There was no provision for the registration of the partnership prior to passing of the Partnership Act 1932. In order to avoid difficulties in the enforcement of Provision in the areas not sufficiently developed for registration, each state government has been empowered by Section 56 of the act, to direct by notification in official gazette, that the provision of the act shall not apply to the state, or to any part thereof, specified in the notification.
Registrar of Firms: Each state government has been empowered by Section 57 to appoint a registrar of Firms and define his jurisdiction, the areas within which he shall exercise his power and perform his duties. The Registrar of firms shall maintain “Register of firms”.
Procedure for Registration : The Procedure of registration of firm is very simple. An application in the prescribed form with the prescribed fees is to be filed with Registrar of the Area in which any place of business of the firm is situated or proposed to be situated. The application states the following:
1. The name of the Firm which shall not contain any of the following words, namely- “crown”, King, Queen royal, or words expressing or implying the sanction, approval or patronage of the government unless prior approval of the government has been taken.
2. The Principal Place of the Business of the Firm.
3. The name of any other place/s where the firm carries on business.
4. The date when each partner join the firm.
5. The duration of the firm.
6. The name in full and permanent addresses of the partner. The application shall be signed and verified by each partner or his agent specially authorized for this purpose in the manner prescribed by law.
As per Section 69 when the registrar is satisfied that the provision of Section 58 above mentioned have been duly complied with, he shall make an application in the register of firms and shall file the same. As held in the case of, Ghelabhai and Co. Vs. Chunilal and Co , It is to be noted that registration is effected as soon as an application in the prescribed form with the prescribed fee and necessary details as to the particulars of the partnership is delivered to the registrar.
Need for Registration :
A partnership firm need not necessarily be registered. It is optional for a firm either to get itself registered or not. It is agreement between two or more persons and not the registration which brings in to existence a partnership firm. Registration provides only reliable evidence and a conclusive proof of existence of partnership firm. It cannot create a partnership. However, partners of an unregistered firm cannot avoid their liabilities by pleading nonexistence of the partnership. Registration is essential for filing of all those suits arising from the contract or in respects of rights conferred by the act.
Non-registration of firm will not make the partnership agreement or any transaction between the partners and their parties void. More ever law does not impose any penalty for registration.
Consequences of Non-registration :
Section 69 States that the partnership Act denies the followings rights to an unregistered firm or its partner.
1. A partner of unregistered firm cannot file a suit to enforce a right arising from the contract or conferred by the act against the firm.
2. A partner of an unregistered firm cannot bring a suit to enforce a right arising from a contract against any past or present partner of the firm.
3. An unregistered firm itself cannot enforce a right arising from a contract against a third part in a court of law. The same is the position with regard to a claim of set off or other proceedings to enforce a right arising from a contract. It cannot claim any set off in a suit filed against it.
Non-registration of a firm does not, however affect the following rights:
1. The right of a partner to sue for the dissolution of a firm or for the accounts of a dissolved firm or to enforce any right or power to realize the property of a dissolved firm.
2. The power of an official assignee or receiver to realize the property of an insolvent partner.
3. The right of the firm or partners in a firm having no place business in India.
4. Any suit or set off in which the claim does not exceed rupees one Hundred.
5. The right of the partners of an unregistered firm to refer a Dispute to arbitration. A Partner of a un registered firm can get the arbitration clause in the partnership agreement enforced against the firm or other partner as held in case of , Jagdish Chandra Gupta Vs. Kajaria Traders.
6. The right of the partnership firm to set up its own claim or a Property under dispute by way of defense.
7. A suit for damages for misconduct against a partner by the firm or a partner of the firm on the firm behalf, as held in the case of, Navinchandra Vs. Mool Chand.
8. The right of a third party to proceed against the unregistered Firm or its partners. A partnership firm may be registered at any time even after the partners have agreed to dissolve it. But it must stand registered on the date of the institution of the suit; otherwise, the suit will be dismissed. Also Registration during the pendency of the suit shall not prohibit the firm to file a fresh suit after registration, if it has not become time– barred.
