SVKMs

NMIMS SCHOOL OF LAW

A PROJECT SUBMITTED ON
REGISTERATION OF A PARTNERSHIP FIRM - AN ADVANTAGEOUS
POSITION
IN COMPLIANCE TO PARTIAL FULFILLMENT OF THE MARKING
SCHEME, FOR TRIMESTER IV OF 2016-2017,

IN THE SUBJECT OF
LAW OF CONTRACT

SUBMITTED TO FACULTY:
Prof. Sunil George
FOR EVALUATION

SUBMITTED BY:
Abhilasha Pant (A032)
0

S.No

Contents

Pg No.

.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Abbreviations
Statutes
Table of Cases
Introduction
Abstract: Research Methodology
Legal Analysis
Role of Judiciary
Comparitive Study
Conclusion
Bibliography

2
2
3
4
6
11
16
22
24
26

ABBREVIATIONS

1. AIR All India Reporter

2. V. Versus
3. ICA- Indian Contract Act
4. IPA- Indian Partnership Act
5. S.- Section

STATUTES

1. Section 4- Indian Partnership Act

2. Chapter VII of The Indian Partnership Act
3. Section 58- Indian Partnership Act
4. Section 70- Indian Partnership Act
5. Income Tax Act

TABLE OF CASES

1. Adamji Lookmanji & Co. & Ors. vs. State of Maharashtra & Anr.
2. Champaran Cane Concern Corporation v. State of Bihar
3. Firm Sitaram Agarwal vs Harnath And Anr. on 25 February, 1969
4. Canara Bank And Another vs United India Insurance Co. Ltd. on 14 August, 1996
5. M/S R. L. Vohra And Sons vs Delhi Development Authority
6. M/S. Shori Lal & Sons & Ant vs Delhi Development Authority & Ant
7. Mohammed Ayub vs Mohammed And Sons And Ors

Public-Private Partnership in financing, service delivery and provision of workspaces

and training of trainers must be promoted to meet the demand and supply gap in the
field of skill development.
(Pallam Raju)

INTRODUCTION

The term 'partnership' is defined under section 4 of Indian partnership act 1932 as under
"Partnership is an agreement between two or more persons who have agreed to share profits of
the business carried on by all or any one of them acting upon all."
Partnership is a mean of bringing together the persons who can contribute capital, skill for the
expansion of business. In the ordinary business number of partners shall exceed than twenty. In
case of banking business they may not exceed than ten. This type of business organization is very
popular in our country.1

Partnership Deed is the document that tells about the mutual rights and obligations of all
partners. This needs to be signed by all the partners and subsequent copies held by each partner.
At the time of registration, a copy of the deed has to be submitted with an application to the
Registrar of Firms in the concerned area. This document may also be referred to as an Article of
partnership.2
It has the force of law and is designed to guide the partners in the conduct of the business. It is
helpful in preventing disputes and disagreements over the role of each partner in the business and
the benefits which are due to them.
1 The American Law Register (1898-1907), Vol. 46, No. 3, Volume 37 New Series (Mar., 1898), pp. 137154
2 Contract II by Dr. R.K Bangia, Allahabad Law Agency.
4

Chapter VII (Section 56-71) of The Indian Partnership Act, 1932, deals with the procedure of
registering a partnership firm.
While it is not compulsory to register your partnership firm as there are no penalties for nonregistration, it is advisable since the following rights are denied to an unregistered firm:
A partner 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.
A right arising from a contract cannot be enforced in any Court by or on behalf of your firm
against any third party.
Further, the firm or any of its partners cannot claim a set off (i.e. mutual adjustment of debts
owned by the disputant parties to one another) or other proceedings in a dispute with a third
party.3

3 http://www.quickbooks.in/r/legal/registration-procedure-for-partnership-firms-in-india/
5

RESEARCH METHODOLOGY

Relevance of the topic

Partnership plays a very important part in Law of Contract. A partnership is generally
formed through a contract and hence it is very important to understand how a
partnership is register to understand the type of contract to be made between two
partners. Also, through this project, we will understand how registering a partnership
has its separate advantages which help in deciding the fate of the partnership without
any hassle.
A Partnership Company is a preferred type of company constitution for businesses
that are had, managed and also regulated by an Organization of Individual people for
profits.
There are 2 kinds of Partnership companies, signed up or registered and un-registered
Partnership firm. It is not compulsory to register a Partnership business; nevertheless,
it is a good idea to sign up or register a Partnership company due to the included
advantages. Partnership companies are created by composing a Partnership deed
among

the

Companions

or

partners.

Partnership

deed

is

a document containing an agreement that details the rights and obligations of each
partner participating in a venture.
For

example,

deed

of

partnership

could

specify

how proceeds from

the partnership's business are to be divided among the partners.4

Object of the study

The object of the study is to understand the benefits of registering a partnership firm
and the states in India that have made registration of partnership firm compulsory.
Partnerships companies are relatively very easy to start are is prevalent among small
as well as moderate sized businesses in the messy or unorganized industries. With the

4 http://www.yourarticlelibrary.com/partnership-firms/partnership-firms-definition-features-advantagesand-disadvantages/40804/
6

intro of Limited Liability Partnerships in India, Partnership Firms are rapid shedding
their frequency because of the included advantages provided by a Limited Liability
Partnership.
Research Questions
1.
2.
3.
4.
5.

What is a Partnership under the Indian Partnership Act, 1932?

How is Partnership registered under the India Partnership Act, 1932?
What are the main features of a Partnership firm?
What are the disadvantages of a partnership firm?
In which parts of India is it compulsory to register a Partnership?

Hypothesis
1. What is a Partnership under the Indian Partnership Act, 1932?
The Indian Partnership Act, 1932, Section 4, defined partnership as the relation
between persons who have agreed to share the profits of business carried on by all or
any of them acting for all. The Uniform Partnership Act of the USA defined a
partnership as an association of two or more persons to carry on as co-owners a
business for profit.5
According to J. L. Hanson, a partnership is a form of business organization in which
two or more persons up to a maximum of twenty join together to undertake some
form of business activity. Now, we can define partnership as an association of two or
more persons who have agreed to share the profits of a business which they run
together. This business may be carried on by all or anyone of them acting for all.6
The persons who own the partnership business are individually called partners and
collectively they are called as firm or partnership firm. The name under which
partnership business is carried on is called Firm Name. In a way, the firm is nothing
but an abbreviation for partners.7
2. How is Partnership registered under the India Partnership Act, 1932?

5 "Governing collaborative governance", by Simon, Zadek; Sacha, Radovich; Working paper, Harvard
University, April 2006
6 http://www.llrx.com/features/llc.htm
7

Under Section 58 of the Act, a firm may be registered at any time (not merely at the
time of its formation but subsequently also) by filing an application with the Registrar
of Firms of the area in which any place of business of the firm is situated or proposed
to be situated.
3. What are the main features of a Partnership firm?
The main features of a partnership firm are:
o More People
o Profit and Loss sharing
o Contractual Relation
o Existence of Lawful Relations
o Utmost Good faith and honesty
o Unlimited Liability
o Restrictions on Transfer of Shares
o Principal-Agent Relations8
4. What are the disadvantages of a partnership firm?
The drawbacks of a partnership firm are:
o Unlimited Liability
o Divided Authority
o Lack of Continuity
o Risk of Implied authority
5. In which parts of India is it compulsory to register a Partnership?
In India, there is no need to register a partnership deed. This is the short answer, as
specified under part VII of the Indian Partnership Act, 1932.
However, In Maharashtra there is a state amendment whereby one year time limit is
fixed for registration. Registration appears to be compulsory for Maharashtra after the

7 http://www.yourarticlelibrary.com/partnership-firms/partnership-firms-definition-features-advantagesand-disadvantages/40804/
8 http://www.llrx.com/features/llc.htm
8

1984 state amendment. There is also a penalty provision. In the rest of the country
there is no time limit. Registration can be done at anytime.9
Literature Review
This project will be researched purely by searching news reports and books via the
Internet. Online books and journal catalogues will be used to research relevant cases. A
few important textbooks too will be utilized for this project.
The Indian Contracts Act 1872 was referred to along with a few textbooks, which include
o Law of Contract II by R.K. Bangia (Allahabad Law Agency)
o Contracts by Pollock and Mulla (Lexis Nexus)
o Indian Contracts and Specific Relief Act by Avtar Singh (Eastern Book Company)
(ALONG WITH ANY OTHER REFERENCE BOOK OF THE SUBJECT.)

Articles used for this project are as follows:

1. Technological Efforts & Internationalization of IT firms in India by K. Narayanan and
Savita Bhat
Indian Journal of Industrial Relations
Vol. 45, No. 1, The Global Indian Firm (Jul., 2009), pp. 62-83
2. Partnership and Its Discontents by Sukumar Muralidharan
Economic and Political Weekly
Vol. 40, No. 32 (Aug. 6-12, 2005), pp. 3589-3591
3. Regulatory Competition in Partnership Law by Mathias M. Siems
The International and Comparative Law Quarterly
Vol. 58, No. 4 (Oct., 2009), pp. 767-802
9 http://www.caclubindia.com/forum/registration-of-partnership-deed-mandatory--64635.asp
9

4. What Constitutes a Partnership? by George Wharton Pepper

The American Law Register (1898-1907)
Vol. 46, No. 3, Volume 37 New Series (Mar., 1898), pp. 137-154

10

LEGAL ANALYSIS

Partnerships in India are governed by The Indian Partnership Act, 1932 and is complimentary to
the Indian Contract Act.
Partnership is a concurrent subject in the sense that it is administered by both the Central and
State governments. So you will have to follow both Central Government and State Government
laws when it comes to partnerships.
Unlimited Liability is a major disadvantage. Any partner can bind the firm and thus the firm
faces all the liabilities the firm is bound to. If the companys property is not enough, then
personal property of the partners will be attached to pay the debts of the firm. 10
A partnership firm is not a legal entity. As per section (4) of Indian Partnership Act, 1932,
'partnership' is the relation between persons who have agreed to share the profits of a business
carried on by all or any one of them acting for all. But for tax purposes, a partnership firm is a
legal entity.11
Key Aspects to Consider in a Partnership Contract:

Partners are mutual agents- each partner is an agent for other partners. Any one partners
act can bind the entire firm. Thus partners are mutual agents.

Agreements can be written or oral. A written agreement is not necessary under the
Partnership Act, but is recommended. However, you will need a written agreement for
registration and tax purposes. A written agreement is advisable to establish existence of

10 Jean Favier, Gold & Spices: the rise of commerce in the middle ages, Holmes & Meier Pub; 1st US
edition, July 1998
11 http://www.manupatrafast.com/articles/PopOpenArticle.aspx?ID=bc6219eb-2a06-4528-b4eb15ef6a3c60b0&txtsearch=Subject:%20contract
11

partnership and to prove rights and liabilities of each partner, as it is difficult to prove an
oral agreement.

Sharing of profits is necessary. Under the Partnership Act, the firm will not be a
partnership if one partner gets a fixed remuneration (regardless of profit). Interestingly,
sharing of losses is not necessary, as well as sharing of capital. Sharing of revenue does
not constitute as sharing of profits.

Mutual Agency is the real test of partnership.

o Partnership at will- If there is no provision made between partners for the duration
or determination of the partnership then the partnership is partnership at will
(section 7). This means that any partner can dissolve the firm by giving notice to
partners. The partnership deed may provide about the duration of the partnership
or how the partnership will be brought to an end. If no provision made, then it is
partnership at will. In case of particular partnership, the partnership comes to
end

when

the

venture

for

which

it

was

formed

comes

to

end.

o Subject to the provision of the act, the mutual rights and duties of partners can be
determined by a contract between partners which can be express or implied. Thus
it will be important to enter into a written agreement to establish rights and duties
or

partners.

Every partner has the right to participate in business.

o The property of the firm- subject to the provisions of the contract, the property of
the firm includes all property, rights and interests of the firm originally brought
into the stock of the firm.

12

o Partner to be the agent of the firm.

o Implied authority- a partner is implied to be an agent of the firm and will act on
the

behalf

of

the

firm

Partners are Jointly and Severally Liable for Acts of Firm- every partner is liable, jointly
with other partners for all acts of the firm while he is a partner. An act of a firm means
any act or omission by all the partners, or by any partner or agent of the firm which gives
rise to a right enforceable by or against the firm [section 2(a)]. Joint and several means
each partner is liable for all acts. Thus, if amount due cannot be recovered from other
partners, any one partner will be liable for payment of entire dues of the firm.12
o Partner by holding out- holding out means giving the impression that a person is
a partner while he is not. If a person gives an impression to outsiders that he is
partner of firm though he is not partner, he will he held liable as partner.
o Minors admitted to benefits of partnership- if a person is a minor according to the
law by which he is governed, he is legally not a partner. But with the consent of
other partners he may be admitted to the benefits of the partnership.

Rights of minor- has a share of property and profits (depending on the agreement)
o The minors share is liable, but not the minor himself.

Dissolution of firm- Without intervention by Court, a partnership can be dissolved byo (a) By Agreement [section 40],
o (b) Compulsorily in case of insolvency [section 41],
o (c) dissolution in case of contingency [section 42],

12 http://www.charteredclub.com/register-partnership-deed/
13

o (d)

by

notice

if

partnership

at

will

[section

43]

Dissolution of Partnership and Dissolution of Firm- the dissolution between all partners
of the firm is called dissolution of the firm.
o However, if one partner is changed/added/goes out, this is merely a reconstitution
of the firm, not dissolution.
o Mode of Dissolution- discussed above
o Consequences- provided for in the Act
o Sale of Goodwill- though intangible, as per section 14 of the Act, goodwill of the
firm is part of the property of the firm. Goodwill is the reputation and connections
which the firm establishes over time, together with circumstances which make the
connections durable. This reputation enables to earn profits more than normal
profits which a similar business would have earned. In settling the accounts of a
firm after dissolution, the goodwill shall, subject to contract between the partners,
be included in the assets, and it may be sold either separately or along with other
property of the firm. [Section 55(1)].13
o Settlement of Accounts- only after all accounts have been settled, is the firm
considered dissolved.

Though optional, registration of the firm is recommended.

o Partner Cannot Sue if Firm is Unregistered- A partner cannot sue the firm or any
other partner in the firm if the firm is unregistered. If third party files suit against
a partner, he cannot claim of set off or institute other proceeding to enforce a right
arising from a contract. Suit or claim or set off upto Rs. 100 can be made as per
section 69(4) (b), but it is negligible in todays standards. Criminal proceedings

13 Ibid
14

can

be

filed,

but

civil

suit

is

not

permissible.

o A Unregistered firm cannot Sue a Third Party- Only if the firm is registered, then
only can it sue a third party in a civil suit [section 69 (2)]. Criminal proceedings
can be filed, but civil suit is not permissible.

15

ROLE OF JUDICIARY

A partnership is constituted by an agreement between the partners. The agreement may be in

writing or oral. But from the practical point of view and particularly in view of the provisions of
other Acts such as the Income Tax Act as well as Partnership Act an oral partnership is not
practicable, and therefore, a partnership agreement is necessarily required to be in writing.
Therefore, the mere fact that two persons as joint owners either as heirs or legatees are carrying
on a business it does not necessarily mean that they are partners and if they want to carry on the
business in partnership, then a Partnership agreement in writing becomes necessary. For
example, if a person dies leaving a running business and his heirs continue to carry on such
business, it will not be a business carried on in partnership and if they want to do so they will
have to enter into a regular agreement of partnership.14
Being an agreement and an agreement enforceable at law, such an agreement must fulfill the
basic requirements of a valid contract, as required by the Contract Act. Therefore, a minor or a
mentally handicapped person cannot enter into a partnership agreement though by virtue of the
provisions of the Partnership Act a minor can be admitted only to the benefits of the
partnership. But that only means that a minor can have a share in the profits of the business, but
he cannot become a partner, and cannot execute any agreement of partnership.15
Similarly if a partnership deed provides that on the death of a partner his heirs or any one or
more of them should be admitted as partners or partner in place of the deceased partner even in
such a case on the death of a partner his heirs or any of them do not become partners
automatically on such death. But a fresh agreement of partnership will have to be executed
between the existing partners and the heirs or heir of the deceased partner and if the heir is a

14 Droli M. Partnering turistico. L'Impostazione, la Creazione, l'Organizzazione ed il Rinforzo Continuo

di una Partnership Strategica di Successo, Forum, Universit degli Studi di Udine, Udine, 2007
15 Section 30, Indian Partnership Act
16

minor the new partnership will stand postponed till the minor attains majority or if the surviving
partners are more than one, the minor can only be admitted to the benefits of partnership. 16

16 https://www.indiafilings.com/partnership
17

Test of partnership
As stated before, a partnership agreement can be oral or in writing. It is not the general practice
to enter into a preliminary agreement to enter into a regular partnership agreement. But if such a
preliminary agreement is entered into and the partners start business in anticipation of executing
a formal deed of partnership, the partnership shall be deemed to have commenced from the
commencement of the business, unless the preliminary agreement is conditional upon the
happening or not happening of some event in which case the partnership cannot be said to have
come into existence unless the event has happened or not happened. Another test of partnership
as mentioned above is that of sharing profits, and which is an essential requirement of a
partnership. Profits may be shared in such proportions as the parties may agree, but sharing of
profits is most essential. As against that, sharing of losses only suffered in business is not a test to
constitute a partnership.
Therefore, the partnership agreement may provide that a particular partner or partners will not be
liable to bear any losses of the firm. As regards sharing in profits the agreement may provide that
a partner shall receive only a fixed share in the profits or a fixed periodical amount and It is not
necessary that profits should be shared in certain proportions.
Section 6 of the Partnership Act provides that In determining whether a group of persons is or is
not a firm or whether a person is or is not a partner in a firm regard shall be had to the real
relation between the parties as shown by all the relevant facts taken together.
It further provides that sharing of profits or gross returns arising from property by persons
holding joint or common interest in that property does not of itself make such persons partners,
that is, as stated above, mere joint ownership of business does not constitute a partnership.
Similarly, receipt by a person of a share of the profits of a business or a payment contingent upon
earning of profits or carrying with the profits earned by a business, does not of itself make him a
partner with the person carrying on the business. For example, the receipt of a share or payment
by a lender of money to persons engaged or about to engage in a business does not make such
lender a partner.17
17 https://www.business.tas.gov.au/starting-a-business/starting-a-business-from-scratch/choosing-abusiness-structure-intro/partnership-advantages-and-disadvantages
18

Similarly, a share given in profits to a servant or agent as remuneration does not make him a
partner, or if a widow or child of a deceased partner is given any annuity in payment of the share
of the deceased partner It does not make the widow or child a partner, or if a business is sold
with goodwill and the seller is given a share in profits towards payment of the sale price it will
not make him a partner of the firm. But otherwise wherever the agreement is for sharing of
business carried on by two or more persons the partnership relation will be inferred.
The partnership business may consist of doing anything which is not illegal or against public
policy. Business may consist of carrying a continuous trade. or profession or any manufacture
and any other activity of which the object is to earn profits. Or it may be limited to a single
adventure.
Partnership for an adventure
Section 8 of the Partnership Act provides that a person may become a partner with another
partner In particular adventure or undertaking.
As observed by the Gujarat High Court, the common law does not recognise the relationship of
co-adventurers but with the passage of time, the judicial decisions have recognised what is
known, as joint ventures of two or more persons undertaking to combine their property or labour
in context of a particular line of trade or general business for joint profits. The courts do not treat
a joint adventure as identical with the partnership though it is so similar in nature, and in the
contractual relations created between such adventurers the rights as between them are governed
particularly by the same rules that govern the partnership.
This relationship has been defined to be a special combination of persons undertaking jointly
some specific adventure for profit without any actual partnership.
It is also described as a commercial or maritime enterprise undertaken by several persons jointly,
a limited partnership, not limited in the statutory sense as to the liabilities of the partners, but as
to its scope or duration. Generally speaking the distinction between joint venture and partnership
is that former relates to a single transaction though It may comprehend business to be continued
over several years while the latter relates to a joint business of a particular trade. In order to
constitute a joint venture there must be a community of interest and right tojoint control.
19

It is recognised on authority that each of the partners must have equal voice in the matter of
performance and control over the activities used therein though one authority may entrust the
performance to another.
The rights and duties and liabilities of a joint venture are similar or analogous to those which
govern corresponding rights and duties and liabilities of the partners. The only difference
between partnership under section 8 of the Partnership Act and an ordinary partnership is that ln
joint venture, parties undertake no liability beyond the limit of a particular venture/adventure or
business or undertaking and their rights and obligations are, therefore, less extensive than those
of the partners in ordinary partnership.
Partnership an agency
The third essential of a partnership is that a partnership business actually may be carried on by
all the partners together or by any one or more partners for all and on behalf of the others, in
which case each partner is an implied agent of the other partners. It is not. therefore, necessary
that all the partners take part in the business of the partnership firm. Some partners can be active
partners and others can be sleeping partners. But it must be clear that there is an implied or
express agency constituted in favour of one partner by the other partners. If there is no element
of agency, even if there is any agreement to share profits, there will be no partnership. So a
partner has a double capacity, he is the principal so far as he is concerned and the agent so far as
other partners are concerned.18
Period of partnership
A partnership can be for a fixed period of time or it may be limited to a particular adventure as
provided in Section 8 or it may be for a duration at the will of the partners. Where the period of
the partnership is not fixed and the partnership is not for a particular adventure then
under section 7 of the Act the partnership shall be deemed to be a partnership at will.
Rights and duties of partners

18 http://taxmap.ntis.gov/taxmap/pubs/p541-001.htm
20

Sections 9 & 10 of the Act lay down the basic duties of every partner and the said duties are not
subject to any contract to the contrary. Therefore, partners are bound to carry on the business of
the firm to the greatest common advantage, to be just and faithful to each other and to render
accounts and full information of all things affecting the firm to any partner or his legal
representative and every partner is bound to indemnify the firm for any loss caused to it by fraud
in the conduct of the business of the firm.
Subject to this the mutual rights and duties of partners may be decided by contract between the
partners, either express or implied.19
Subject to any contract to the contrary such duties and rights of each partner are provided in
Sections 12 and 13 of the Partnership Act.
Registration
A partnership firm is required to be registered under sections 58 and 59 of the Partnership Act,
though it is not compulsory.
Every change in the constitution of a partnership is also required to be registered. But if it is not
registered, then there are certain handicaps stated in S.69 of the Act.
The main handicap being that a partnership firm or its partner cannot file a suit against a third
party. In Maharashtra, the Section is made more stringent making registration almost
compulsory. For the purpose of income tax benefits It is necessary to register a partnership with
the Department under S. 184 and S.185 of the Income Tax Act, 1961.
Stamp Duty and Registration
Stamp Duty: On a Deed of Partnership the stamp duty under the Indian Stamp Act is a fixed
one. The same duty is payable on a deed of retirement or a deed of dissolution. But in
Maharashtra, if the deed of retirement or deed of dissolution affects any transfer of an
immoveable property, it will attract stamp duty as on a conveyance on the market value of the
property. For the law in different States, see Ch.1 in Part VIII.

19 http://taxmap.ntis.gov/taxmap/pubs/p541-001.htm
21

Registration: A partnership deed is not required to be registered even if an immoveable property

is brought in the firm. Similarly, a deed of retirement or a deed of dissolution is not required to
be registered. According to Supreme Court a division of even immoveable properties on
dissolution is not required to be registered as it does not amount to a transfer. The correctness of
this view is doubtful and it is desirable to get such a deed of dissolution or retirement registered
for the sake of caution or safety.20

20 http://www.myonlineca.in/startup-blog/how-to-register-your-partnership-firm-in-india
22

COMPARATIVE STUDY
Partnership under Companies Act
Section 4 of the Companies Act, 1956, provides that the number of partners in a firm shall not
exceed 20, and a partnership having more than 20 persons will be illegal.
When there is partnership between two firms all the partners of each firm will he taken into
account for the purpose of this provision but if a partnership is between the Karta or any member
of HUF on the one hand and another individual or Individuals on the other, the members of the
joint family will not be taken into account. A Hindu Undivided family carrying on business as
such, not being a partnership, S 11 of the Companies Act will not apply even if the members of
that family are more than 20. But where two or more Hindu Undivided families are carrying on
business in partnership the number of the members of those families except minors will be taken
into account for the purpose of S. 11 of the Companies Act.
Partnership under Income Tax Act
A partnership to be recognised for the purpose of income Tax liability of the partners and their
firm is required to comply with certain provisions of the Income Tax Act. While therefore
drafting a deed of partnership the provisions of the Act are required to be taken in to account
Partnership and other bodies of Individuals
A partnership is distinguishable from several other associations or bodies of individuals. A
partnership is different from co-owners in several respects. The distinguishing features are stated
by the Supreme Court in Champaran Cane Concern Corporation v. State of Bihar. It is
different from a club which is an association of persons formed for the purpose other than
carrying on business and therefore there is no object to earn profit. Partnership is differentfrom a
company or any other corporate body which is a legal entity. Partnership is also different from
Hindu Joint family firm, the latter being a creation of law while the former is a creation of
contract. It is not necessary to discuss the subject in more detail as each of these bodies are dealt
with separately elsewhere.

23

In Maharashtra,
Important Court Decision
Maharashtra State Amendment to Indian Partnership Act, 1932 (Maharashtra Act, 29 of 1984, S.
14) came into force w.e.f. 1985. By this amendment, a time limit was laid down within which
Registration and subsequent changes were to be intimated to the Registrar. A new section 69A
was inserted providing for levy of penalty in case of delay in furnishing the forms required by
u/ss. 60 to 63 of the Act. (Refer chart for time limits). In case of M/s. Adamji Lookmanji & Co.
Registrar of Firms levied penalty for non-intimation of changes in partnership in time limits
(which has been prescribed w.e.f. 1-1-1985) for changes that took place prior to 1-1-1985.
The penalty was challenged by M/s. Adamji Lookmanji & Co. since there was no prescribed
time or clauses of penalty prior to 1-1-1985.
The petition was allowed and it was held in M/s. Adamji Lookmanji & Co. & Ors. vs. State of
Maharashtra & Anr.21, that the demand of such penalty in respect of changes effected prior to 11-1985 is without the authority of law. Any change or alteration if made in terms of sections 60,
61, 62 or 63, prior to the Amendment by Maharashtra Act 29 of 1984 will be governed by the
provisions of law as they stood before the amendment. Even in respect of such change if a party
applies for effecting the change or alterations after the Amendment Act has come into force,
considering the language and perusing the ambit of section 69, it will be governed by the law
before the Amendment. It is only change or alteration after the amendment which will be
governed by the amended provisions. The above demand is therefore illegal, bad and without
jurisdiction. The respondents at the highest can consider and/or impose penalty in respect of
changes which took place after 1-1-1985.

21 AIR 2007 Bom 56

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CONCLUSION

Paretnership is a very important part of the Indian Business world. It helps keep aside all the
problems which one may face in a partnership in the near future.
The registration of partnership is not compulsory under Indian Partnership Act. In England
registration is, however, compulsory. In India there are certain privileges which are allowed to
those firms which are registered. Unregistered firms are prejudiced in certain matters in
comparison to registered firms.
Though directly the registration of firms is not compulsory but indirectly it is so. To avail of
certain advantages under law the firm must be registered with the Registrar of Firms of the State.
Registration of a firm does not provide a separate legal entity to the concern as in the case of
Joint Stock Company.
Partnership does not need registration for coming into existence because it is created by an
agreement among two or more persons. The registration of a firm merely certifies its existence
and non-registration does not invalidate the transactions of the firm.
When some job is done by consent of all the members and if some profit is earned then it is
shared among the different partners. And similar is the case when some loss occurs then that is
also beard among all the members and its not that only one has to take responsibility or give
compensation. So in my view Partnership is a good form of doing business than a company
which is owned by a single person.
Partnership is one of the oldest forms of business relationships. Though limited liability
companies have replaced partnership firms in complex businesses, partnerships are still preferred
by professionals and small trading and business enterprises in India and abroad.
The Indian partnership act of 1932 provides for a general form of partnership which is the most
prevalent form in India, but, over time the general form of partnership has lost its charm because
of the inherent disadvantages in it, the most important is the unlimited liability of all partners for

25

business debts and legal consequences, regardless of their holding, as the firm is not a legal
entity.
General partners are also jointly and severally liable for tortuous acts of co-partners. Each
partner has the exposure of their personal assets being appropriated and liquidated to meet
partnership dues. These are statutory position, which cannot be altered by contract inter-se,
though at times subterfuges are resorted to by unscrupulous partners to avoid personal liability.
General partnership holdings are not easy to transfer; typically all other partners have to agree.
Yet partnership is preferred in India, because of the ease of formation and lack of compliances
involved.

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BIBLIOGRAPHY
1. Technological Efforts & Internationalization of IT firms in India by K. Narayanan and Savita
Bhat
Indian Journal of Industrial Relations
Vol. 45, No. 1, The Global Indian Firm (Jul., 2009), pp. 62-83

2. Partnership and Its Discontents by Sukumar Muralidharan

Economic and Political Weekly
Vol. 40, No. 32 (Aug. 6-12, 2005), pp. 3589-3591

3. Regulatory Competition in Partnership Law by Mathias M. Siems

The International and Comparative Law Quarterly
Vol. 58, No. 4 (Oct., 2009), pp. 767-802

4. What Constitutes a Partnership? by George Wharton Pepper

The American Law Register (1898-1907)
Vol. 46, No. 3, Volume 37 New Series (Mar., 1898), pp. 137-154

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