payment of such
fees as may be prescribed.
Maximum fee which can be charged for inspection of any document or obtaining copies from
the Registrar has been mentioned in Schedule I. The State Government has, however, been
empowered to prescribe such charges in respect of the above, but such charges cannot exceed
the maximum amount mentioned in Schedule I.

EFFECTS OF NON REGISTRATION OF PARTNERSHIP FIRMS

Under the English law, the registration of firms is compulsory. Therefore, there is penalty for
non-registration of firms. But the Indian Partnership Act does not make the registration
of the firms compulsory nor does it impose any penalty for non-registration.
However, under section 69, the consequences of non-registration of partnership firm includes
a number of disabilities which are as follows:
1. As per section 69 unregistered firm cannot file any case in any court.
2. No relief is available to the partners for set-off of claim.
 3. Aggrieved partner cannot bring legal action against the firm or other partner of the
firm if the firm is not registered.
4. The third party can file a suit against an unregistered firm.
Krishna Motors Service v. H.B. Vittala Kamath
Section 69 is mandatory in nature. Its effect is to render a suit by a partner in respect of a
right vested in him or acquired under a contract which he entered into as a partner to be
maintainable.
Andhra Pradesh Coop. Wool Spg. Mills Ltd. v. Mahanandi & Co.
The burden of proving that the firm is registered as required under the Act is on the firm or
the partner suing
EXCEPTIONS IN WHICH RIGHTS ARE NOT AFFECTED ON NON-REGISTRATION
OF FIRM-
Rights not affected by non- registration of partnership firm:
Non-registration of the partnership firm does not affect the following rights:
1. Suit for dissolution- section 69(3)(a).
Section 44 mentions certain circumstances under which on the suit of a partner the court may
dissolve a firm.
Chagganlal Gupta v. State of Uttar Pradesh :
Section 69(3) (a) permits a suit even by the partners of an unregistered firm to sue for the
dissolution of a firm or for the accounts of a dissolved firm.
Pradeep Kumar v. Gopal Chandra:
In case the firm has already been dissolved, the partners of the unregistered firm can realise
the
property of the dissolved firm. The right includes enforcing a claim arising from contract
prior
to dissolution. The disability for non-registration works only during the subsistence of the
partnership.
2. Suit on behalf of an insolvent partner section 69(3)(b)
Section 69(3)(b) mentions another exception when an action would be brought on behalf of
an
insolvent partner against an unregistered firm. It provides that an official assignee, receiver of
court has the power to bring an action to realise the property of the insolvent partner.
3. Suit where provisions relating to registration of firms do not apply [ section
-64(4)(a)]
Section 69(4) (a) exempts such firm from the operation of the provisions of this section
whose
place of business is not in India or whose place of business is in such areas, where because of
notification under section 56, this chapter does not apply.
4. When value of the suit does not exceed Rs 100 (section 69(4)(b))
Section 69 (4)(b) provides an exception for firms having small claims. If the value of the suit
does not exceed Rs 100, an unregistered firm or its partner can bring an action against the
third
party.
.OTHER CASE LAWS RELATED -
1. SHARAD VASANT KOTAK & OTHERS V. RAMNIKLAL MOHANLAL
CHAWDA & ANOTHER
It was held that on the induction of the second respondent, the existing firm was only
reconstituted as per the facts of this case and therefore, it is not necessary to get a fresh
registration. The suit in question was not hit by section 69(2A) of the Act and the Appeal
was dismissed. There was no order as to the cost.
2. D.D.A. v. Kochhar Construction Work and Anr (1996)
In this case, the court held that just because a proceeding has been filed in the court for its
non-registration, the obligation to it be registered as a company does not remove the initial
defect as it may be a registered firm now but it was not one in the institution of the
proceeding. It was unregistered that is why the firm was led to court if it is seen that the
initial defect is settled the whole point of the proceeding will be meaningless as well as it will
be unjustified to the plaintiff too.

3. Shriram Finance Corporation v. Yasin Khan and Ors. (1989)

In this case, it was held by the court that the suit filed by the current partners was not
maintainable as the current partners were recruited after the registration and their name was
not mentioned under the register of incorporation which makes them not in the position to file
a suit. As it was mentioned under section 69(2) of the Indian Partnership Act,1932 that for a
third party to sue, their name shall be mentioned in the register of registration as a firm. So
that is why the suit was not held liable.

Section 70- PENALTY FOR FURNISHING FALSE PARTICULARS

What penalty is imposed for furnishing false particulars?
If the information provided to the registrar is incomplete and misleading than in this penalty
under section 70 may be imposed on the partnership firm for making false declaration and
such penalty may include punishment which may extend to imprisonment for 3 months or
with fine or with both.
Section 71: Power to make rules
As per section 71 of the act, the State government is free to make rules regarding the fess to
be given to the registrar along with the other documents for registration. Different states
impose different stamp duty on the partnership agreements/deeds, it means while creating a
partnership deed the partners must purchase stamp paper of appropriate value as may be
applicable in in the respective state, to be annexed with the agreement.
In Salem Chit Funds v. State of Tamil Nadu, it has been held by Madras High Court that
rule 3A of T.N. Partnership (Registration of Firms) Rules,1932 requiring every registered
firm to file with the registrar a declaration to the effect that the registered firm had been
carrying on its business or has been in operation during the financial year is intra vires rule
making power. Therefore, the requirement of the filling of the return every year was held to
be valid.

BENEFITS FROM REGISTRATION OF A FIRM

1. Benefits to the Firm: The firm gets an unmitigated right towards the third parties in civil
suits for getting its rights discharged. In the non-existence of registration, the firm is not
entitled to sue outside partners in courts.
The mandatory requirements to be fulfilled before a suit against third party can be filed to
enforce contractual rights by the firm or on behalf of the firm are-
(a) that the firm must be a registered firm and
(b) that the persons suing are or have been shown in the Register of Firms as partners of the
firm.
2. Benefits to Creditors: A creditor can employ any partner for recuperating his money due
from the firm. All partners whose names are set in the registration are personally accountable
to the unknowns. So, creditors can restore their money from any partner of the firm.
3. Benefits to Partners: The partners can seek the help of a court of law against each other in
case of disagreement among partners. The partners can sue external parties also for restoring
their amounts, etc.
4. Benefits to Incoming Partners: A new partner can contest for his rights in the firm if the
firm is registered. If the firm is not registered then he will have to rely upon the
trustworthiness of other partners.
5. Benefits to Outward-bound Partners: The registration of a partnership firm acts as an
advantage to the outward-bound partners in numerous ways. The outward-bound partners
may be divided into two categories:
(a) On the demise of a partner,
(b) On the superannuation of a partner.

CASE LAWS RELATED TO THE REGISTARTION OF PARTNERSHIP FIRM UNDER

INDIAN PARTNERSHIP ACT
The Indian Partnership Act, 1932 provides for the registration of partnership firms in India.
Here are some landmark case laws related to registration of partnership firms under the
Partnership Act:
Abdul Rahim v. mohd. Ibrahim (1956): In this case, the court held that the registration of
the firm is not mandatory, but it confers certain rights on the firm and its partner. if a firm is
not registered, it cannot sue or be sued in a court of law.
Madanlal v. makhan lal (1967): In this case the court held that the mere fact that a firm has
been carrying on business for a long time does not imply that if registered. Registration is a
mandatory requirement under the partnership act, and without registration, the firm cannot
claim any rights.
Radhakrishna naidu v. venkatachalapathy (1977): In this case, the court held that a
partnership firm cannot claim any benefits of registration if it is not registered with the
registrar
of firms. A firm can only be deemed to be registered from the date of issue of the certificate
of
registration by the registrar of firms.
CONCLUSION
Registration of a firm is affected by the Registrar of Firms by recording in the Register of
Firms an entry of the statement relating to registration furnished to him. The does not make
the registration of the firm compulsory, yet the effect of the rules relating to the consequences
of non-registration is such as practically necessitates the registration of the firm at one time or
other. Once a partnership firm is registered, it becomes a separate legal entity that can enter
into contracts, hold property, and sue or be sued in its own name. It is also required to file
income tax returns and comply with other legal and regulatory requirements.
Partnership are a popular form of business organization in India, particularly among small
and medium-sized enterprises, and the registration process under the Partnership Act is
relatively simple and straightforward.
Certain disabilities have been imposed on partners of an unregistered firm seeking to enforce
certain claims in the Civil Courts; and any partner who is not registered is not able to enforce
his claims either against third parties or against the fellow partners. The advantage provided
to the unregistered firm is yet a misfortune as they do not have the basic absolute right to
work as a firm. It is observed that the working of a company is more complex than that of a
firm. The company does not entertain a company being unregistered. A company that has not
gone under the process of registration does not exist in the eyes of law. Even if being
unregistered has many limitations still many powers have been provided to the unregistered
firm through the Indian Partnership Act, 1932.

REFRENCES
BOOKS REFERRED TO:
• Devashish Bharuka, The Indian Partnership Act (LexisNexis, 8th edn.).
• Dr.R.K.Bangai, Bangai's Contract-II (Allahabad Law Agency, 9th edn.).
WEBSITES REFRRRED TO:
• Registration of Partnership Firm in India and Effect of Non-registration of Partnership
Firm, available at:https://lawbhoomi.com/registration-of-partnership-firm-in-india-
and-effect-of-non-registration-of-partnership-firm/0 (last modified on February
6,2022)
• Unregistered Partnership Firm, Indian Partnership Act,1932, available
at:https://www.casemine.com/search/in/unregistered%20partnership%20firm (last
visited on March 24, 2024)
• LANDMARK JUDGEMENT-EFFECTS OF NON REGISTRATION OF
PARTNERSHIP FIRM, available at:https://www.pathlegal.in/Landmark-Judgement-
Effects-of-non-registration-of-partnershi-blog-1181082 (last modified on July 29,
2017)
• Effect of Non Registration, available at:
http://www.legalserviceindia.com/articles/rn.htm (last visited on March 30, 2024)
• Consequences of Non-Registration of Firm, available at:
https://www.toppr.com/guides/business-laws/the-indian-partnership-
act/consequences-of-non-registration-of-firm/ (last visited on March 20, 2024)
• Registration of Partnership Firm in India and Effect of Non-registration of Partnership
Firm, available at: Registration of Partnership Firm in India and Effect of Non-
registration of Partnership Firm (lawbhoomi.com):(last modified on February 6, 2022)