"The indian partnership act has effectively ensured the registration of firms without making it compulsory" Explain?
Answers
Answer:
In India, Partnerships are governed by Indian Partnership Act, 1932 and the Registration of Partnership Firm is not essential as per this Act.
The real test of Partnership Firm is based on Mutual Agency. Mutual Agency means every partner works in a partnership firm as an implied agent of other partners and every partner shall be liable for the acts done by other partners on behalf of the firm.
If there is good understanding and mutual trust between partners, then registration may not be required. However, future is uncertain and it is always advisable to register a partnership firm keeping in mind the benefits of registering a Partnership firm.
Section 69 of Indian Partnership Act, 1932 Deals with the Effects of Non-Registration of a Partnership Firm and they are Mentioned Herein Below:
- An unregistered partnership firm cannot file a suit against a third party to enforce a right arising out of a contact.
- A partner of an unregistered partnership firm cannot file a suit against the firm and co-partners to enforce the rights under partnership deed.
- An unregistered firm cannot claim a set off exceeding Rs. 100 in value against a third party to enforce a right arising out of a contract.
However, There are Some Rights Which Cannot be Deprived of Even if a Partnership Firm is Not Registered with the Registrar of Firms:
- A third party has right to sue even an unregistered partnership firm or any partner of such firm.
- Every partner has right to sue for dissolution of the firm, accounts after dissolution and realization of property after dissolution.
- An unregistered firm can claim a set off not exceeding Rs. 100 in value against a third party to enforce a right arising out of a contract.
- The rights a firm or partners of firm having no place of business in India.
To avoid all these effects of non-registration, it is always advisable to register a partnership firm to avoid future conflicts, disputes and for enforcement of rights arising out a contract or under partnership deed.