NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL

PROJECT ON
EFFECTS OF NON REGISTRATION OF PARTNERSHIP FIRM

Ms. NEHA SHARMA VINOD DHAKAR

ASSISTANT PROFFESOR 2017/ LL.M. /33

NLIU, BHOPAL

1
 RESEARCH SCHEME

Introduction……………………………………………………………………………….. 05

Historical Background………………………………………………………………..…….08

Statutory provision on the effect of non registration………………….…………………....10

Suit between Partners and the firm(Sec.69(1))……………………………………………..11

Suit between the firm and the third party(Sec.69(2)) …………………………………........13

Statutory and non contractual Rights …………………………………………………........13

Action based on tort …………………………………………………………………….......14

Registration of Partnership deed …………………………………………………………....14

Effect of change in the constitution …………………………………………………...........14

Burden of proof ………………………………………………………………………..…….15

Exception to the sec………………………………………………………………………….15

Registration before action……………………………………………………………………15

Set-off and other proceeding Sec. 69(3)……………………………………………………...15

“Other proceedings” ……………………………………………………………………….....15

Proceeding after arbitration award…………………………………………………………...16

Exceptions to the section……………………………………………………………………..16

Exception of the section 69 (Sec. 69(4)…………………………………………………..….16

Suit where provisions relating to registration of firm not apply……………………………..17

Value of suit does not exceed Rs.100………………………………………………..……….17

Other exceptions……………...……………………………………………………………….18

Introduction of sub Sec. (2-A)………………………………………………………………...18

Suit filed in individual capacity………..………………………………………………………19

Conclusion……………………………….…………………………………………………….20

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 CERTIFICATE

The project entitled “Effects of non registration of partnership firm” submitted to the National
Law Institute University, Bhopal for “Fundamental of Business Law ” as part of an assessment
is based on my original work carried out under the guidance of Ms. Neha Sharma . The research
work has not been submitted elsewhere for award of any degree. The material borrowed from
other sources and incorporated in the project has been duly acknowledged.

Signature of the candidate

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 ACKNOWLEDGMENT

I express my gratitude and deep regards to my teacher for the subject Miss. NEHA SHARAM
for giving me such a wonderful opportunity to make a research work on the topic which involves
such a relevant question of law. It will indeed enhance my knowledge and also widen the scope
of my study. I would like to thank her for her exemplary guidance, monitoring and constant
encouragement throughout the course of this study.

I also take this opportunity to express a deep sense of gratitude to my classmates in the college
for their cordial support, valuable information and guidance, which helped me in completing this
task through various stages.

I am obliged to the staff members of the Library, for the timely and valuable information
provided by them in their respective fields. I am grateful for their cooperation during the period
of my assignment.

Lastly, I thank my family for their constant encouragement without which this assignment would
not have been possible.

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INTRODUCTION

The Indian Partnership Act, (1932) was enacted by the Parliament repealing the relevant sections
from the Indian Contract Act, 1872 keeping in mind the conditions and the special nature of
business in India. It was thought proper to define and amend the law relating to partnership.
Registration of the partnership is a very important area which has been dealt in Chapter VII of
the Act, and due to its special nature, that the disabilities resulting from non-registration came in
to effect a year after the Act. Chapter VII of the Act deals with 'Registration of Firms' of which
sections 56 to 65 deals with the procedure for registration. Section 66, relates to inspection of
register, section 67 to grant of copies to 'any person' and section 68 with 'rules of evidence'. The
purpose of these provisions is to protect the interest of those who deal with partnership firms in
various commercial transactions. Third parties who deal with a firm on its name or with a partner
or managing partner as representative of the firm must be in a position to know who the partners
are and what are their respective shares in the partnership, the details, if any, as to the capital
investment by partners, and the details, if any, of the partnership property. That would enable
them to have an idea of the competence, status and solvency of the partners of the firm.
If the partnership firm does not choose to get itself registered, then the firm as well as the
partners is under the disabilities which are extremely inconvenient. There is no direct compulsion
but a pretty strong persuasive pressure to come on the register of firms. No member of an
unregistered firm can enforce his rights under the partnership contract against either the firm or
any present or past member of it, nor can the firm sue its customers on their contracts

STATEMENT OF PROBLEM

(1) A partner is not entitled to file a suit in any court of law against the other partners or the firm
for the execution of any right emerging from any undertaking or right bestowed by the
Partnership Act.

(2) A right evolving from an undertaking cannot be implemented in any Court of law by or in
support of one’s firm against any other firm.

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(3) the firm or any of its associates cannot assert a set off (i.e. fundamental negotiation of debts
possessed by the argufied parties to one another) or other actions in a disagreement with a third
party.

HYPOTHESIS

The India Partnership Act, 1932 is inadequate to protect the rights of the unregistered partnership
firm.

KEY RESEARCH QUESTIONS

The questions to be answered in the project are the following:

1. Whether the registration of partnership firm is compulsory or not?

2. What are the effects of non registration of partnership firm?
3. Which rights of the partners are not affected due to the non registration?

SCOPE AND OBJECT

THE project seeks to look at the consequences faced by an unregistered partnership

firm. It will focus on the disabilities of an unregistered firm provided by section 69
of Indian partnership Act 1932. It will also focus on the exceptional situations where
an unregistered partnership firm can file cases in a suit.

RESEARCH METHODOLOGY
The method of research which is followed for the project is a doctrinal study. The research
includes gathering the data from the existing information like referring the books related to the
topic, article , journals, and the document relating to the topic available online.

REVIEW OF LITERATURE

1. Law of Partnership by Avatar Singh: The English law compels registration at the pain of
penalty; Section 69 compels it at the pain of disability to sue. Thus it becomes necessary for
the survival of a firm that it should be registered. However, where a person in his individual
capacity is not shown partner of the firm but as Karta of Hindu undivided Family he is

6
 partner of the firm, he is therefore duly authorized to institute the suit. A Joint family firm is
not subject to the restrictions imposed by Section 69 of the Act. Similarly, there are other
situations also where firms can escape the liability of being registered. Hence, this project
aims to deal with all those circumstances where the scope of Section 69 extends and where
the law proves to be a mere façade.
2. The Law of Partnership by R.R. Maurya: The registration of the partnership firm is not
compulsory but it should be registered with the Registrar of Firms soon after its formation.
Because an unregistered firm cannot sue outsiders although outsiders can sue the firm.

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HISTORICAL BACKGROUND

In order to compel partners to register their partnership firms so that all relevant information
could be obtained by inspection of the register or by obtaining a certified copy thereof, a suitable
legal provision is needed. Under the UK Registration of Business Names Act, 19161 there was a
penal provision and also a provision which created certain disability in respect of enforcement of
certain rights in Courts. However, under the Indian Partnership Act, there is no penal sanctions
for non-registration (as in UK), but only a provision that creates certain disabilities in respect of
enforcement of rights in Courts2
Under the Act, registration of firm is not mandatory. It is utterly on the will of the partners to get
it registered with the Registrar of the Firm or not to do the same. The object and the reason as to
why registration is not made compulsory are, in brief difficulties related to Hindu undivided
family business, short lived partnership and firm in a small way of business3Although there is no
penalty for non-registration, yet registration becomes necessary at one time or the other, because
Section 69 of the Act seriously cuts short the capacity of an unregistered firm and its partner to
sue and be sued (which would prevent other parties from transacting) It was on the basis of the
Report of the Special Committee that the Partnership Act 1932 was passed by the Parliament.4
Para 15 of the report stated that the Bill seeks to overcome class of difficulty by making
registration optional and by creating inducements to register, which will only bear upon firms in
a substantial and fairly permanent way of business5Business Names Act 1985 (English Act), has
replaced the above the UK Registration of Business Names.
Act of 1916 and Section 4 of the new Act refers to the civil remedies for breach of Section 4. It
provides for dismissal of the action to enforce a right arising out of a contract made in the course
of a business, if the firm is not registered6

1
The UK Registration of Business Names Act, 1916 makes it compulsory not just firms but also individuals
carrying on
business to register both the business names and the personal names of the parties in the form therein prescribed.
Registration is not called for in case of a firm name consisting only of the usual names of the partners, but in practise
the great majority of firms have to be registered.
2
These disabilities are contained in Section 69 of the Indian Partnership Act.
3
Mulla, Partnership Act, Ist edn. 1934, Page 88.
4
The committee consisted of Sir Brojendra Lal Mitter, Sir Dinesh F Mulla, Sir Alladi Krishnaswamy Iyer and Mr
Arthur Eggar. Earlier the law governing partnership was contained in the Indian Contract Act, 1872.
5
Mulla, Partnership Act, 1 edn. 1934, Page 167, 176-177.
6
See Halsbury Statutes, 4th edn., Vol 48 at p 101

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The English precedent in so far as it makes registrations compulsory and imposes a penalty for
non-registration has not been followed, as it is considered that this step would be too drastic for a
beginning in India, and would introduce all the difficulties connected with small or ephemeral
undertakings. Instead, it is proposed that registration should lie entirely within the discretion of
the firm (or the partners) concerned; but following the English precedent, and firm which is not
registered will be incapable to enforce its claim against third parties in the civil court; and any
partner who is not registered will be unable to enforce his claims either against third parties or
fellow partners7 The English precedent referred to in Para 17 of the report of the Special
Committee, which has been not followed in totality but followed in part in drafting section 69(2)
is the one contained by the Registration of Business Names Act 1916. Section 7 of that
Registration of Business Names Act 1916 refers to penalties for default in registration. As stated
in the report, the penalty part of this Act has not been introduced in India but the provisions of
Section 8 creating disabilities in the way of the firm in default is adopted8 But once registration
has been effected the statement recorded in the register regarding the constitution of the firm will
be conclusive proof9 of the facts therein contained against the partners making them and no
partner whose name is on the register will be permitted to deny that he is not a partner with
certain natural and proper exceptions. This should afford a strong protection to persons dealing
with firms against false denials of partnership and the evasion of liability by the substantial
members of a firm10
A third Party who deals with a firm and knows that a new partner has been inducted, can either
make registration of the new partner a condition for further dealings or content himself with
certain security from the other partners and the chance of proving by other evidence, the
membership of the new but unregistered partner A third party who deals with a firm without
knowing of the addition of a new partner counts on the credit of the old partners only and will
not be prejudiced by the failure of the new partner's registration. The rights of that defaulter

7
Mulla, Partnership Act, 1 edn. 1934, Page 167, 186-187. Para 23 of the Report of the Special Committee also
refers to those who deal with the firm
8
Para 23 of the Report of the Special Committee.
9
Section 68(1) Indian Partnership Act, 1932. The Special Committee Report, Para 18. See also Bhardia Brothers v.
Union of India, AIR 1973 Ori 28
10
The Report of the Special Committee, reference to Paras 18 and 19

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under or arising out of any contract made or entered into by or on behalf of such defaulter in
relation to the business in respect of which the particulars were required to be furnished11.
The above provision clearly signifies that the right that is sought to be enforced by the
unregistered firm and which is barred must be a right arising out of a contract with a third party-
defendant in respect of the firm's business transactions. If two persons agree to share the profit of
a money lending business, they are partners and form partnership to which section 69 applies12

STATUTORY PROVISIONS ON THE EFFECTS OF NON REGISTRATION

Sec. 69 contains the effects of no registration of partnership firm
Sec. 69- effects of non registration:-
1. No suit to enforce a right arising from a contract or conferred by this Act 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 to have been a partner in the firm
unless the firm is registered and the person suing is or has been shown in the
Register of Firms as a partner in the firm.
The sub sec.(1) bars any suit or action by the partner of unregister firm against that firm or
against any other partner of that firm.
2. No suit to enforce a right arising from a contract shall be instituted in any Court by
or on behalf of a firm against any third party unless the firm is registered and the
persons suing are or have been shown in the Register of Firms as partners in the
firm.
sub sec. (2) bars any suit or action by the unregistered firm against any third party.
The operation of sec. 69 would extends to the suit in which a partner sues his co-partner or sue
the firm to enforce any right arising from the contract between the partners.13
3. The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or
other proceeding to enforce a right arising from a contract, but shall not affect,—
(a) the enforcement of any right to sue for the dissolution of a firm or for accounts
of a dissolved firm, or any right or power to realise the property of a dissolved firm,
or

11
Halsbury Statutes, 3rd edn. Vol 37 p 867
12
Gokuldas Rampratap Marwadi v.Kesheorao Janurao Marathe, AIR 1937 Nag 134
13
C.l. gupta Law of partnership,3rd edi. 563 (modern law publication, Allahabad 2001)

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 (b) the powers of an official assignee, receiver or Court under the Presidency-towns
Insolvency Act, 1909 (3 of 1909) or the Provincial Insolvency Act, 1920 (5 of 1920) to
realise the property of an insolvent partner.
The sub sec. 3 says the disabilities mentioned in the above sub sec. also apply to acclaim of Set-
off or other proceeding to enforce a right arising from a contract. But the further sub clause of
this section contain exceptions.
(4) This section shall not apply,—
(a) to firms or to partners in firms which have no place of business in 8 [the territories
to which this Act extends], or whose places of business in 9 [the said territories], are
situated in areas to which, by notification under 10 [section 56], this Chapter does not
apply, or
(b) to any suit or claim of set-off not exceeding one hundred rupees in value which, in
the Presidency-towns, is not of a kind specified in section 19 of the Presidency Small
Cause Courts Act, 1882 (5 of 1882), or, outside the Presidency-towns, is not of a kind
specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887 (9 of
1887), or to any proceeding in execution or other proceeding incidental to or arising
from any such suit or claim. State Amendments
Sec. 4 also contains some exceptions.
These were the statutory provisions of the effects of non registration of partnership firm
contained in Indian partnership Act. So, Lets further understand the concepts
Suit between partners and the firm sec. 69(1)
A partner of an unregistered firm can not sue the firm or his present or past co-partner for the
enforcement of any rights arising from a contract or conferred by the partnership Act According
to sec. 69(1) two conditions are necessary to enable a partner to sue his co- partner or firm. These
are –
1. The firm should be registered
2. The name of the partner suing must figure in registration
This difficulty may be overcome by getting the firm registered before an action brought.
But once a dispute between the partners has arisen all of them may not sign the
application form and consequently the firm may remain unregistered. It is therefore the
advisable to

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 have firm registered as soon as it is constituted. The scope of this sub sec. was examined
bythBombay high court in S.H. patel V. Husainbhai mohd. The case where the action
was between two former partners to enforce an agreement restraining the outgoing
partner from carrying on in some area any business similar to that of the firm and the
court had to examine whether such suit was maintainable or not at the firm was not
registered Desai justice in this case held that here there was the new agreement as to
restrain and not one arising out of the original contract of partnership. He said the right
which the plaintiff seeks to enforce is not the right wasted in or acquiring by him as a
partner but a right acquiring by him under a distinct subsequent agreement. This
agreement does not in anyway regulate the rights of partners as such i.e., it does in any
way regulate their actual rights and obligations as partners, but is on the contrary, a new
and independent right furnishing an intire different cause of action. Therefore the court
accordingly included that an agreement between former partners as to restrain of trade is
not within the scope of sec. 69(1)
In a case where the firm takes an insurance policy on a motor vehicle belongs to the firm
the claim arises out of a contract of insurance and therefore the same cannot be enforced
by filing a suit if the firm is unregistered14
In Mahendra singh choudhary V. Tej ram singh15, one of the partners of the firm that is
“A” brought an action for injunction requiring that the cheques for the payment to the
firm should not be paid to singly to the other partner “B” but should be paid on the joint
name of A&B so that money could reach the coffer of the firm. But the firm was
unregistered. It was held that the action brought by A is not maintainable.
A point has been considered by the supreme court, namely, whether registering during
pendency of the suit to revive the suit or make the same competent at least from the date
of registration or not but no conclusive opinion was given16
Where a partnership was reconstituted but was not registered whereas the original partnership
was registered, the court finding that the dispute related to the original partnership allowed the
case about it to be filled.

14
Oriental fire &General insurance company ltd. V. U.O.I AIR 1991 pat. 250
15
AIR 1987 ALL. 152
16
Raptakos Brat v. ganesh property 1998 S.C. 3085

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SUIT BETWEEN THE FIRMS AND THE TRHIRD PARTIES SEC. 69(2)
According to the sec. 69(2), if the firm is unregistered, no suit to inforce a right arising from
contract can be instituted by a firm or its partners against a third party. A suit can be brought
only by or on behalf of a registered firm and that also by persons whose names appears as
partners in the registere of firm.
To enforce a right against third party it is not enough that the firm is registered it is further
necessary that “ The person suing is or has been shown in the registrar of firm as a partner in the
firm”.
If the name of one of the partners had not in the shown in the registrar of the firm the suit filled
by the partnership firm must be fail. 17
This sec. has been held to be a penal provision which deprive the plaintiff to its rights to get its
case examined on merits by a court. Simultaneously, it deprives the court of its jurisdiction to
adjudicate on the merits of the controversy between the parties. It is therefore the strictly
construed. Therefore the said provision being mandatory in nature would make the suit
incompetent on the very threshold.
Statutory and non contractual rights :-
This sub section is also confined its effect only to contract matters. Right arising independently
of contract remain enforceable.
In ruby general insurance company ltd. V. pearey lal kumar18 The word arising from a contract
were held to be akin to the word ‘arising out of a contract” and were construed widely in the
context of arbitration clause. But even so these words not apply to statutory or common law
rights because such rights do not have their roots in contract. This view was explained by the
supreme court in other cases also.
It was held by the SC that the to evict a tenant was not a right arising from a contract but was a
statutory right under the transfer of property Act. The eviction proceeding was therefore, not
barred.19
The supreme court followed this ruling in,
Haldiram Bhujiabala v. Anand Kumar Deepak kumar20 and held that a suit to prevent
infringement of a trademark is not barred by the section whether the firm is registered or not. The

17
AIR 1987 BOM. 348
18
AIR 1952 SC. 119
19
Raptakos brett v. Ganesh property, AIR 1998 SC. 3085

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court said that it is a best settled that a passing off action is a common law action based on tort.
This sub sec. also does not affect the right to apply for an interim relief under sec. 9 of the
arbitration and conciliation Act, 1996 where the partner forcibly broke upon the shop of the firm
and removed certain articles and surrendered the godown of the firm with an ulterior motive, it
was held that such acts of misconduct will not fall within the scope of sec. 69, hence the suit for
recovery of damages and was maintainable even if the firm was not registered.
Action based on tort

If the action on third party is not based on contract but on tort, fraud or any wrongful act, the
same is not hit by sec. 69(2) and the action is maintainable. Thus when the action relates to
detention of property, the action being founded on tort rather than contract the same is
maintainable.

For example : if the third person destroyed the property of firm by any negligent or deliberate act
the firm can definitely sue whether registered or not

Registration of partnership deed

Though section 69(2) says that the registration is compulsory but it doesn’t talk about the
registration of partnership deed also.
In J.K. finance& chief funds v. surya kumar21 a suit was filed by one of the partners of an
unregistered firm against the defendants for the recovery of money on the basis of promissory
note which was dismissed by the trial court on the ground that the plaintiff could not produce a
registered copy of the partnership deed but the high court reversed the judgment and held that
section 69(2) did not require the registration of the partnership deed of the partnership firm.

Effect of change in the constitution:-

Where the change in the constitution of the firm is notified to the registrar, the firm continues to
enjoy the status of a registered firm. But if the change is not notified, than it will remain as an
unregistered firm only 22

20
AIR 2000 SC. 128
21
AIR 2004 A.P. 190
22
Avtar singh, law of Partnership, 3rd ed. (2001) page no. 617-618

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Burden of proof:-
The burden of prove that the plaintiff is a registered firm and therefore, is entitled to maintain a
suit against a third party is always on the firm in view of the legislative mandate under this
section
Exception to the section:-
However there is an exception to this section to the third party is not barred from bringing an
action against an unregistered partnership firm. Third party can always sue a firm whether
registered or not. The disabilities is that of the firm and not of persons outside it.
Registration before action:-
The difficulty caused by the section can be overcome by getting the firm registered before an
action is brought. The action of an unregistered firm is, however, liable to be dismissed and it
cannot be rectified by subsequent registration. A fresh suit will have to be filed after registration
provided that it is still within the period of limitation. The names of those filling a suit must be
appear in the registration
SET-OFF AND OTHER PROCEEDINGS SECTION 69(3)

The above two disabilities also apply to a claim set-off or other proceedings to inforce a right
arising from a contract. A “claim of set-off” mean that if , for example, an unregistered firm is
sued by a third party to recover a sum of money the firm cannot say that the money owing by
that third party to the firm should be set-off against the claim. Therefore an unregistered firm
cannot claim a set-off.

“Other proceedings”:-
The words “other proceedings” had created some difficulty as to their import, particularly in
reference to the question whether the included “arbitration proceedings”. The supreme court has
now by its decision in jagdish Chandra gupta v. kajariya traders(India) Ltd.23 Settled the
controversy. In the present case, there is a clause in a deed of partnership provided that in case of
dispute between the partners, the matter will be referred to the arbitration a dispute having
arisen, one partner appointed an arbitrator to which the other party gave no response. An action
was then commenced to enforced the arbitration clause of the agreement. The other partner

23
AIR 1964 SC. 1882

15
contended that the firm was not registered, and therefore the suit should be dismissed the
supreme court held that the suit was not maintainable. “It is impossible to think that the right to
proceed to arbitration is not one of the rights which are founded on the agreement of the parties.
The words of sec.69(3) ‘or other proceedings to enforce a right arising from a contract’ , are
sufficient to cover the present matter” . this is a welcome decision. If arbitration proceeding
were allowed unregistered firm would, by providing for arbitration in the partnership deed
escape the disability contained in the section.
Thus it is a settled proposition that unregistered firm can not refer to arbitration a dispute
pertaining to its right under a contract.
Proceeding after arbitration award:-
Where a dispute between unregistered firm and the other party was referred to arbitration at the
instance of the of the other party and the arbitrator have submitted this award which went in
favor of the firm, the question is arose whether the firm had the right to get the award converted
into a court decree and then enforce it. The Madhya Pradesh high court allowed the enforcement
of the award and the supreme court affirmed the decision. The court was of the view that the
section 69(3) was not attracted. Enforcement of an arbitration agreement is barred. But when the
other party activated the arbitration clause against the unregistered firm, and the arbitrator firm
and the arbitrator gave his award, the matter went beyond the scope of the agreement. It was then
an award which was sought to be enforced and not a clause in the agreement.24

Exceptions to the section:-

There are two exception mentioned in this section only in the form of two clauses i.e. clause ‘a’
and clause ’b’
(a) Action for dissolution and accounts:- sec. 69(3) (a) talks about this exception. First an
unregistered firm and its partners can bring an action for the dissolution of firm or for
account of a dissolved firm. They can also enforce right or power to release the property
of a dissolved firm. Thus the disability to sue disappears with the dissolution of the firm.
“It seems that the intention of the legislation was inflict disability for non registration
only during the substance of the partnership”. For example A and B purchased a taxi to
ply it in partnership. They had done business for about a year when A, without the

24
Kamal Pushp Enterprises V. D.R. construction co. AIR 1996 M.P. 139

16
 consent of B, disposed of the taxi. B, brought an action to recover his share in the sale
proceeds. The only defence available to A was that the firm was not registered. The court
held that the business had been closed on the sale of the taxi, the action was for the
realization of the assets of the dissolved firm, and therefore the suit is maintainable.
it has been held by the Bombay High Court that a suit for damages for misconduct can be
Brought by one partner against another even if the firm is not registered, because
enforcing the claim of the firm is realization of its assets. Where the debts of an
unregistered firm being in dissolution were allotted to a partner, he was allowed to sue. It
was not the suit by the firm, and even if it was, it was one for realization of assets.
A partner of an unregistered firm had filed a suit against his co-partners claiming
declaration of shares, proper administration of firm and rendition of accounts. The suit
was dismissed under sec. 69(1). Subsequently the same partner filed another suit praying
for the dissolution of firm. This suit was held to be maintainable under sec.69(3)(a). the
court said that the subsequent suit was not barred by the doctrine of res judicata because
the cause of action was different in the two suits.
(b) Suit on behalf of an insolvent partner:- section 69(3) (b) mention this exception. It just
say that the official assignee, receiver of court acting for an insolvent partner may bring
an action for realization of the insolvents share, whether the firm was registered or not.

EXCEPTION OF THE SECTION 69(SECTION 69(4))

Suit where provisions relating to registration of firm do not apply:-

Clause (a) of this sub section talks about it. It exempts those firms whose place of business is in
such areas, where because of notification under section 56, this chapter does not apply. Section
56 provides that the government of any state may, by notification in the official Gazette, direct
that the provisions of this chapter shall not apply to that state or to any part thereof specified in
the notification.
Value of suit does not exceeds Rs. 100:-
Section 69(4)(b) mentions this exception. It says that an unregistered firm and its partners may
sue or claim a set-off where the subject matter of the suit does not exceeds Rs.100 in value.

17
Other exceptions :-
There are also other exceptions too which might not be explicitly not contained in the provision
These are25:
Joint hindu family business:- any suit by the joint Hindu family business is always
maintainable
Suit by proprietorship firm:- any suit filed by any proprietorship firm whether registered or not
is always maintainable.
Interim relief:- An application before the court for interim relief under section 9 of the
arbitration and conciliation act,1996 has been held to be maintainable whether the firm is
registered or not.
Criminal proceedings: A criminal proceeding under sec. 138 of the negotiable instrument
Act,1881 for the dishonor of cheque is not in the nature of the civil suit and therefore the bare of
section 69 would not prevent an unregistered firm from launching such a proceeding.

INTRODUCTION OF SUB SECTION. 2-A

The Bombay state amendment Act 1984 has added sub sec. (2-A) to section 69. The sub section
provides:-
“No suit to enforce any right for the dissolution of a firm or for account of a dissolved firm or
any right or power to realize 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 register of firms as a partner in the firm.”
It was held by the Supreme Court that it was no amendment of a suit could be allowed where the
original suit itself was not maintainable26
Till the introduction of sub section (2-A), a partner in a firm could file a suit for dissolution of an
unregistered partnership firm, or for accounts of the dissolved firm, or to recover the priorities of
the dissolved firm. With the coming into force of the sub-section in 1985, a partner in an
unregistered partnership firm in Maharashtra could not filed even those types of suits.

25
Avtar singh, Law of Partnership, 3rd ed. (2001), Pg.(649-6500
26
Ramniklal Mohanlal Chawda v. sharad vasant kotak, (1997)2Mah LJ 731(Bom.)

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In V. Subramanium V. R. Rao.27, the Supreme Court declared unconstitutional significant state
amendment to the partnership Act, 1932, the question regarding the constitutionality of the sub
section was referred to the Bombay High Court, which upheld the section. An appeal was
preferred against this judgment before the Supreme Court. The Supreme Court struck down the
impugned sub section (2-A) as violative of Article14, 19(1)(g) and 300A of the Indian
Constitution.
Accordingly Sec. 69(2A) introduced by the Maharashtra state amendment was declared to be
unconstitutional.
Suit File in Individual capacity:-
It has also been held that if a suit has been filed in the individual capacity by a person who had
been a partner of a dissolved firm against another who had been also a partner of the dissolved
firm, the bar under section 69(2A)would not be attracted. Therefore the suit was not barred by
the provisions of section 69(2A) of the Indian Partnership Act.28

27
V.Subramanium V. R. Rao (2009)
28
Kishore Kumar V. Navin Chandra, AIR 1998 Bom. 153.

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CONCLUSION
Registration of a partnership firm has been given sufficient attention by the legislature by
incorporated in a whole chapter in the Act. Though the Act never makes registration compulsory
but it would become too onerous for a firm to conduct its operations. Even routine activities like
suing third party for money due to the firm would be not allowed and thus any partnership with
relatively long period of operation would have to get them registered. The registration of firm is
condition precedent to its right to institute a suit and thus a court of law can not proceed with the
trial of suit when the condition precedent has not been fulfilled. In order to institute a suit, a
partnership firm must not only be a registered firm but all the persons, who are partners in the
firm at the time of institute a suit must also be shown as such in the register of the firm. If one or
more of the partners of the partnership firm have not been shown in the register of firms when
the suit is instituted by the firm, The suit is not maintainable. But there have been a number of
situations where the court themselves have distinguished the fact of the case from the one quoted
in precedent to such an effect that the case in question is one where there was a new agreement
altogether. It does not therefore admit of doubt that, the suit is inextricably mixed up with the
partnership itself and arise out of the partnership contract. Hence the firm can conveniently be
placed the outside the scope of section 69.
Moreover there is considerable ambiguity in sec.69(2) as to what is meant by the words arising
out of a contract. The Courts in the number of cases held that the suit is not for enforcement of
any right arising out of a contract entered into by or on behalf of the unregistered firm with third
party in the course of the firm business transaction. The suit is therefore, fails to be barred by
section 69(2)
The whole idea of this section is that consumers and all others who are dealing with the firm
must be aware of the constitution of the company and thus the document which are available
with the registrar of the companies are public document and people dealing with the firm are said
to have constructive notice of the details about the firm.
Further, subsequent registration cannot cure the initial defect. A plaint filed by the unregistered
firm is in fact no plaint, at all because section 69 makes claim arising out of a contract
unenforceable if the firm is unregistered at the time of the institution of the suit. An unregistered
firm has no right to sue, and therefore, a plaint by it has no legal effect. If at the time the plaint is
filed the claim is bound to fail, how subsequent registration can improve the position. There will

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also be this further difficulty that one’s a dispute between the partners has been arisen, all of
them may not sign the application form and consequently the firm may remain unregistered and
even if registration is obtained by dropping the names of adversaries, those whose names do not
figure in the registration cannot still be sued as partners. It is therefore, advisable to have the firm
registered when it is constituted.

BIBLIOGRAPHY

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Books:-
1. “Law of Partnership” by Avtar shingh
2. “Partnership Act” by Pollock & Mulla
3. “Law of Partnership” by C.L. Gupta
4. “The Law of Partnership” by R.R. Maurya

Articles:-
1. Effects of non registration of a firm, by Abhinav K. Mishra

Website

1. www.legaldisire.com
2. https://indiankanoon.org
3. http://www.legalserviceindia.com
4. https://www.lawteacher.net
5. http://en.wikipedia.org/wiki

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