PARTNERSHIP FIRM PROCESS AND PROCEDURE INTRODUCTION
Partnership firms in India are governed by the Indian Partnership Act, 1932. While it is not compulsory to register your partnership firm as there are no penalties for non registration, registration, it is advisable since the follo!ing follo!ing rights are denied to an unregistered firm"
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A part partne nerr cannot cannot file file a suit suit in any court court again against st the firm firm or other other partn partner erss for for the the enforcement of any right arising from a contract or right conferred by the Partnership Act
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A right right aris arisin ing g from from a contract contract cann cannot ot be enforc enforced ed in any $our $ourtt by or on behalf behalf of your firm against any third party
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%urth %urther er,, the firm firm or any of its partn partners ers cannot cannot claim claim a set off off &i.e. &i.e. mutual mutual ad'ust ad'ustmen mentt of debts o!ned by the disputant parties to one another( or other proceedings in a dispute !ith a third party.
)egistration Procedure" A partnership firm can be registered !hether at the time of its formation or even subse*uently. +ou need to file an application !ith the )egistrar of %irms of the area in !hich your business is located.
• Application for partnership registration shol! incl!e the follo"ing infor#ation$
ame of your firm ame of the place !here business is carried on ames of any other place !here business is carried on -ate of partners 'oining the firm %ull name and permanent address of partners. -uration of the firm
# very partner needs to verify and sign the application # nsure nsure that that the the follo follo!i !ing ng docume documents nts and and prescr prescribe ibed d fees fees are enclos enclosed ed !ith !ith the registration application "
Application for )egistration in the prescribed %orm / I
-uly filled 0pecimen of Affidavit $ertified copy of the Partnership deed Proof of o!nership of the place of business or the rentallease agreement thereof It may be noted here that the name of your partnership firm should not contain any !ords !hich may epress or imply the approval or patronage of the government ecept !here the government has given its !ritten consent for the use of such !ords as part of the firm4s name5.
6nce the )egistrar of %irms is satisfied that the application procedure has been duly complied !ith, he shall record an entry of the statement in the )egister of %irms and issue a $ertificate of )egistration.
7his entry !as posted on 7uesday, April 2nd, 2813 at ":; am and is filed under 0tarting a
=nder 0ection ; of the Act, a firm may be registered at any time & not merely at the time of its formation but subse*uently also ( by filing an application !ith the )egistrar of %irms of the area in !hich any place of business of the firm is situated or proposed to be situated.
AIMS AND O%&ECTI'ES
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Application shall be signed and verified by all the partners or their duly authori>ed agents.
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Application shall be accompanied by prescribed fee as !ell as the follo!ing documents"
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Prescribed )egistration %orm for Incorporation of a $ompany. &%orm o. 1 and 0pecimen of Affidavit(
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certified true copy of the Partnership deed entered into.
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o!nership proof of the principal place of business
ame of the firm should not contain any !ords !hich may epress or imply the approval or patronage of the government ecept !here the government has given its !ritten consent for the use of such !ords as part of the firms name.
=nder 0ection 9 of the Act, !hen the )egistrar of %irms is satisfied that the provisions of section ; have been duly complied !ith, he shall record an entry of the statement in the )egister of %irms and issue a $ertificate of )egistration.
NEEDS AND IMPORTANT
)ectification of mista?es &0ection @: of the Act( 7he )egistrar shall have po!er at all times to rectify any mista?e in order to bring the entry in the )egister of %irms relating to any firm into conformity !ith the documents relating to that firm filed under this Act.
6n application made by all the parties !ho have signed any document relating to a firm filed under this Act, the )egistrar may rectify any mista?e in such document or in the record or note thereof made in the )egister of %irms.
Inspection of )egister and filed documents &0ection @@ of the Act"(
7he )egister of %irms shall be open to inspection by any person on payment of such fee as may be prescribed.
All statements, notices and intimations filed under this Act shall be open to inspection, sub'ect to such conditions and on payment of such fee as may be prescribed.
PRESENTATION OF DATA AND INFORMATION
Any person !ho signs any statement, amending statement, notice or intimation under this $hapter containing any particular !hich he ?no!s to be false or does not believe to be true or containing particulars !hich he ?no!s to be incomplete or does not believe to be complete, shall be punishable !ith imprisonment !hich may etend to three months, or !ith a fine or !ith both.
Any alterations, subse*uent to )egistration shall be notified to the registrar"
$hange in firm name and principal place of business &0ection @8( shall re*uire sending of a ne! application form along !ith the prescribed fee, duly signed and verified by all the partners. $hange relating to opening and closing of branches. &0ection @1( When a registered firm discontinues business at any place or begins to carry on business at any place, such place not being its principal place of business, any partner or agent of the firm may send intimation thereof to the )egistrar.
$hange in the name and permanent address of any partner &0ection @2(
When any partner in a registered firm alters his name or permanent address, an intimation of the alteration may be sent by any partner or agent of the firm to the )egistrar
$hange in the constitution of the firm and its dissolution 0ection @3&1(B !hen change occurs in the constitution of the firm, any of the ne!, continuing or the outgoing partner, !hile !hen a registered firm is dissolved , any person !ho !as a partner immediately before the dissolution or the agent of any such partner or person specially authori>ed on his behalf, may give notice of such a change to the )egistrar, specifying the date thereof. =nder 0ection @3&2(, !hen a minor !ho has been admitted to the benefits of partnership in a firm attains ma'ority and elects to become or not to become a partner, he or his agent specially authori>ed in this behalf, may give notice to the )egistrar that he has or has not become a partner. Accordingly, the various forms prescribed under the Indian Partnership Act, 1932, for the alterations in the registered partnership firm are"
a. %orm o. II " %or change of principle place of business C change in the name of the firm. b. %orm o. III " %or change of the other then principle place of business.
c. %orm o. ID " %or change of name of the partners C permanent address of the partners. d. %orm o. D " %or change of constitution of forms C addition or retirement of partner. e. %orm o.DI " %or dissolution of the firm f. %orm o. DII " %or minor partner attains the age of ma'ority.
PRO%(EMS ) EFFECTS EFFECT OF NON RE*ISTRATION %ar on sits +, nregistere! fir#s
0ubsection &1( of section @9 of the Act bars suits by partners against an unregistered firm or against any person alleged to be or to have been a partner of such a firm 29B . 7he bar applies to enforcement of &a( right arising out of a contract 38B , or &b( right conferred by the partnership Act. 6n the other hand, subsection &2( of section @9 of the Act bars suits for enforcement of a right arising out of a contract by or on behalf of the unregistered firm against Ethird parties4. 7he operation of section @9 !ould etend to the suit in !hich a partner sues his copartner or sues the firm to enforce any right arising from the contract bet!een the partners 31B . 7he 0upreme $ourt has held that this section is mandatory in character and its effect is to render a suit by plaintiff in respect of a right vested in him or ac*uired by him under a contract !hich he had entered into as partner of an unregistered firm, !hether eisting or dissolved, is void 32B . In other !ords, a partner of an erst!hile unregistered partnership firm cannot bring a suit to enforce a right arising out of a contract hit by the provision of section @9 33B . Fo!ever a suit by a partner to recover money from a third person is not barred by section @9 of the Act, if the transaction, involved in the suit, is in his o!n name only and the defendant had no notice of the eistence of the partnership 3:B . 7he conditions re*uired by this section are mandatory, and the bar of the section applies both to suits by the firm as !ell as on behalf of the firm 3B . In Gagdish $handra Hupta4s case 3@B , the $onstitution
$orporation 3JB calls for the effect of bar created by 0ection @9 being determined by reference to the date of institution of the suit and not by reference to any subse*uent event. In -elhi -evelopment Authority4s case 3;B , the $ourt held section @9 of the Act is applicable to an application under section 28 of the Arbitration Act, 19:8 as such an application &under the scheme of that Act( !ould be included !ithin the meaning of Eother proceedings4 in 0ection @9&3( of the Act. 0ection ; of the above nglish Act is relevant and it spea?s of the rights of that defaulter under or arising out of any contract made or entered into by or on behalf of such defaulter is in relation to the business for !hich particulars !ere re*uired to be furnished for carrying on that business. 39B 7he above provision clearly signifies that the right that is sought to be enforced by the unregistered firm and !hich is barred must be a right arising out of a contract !ith a third partydefendant in respect of the firm4s business transactions. %or the purpose of deciding the point about the !ords Earising from a contract4 in section @9&2(, it is necessary to go into the *uestion as to !hat the legislature meant !hen it used it. In this contet it is important to refer to the )eport of the 0pecial $ommittee &193831( !hich eamined the draft
ven going by this restricted vie!, !e find that there is considerable ambiguity in section @9&2( &unli?e the nglish 0tatutes of 191@ and 19;( as to !hat is meant by the !ords Earising out of a contract4 in as much as the provision does not say !hether the contract in section @9&2( is one entered into by the firm !ith the defendant or !ith somebody else !ho is not a defendant, nor to !hether it is a contract entered into !ith the defendant in business or unconnected !ith business. Fence, it should thus be permissible to loo? into the report even for purpose of construing section @9&2(. A *uestion has arisen !hether the !ords Eenforce a right under a contract4 !ould include rights arising out of contracts !ith third parties not in connection !ith the daytoday business or commercial transactions entered into by the unregistered firm. 7he vie! !as epressed by the 0upreme $ourt in )apta?os
OPINION
Partnership Act, 1932 does not provide for compulsory registration of firms. It is optional for partners to set the firm registered and there are no penalties for nonregistration.
Fo!ever, 0ection @9 of the Act !hich deals !ith the effects of nonregistration denies certain rights to an unregistered firm. =nder the Act " A partner of an unregistered firm cannot file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act unless the firm is registered and the person suing is or has been sho!n in the )egister of %irms as a partner in the firm.
o suits to enforce a right arising from a contract shall be instituted in any $ourt by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been sho!n in the )egister of %irms as partners in the firm.
An unregistered firm or any of its partners cannot claim a set off &i.e. mutual ad'ustment of debts o!ned by the disputant parties to one another( or other proceedings in a dispute !ith a third party. Fence, every firm finds it advisable to get itself registered sooner or later.
Fo!ever, nonregistration of a Partnership firm shall not affect"
7he rights of third parties to sue the firm andor its partners.
7he firms or partners in the firms !hich have no place of business in the territories to !hich this Act etends, or !hose places of business in the said territories are situated in areas to !hich the act does not apply.
any suit or claim or setoff not eceeding one hundred rupees in value !hich, in the Presidencyto!ns, is not of a ?ind specified in 0ection 19 of the Presidency 0mall $ause $ourts Act, 1;;2 &1 of 1;;2(, or outside the Presidency to!ns, is not of a ?ind specified in the 0econd 0chedule to the Provincial small $ause $ourts Act, 1;;J &9 of 1;;J(, to
any proceeding in eecution or other proceeding incidental to or arising from any such suit or claim.
the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or po!er to realise the property of a dissolved firm the po!ers of an official assignee, receiver or $ourt under the Presidencyto!ns Insolvency Act, 1989 &3 of 1989(, or the Provincial Insolvency Act, 1928 & of 1928(, to realise the property of an insolvent partner.
FORMATION OF PARTNERSHIP FIRM
A partnership is a type of
7hus basic essential for formation of partnership is i( agreement, ii( business and iii( sharing of profit and loss. Agreement of partnership or -eed of partnership is a document signed by partners containing details of partnership such as" #
-ate of Partnership,
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ames of Partnership,
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%irm ame and Address,
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-uration of the firm,
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-issolution of the firm
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-etails of allocation of Profit and Koss amongst the partners,
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)ights and -uties of Partners,
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-etails of contribution by partners and property of the firm,
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Application of property of the firm,
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7erms and conditions for admission of ne! partners, retirement of eisting partners, epulsion of the partner, death of partner, insolvency of partner,
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)eference of dispute to arbitration, and any other terms or conditions agreed bet!een the partners.
7he la! relating to partnership in India is governed by India Partnership Act, 1932. 7he Indian Partnership Act, 1932 is applicable to !hole of India ecept the state of Gammu and LashmirM The act is +t- administrated by the 0tate Hovernment. 0tate Hovernments have made
rules for administration of the act and registration of firm under Indian Partnership Act.
In aharashtra the Partnership is registered !ith )egistrar of %irms, aharashtra 0tate. 7he application is to be accompanied along !ith the filing fees and must be made in prescribed form.
7he 0tamp -uty is payable as per capital contribution made by the partners detailed as under"
CONC(USION
)egistration of firm is not compulsory under Indian Partnership %irm, ho!ever unregistered firm faces various incapacities in court of la!. o suit to enforce a right arising from a contract or conferred by this partnership act can be instituted in the court by any person suing as the partner of the firm against the firm or any person alleged as the partner of the firm until the firm is registered. 7he firm can also not enforce any rights arising from the contract against the third party unless the firm is sued. Indirectly registration of firm is a must. 7he firm can ho!ever be registered before filing the suit, by payment late filing penalty to the )egistrar of %irms.
The follo"ing are re.ire! for registration "ith the Registrar of Fir#s/ Maharashtra0
1. $opy of Partnership deed, 2. 7ranslation of partnership deed in arathi, 3. Application %orm A duly notari>ed, :. 0elf Addressed Postage Paid nvelope, . 0tamp paper of )s.188 7he partnership can be registration !ithin one year of its formation along !ith the filing fees of )s.J8. 7he firm can be registered after 1 year by paying the late fee of )s.188 per year or part thereof
7he entrepreneurs !illing to start up partnership firm may or may not go for registering the business as the registration of the partnership firms in India is not compulsory. ven prior to the passing of the Indian Partnership Act, 1932, there !as 18 provision for registration of firms in India. 7hough registration of the firm is optional at the discretion of the partners, an unregistered firm suffers from certain disabilities. 7hese disabilities have indirectly made some sort of compulsion on the part of the firms to be registered. In case of unregistered firm, payment of salary, commission, interest on borro!ings or dra!ings are not considered as allo!able epenses for determination of total income for payment of ta.
RECOMMENDATION
ntrepreneurs desirous of setting a partnership firm may apply in the prescribed form to be submitted to the )egistrar of %irms of the 0tate in !hich the business of the firm is situated or proposed to be situated. 7he prescribed registration fee also need to be deposited Along !ith the application. 7he application must be signed by all the partners or their authorise agents. 7he application or the statement must contain the follo!ing particulars" 7he name of the firm. 7he place or principal, place of business of the firm. 7he names of other places !here the firm carries on business. 7he different dates on !hich partners 'oined the firm.
7he full names and permanent addresses of the partners. 7he duration of the firm.
When the )egistrar is satisfied that the above provisions have been duly complied !ith, he shall record an entry of the statement in the register of firms and file the statement. 7he )egistrar shall then issue a certificate of registration.
Effects of Non1Registration$
An unregistered firm and its partners suffer from the follo!ing disabilities" i. An unregistered firm cannot file a suit against a third party to enforce a right arising from a contract. &%or eample, for the recovery of the price of goods supplied( ii. A partner cannot file a suit against the firm or copartners to enforce his rights under the Partnership -eed. iii. An unregistered firm cannot claim a setoff against a third party to enforce right arising from a contract eceeding )s.188 in value.
ception" 7he nonregistration of a firm, ho!ever, does not affect the follo! rights" i. 7he rights of third parties to sue the firm or any partner. ii. 7he rights of a partner to sue for dissolution of the firm, accounts after dissolution and realisation of property after dissolution. iii. 7he rights of firm or partners of firm having no place of business in India. iv. 7he right to sue or claim a setoff of value not eceeding )s. 188. v. 7he po!ers of an 6fficial Assignee or )eceiver or the $ourt to realise the prop of an insolvent partner.
REFERENCES
http"!!!.charteredclub.comregisterpartnershipfirm
http"!!!.la!yersclubindia.comarticles)IHF70A--=7I06% PA)7)0IAPA))0FIP%I)KKP1:
[email protected]+Pl:nK?c
http"admis.hp.nic.inhimpol$iti>enKa!Kib$1:2.htm
!!!.google.com
!!!.!i?ipedia.com
