Is registration of a Partnership Firm Compulsory in India
Is registration of a Partnership Firm Compulsory in India

Is registration of a Partnership Firm Compulsory in India?

(1) Introduction:

Many business concepts are available worldwide, for example, private limited company, public limited company, Limited liability partnership (LLP.), proprietor, Partnership, etc. Among them, managing a business through the Partnership is an easy, simple, and popular way.

Generally, the Partnership refers to two or more people who can decide their rights and share the profit and liabilities of the Firm business. They select who can run a business and which partners can manage on behalf of all.

After all, if considering the above benefit 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, of 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 later stage.

(3) Effect of registration of partnership firm:

As we know, a registered partnership firm is treated 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 the curt.

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) Right is not affected by Non-registration :

Because of the non-registration of a firm, we see the above restriction, however, the following right does 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, have a right to file a lawsuit for the 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 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 can 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, the issues regarding the enforcement of a right of contract,  goods related, 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 the 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 file that type of case against third parties.

(2) The firm has the right to file a suit against co-partners:

During the partnership firm 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 right in the court. The unregistered partnership firm can’t enforce any clause of the partnership deed in court.

As per the abovementioned, 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).

About Sandeep Bhatt

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