(1) Introduction:
Many business concepts are available worldwide, for example, private limited company, public limited company, Limited liability partnership (LLP), sole proprietorship, Partnership, etc. Among them, managing a business through a partnership is an easy, simple, and popular way.
Generally, a partnership refers to two or more people who can decide their rights and share the profits and liabilities of the firm. They select who can run a business and which partners can manage on behalf of all.
After all, if considering the above benefits of the partnership, here are some questions about whether the registration of a partnership firm is compulsory or not. What is the legal provision involved in the registration of a partnership? In this article, we discuss and try to get the answer to these questions.
(2) Is the registration of a partnership firm compulsory in India?
The Indian Partnership Act, 1932, deals with the partnership Firm (1). Whether it is registered or not. There is no compulsory requirement for the registration of partnerships in India.
We refer to the provision of section 58 of the Indian Partnership Act, 1932 (2), which deals with the application for registration; according to that section, there is specific mention that the registration of a partnership firm can be effected at any time; now it is clear that the registration of a partnership firm is not compulsory in India. It may be registered at any time or at a later stage.
(3) Effect of registration of partnership firm:
As we know, a registered partnership firm is treated with more reliability in business compared to a non-registered firm. Everyone wants to get more benefits from their business, so it is advisable to register a partnership firm.
The question ” Are registrations of partnership firms compulsory?” To find the answer here, we need to know the advantages of registration of partnership firms. The Indian Partnership Act, of 1932, under section 69, defines the non-registration of registration of a partnership firm. (3).
(4) Effects of Non-registration of the partnership firm:
(1) The non-registered partnership can not take legal action against a third party in court.
In the case of Union of India vs. M/s. Durgadutta Biswanath and another, (AIR 1961 ASSAM 2), the Assam High Court observed that Section 69(2) in terms prohibits the institution of the suit by a firm without registration. The words in Section 69 (2) are mandatory, and the suit instituted without obtaining firm registration is void and cannot be proceeded with. The subsequent registration of the firm will not validate the institution of the suit. Nor can the suit be deemed to have commenced on the date when the registration has been obtained. (4).
(2) Due to the non-registration of a firm, can not file suit against other partners of the firm.
(3) A partner of a non-registered firm can not file a lawsuit against other co-partners of the firm regarding the dispute of the firm.
(4) Obliging any third party to file a lawsuit against the unregistered firm is not.
(5) Rights are not affected by Non-registration :
Because of the non-registration of a firm, we see the above restriction; however, the following rights do not affect non-registered firms, which are given below.
(1) A partner of a non-registered firm has a right to file a suit for dissolution of the firm. Also, has the right to file a lawsuit for accounting and recover his remaining share from the dissolved firm.
(2) The partners, or the firm, who have no place of business in India.
(3) Can not file any suit or set-off where the claim does not exceed one hundred rupees.
(6) Benefits of registration of Partnership Firm:
Here are some benefits mentioned below that can be available to the registered firm.
(1) The firm is able to file a suit against third parties:
Due to the registration of a partnership firm, partners of the firm can be able to file a suit against a third party in court. For Example, issues regarding the enforcement of a right of contract, goods-related issues, like price and supplies, Etc.
That type of issue always comes out during the business of the firm. The registered firm has the power to file a lawsuit against third parties.
That right can not be available to the partners of an unregistered firm. However, it should be noted that an unregistered firm can file criminal proceedings. There is no bar to filing that type of case against third parties.
(2) The firm has the right to file a suit against co-partners:
During the partnership firm’s business, there are some possibilities that some issues will come between the partners and the firm. Or that may be possible issues will arise among the partners of a firm. For example, it could be any issue regarding profit sharing, management of a partnership firm, enforcement of legal rights in the firm, etc.
The registered firm enables a partner to establish their rights in court. The unregistered partnership firm can’t enforce any clause of the partnership deed in court.
As per the above-mentioned, the unregistered partnership firm’s partner can lay down only criminal proceedings against the other partners and nothing else.
(3) The firm has the power to claim set-off:
The registered partnership firm’s partner can claim set-off if any third party files a suit against the firm. Such power is not available for an unregistered firm.
(7) Conclusion :
After the above discussion regarding the registration of a partnership firm. We shall get our perfect answer to the question, “ Is registration of a partnership firm compulsory?” As we have discussed, there is no mandatory requirement in the law that registration of a partnership firm is compulsory. However, the partnership firm should be registered to get all the above benefits.
(8) Reference:
(1) The Indian Partnership Act,1932.
(2) section 58 of the Indian partnership act 1932.
(3) The Indian Partnership Act,1932, under section 69.
(4) Union of India vs. M/s. Durgadutta Biswanath and another, (AIR 1961 ASSAM 2).
