Introduction – Registration of firms

(Section 56 to 71) Chapter VII

This chapter provides for the registration of firms, the object being that a third party dealing with a firm may know who are the partners in that firm. The scheme of this chapter may be cleared with the assistance of the following illustration :

A, B, & Co. is a newly constituted firm and commences business without registering their firm.

X is a creditor and Y is their debtor.

X may sue A, B & Co but,

A, B & Co., or the partners thereof, cannot sue Y, who is a debtor,

Unless before instituting the suit they effect registration of their firm under the Act.

Section 56. Power to exempt from application of this Chapter

The State 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.

Section 57. Appointment of Registrars

1. The State Government may appoint Registrars of Firms for the purposes of this Act, and may define the areas within which they shall exercise their powers and perform their duties.
2. Every Registrar shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code (45 of 1860).

Maharashtra : For section 57, substitute the following section, namely,—

Sec 57 : Appointment of Registrar of Firms and Deputy Assistant Registrars of Firms.—

(1) The State Government may, by notification in the Official Gazette, appoint a Registrar of Firms who shall exercise, perform and discharge the powers, functions and duties of the Registrar under this Act throughout the State of Maharashtra.

(2) The State Government may likewise appoint one or more Deputy Registrars of Firms and Assistant Registrars of Firms who shall exercise, perform and discharge all or such of the powers, functions and duties of the Registrar and in such areas as the State Government may, by notification in the Official Gazette, specify.

(3) The officers appointed under sub-section (1) and sub-section (2) shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code”. [Vide Maharashtra Act 29 of 1984, sec. 5 (w.e.f. 1-5-1985).

Section 58. Application for registration

1. The registration of a firm may be effected at any time by sending by post or delivering to the Registrar of the area in which any place of business of the firm is situated or proposed to be situated, a statement in the prescribed form and accompanied by the prescribed fee, stating-
2. the firm name,
3. the place or principal place of business of the firm,
4. the names of any other places where the firm carries on business,
5. the date when each partner joined the firm,
6. the names in full and permanent addresses of the partners, and
7. the duration of the firm.

The statement shall be signed by all the partners, or by their agents specially authorized in this behalf.

• Each person signing the statement shall also verify it in the manner prescribed.
• A firm name shall not contain any of the following words, namely – Crown, Emperor, Empress, Empire, Imperial, King, Queen, Royal, or words expressing or implying the sanction, approval or patronage of, Government, except when the State Government signified its consent to the use of such words as part of the firm name by order in writing.

In the state of Maharashtra, the application for registration of a firm is also to be accompanied by a true copy of the partnership deed and must be made within one year from the date of the constitution of the firm. Such a statement is to be signed by all the partners, or by their agents specially authorised in this behalf.

Sec 59. Registration : When the Registrar is satisfied that the provisions of section 58 have been duly complied with, he shall record an entry of the statement in a register called the Register of Firms, and shall file the statement.

As per the Maharashtra State amendment, on the date such entry is recorded and such statement is filed, the firm shall be deemed to be registered.

Section 60. Recording of alterations in firm name, (nature of business) and principal place of business

1. When an alteration is made in the firm name (or in the nature of business of a firm) or in the location of the principal place of business of a registered firm, a statement may (shall) be sent to the Registrar, (within a period of 90 days from the date of making such alteration) accompanied by the prescribed fee, specifying the alteration and signed and verified in the manner required under section 58.
2. When the Registrar is satisfied that the provisions of sub-section (1) have been duly complied with, he shall amend the entry relating to the firm in the Register of Firms is accordance with the statement, and shall file it along with the statement relating to the firm filed under section 59.

Section 61. Noting of closing and opening of branches :

When a registered firm discontinued 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 Registrar, who shall (shall send intimation thereof to the Registrar, within a perios of 90 days from the date of such discontinuance or, as the case may be, from the date on which the firm begins to carry on business at such place. The Registrar shall then) make a note of such intimation in the entry relating to the firm in the Register of Firms, and shall file the intimation along with the statement relating to the firm filed under section 59.

Section 62. Nothing of changes in names and addresses of partners

When any partner in a registered firm alters his name or permanent address, an intimation of the alteration may be sent (shall be sent , within a period of 90 days from the date of making such alteration)       by any partner or agent of the firm to the Registrar, who shall deal with it in the manner provided in section 61.

Section 63. Recording of changes in and dissolution of a firm :

(1) When a change occurs in the constitution of a registered firm any (every) incoming, continuing or outgoing partner, and when a registered firm is dissolved any (every) person who was a partner immediately before the dissolution, or the agent of any (every) such partner or person specially authorized in this behalf, may give notice to the Registrar of such change or dissolution, specifying the date thereof;

(shall, within a period of 90 days from the date of such change or dissolution, give notice to the Registrar of such change or dissolution, specifying the date thereof) and the Registrar shall make a record of the notice in the entry relating to the firm in the Register of Firms, and shall file the notice along with the statement relating to the firm filed under section 59.

(2) Recording of withdrawal of a minor :- When a minor who has been admitted to the benefits of partnership in a firm attains majority and elects to become or not to become a partner, and the firm is then a registered firm, he, or his agent specially authorised in this behalf,     may give notice to the Registrar (shall within a period of 90 days from the date of his election, give notice to the Registrar) that he has or has not become a partner, and the Registrar shall deal with the notice in the manner provided in sub-section (1).

Section 64. Rectification of mistakes

1. The Registrar shall have power at all times to rectify any mistake in order to bring the entry in the Register of Firms relating to any firm into conformity with the documents relating to that firm filed under this Chapter.
2. On application made by all the parties who have signed any document relating to a firm filed under this Chapter, the Registrar may rectify any mistake in such document or in the record or note thereof made in the Register of Firms.

Section 65. Amendment of Register by order of court :

A court deciding any matter relating to a registered firm may direct that the Registrar shall make any amendment in the entry in the Register of Firms relating to such firm which is consequential upon its decision; and the Registrar shall amend the entry accordingly.

Section 66. Inspection of Register and filed documents

1. The Register of Firms shall be open to inspection by any person on payment of such fee as may be prescribed.
2. All statements, notices and intimations filed under this Chapter shall be open to inspection, subject to such conditions and on payment of such fee as may be prescribed.

Section 67. Grant of copies

• The Registrar shall on application furnish to any person, an payment of such fee as may be prescribed, a copy, certified under his hand, of any entry or portion thereof in the Register of Firms.

Section 72. Mode of giving public notice

A public notice under this Act is given-

(a) where it relates to the retirement or expulsion of a partner from a registered firm, or

to the dissolution of a registered firm, or

to the election to become or not to become a partner in a registered firm by a person attaining majority who was admitted as a minor to the benefits of partnership,

…by notice to Registrar of Firms under section 63 (recording of changes in & dissolution..of firm), and by publication in the Official Gazette and in at least one vernacular newspaper circulating in the district where the firm to which it relate has its place or principal place of business, and

(b) in any other case, by publication in the Official Gazette and in at least one vernacular newspaper circulating in the district where the firm to which it relates has its place or principal place of business.

Section 68 : Rules of Evidence (Effect of Registration)

Illustration : A, B, & C are partners in a registered firm. A retires.

It will be necessary for A as for B & C to give public notice of his retirement…which under section 72 of the Act, includes notice to the Registrar……If this is not done, A will be as much liable for the acts of the continuing partners or of the firm as if A had continued to be a member of the firm…. And on the other hand, the firm will be liable for any act purporting to be done by A on behalf of the firm after retirement.

(refere sec 32(3)). (The same consideration will apply when A is expelled refer sec 33 ; but not if A dies or becomes insolvent refer section 34 & 35.

68. Rules of evidence

1. Any statement, intimation or notice recorded or noted in the Register of Firms shall, as against any person by whom or on whose behalf such statement, intimation or notice was signed, be conclusive proof of any fact therein stated.
2. A certified copy of an entry relating to a firm in the Register of Firms may be produced in proof of the fact of the registration of such firm, and of the contents of any statement, intimation or notice recorded or noted therein.

The object of this section is to compel members of a firm to have all subsequent changes in the constitution of a Registered firm notified to or registered with the Registrar of Firms

From above, we can say that, registration of a firm is not made compulsory but sec 68 lays down a rule of conclusive proof. So if we read further section 69, we can conclude that its better to get firm registered.

Section 70. Penalty for furnishing false Particulars

Any person who signs any statement, amending statement, notice or intimation under this Chapter containing any particular which he knows to be false or does not believe to be true, or containing particulars which he knows to be incomplete or does not believe to be complete, shall be punishable with imprisonment which may extend to three months, or with fine, or with both. Shall, on conviction, be punished with imprisonment for a term which may extend to one year, or with fine, or with both :…. Provided that, in the absence of a special and adequate reasons to the contrary to be mentioned in the judgement of the Court, the fine shall not be less than one thousand rupees.

(Section 70-A is also added which is related to maximum fees and power to amend Schedule I

Section 69. Effect 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.

“Provided that the requirement of registration of firm under this sub-section shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of the firm or to realise the property of the firm.”

• 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.

2(A) “No suit to enforce any right 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 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:

Provided that the requirement of registration of firm under this sub-section shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of a dissolved firm or to realise the property of a dissolved firm.”;

• The provisions of sub-sections (1) and (2) & (2A) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affect-
• 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

 the firms constituted for a duration up to six months or with a capital up to two thousand rupees; or.” [Vide Maharashtra Act 29 of 1984, sec. 13 (w.e.f. 1-1-1985)].

• 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.
• This section shall not apply-
• to firms or to partners in firms which have no place of business in the territories to which this Act extends, or whose places of business in the said territories, are situated in areas to which, by notification under section 56, this Chapter does not apply, or
• 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 Schedule II 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.

Sec 69A. Penalty for contravention of section 60, 61, 62 or 63 :—                                          If any statement, intimation or notice under section 60, 61, 62 or 63 in respect of any registered firm is not sent or given to the Registrar, within the period specified in that section, the Registrar may, after giving notice to the partners of the firm and after giving them a reasonable opportunity of being heard, refuse to make the suitable amendments in the records relating to the firm, until the partners of the firm pay such penalty, not exceeding ten rupees per day, as the Registrar may determine in respect of the period between the date of expiry of the period specified in sections 60, 61, 62 or as the case may be 63 and the date of making the amendments in the entries relating to the firm.” [Vide Maharashtra Act 29 of 1984, sec. 14 (w.e.f. 1-1-1985)].

EFFECTS OF NON-REGISTRATION OF A PARTNERSHIP (S 69)

Object of the section : After going through section 69, we can say that, the Indian Partnership Act has not provided any penalties for non-registration. Non-registration does not make the partnership deed or any transaction between the partners and third parties, void.

         But by providing certain disabilities, this section renders(cause to become) the registration of a firm compulsory. The disabilities consists of denying certain rights of litigation to the firms or partners not registered under this Act.

The disabilities provided are as under :

*** A firm may not enforce in a court of law its dues from third parties; nor will the partners be enabled to do so by filing a suit in their own names instead of in the name of firm.

Thus it is necessary that not only the firm should be registered but the person suing must be shown as a partner in the firm. (Bank of Koothattukulam v. Thomas),

So where one of the partners of a firm who had been a partner of a firm for several years had not been, at the time of institution of the suit, shown in the Register of Firms as a partner, it was held that suit must be dismissed. (Dr. V.S. Bahl v. M/s S.L. Kapur & Co)

So, the two requirements of the Act must be fulfilled before a suit can be filed to enforce a contractual right by a firm or on behalf of a firm.

They are that, the firm must be registered and all persons suing are or have been shown in the Register of Firm as partners of the firm when the cause of action arose. (V.J. Masarwala v. P. Sheth & Co.)

*** A partner will not be entitled to recover through a court his dues from the firm or from his fellow partners, though he may sue for dissolution, or pay for accounts and realisation of his shares where the firm has been actually dissolved.

Illustration : Suit by A, a partner of unregistered dissolved firm, against B the other partner, to recover (1) sum which was overdrawn by B from the partnership asset & (2) sum which was B’s share, of loss incurred by partnership firm, is a suit to recover a property of a dissolved firm and is valid even if firm is not registered (Sheodutt v. Pushi Ram).

“It should be noted that, this section 69 does not affect the right of a third party to proceed against the firm or its partners, even though unregistered, nor does it affect the right of an official assignee to realize the property of an insolvent partner. Secondly, the Act does not say that, any transaction of an unregistered firm will be invalid.”

Summary of Sec 69 :

***Unless the firm is registered and the person suing is or has been shown in the Registere of Firms as a partner of the firm, he or his nominee or his agent cannot bring a suit to enforce a right arising from a contract or a right conferred by this Act against the firm & against any past or present partner of the firm.

*** No suit to enforce a right arising from a contract can be instituted by or on behalf of a firm against third party, unless the firm is registered and the persons suing are shown as partners in the Register of Firms. The same disability also apply to claim of set off or other proceedings to enforce a right arising from a contract.

*** Non-registration of a firm does not affect the following rights  :

1. The right of third parties to sue firm or any partner.
   1. The right of a partner to sue for dissolution of a firm, or for accounts of a dissolved firm, or enforce any right or power to realise the property of a dissolved firm (This exception does not, however, apply to the State of Maharashtra.)
   1. The power of an official Assignee, or Receiver, to realise the property of an insolvent partner.
   1. The rights of firms or partners in firms having no place of business in India.
   1. Any suit or set-off in which the claim does not exceed Rs100.

*** For Maharashtra, section 69A is inserted which prescribes penalty for contravention of section 60, 61, 62 or 63.

Section 71 is related to empowerment of The State Government to make rules and related provisions. Section 73 is repealed & Section 74 is Savings.