“Indian Partnership Act does not make the registration of firms compulsory, nor does it impose any penalty for non-registration.” In light of the…

It is true to say that the Indian Partnership Act,1932 does not make the registration of firms compulsory nor does it impose any penalty for non-registration. Following are consequences of Non-registration of Partnership Firms in India: The Indian Partnership Act,1932 does not make the registration of firms compulsory nor does it impose any penalty for non-registration. However, under Section 69, non-registration of partnership gives rise to a number of disabilities which we shall presently discuss. Although registration of firms is not compulsory, yet the consequences or disabilities of non-registration have a persuasive pressure for their registration. These disabilities briefly are as follows: (i) No suit in a civil court by firm or other co-partners against third party: The firm or any other person on its behalf cannot bring an action against the third party for breach of contract entered into by the firm, unless the firm is registered and the persons suing are or have been shown in the register of firms as partners in the firm. In other words, a registered firm can only file a suit against a third party and the persons suing have been in the register of firms as partners in the firm. (ii) No relief to partners for set-off of claim: If an action is brought against the firm by a third party, then neither the firm nor the partner can claim any set-off, if the suit be valued for more than 100or pursue other proceedings to enforce the rights arising from any contract. (iii) Aggrieved partner cannot bring legal action against other partner or the firm: A partner of an unregistered firm (or any other person on his behalf) is precluded from bringing legal action against the firm or any person alleged to be or to have been a partner in the firm. But, such a person may sue for dissolution of the firm or for accounts and realization of his share in the firm’s property where the firm is dissolved. (iv) Third party can sue the firm: In case of an unregistered firm, an action can be brought against the firm by a third party.