The main disabilities that are suffered by an unregistered firm are listed below:

1. No suit in a civil court by a partner against the firm or other co-partners:

If any dispute arises among the partners or between a partner and the firm or between a partner
and ex-partners, and the dispute is based upon the rights arising from contract (i.e., partnership
deed) or upon the rights conferred by the Partnership Act, then a partner of an unregistered firm
cannot institute a suit to settle such disputes.
However, criminal proceedings can be brought by one partner against the other(s). Thus, if a partner
steals the property of the firm or puts fire to the buildings of the firm, any partner can prosecute him
for the same.
2. No suit in a civil court by firm against third parties:
An unregistered firm cannot file a suit against a third party, if it so becomes necessary, to enforce
any right arising from contract, e.g., for the recovery of the price of goods supplied. Of course,
criminal proceedings can be brought against the wrong doers. Thus a suit can be filed against a
person who causes damage to the goods of the firm.
Similarly, an unregistered firm can sue the drawer of a cheque dishonoured for insufficiency of funds
which is a criminal offence under Section 138 of the Negotiable Instruments Act, 1881. It may be
noted that a suit by a third party against the firm or its partners is not prohibited, it is only a suit by
the firm, and that too arising out of a contract, against a third party which is prohibited.
3. The firm or its partners cannot make a claim of set-off or other proceeding based upon
a contract:
The above two disabilities also apply to a claim of set-off or Gather proceeding to enforce a right
arising from a contract. Thus, if a third party sues the firm to recover a sum of money, the firm
cannot claim a set-off, i.e., the firm cannot say that the third party also owes some money to the
firm and the same should be adjusted against the claim in question.
Similarly, if an unregistered firm institutes a suit for the reduction of rent against its landlord, such a
suit is not maintainable because the suit falls under the disability relating to other proceeding to
enforce a right arising from a contract (Gappulal Gordhandas vs Chunilal Shyamlal).
Exception: The non-registration of a firm, however, does not affect the follow rights:
i. The rights of third parties to sue the firm or any partner.
ii. The rights of a partner to sue for dissolution of the firm, accounts after dissolution and
realisation of property after dissolution.
iii. The rights of firm or partners of firm having no place of business in India.
iv. The right to sue or claim a set-off of value not exceeding Rs. 100.
v. The powers of an Official Assignee or Receiver or the Court to realise the prop of an insolvent
partner.
DOCUMENTATION REQUIREMENTS PARTNERSHIP FIRM:
1.
2.
3.
4.
5.
6.
7.
8.

A copy of the Partnership Deed

Registration certificate if the firm is availing of any credit facility / Secured
Overdraft / Temporary Overdraft facility
PAN Card / Form No. 60 of the firm
Passport size Photograph of the authorized signatories
Identity Proof of all the authorized signatories as per List-A
Signature Proof of all the authorized signatories as per List-B
Address Proof of all the authorized signatories as per List-C
Mailing Address of the Concern to be submitted as per List-D only if the
address is different from the one mentioned in the Partnership deed or from
that of any of the partners who is an authorized signatory

List D-Document pertaining to the Proprietary / Partnership Firm (Any One)

Shop and Establishment Certificate / Municipal License

Sales Tax Returns / Registration Certificate / Profession Tax Regn. Certificate
Existing Bank Account Statement with account opening amount cheque from the same account
License to Carry on Business from Registered Authority E.G.: Chemists-FDA
Certificate of Practice Issued by Institute of Chartered Accountants of India / Institute of Cost Accountants of
India / Company Secretary of India / Medical Council
Chartered Accountants Certificate.

Dissolution oF Firms
When the relation between all the partners of the firm comes to an end, this is called dissolution of the
firm. Section 39 of the Indian Partnership Act, provides that the dissolution of the partnership between all
the partners of a firm is called the dissolution of a firm. It implies the complete break down of the relation
of partnership between all the partners.
Dissolution of partnership is different from the dissolution of firm.
Dissolution of a partnership firm merely involves a change in the relation of partners; whereas the
dissolution of firm amounts to a complete closure of the business. When any of the partners dies, retires or
become insolvent but if the remaining partners still agree to continue the business of the partnership firm,
then it is dissolution of partnership not the dissolution of firm. Dissolution of partnership changes the
mutual relations of the partners. But in case of dissolution of firm, all the relations and the business of the
firm comes to an end. On dissolution of the firm, the business of the firm ceases to exist since its affairs are
would up by selling the assets and by paying the liabilities and discharging the claims of the partners. The
dissolution of partnership among all partners of a firm is called dissolution of the firm.
Dissolution of a Partnership firm may be effected in the following ways:
Dissolution without the intervention of the Court.
Dissolution by Court.
Dissolution without the intervention of Court:1. By Agreement (S.40)
A partnership firm can be dissolved any time with the consent of all the partners whether the partnership is
at will or for a fixed duration. A partnership can be dissolved in accordance with the terms of the
Partnership Deed or of the separate agreement.
2. Compulsory Dissolution (Sec.41):- In case, any of the following events take place then it becomes
compulsory for the firm to dissolute:
(i) Insolvency of Partners
In case all the partners or all the partners except one become insolvent.
(ii) Unlawful Business
In case the firm is engaged in more than one business which may have become unlawful, the better view
appears to be that the firm will not dissolve as to the other legitimate businesses unless all of them are so
inter connected that stoppage of one would paralyze the others e.g. A and B charter a ship to go to foreign

port and receive a cargo on the joint venture. War breaks out between England and the country where the
port is situated before the ship arrives at the port, and continues until after the time appointed for loading.
The partnership between A and B is dissolved
3. Dissolution on the happening of contingent event (S.42) A firm may be dissolved on the happening
of any of the following contingent event
(i) Expiry of Fixed Period
A firm constituted for a term is of course not exempt from dissolution by any of the other possible cause
before the expiration of the term. The contract may expressly provide that the partnership will determine in
certain circumstances but even if there is no such express term, an implied term as to when the partnership
will determine may be gathered from the contract and the nature of the business. The provision of this
section make it clear that unless some contract between the partners to the contrary is proved, the firm, if
constituted for a fixed term would be dissolved by the expiry of that term.
(ii) On achievement of specific task
A partnership constituted to carry out contracts with specified persons during a particular season would be
taken to be dissolved once the contracts are closed. In the case of Basantlal Jalan v. Chiranjilal, Where the
firm was constituted for a specific undertaking to supply certain quantity of grain and the contract was
prematurely terminated after supply of a part of the goods, it was held that the partnership did not come to
an end and was dissolved only on the final realization of the assets
(iii) Death of Partner
When the deed of partnership did not provide that the death of a partner would not dissolve the partnership,
the partnership stood dissolve on the death of a partner. Firm, stands dissolved automatically on death of
one partner. Continuance of business after such death would not tantamount to continuance of earlier
partnership.
(iv) Insolvency of Partner
In the absence of a contract to the contrary, the insolvency of any of the partner may dissolve the firm.the
rule shall apply even though the partnership has been constituted for a fixed term and the term has not yet
expired or has been constituted for particular ventureand the same has yet not been completed.
(v) Resignation of Partner
Resignation by any of the partners dissolves the partnership
4. Dissolution by notice (S.43)
In case of partnership at will, a partner can dissolve it by giving written notice of dissolution to other
partners duly signed by him. Notice must be very clear and certain. A notice once given cannot be
withdrawn without the consent of other partners was held in case of Banarsidas v. Kanshi Ram. In those
cases where a partner has given notice of dissolution at a time when dissolution will give him some
advantage over the other partners, he may be held in the firm till the pending transactions are completed.

Dissolution by Court (S 44)

The court may order for the dissolution of the firm on the following grounds:(i) Insanity of Partner

On the application of any of the partner, court may order for the dissolution of the firm if a partner has
become of an unsound mind. Lunacy of a partner does not itself dissolve the partnership but it will be a
ground for dissolution at the instance of other partners. It is not necessary that the lunacy should be
permanent. In the case of a dormant partner the court may not order dissolution even on the ground of
permanent insanity, except in special circumstances.
(ii) Incapacity of Partner
If a partner has become permanent in capable of discharging his duties and obligations then court may
order for the dissolution of firm on the application of any of the partner. where a partner is imprisoned for
a long period of time the court may dissolve the partnership was held in case ofWhitwell v. Arthur
(iii) Misconduct of Partner
If any partner other than partner suing is responsible for any loss to the firm, which amounts to misconduct
and prejudicially affects the carrying on of business then the court may order for the dissolution of the
firm.
(iv) Constant breach of agreement by partner
The court may order for the dissolution of the firm if the partner other than the suing partner is found
guilty for constant breach of agreement regarding the conduct of business or the management of the affairs
of the firm and it becomes impossible to continue the business with such partner.
(v) Transfer of Interest
When any of the partner other than the suing partner transfers whole of its share to the third party for
permanently.
(vi) Continuous Losses
The court may order for dissolution if the firm is continuously suffering losses and there is no more capital
available for the future growth of the firm.
(vii) Just and Equitable
The court may order for dissolution on any other ground which court think is just, fair and equitable. e.g.
loss of total confidence between the partners was held in case of Havidatt singh v. Mukhe Singh