Registration of Partnership Firms

Registration of Partnership Firms

Introduction:

Chapter VII (Section 56-71) of the Indian Partnership Act, 1932 deals with Registration of partnership firms. It is not necessary for any firm to get registered, but the results of non-registration are so great that the partners choose to get the firm registered to shield the disabilities resulting therefrom, which have been mentioned under Section 69.

An overview of the sections 56-71 is as follows:

  • Sec. 56: Power to exempt from application of this Chapter
  • Sec. 57: Appointment of Registrars
  • Sec. 58: Application of Registration
  • Sec. 59: Registration
  • Sec. 60: Recording alterations in firm name or principal place of business
  • Sec. 61: Noting of closing and opening of branches
  • Sec. 62: Noting of changes in names and addresses of partners
  • Sec. 63: Recording of changes in and dissolution of the firm & Recording of withdrawal of a minor
  • Sec. 64: Rectification of mistakes
  • Sec. 65: Amendment of Register by order of Court
  • Sec. 66: Inspection of Register and filed documents
  • Sec. 67: Grant of Copies
  • Sec. 68: Rules of evidence
  • Sec. 69: Effect of non-registration
  • Sec. 70: Penalty for furnishing false particulars
  • Sec. 71: Power to make rules

Procedure for Registration:

Section 58 and 59 deal with the procedure of registration of firms. The form along with registration fees (not extending more than Rs. 3) needs to submitted to Registrar of Firms who has been appointed in consonance with Sec. 57 by the State government. The application must state the following:

  1. The firm name
  2. The place or principal place of business of the firm
  3. The names of any other places where the firm carries on business
  4. The date when each partner joined the firm
  5. Names in full and permanent addresses of the partners
  6. The duration of the firm

The statement must be signed by all the partners, or their specially authorized agents verifying the manner prescribed. There has been no period of limitation mentioned or prescribed in the Act for the registration of firms or for recording subsequent changes, as contemplated in Section 63 of the Act and therefore, any legislation specified by the Registrar or the State government regarding the time limitation is ultra vires as decided in the case of O. Balanarayan v. Registrar of Firms, Trivandrum[1].

Also, in the case of Noble Kuries v. Sebastian Antony and Ors.[2] it has been held by the High Court of Kerala that no separate registration is required on the reconstitution of the firm. What is required is the only intimation to the Registrar of the Firms about the change, as provided under Section 60 to 67.

Also, the partners of the firm and the Registrar while noting down the firm must comply with provision Sec. 58(3) where it is strictly prohibited for the partners to use title ‘King’, ‘Imperial’, ‘Emperor’, ‘Empress’, ‘Royal’, ‘Crown’ or words expressing the sanction from the State government except when the government signifies its consent to the use of such words as part of the firm name in writing.

Subsequent changes and alterations (Sec. 60-65):

The alterations, if any, occurring related to the place of business or incoming or retiring of any partner, the Registrar has to make those in consonance with the provisions listed in the Act.

The act contains the following provisions in this connection:

  1. Alteration in the firm name and principal place of business (Sec. 60)
  2. Closing and opening of branches (Sec. 61)
  3. Changes in names and addresses of partners (Sec. 62)
  4. Changes in constitution of the firm or on dissolution of the firm (Sec. 63) in case of retirement, expulsion, insolvency or death. No fresh registration is required on the death of a partner or otherwise in case of a change in the constitution of the firm, but it is sufficient to notify the Registrar, who can make a note in the relevant register. However, the notice for registration of the firm, change in the constitution or its dissolution is not necessary but the notice must be given for its dissolution, or the retirement or expulsion of a partner, otherwise, the liability of the partners continues to be the same as before. In case of the registered firm, the public notice includes notice to the Registrar under Sec. 73.

In the case of Sharad Vasant Kotak v. Ramniklal Mohanlal Chawda[3] there was a change in the constitution of the firm due to death of one of its partner. The court held that there was no need of fresh registration all over again and the mere notice to the Registrar regarding the change in the constitution under Sec. 63 would suffice. Failure to comply with Sec. 63 attracts penalty under Sec. 69A of the Act. Moreover, the person whose name doesn’t appear in the Register of the Registrar of Firms may suffer from certain liabilities under Sec. 69.

  1. Rectification of mistakes (Sec. 64): This section empowers the Registrar to correct any mistakes which may have been there in the Register of firms in order to bring the register relating to any firm in conformity with the documents filed under this Chapter.
  2. Amendment of the Register by order of Court (Sec. 65): If any case affects the report of a registered firm, then the same has to be amended in the Register of firms. This section empowers the court to direct the Registrar to make necessary amendments in the register.

Sec. 66 and 67 empower the citizens and are related to Right to Information. Sec. 66 provides that every statement, notice or intimation mentioned in the Register of firms shall be available for inspection to any person subject to conditions prescribed upon paying the necessary fees. Sec. 67 further unfolds the right to citizens that in case they need a certified copy of any entry or portions of the Register of Firms, he can have the same from Registrar on payment of such fees as prescribed in Schedule I. The State Government may make changes in the fees required but anyhow, the fees must not exceed the limit mentioned in the Schedule I.

Sec. 68 gives an insight into the evidentiary value of entries in the Register of Firms.

  1. the information on the basis of which the Registrar prepares the record in the Register, shall be considered as conclusive proof of the facts contained therein as against any person by whom such information was signed. It may be noted, that the information which is recorded with the Registrar is the only conclusive proof against those who have furnished the information and not against any third party. Therefore, a third party is free enough to prove against the information mentioned in the register regarding the partners and can also prove facts such as there are partners working on behalf of the firm whose names don’t appear in the register. This is related to the doctrine of holding out. a remarkable case of this doctrine is Snow White Food Products Pvt. Ltd. v. Sohanlal Bagla[4].

Advantages of partnership:

There are many merits of having a partnership firm, which ultimately results in partnership firms having an edge over other ventures.

  • Minimal compliance: General partnerships, for instance, do not need to appoint an auditor or if unregistered, even file annual accounts with the Registrar. Annual compliances are also fewer as compared to an LLP. General partnerships do need to file income taxes, depending on turnover service and sales tax.
  • Easy to start: It can be started with just an unregistered partnership deed within 24 days of registration. However, it does bring a few advantages. It would enable you to file suits in courts against other firms or the partners in the firm for the enforcement of rights arising from a contract or right given by the Partnership Act.
  • It is relatively inexpensive: General partnership is cheaper to start then an LLP. Even over the long-term, owing to the minimal compliance requirements. It is inexpensive, which asserts that you would not need to hire an auditor, for example. This is why despite its severe shortcoming (unlimited liability), a home business may opt for it.

 


 [1] AIR 1984 Kerala 20

[2] AIR 2010 Ker. 99

[3] AIR 1998 SC 877

[4] AIR 1964 Cal. 209

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