effects of non registration of partnership firm

8/20/2019 effects of non registration of partnership firm

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Final word count: 5874

PROJECT WORK

(Contracts- II)

Effects of Non- Registration of a Partnership Firm

NATIONAL LAW UNIER!IT"# JO$%PUR

WINTER !E!!ION

&JANUAR"- 'A" ()*+,

!.mitte/ to0 !.mitte/ .10

Mrs. Anjali Thanvi ivita !ansal

Facult" o# Contracts- II !!A ($)% &&! ($)

'& odh*ur + ,str II (sction-!)

/oll 'o. 0014

CONTENT!


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Ac2nowld3nt......................................................................................................................4

/sarch Mthodolo3"...............................................................................................................5

,co* o# th rojct...................................................................................................................1

Introduction................................................................................................................................7

$istorical !ac23round...............................................................................................................8

,tatutor" rovisions on th ##cts o# 'on- /3istration..........................................................6

,uits twn artnrs and th Fir (,. 16(0)).......................................................................0

,uits !twn th Firs and th Third artis (,. 16(9))........................................................09

,tatutor" and 'on- Contractual /i3hts:-..............................................................................09

Actions asd on Tort:-........................................................................................................0

/3istration o# artnrshi* d:-.......................................................................................0

##ct o# Chan3 in th Constitution:-.................................................................................04

!urdn o# roo#:-.................................................................................................................04

;c*tion to th sction:-.....................................................................................................04

/3istration #or Action:-.................................................................................................04

,t- o## and


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!ilio3ra*h".............................................................................................................................9

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ACKNOWLE$2E'ENT

At the outset, I take this opportunity to thank my teacher and guide, Mrs. Anjali Thanvi fromthe bottom of my heart who has been of immense help during moments of anxiety and

torpidity while the project was taking its crucial shape. ence, I as a student am forever

deeply indebted to her.

!econdly, I convey my deepest regards to the administrative staff of "#$% who held the

project in high esteem by providing reliable information in the form of library infrastructure

and database connections in times of need.

Thirdly, the contribution made by my parents and friends by foregoing their valuable time is

unforgettable and highly solicited. Their timely advice and solid supervision paved the way

for the successful completion of this project.

&inally, I thank the Almighty who gave me the courage and stamina to confront all hurdles

during the making of this project. 'ords are insufficient to acknowledge the tremendous

contributions of various people involved in this project(((as I know )'ords are *oor

+omforters. I once again wholeheartedly and earnestly thank all the people who were

involved directly or indirectly during this project making which ultimately paved the way for

me to complete the task of project making within the stipulated time.

-IITA /A"!A#

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R E!EARC% 'ET%O$OLO2"

,!CT: +ontracts( II

T


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!COPE OF T%E PROJECT

The project seeks to look at the conse2uences faced by an unregistered partnership firm. It

will focus on the disabilities of an unregistered firm provided by !ection 34 of Indian

*artnership Act, 5467. It will also focus on the exceptional situations where an unregistered

firm can file cases in a suit. At the end of the project, you will come to know about the state

amendment which was declared unconstitutional recently. &urthermore, subse2uent

registration cannot cure the defects of non registration. Therefore, the whole project is trying

to show the fatal conse2uences faced by the partners as well as the firm in case of non(

registration of partnership firm.

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INTRO$UCTION

Th Indian artnrshi* Act% 069 (th Act) was nactd " th arliant r*alin3 th

rlvant sctions #ro th Indian Contract Act% 0879 2*in3 in ind th conditions and th

s*cial natur o# usinss in India. It was thou3ht *ro*r to d#in and and th law rlatin3

to *artnrshi*. /3istration o# th *artnrshi* is a vr" i*ortant ara which has n dalt in

Cha*tr ?II o# th Act% and du to its s*cial natur% that th disailitis rsultin3 #ro non-

r3istration ca in to ##ct a "ar a#tr th Act. Cha*tr ?II o# th Act dals with

/3istration o# FirsB o# which sctions 51 to 15 dals with th *rocdur #or r3istration.

,ction 11% rlats to ins*ction o# r3istr% sction 17 to 3rant o# co*is to an" *rsonB and

sction 18 with ruls o# vidncB. Th *ur*os o# ths *rovisions is to *rotct th intrst

o# thos who dal with *artnrshi* #irs in various corcial transactions. Third *artis

who dal with a #ir on its na or with a *artnr or ana3in3 *artnr as r*rsntativ o#

th #ir ust in a *osition to 2now who th *artnrs ar and what ar thir rs*ctiv

shars in th *artnrshi*% th dtails% i# an"% as to th ca*ital invstnt " *artnrs% and th

dtails% i# an"% o# th *artnrshi* *ro*rt". That would nal th to hav an ida o# th

co*tnc% status and solvnc" o# th *artnrs o# th #ir. I# th *artnrshi* #ir dos not

choos to 3t itsl# r3istrd% thn th #ir as wll as th *artnrs ar undr th disailitis

which ar ;trl" inconvnint. Thr is no dirct co*ulsion ut a *rtt" stron3

*rsuasiv *rssur to co on th r3istr o# #irs. 'o r o# an unr3istrd #ir can

n#orc his ri3hts undr th *artnrshi* contract a3ainst ithr th #ir or an" *rsnt or *ast

r o# it% nor can th #ir su its custors on thir contracts.

Th Indian artnrshi* Act dos not a2 r3istration o# a #ir co*ulsor" nor dos it

i*os an" *nalt" #or non r3istration. It is o*tional #or th #ir to 3t itsl# r3istrd or

not. $owvr% ,ction 16 *uts down crtain disailitis to a non r3istrd #ir which

norall" #orcs th *artnrs th *artnrs to 3t th #ir r3istrd. Ths ar:-

0. isailit" o# #ir: nr3istrd #ir cannot #il suit #or th rcovr" o# th dus or #or

othr attrs a3ainst third *artis.

9. isailit" to *artnr: Th *artnr o# an un-r3istrd #ir cannot rin3 a suit #or th

n#orcnt o# ri3ht a3ainst a third *art" or his co-*artnr unlss th #ir is r3istrd.

. Ailit" a3ainst #ir and *artnr: Th third *art" has #ull ri3ht to #il suit o# thir dus

a3ainst th un-r3istrd #ir and th *artnrs.

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%I!TORICAL 3ACK2ROUN$

In ordr to co*l *artnrs to r3istr thir *artnrshi* #irs so that all rlvant in#oration

could otaind " ins*ction o# th r3istr or " otainin3 a crti#id co*" thro#% a

suital l3al *rovision is ndd. Th Indian artnrshi* Act was nactd in 069 and it

ca into #orc on 0st da" o#


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!TATUTOR" PROI!ION! ON T%E EFFECT! OF NON- R E2I!TRATION

,ction 16 contains th *rovisions dscriin3 th ##cts o# non r3istration o# a *artnrshi*#ir.

,ction 16- ##ct o# non-r3istration5:-

&*, No sit to enforce a right arising from a contract or conferre/ .1 this Act sha44 .e

institte/ in an1 cort .1 or on .eha4f of an1 person sing as a partner in a firm

against the firm or an1 person a44ege/ to .e or to ha5e .een a partner in the firm

n4ess the firm is registere/ an/ the person sing is or has .een sho6n in the

Register of Firms as a partner in the firm7

Th su sction (0) ars an" suit or action " th *artnr o# an unr3istrd #ir a3ainst that

#ir or a3ainst an" othr *artnr o# that #ir.

&(, No sit to enforce a right arising from a contract sha44 .e institte/ in an1 cort

.1 or on .eha4f of a firm against an1 thir/ part1 n4ess the firm is registere/ an/

the persons sing are or ha5e .een sho6n in the Register of firms as partners in

the firms7

Th su sction (9) ars an" suit or action " th unr3istrd #ir a3ainst an" third *art".

Th o*ration o# sction 16 would ;tnd to th suit in which a *artnr sus his co-*artnr or

sus th #ir to n#orc an" ri3ht arisin3 #ro th contract twn th *artnrs. 1

&8, The pro5isions of s.-sections &*, an/ &(, sha44 app41 a4so to a c4aim of setoff or

other procee/ings to enforce a right arising from a contract .t sha44 not affect0

4 olloc2 E Mulla% *artnership Act % 0std. (064)% *3. 017% 081-087

5 Indian artnrshi* Act% 069

1 C.&.+u*ta% &aw o# artnrshi*% rd d.% 51 (Modrn &aw ulications% Allahaad% 90)

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(a) the enforcement of any right to sue for the isso!ution of a firm or for accounts

of a isso!"e firm or any right or #o$er to rea!ise the #ro#erty of a isso!"e

firm% or%

(&) the #o$ers of an officia! assigne% recei"er or Court uner the 'resiency

To$ns Inso!"ency Act% *% or the 'ro"incia! Inso!"ency Act% +*% to rea!ise

the #ro#erty of an inso!"ent #artner,

Th su sction () sa"s that th disailitis ntiond in th aov su sctions also a**l" to

a clai o# st o## or othr *rocdin3s to n#orc a ri3ht arisin3 #ro a contract. !ut th

#urthr su clauss o# this sction contain ;c*tions.

&9, This section sha44 not app410

(a) to firms or #artners in firm $hich ha"e no #!ace of &usiness in the territories to$hich this Act e-tens% or $hose #!aces of &usiness in the sai territories are

situate in areas to $hich% &y notification uner section ./ this Cha#ter oes

not a##!y% or

(&) to any suit or c!aim of set0off not e-ceeing one hunre ru#ees in "a!ue

$hich% in the #resiency to$ns% is not of a 1in s#ecifie in section of the

'resiency Sma!! Cause Courts Act% 22+% or outsie the 'resiency to$ns% is

not of a 1in s#ecifie in the Secon Scheu!e to the 'ro"incia! Sma!! Cause

Courts Act% 223% or to any #roceeing in e-ecution or other #roceeing

incienta! to or arising from any such suit or c!aim,

,u sction (4) also contains so ;c*tions.

Ths wr th statutor" *rovisions o# th ##cts o# non r3istration o# a #ir containd in

Indian artnrshi* Act. ,o% ltBs #urthr undrstand th conc*tssctions on " on.

!UIT! 3ETWEEN PARTNER! AN$ T%E FIR' &!7 :;&*,,

A *artnr o# an unr3istrd #ir cannot su th #ir or his *rsnt or *ast co-*artnrs #or th

n#orcnt o# an" ri3ht arisin3 #ro a contract or con#rrd " th artnrshi* Act.

Accordin3 to sction 16(0) two conditions ar ncssar" to nal a *artnr to su his co-

*artnrs or th- #ir. Ths ar:-

• Th #ir should r3istrd.

• Th na o# th *artnr suin3 ust #i3ur in r3istration.

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This di##icult" a" ovrco " 3ttin3 th #ir r3istrd #or an action is rou3ht.

!ut onc a dis*ut twn th *artnrs has arisn% all o# th a" not si3n th a**lication

#or% and consGuntl" th #ir a" rain unr3istrd. It is% thr#or% advisal to hav

th #ir r3istrd as soon as it is constitutd. Th sco* o# this su-sction was ;aind "

th !oa" $i3h Court in ,.$. atl v. $ussinhai Mohd. 7% a cas whr th action was

twn two #orr *artnrs to n#orc an a3rnt rstrainin3 th out3oin3 *artnr #ro

carr"in3 on in so ara an" usinss siilar to that o# th #ir and th court had to ;ain

whthr such suit was aintainal or not as th #ir was not r3istrd. sai% .% in this

cas hld that hr thr was a nw a3rnt as to rstraint and not on arisin3 out o# th

ori3inal contract o# *artnrshi*. $ said: HTh ri3ht which th *lainti## s2s to n#orc is not

th ri3ht vstd in% or acGuird "% hi as a *artnr% ut a ri3ht acGuird " hi undr a

distinct susGunt a3rnt. This a3rnt dos not in an" wa" r3ulat th ri3hts o#

*artnrs as such% i..% it dos not in an" wa" r3ulat thir actual ri3hts and oli3ations as

*artnrs% ut is% on th contrar"% a nw and ind*ndnt ri3ht #urnishin3 an ntirl" di##rnt

caus o# action>. Thr#or% th court accordin3l" concludd that an a3rnt twn

#orr *artnrs as to rstraint o# trad is not within th sco* o# ,ction 16(0).

In a cas whr th #ir ta2s an insuranc *olic" on a otor vhicl lon3d to th #ir%

th clai ariss out o# a contract o# insuranc and thr#or th sa cannot n#orcd "#ilin3 a suit i# th #ir is unr3istrd.8

In Mahndra ,in3h Choudhar" v. Tj /a ,in3h6% on o# th *artnrs o# th #ir% i.. AB

rou3ht an action #or injunction rGuirin3 that th chGus #or *a"nt to th #ir should not

*aid sin3l" to th othr *artnr !B% ut should *aid in th joint na o# A E ! so that

th on" could rach th co##rs o# th #ir. !ut th #ir was unr3istrd. It was hld that

th action rou3ht " A was not aintainal.

7 AI/ 067 !o 995

8


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A *oint has n considrd " th ,u*r Court% nal"% whthr r3istration durin3

*ndnc" o# th suit could rviv th suit or a2 th sa co*tnt at last #ro th dat

o# r3istration or not% ut no conclusiv o*inion was 3ivn.0

hr a *artnrshi* was rconstitutd ut was not r3istrd whras th ori3inal *artnrshi*

was r3istrd% th court #indin3 that th dis*ut rlatd to th ori3inal *artnrshi*% allowd

th cas aout it to #ild.

!UIT! 3ETWEEN T%E FIR'! AN$ T%E T%IR$ PARTIE! &!7 :;&(,,

Accordin3 to th sction 16(9)% i# th #ir is unr3istrd% no suit to n#orc a ri3ht arisin3

#ro a contract can institutd " th #ir or its *artnrs a3ainst a third *art". A suit can

rou3ht onl" " or on hal# o# a r3istrd #ir and that also " *rsons whos nas

a**ar as *artnrs in th r3istr o# #irs.

To n#orc th ri3hts a3ainst third *artis% it is not nou3h that th #ir is r3istrdD it is

#urthr ncssar" that =th *rson suin3 is or has n shown in th /3istrar o# #irs as a

*artnr in th #ir>.

I# th na o# on o# th *artnrs had not n shown in th /3istrar o# Firs% th suit #ild

" th *artnrshi* #ir ust #ail.00

This sction has n hld to a *nal *rovision% which d*rivs th *lainti## to its ri3ht to

3t its cas ;aind on rits " a court. ,iultanousl"% it d*rivs th court o# its

jurisdiction to adjudicat on th rits o# th controvrs" twn th *artis. It is% thr#or%

to strictl" construd. Thr#or% th said *rovision in3 andator" in natur would a2

th suit inco*tnt on th vr" thrshold.

09

0 /a*ta2os !rtt v +ansh ro*rt"% AI/ 0668 ,C 85

00 AI/ 0687 !o. 48

09 ,u*ra% not 0

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!tattor1 an/ Non- Contracta4 Rights0-

This su- sction is also con#ind in its ##ct onl" to contract attrs. /i3hts arisin3

ind*ndntl" o# contract rain n#orcal.0

In /u" +nral Insuranc Co &td v ar" &al uar 04 th words =arisin3 #ro a contract>

wr hld to a2in to th words =arisin3 out o# th contract> and wr construd widl" in

th cont;t o# aritration claus. !ut vn so ths words would not a**l" to statutor" or

coon law ri3hts caus such ri3hts do not hav thir roots in contract. This viw was

;*rssd " th ,u*r Court in othr cass also.

It was hld " th ,C that th ri3ht to vict a tnant was not a ri3ht arisin3 #ro a contract ut

was a statutor" ri3ht undr th Trans#r o# ro*rt" Act. Th viction *rocdin3 was%

thr#or% not arrd.05

Th ,u*r Court #ollowd this rulin3 in $aldira !hujiawala v Anand uar *a2

uar 01 and hld that a suit to *rvnt in#rin3nt o# a trad ar2 is not arrd " th

sction whthr th #ir is r3istrd or not. Th Court said that it is wll sttld that a

*assin3 o## action is a coon law action asd on tort. This su-sction also dos not a##ct

th ri3ht to a**l" #or an intri rli# undr ,ction 6 o# th Aritration and Conciliation Act%

0661. hr a *artnr #orcil" ro2 u*on th sho* o# th #ir and rovd crtain articlsand surrndrd th 3odown o# th #ir with an ultrior otiv% it was hld that such acts o#

isconduct did not #all within th sco* o# ,ction 16. $nc% th suit was #or rcovr" o#

daa3s and was aintainal vn i# th #ir was not r3istrd.

Actions .ase/ on Tort0-

I# th action a3ainst third *art" is not asd on contract ut on tort% #raud or an" othr

wron3#ul act% th sa is not hit " sction 16(9) and th action is aintainal. Thus whn

0 In#ra% not 06

04 AI/ 0659 ,C 006

05 ,u*ra% not 0

01 AI/ 9 ,C 0987

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th action rlats to dtntion o# *ro*rt"% th action in3 #oundd on tort rathr than

contract% th sa is aintainal.

For ;a*l: I# a third *rson dstro"d th *ro*rt" o# a #ir " an" n3li3nt or dlirat

act% th #ir can d#initl" su hi whthr r3istrd or not. 07

Registration of Partnership $ee/0-

Thou3h ,ction 16(9) sa"s that th r3istration is co*ulsor" ut it dosnBt tal2 aout th

r3istration o# *artnrshi* dd also.

In .. Financ E Chit Funds v. /. ,ur"a uar 08% a suit was #ild " on o# th *artnrs o#

an unr3istrd #ir a3ainst th d#ndants #or th rcovr" o# on" on th asis o#

*roissor" not which was disissd " th trial court on th 3round that th *lainti## could

not *roduc a r3istrd co*" o# th *artnrshi* dd. !ut th hi3h court rvrsd th

jud3nt and hld that sction 16(9) did not rGuir th r3istration o# th *artnrshi* dd

o# a *artnrshi* #ir.

Effect of Change in the Constittion0-

hr th chan3 in th constitution o# th #ir is noti#id to th /3istrar% th #ir

continus to njo" th status o# a r3istrd #ir. !ut i# th chan3 is not noti#id% thn it will

rain as an unr3istrd #ir onl".06

3r/en of Proof0-

Th urdn to *rov that th *lainti## is a r3istrd #ir and thr#or% is ntitld to aintain

a suit a3ainst a third *art" is alwa"s on th #ir in viw o# th l3islativ andat undr this

sction.

E


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Registration .efore Action0-

Th di##icult" causd " th sction can ovrco " 3ttin3 th #ir r3istrd #or an

action is rou3ht. Th action o# an unr3istrd #ir is% howvr% lial to disissd and it

cannot rcti#id " susGunt r3istration. A #rsh suit will hav to #ild a#tr

r3istration *rovidd that it is still within th *riod o# liitation. Th nas o# thos #ilin3 a

suit ust a**ar in th r3istration.9

!ET- OFF AN$ OT%ER PROCEE$IN2! &!7 :;&8,,

Th aov two disailitis also a**l" to a clai st-o## or othr *rocdin3s to n#orc a ri3ht

arisin3 #ro a contract. A =clai o# st-o##> an that i#% #or ;a*l% an unr3istrd #ir is

sud " a third *art" to rcovr a su o# on" th #ir cannot sa" that th on" owin3 "

that third *art" to th #ir should st-o## a3ainst th clai. Thr#or% an unr3istrd #ir

cannot clai a st- o##.

=Other Procee/ings>0-

Th words =othr *rocdin3s> had cratd so di##icult" as to thir i*ort% *articularl" in

r#rnc to th Gustion whthr th" includd =aritration *rocdin3s>. Th ,u*r

Court has now " its dcision in a3dish Chandra +u*ta v ajaria Tradrs (India) &td90%

sttld th controvrs". In th *rsnt cas% thr is a claus in a dd o# *artnrshi* *rovidd

that in cas o# dis*ut twn th *artnrs% th attr will r#rrd to aritration. A

dis*ut havin3 arisn% on *artnr a**ointd an aritrator to which th othr *art" 3av no

rs*ons. An action was thn concd to n#orc th aritration claus o# th a3rnt.

Th othr *artnr contndd that th #ir was not r3istrd and% thr#or% th suit should

disissd. Th ,u*r Court hld that th suit was not aintainal. =It is i*ossil to

thin2 that th ri3ht to *rocd to aritration is not on o# th ri3hts which ar #oundd on th

a3rnt o# th *artis. Th words o# ,ction 16() or othr *rocdin3s to n#orc a ri3htarisin3 #ro a contractB% ar su##icint to covr th *rsnt attr>. This is a wlco

dcision. I# aritration *rocdin3s wr allowd% unr3istrd #ir would% " *rovidin3 #or

aritration in th *artnrshi* dd% sca* th disailit" containd in th sction.

9 Iid.

90 AI/ 0614 ,C 0889

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16/24

Thus% it is a sttld *ro*osition that an unr3istrd #ir cannot r#r to aritration a dis*ut

*rtainin3 to its ri3ht undr a contract.

Procee/ing after ar.itration a6ar/0-

hr a dis*ut twn an unr3istrd #ir and th othr *art" was r#rrd to aritration

at th instanc o# th othr *art" and th aritrator hav suittd his award which wnt in

#avour o# th #ir% th Gustion aros whthr th #ir had th ri3ht to 3t th award

convrtd into a court dcr and thn n#orc it. Th Madh"a radsh $i3h Court allowd

th n#orcnt o# th award and th ,u*r Court a##ird th dcision. Th court was o#

th viw that ,ction 16() was not attractd. n#orcnt o# an aritration a3rnt is

arrd. !ut whn th othr *art" activatd th aritration claus a3ainst th unr3istrd #ir%

and th aritrator #ir% and th aritrator 3av his award% th attr wnt "ond th sco* o#

th a3rnt. It was thn an award which was sou3ht to n#orcd and not a claus in th

a3rnt.99

E


17/24

an unr3istrd #ir% in3 in dissolution% wr allottd to a *artnr% h was allowd

to su. It was not a suit " th #ir% and vn i# it was% it was on #or ralisation o#

assts.

A *artnr o# an unr3istrd #ir had #ild a suit a3ainst his co- *artnrs claiin3

dclaration o# shars% *ro*r adinistration o# #ir and rndition o# accounts. Th suit

was disissd undr ,ction 16(0). ,usGuntl" th sa *artnr #ild anothr suit

*ra"in3 #or dissolution o# th #ir. This suit was hld to aintainal undr

,ction 16() (a). Th court said that th susGunt suit was not arrd " th

doctrin o# res judicata caus th caus o# action was di##rnt in th two suits.

Suit on &eha!f of an inso!"ent #artner4 0 ,ction 16() () ntions this ;c*tion. It

just sa"s that th o##icial assi3n% rcivr or court actin3 #or an insolvnt *artnr

a" rin3 an action #or ralisation o# th insolvntBs shar% whthr th #ir was

r3istrd or not.

E?CEPTION! OF T%E !ECTION :; &!7 :; &9,,

!its 6here pro5isions re4ating to Registration of firms /o not app410-

Claus (a) o# this su sction tal2s aout it. It ;*ts thos #irs whos *lac o# usinss is

in such aras% whr caus o# noti#ication undr sc. 51% this cha*tr dos not a**l".

,ction 51 *rovids that th +ovrnnt o# an" stat a"% " noti#ication in th


18/24

!uit by *roprietorship &irm8 ( An" suit #ild " an" *ro*ritorshi* #ir whthr r3istrd or

not is alwa"s aintainal.

Interim relief8( An a**lication #or th court #or intri rli# undr ,ction 6 o# th

Aritration and Conciliation Act% 0661 has n hld to aintainal whthr th #ir is

r3istrd or not.

+riminal proceedings8 ( A criinal *rocdin3 undr ,ction 08 o# th '3otial

Instrunts Act% 0880 #or th dishonour o# a chGu is not in th natur o# a civil suit and%

thr#or% th ar o# ,ction 16 would not *rvnt an unr3istrd #ir #ro launchin3 such a

*rocdin3.

INTRO$UCTION OF !U3- !ECTION &(- A,

Th !oa" ,tat Andnt o# 0684 has addd s.- section &(-A, to !ection :;. Th su-

sction *rovids:

)"o suit to enforce any right for the dissolution of a firm or for accounts of a dissolved firm

or any right or power to reali9e the property of a dissolved firm shall be instituted in any

court by or on behalf of any person suing as a partner in a firm against the firm or any

person alleged to be or have been a partner in the firm, unless the firm is registered and the

person suing is or has been shown in the 1egister of &irms as a partner in the firm.

It was hld " th ,C that no andnt o# a suit could allowd whr th ori3inal suit

itsl# was not aintainal94.

Th #acts o# th cas wr:

A *artnrshi* #ir havin3 si; *artnrs ca into ;istnc on 96-00-0676 a#tr th dd o#

*artnrshi* was ;cutd. Th *artnrshi* was dul" r3istrd.


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sou3ht dclaration that th *rovisions o# ,ction 16(9-A) o# th Indian artnrshi* Act which

ca to insrtd " Maharashtra Act 96 o# 0684 wr constitutionall" invalid and not

a**lical to th *lainti##Bs cas. It was hld that whn th *rsnt suit was hit and a##ctd

" sction 16(9-A) o# th act and was inco*tnt and such inco*tnt suit could not

allowd to andd. hn th suit was arrd in viw o# ,ction 16 (9-A) and it could

not hav n ntrtaind% no andnt o# such a suit vn " wa" o# challn3 to ,ction

16 (9-A) could *rittd. Char suons s2in3 andnt was disissd.

Till th introduction o# su-sction (9A)% a *artnr in a #ir could #il a suit #or dissolution o#

an unr3istrd *artnrshi* #ir% or #or accounts o# th dissolvd #ir% or to rcovr th

*ro*rtis o# th dissolvd #ir. ith th coin3 into #orc o# th su-sction in 0685% a

*artnr in an unr3istrd *artnrshi* #ir in Maharashtra could not #il vn thos t"*s o#

suits.

In 7 !.ramanim 57 R7 Rao(+% th ,u*r Court dclard unconstitutional a si3ni#icant

stat andnt to th artnrshi* Act% 069. Th Gustion r3ardin3 th constitutionalit" o#

th su-sction was r#rrd to th !oa" $i3h Court% which u*hld th sction. An a**al

was *r#rrd a3ainst this jud3nt #or th ,u*r Court. Th ,u*r Court

(Mar2and" atju and +.,. ,in3hvi .) struc2 down th i*u3nd su-sction (9A) as

violativ o# Articls 04% 06(0) (3) and A o# th Constitution.

Th Court rasond that not allowin3 a *artnr to #il a suit #or accounts and rcovr" o#

*ro*rt" ssntiall" d*rivd a *artnr o# an unr3istrd #ir o# his ri3ht to *ro*rt" in th

#ir without an" co*nsation. Thr#or% th su-sction was in violation o# Articl A

o# th Constitution (='o *rson shall d*rivd o# his *ro*rt" sav " authorit" o# law>).

Followin3 a lin o# *rcdnts% it was hld that =law> cont*latd in Articl A cannot

includ a law which is aritrar" in natur. Additionall"% th strin3nc" o# th law ant that it

violatd Articls 04 and 06 as wll. Th rasonin3 o# th Court is sn throu3h th #ollowin3

*ara3ra*h #ro th jud3nt:

=Th *riar" ojct o# r3istration o# a #ir is *rotction o# third *artis who wr sujctd

to hardshi* and di##icultis in th attr o# *rovin3 as to who wr th *artnrs. ndr th

arlir law% a third *art" otainin3 a dcr was o#tn *ut to ;*nss and dla" in *rovin3

that a *articular *rson was a *artnr o# that #ir. Th r3istration o# a #ir *rovids

95 ?. ,uraaniu v. /. /ao% (9th March% 96)

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*rotction to th third *artis a3ainst #als dnials o# *artnrshi* and th vasion o# liailit".

.91

Accordin3l"% ,ction 16(9A) introducd " th Maharashtra stat andnt was dclard to

unconstitutional.

!it fi4e/ in In/i5i/a4 Capacit10-

It has also n hld that i# a suit has n #ild in th individual ca*acit" " a *rson who

had n a *artnr o# th dissolvd #ir a3ainst anothr *rson who had also n a *artnr

91 Ahinav . Mishra% 0ffect of non( registration of a firm% availal at:

htt*:lawanlo3.lo3s*ot.in9096##ct-o#-non-r3istration-o#.htl

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http://lawmanblog.blogspot.in/2012/09/effect-of-non-registration-of.htmlhttp://lawmanblog.blogspot.in/2012/09/effect-of-non-registration-of.html


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o# th dissolvd #ir% th ar undr sction 16(9A) would not attractd. Thr#or% th suit

was not arrd " th *rovisions o# sction 16 (9A) o# th Indian artnrshi* Act.97

CONCLU!ION

/3istration o# a *artnrshi* #ir has n 3ivn si3ni#icant attntion " th l3islatur "

incor*oratin3 it in a whol cha*tr in th Act. Thou3h th Act nvr a2s r3istration

co*ulsor" ut it would co too onrous #or a #ir to conduct its o*rations. vn

routin activitis li2 suin3 a third *art" #or onis du to th #ir would not allowd and

thus an" *artnrshi* with rlativl" lon3 *riod o# o*ration would hav to 3t th

r3istrd. Th r3istration o# #ir is condition *rcdnt to its ri3ht to institut a suit and

thus a court o# law cannot *rocd with th trial o# a suit whn th condition *rcdnt has

not n #ul#illd. In ordr to institut a suit% a *artnrshi* #ir ust not onl" a r3istrd

#ir ut all th *rsons% who ar *artnrs in th #ir at th ti o# institution o# suit% ust

also shown as such in th r3istr o# #irs. I# on or or o# th *artnrs o# th *artnrshi*

97 ishor uar v. 'avin Chandra% AI/ 0668 !o. 05

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#ir hav not n shown in th r3istr o# #irs whn th suit is institutd " th #ir% th

suit is not aintainal.

!ut thr hav n a nur o# situations whr th court thslvs hav distin3uishd th

#acts o# th cass #ro th on Guotd in *rcdnt to such an ##ct that th cas in Gustion

is on whr thr was a nw a3rnt alto3thr. It dos not% thr#or% adit o# dout that

th suit is in;trical" i;d u* with th *artnrshi* itsl# and ariss out o# th *artnrshi*

contract. $nc th #ir can convnintl" *lacd outsid th sco* o# ,ction 16.

Morovr% thr is considral ai3uit" in ,ction 16(9) as to what is ant " th words

Karisin3 out o# a contract. Th courts in a nur o# cass has hld that Th suit is not #or

n#orcnt o# an" ri3ht arisin3 out o# a contract ntrd into " or on hal# o# th

unr3istrd #ir with third *artis in th cours o# th #irKs usinss transactions. Th suit

is% thr#or% #ails to arrd " ,ction 16(9).

Th whol ida o# this sction is that consurs and all othrs who ar dalin3 with th #ir

ust awar o# th constitution o# th co*an" and thus th docunts which ar availal

with th r3istrar o# co*anis ar *ulic docunts and *o*l dalin3 with th #ir ar

said to hav constructiv notic o# th dtails aout th #ir.

Furthr% susGunt r3istration cannot cur th initial d#ct. A *laint #ild " an

unr3istrd #ir is in #act no *laint at all% caus ,ction 16 a2s clais arisin3 out o# a

contract unn#orcal i# th #ir is unr3istrd at th dat o# th institution o# th suit. An

unr3istrd #ir has no ri3ht to su and% thr#or% a *laint #ild " it has no l3al ##ct. I# at

th ti th *laint is #ild th clai is ound to #ail% how susGunt r3istration can i*rov

th *osition. Thr will also this #urthr di##icult" that onc a dis*ut twn th *artnrs

has arisn% all o# th a" not si3n th a**lication #or and consGuntl" th #ir a"

rain unr3istrd and vn i# r3istration is otaind " dro**in3 th nas o# advrsaris%

thos whos nas do not #i3ur in th r3istration cannot still sud as *artnrs. It is%

thr#or% advisal to hav th #ir r3istrd whn it is constitutd.

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3I3LIO2RAP%"

Artic4es0

0. =##ct o# non- r3istration o# a #ir> " Ahinav . Mishra

3oo@s0

0. =&aw o# artnrshi*> " Avtar ,in3h

9. =artnrshi* Act> " olloc2 E Mulla

. =&aw o# artnrshi*> " C.&.+u*ta

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Cases0

0. !.. *atel v. usseinbhai Mohd . AI/ 067 !o. 995

9. :riental &ire ;

effects of non registration of partnership firm

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