Supplemental | Law of Contracts - CLAT PG PDF Download

Registration of Partnership (Chapter VII) (Sections 56 to 71) 

The registration of partnership firms in India is not mandatory under the Act, and there are no penalties for non-registration. However, unregistered firms and their partners face certain disabilities as outlined in section 69 of the Act. The registration process is straightforward, and the disadvantages of non-registration often motivate partners to register their firm.

 Procedure for Registration (Sections 58 and 59) 

• The registration of a firm involves submitting a statement in the prescribed form to the Registrar of Firms, along with the prescribed fee.
• The Registrar of Firms, appointed by the State Government, oversees the registration process within defined areas.

 Application Requirements 

• The application for registration must include:
•  Firm’s name 
•  Principal place of business 
•  Other business locations 
•  Date of partner joining 
•  Full names and addresses of partners 
•  Duration of the firm 

 Signing and Verification 

• The statement must be signed by all partners or their authorized agents.
• Each signer must verify the statement as prescribed.

 Timeframe for Registration 

• A firm can be registered at any time after its formation, and there is no strict time limit for registration.
• Legislation imposing time limits for registration or recording changes would be invalid.

 Firm's Name Restrictions 

• The firm’s name cannot include certain words like "Crown," "Emperor," "Imperial," "King," "Queen," or "Royal," unless approved by the State Government.

 Penalties for False Information (Section 70) 

• Section 70 imposes penalties for providing false information in documents submitted to the Registrar during the registration process.
• Persons signing documents with false or incomplete information may face imprisonment, fines, or both.

 Power to Make Rules (Section 71) 

• Section 71 empowers the State Government to establish rules regarding fees, statements, procedures, and document inspections related to firm registration.
• The Madras High Court upheld the validity of Rule 3A of the T.N. Partnership (Registration of Firms) Rules, 1932, requiring annual declarations from registered firms.

 Subsequent Changes and Alterations (Sections 60-65) 

• Changes such as firm name, principal place of business, branch openings or closings, partner details, or firm dissolution need to be recorded by the Registrar.
• Alterations in firm name or principal place of business require formalities similar to initial registration. The Registrar will update the Register of Firms upon compliance.

 Closing and Opening of Branches (Section 61) 

• Any partner or agent can inform the Registrar about closing or opening branches of the firm, leading to necessary updates in the Register of Firms.

 Changes in Partner Details (Section 62) 

• Changes in a partner's name or permanent address can be communicated to the Registrar, who will update the Register of Firms accordingly.

 Changes in Firm Constitution or Dissolution 

• Changes in firm constitution, such as adding or removing partners, do not require fresh registration. Notice of such changes should be given to the Registrar.
• In cases of retirement, expulsion, or dissolution, public notice is necessary to avoid continued liability among partners for each other's actions.
• Public notice for registered firms includes notifying the Registrar of Firms.

 Rectification of Mistakes (Section 64) 

• The Registrar can correct mistakes in the Register of Firms to align with filed documents.
• On request from all parties who signed documents, the Registrar may rectify mistakes in documents or records.

 Amendment by Court Order (Section 65) 

• Court decisions regarding registered firms may necessitate amendments in the Register of Firms, directed by the Registrar.

 Inspection and Copies of Documents (Sections 66 & 67) 

• The Register of Firms is open for inspection by any individual upon payment of prescribed fees.
• All statements, notices, and intimations filed under this Chapter are also open for inspection, subject to conditions and fees.
• The maximum fees for document inspection or obtaining copies from the Registrar are specified in Schedule I, with the State Government authorized to set such charges within limits.

 Evidentiary Value of Register of Firms Entries (Section 68) 

• Documents filed with the Registrar form the basis for the Register of Firms, serving as conclusive proof of facts against signatories.
• A certified copy of an entry in the Register of Firms can be used to prove firm registration or other filed statements.
• In the case of disputes about partnership status, entries in the Register of Firms carry significant evidentiary weight.

 Effects on Non-Registration 

Section 69 of the Partnership Act outlines the consequences of not registering a partnership firm. While registration is not mandatory and no penalties are imposed for non-registration, there are certain disadvantages for unregistered firms and their partners.

 Disabilities of Non-Registration 

A. Suits Between Partners and the Firm (Section 69(1))

• No suit can be filed by a partner against co-partners or the firm to enforce rights arising from a contract or the Partnership Act unless the firm is registered and the partners are listed in the Register of Firms.
• In cases like  Neelakantan Omana v Neelakantan Raveendran  ,  Oriental Fire & General Insurance Co. Ltd. v. The Union of India  , and  Mahendra Singh Chaudhary v Tej Ram Singh  , it was held that suits involving unregistered firms are not maintainable under Section 69.
• In  Popular Automobiles v G.K. Channi  , the suit was dismissed due to non-compliance with Section 69(2).

B. Suits Between the Firm and Third Parties (Section 69(2))

• If the firm is unregistered, it cannot sue a third party to enforce a right arising from a contract.
• Conditions for filing a suit against a third party include the firm being registered and the suing partners listed in the Register of Firms.
• In cases like  Gandhi & Co v Krishna Glass Pvt. Ltd.  , if a partner is not listed in the Register of Firms, the suit filed by the partnership firm will fail.

 Arbitration Proceedings and Trademark Infringement 

 A. Arbitration Proceedings 

• Section 69 bars enforcement of contracts by unregistered firms. However, this bar does not apply to arbitration proceedings.
• The Supreme Court, in  Kamal Pushpa Enterprises v D.R. Construction Company  , ruled that enforcement of an arbitration award is not a right under a contract.

 B. Trademark Infringement 

• A suit for trademark infringement and passing off is not barred by Section 69(2).
• In  Haldiram Bhujjawala v Anand Kumar Deepak Kumar  , the court held that such a claim arises under the Trade Marks Act, not out of contract.

 Disability Against Third Parties 

• Section 69(2) imposes disability on unregistered firms and their partners, but not on third parties.
• Third parties can bring actions against unregistered firms, as clarified in  Kantilal Jethalal Gandhi v Ghanshyam Ratilal Vyas  .

Exceptions to Disabilities 

 A. Suit for Dissolution and Accounts (Section 69(3)(a)) 

• Partners of an unregistered firm can sue for dissolution or accounts of a dissolved firm.
• The right to realize property of the dissolved firm includes enforcing claims arising from contracts prior to dissolution.
• In cases like  Biharilal Shyamsunder v Union of India  , partners can bring suits for damages after dissolution of an unregistered firm.

 B. Suit on Behalf of Insolvent Partner (Section 69(3)(b)) 

• Actions can be brought on behalf of an insolvent partner against an unregistered firm to realize the property of the insolvent partner.

 C. Dismissal of Suit under Section 69(1) No Bar to Subsequent Suit under Section 69(3)(a) 

• If a suit is dismissed under Section 69(1), it does not prevent a subsequent suit under Section 69(3)(a).
• The subsequent suit is maintainable as per Section 69(3)(a) regardless of the dismissal of the earlier suit.
• In cases like  Ramesh Kumar Bhalotta v Lalit Kumar Bhalotta  and  Kishore Kumar v Navin Chandra  , the bar under Section 69(2A) is not applicable.

 D. Suit Where Provisions Relating to Registration of Firms Do Not Apply (Section 69(4)(a)) 

• Firms whose place of business is not in India or in areas exempted by notification under Section 56 are exempt from the provisions of Section 69.

 E. When Value of the Suit Does Not Exceed Rs. 100 (Section 69(4)(b)) 

• If the suit value does not exceed Rs. 100, an unregistered firm or its partner can take action against a third party.

 Registration Subsequent to Filing of the Suit 

• If a firm is unregistered, no suit can be instituted between partners or against third parties.
• If the firm is unregistered, the suit will be dismissed.
• The court must dismiss the suit if the plaintiff admits it is on behalf of an unregistered partnership.
• In the case of  M/s Jammu Cold Storage v M/s Khairati Lai and Sons  , the suit was dismissed because the firm was not registered at the time of filing.