DR.

RAM MANOHAR LOHIA NATIONAL

LAW UNIVERSITY

2015-2016

LAW OF CONTRACTS II

SCOPE OF RESTRICTION UNDER SEC. 69

AND REGISTRATION COMPULSION IN INDIAN
PARTNERSHIP ACT,1932
SUBMITTED TO:

SUBMITTED BY:

Dr. M.S. PASWAN,

Monish Nagar

Assistant Professor (Law)

Roll no: 84

Professors signature

Students signature
1

ACKNOWLEDGEMENT
I take this opportunity to express my profound gratitude and deep regards to Dr. M.S.
PASWAN, Associate Professor (Law), for her exemplary guidance, monitoring and constant
encouragement throughout the course. The blessing, help and guidance given by her time to
time shall carry me a long way in the journey of life on which I am about to embark.
I thank almighty, my parents, brother, sisters and friends for their constant encouragement
without which this research paper would not be possible.
Monish Nagar

Table of Contents
INTRODUCTION.......................................................................... 4

HISTORY.................................................................................... 6

SCOPE AND METHOD OF REGISTRATION....................................8

EFFECT OF NON REGISTRATION.................................................9

NON-REGISTRATION OF THE PARTNERSHIP FIRM HAS NO LEGAL

BEARING ON THE CRIMINAL CASE...........................................11

DISPUTE RESOLUTION AND NON REGISTRATION......................12

REGISTRATION OF CHARGES....................................................15

CONCLUSION...........................................................................16

BIBLIOGRAPHY......................................................................... 17

INDEX OF AUTHORITY
Badri Prasad & Ors v. Nagarmal & Ors, AIR 1959 SC 559
Afsar Hussain v.Trilokchand Premchand , AIR 1975 Ori 84
Gokuldas Rampratap Marwadi v.Kesheorao Janurao Marathe, AIR 1937 Nag 134.
Girdharilal v.Speedding Dinga Singh & Co., AIR 1954 HP 52
Hiralal Agarwal v.State of Bihar, AIR 1972 Patna 507

INTRODUCTION
The Indian Partnership Act, 1932 (the Act) was enacted by the Parliament repealing the
relevant sections from the Indian Contract Act, 1872 keeping in mind the conditions and the
special nature of business in India

. It was thought proper to define and amend the law

relating to partnership 2 . Registration of the partnership is a very important area which has
been dealt in Chapter VII of the Act, and due to its special nature, that the disabilities
resulting from non-registration came in to effect a year after the Act 3 .Chapter VII of the Act
deals with Registration of Firms of which sections 56 to 65 deals with the procedure for
registration. Section 66, relates to inspection of register, section 67 to grant of copies to any
person and section 68 with rules of evidence. The purpose of these provisions is to protect
the interest of those who deal with partnership firms in various commercial transactions.
Third parties who deal with a firm on its name or with a partner or managing partner as
representative of the firm must be in a position to know who the partners are and what are
their respective shares in the partnership, the details, if any, as to the capital investment by
partners, and the details, if any, of the partnership property. That would enable them to have
an idea of the competence, status and solvency of the partners of the firm. If the partnership
firm does not choose to get itself registered, then the firm as well as the partners are under the
disabilities which are extremely inconvenient

. There is no direct compulsion but a pretty

strong persuasive pressure to come on the register of firms. No member of an unregistered

firm can enforce his rights under the partnership contract against either the firm or any
present or past member of it, nor can the firm sue its customers on their contracts 5
The English law compels registration at the pain of penalty; Section 69 compels it at the pain
of disability to sue. Thus it becomes necessary for the survival of a firm that it should be
registered. However, where a person in his individual capacity is not shown partner of the
1 The Special Committee which was set up for the purpose of reforming the Law
relating to partnership, discussed it in Para 15 of its report. Some of the
conditions it mentioned were the typical nature of Hindu Joint Family business.
2 Preamble to Indian Partnership Act, 1932.
3 Section 1(3) of the Indian Partnership Act, 1932.
4 Badri Prasad & Ors v. Nagarmal & Ors, AIR 1959 SC 559
5 Afsar Hussain v.Trilokchand Premchand , AIR 1975 Ori 84
5

firm but as Karta of Hindu undivided Family he is partner of the firm, he is therefore duly
authorized to institute the suit. A Joint family firm is not subject to the restrictions imposed
by Section 69 of the Act. Similarly, there are other situations also where firms can escape the
liability of being registered. Hence, this project aims to deal with all those circumstances
where the scope of Section 69 extends and where the law proves to be a mere facade.

HISTORY
In order to compel partners to register their partnership firms so that all relevant information
could be obtained by inspection of the register or by obtaining a certified copy thereof, a
suitable legal provision is needed. Under the UK Registration of Business Names Act, 1916
6

, there was a penal provision and also a provision which created certain disability in respect

of enforcement of certain rights in Courts. However, under the Indian Partnership Act, there
is no penal sanctions for non-registration (as in UK), but only a provision that creates certain
disabilities in respect of enforcement of rights in Courts 7 . Under the Act, registration of firm
is not mandatory. It is utterly on the will of the partners to get it registered with the Registrar
of the Firm or not to do the same.
The object and the reason as to why registration is not made compulsory are, in brief
difficulties related to Hindu undivided family business, short lived partnership and firm in a
small way of business8. Although there is no penalty for non-registration, yet registration
becomes necessary at one time or the other, because Section 69 of the Act seriously cuts short
the capacity of an un-registered firm and its partner to sue and be sued (which would prevent
other parties from transacting). It was on the basis of the Report of the Special Committee
that the Partnership Act 1932 was passed by the Parliament 9. Para 15 of the report stated that
the Bill seeks to overcome class of difficulty by making registration optional and by creating
inducements to register, which will only bear upon firms in a substantial and fairly permanent
6 The UK Registration of Business Names Act, 1916 makes it compulsory not just
firms but also individuals carrying on business to register both the business
names and the personal names of the parties in the form therein prescribed.
Registration is not called for in case of a firm name consisting only of the usual
names of the partners, but in practise the great majority of firms have to be
registered
7 These disabilities are contained in Section 69 of the Indian Partnership Act. 8
1934, Page 88.
8 Mulla, Partnership Act, Ist edn.
6

way of business10. Business Names Act 1985 (English Act), has replaced the above the UK
Registration of Business Names Act of 1916 and Section 4 of the new Act refers to the civil
remedies for breach of Section 4. It provides for dismissal of the action to enforce a right
arising out of a contract made in the course of a business, if the firm is not registered. The
English precedent in so far as it makes registrations compulsory and imposes a penalty for
non-registration has not been followed, as it is considered that this step would be too drastic
for a beginning in India, and would introduce all the difficulties connected with small or
ephemeral undertakings. Instead, it is proposed that registration should lie entirely within the
discretion of the firm (or the partners) concerned; but following the English precedent, and
firm which is not registered will be incapable to enforce its claim against third parties in the
civil court; and any partner who is not registered will be unable to enforce his claims either
against third parties or fellow partners.
The English precedent referred to in Para 17 of the report of the Special Committee, which
has been not followed in totality but followed in part in drafting section 69(2) is the one
contained by the Registration of Business Names Act 1916. Section 7 of that Registration of
Business Names Act 1916 refers to penalties for default in registration. As stated in the
report, the penalty part of this Act has not been introduced in India but the provisions of
Section 8 creating disabilities in the way of the firm in default is adopted

11

. But once

registration has been effected the statement recorded in the register regarding the constitution
of the firm will be conclusive proof of the facts therein contained against the partners making
them and no partner whose name is on the register will be permitted to deny that he is not a
partner with certain natural and proper exceptions. This should afford a strong protection to
persons dealing with firms against false denials of partnership and the evasion of liability by
the substantial members of a firm . A third party who deals with a firm and knows that a new
partner has been inducted, can either make registration of the new partner a condition for
further dealings or content himself with certain security from the other partners and the
chance of proving by other evidence, the membership of the new but unregistered partner A
third party who deals with a firm without knowing of the addition of a new partner counts on
9 The committee consisted of Sir Brojendra Lal Mitter, Sir Dinesh F Mulla, Sir
Alladi Krishnaswamy Iyer and Mr Arthur Eggar. Earlier the law governing
partnership was contained in the Indian Contract Act, 1872
10 Mulla, Partnership Act, 1st edn. 1934, Page 167, 176-177
11 Para 23 of the Report of the Special Committee
7

the credit of the old partners only and will not be prejudiced by the failure of the new
partners registration. The rights of that defaulter under or arising out of any contract made or
entered into by or on behalf of such defaulter in relation to the business in respect of which
the particulars were required to be furnished. The above provision clearly signifies that the
right that is sought to be enforced by the unregistered firm and which is barred must be a
right arising out of a contract with a third party-defendant in respect of the firms business
transactions. If two persons agree to share the profit of a money lending business, they are
partners and form partnership to which section 69 applies 12 .

SCOPE AND METHOD OF REGISTRATION

Registration under the Indian Registration Act, 1908 or Income Tax Act, 1961 is different
from registration under the Act

13

. Registration under the Act may be effected by sending a

statement in the prescribed form to the Registrar, of the area in which any place of business
of the firm is situated or proposed to be situated . However, it has been held that omission to
mention one of the other places of business when the principle place is mentioned will not
vitiate the registration and the mistake can be rectified under Section 64 of the Act . However
the registration under the Act is not conclusive for purposes of Income Tax Act, 1961 . Sub
section (1) of Sec 58 provides for the documents required for registration. Nothing of the
internal economy of the firm need be disclosed beyond the mere names of the partners, and
the duration of their partnership. It provides that when there is an application for registration
of a firm, it shall contain a statement of matters enumerated in clauses (a) to (f) of this sub
section.14
If an application for registration of partnership firm complies with the requirements of
section 58 and the rules framed under the Act, the Registrar of the Firms is bound to record
an entry of the statement under section 59 in the Register of Firms. He cannot refuse
registration on the ground of the same or similar firm name having already been registered.
The registration of partnership cannot also be refused on the ground that some of the objects
of partnership are unlawful; partnership may be registered for the valid objects of the
partnership . Registration of a firm cannot be refused on the ground that one of the partners
12 Gokuldas Rampratap Marwadi v.Kesheorao Janurao Marathe, AIR 1937 Nag
134.
13 Girdharilal v.Speedding Dinga Singh & Co., AIR 1954 HP 52
14 Hiralal Agarwal v.State of Bihar, AIR 1972 Patna 507
8

of the firm is a company as a company is also a person within the meaning section 4 of
the Act . Under the Partnership Law, it can be taken to have been settled that the registration
of the firm takes place only when the necessary entry is made in the register of firms under
section 59 of the Act, 1932 by the Registrar 15 . Mere dispatch of an application for
registration under section 58 of the Act does not amount to registration of the partnership
firm.
The registration of the firm can be proved only by certified copy of entry relating to firm in
registrar of the firms and not otherwise. Thus, acknowledgement of the registrar of firm
cannot be accepted as proof relating to its registration . Section 66 of the Act, authorises any
person to inspect the Register of Firms on payment of the prescribed fee. It also authorises
inspection of all statements, notices and intimations filed under Chapter VII of the Act. This
makes the person transacting with the firm aware of its composition and thus their
creditability.

EFFECT OF NON REGISTRATION

Bar on suits by unregistered firms
Sub-section (1) of section 69 of the Act bars suits by partners against an unregistered firm or
against any person alleged to be or to have been a partner of such a firm. The bar applies to
enforcement of (a) right arising out of a contract16 , or (b) right conferred by the partnership
Act. On the other hand, sub-section (2) of section 69 of the Act bars suits for enforcement of
a right arising out of a contract by or on behalf of the unregistered firm against third parties.
The operation of section 69 would extend to the suit in which a partner sues his co-partner or
sues the firm to enforce any right arising from the contract between the partners. The
Supreme Court has held that this section is mandatory in character and its effect is to render a
suit by plaintiff in respect of a right vested in him or acquired by him under a contract which
15 Law of Partnership: C.L.Gupta, 3rd Edn., Modern Law Publications, Allahabad
2001
16 The Law Commission of India, in its One Hundred and Seventy Eighth report,
taking into account certain judgements of the Supreme Court of India, and to
avoid any uncertainty, had expressed a view that the bar should be restricted to
suits by the unregistered firm (or claims to set off or other proceedings) in
respect of the rights arising out of contracts entered into in the course of
business. It accordingly had proposed the addition of an explanation to Section
69 of the Partnership Act to the effect that a right arising from a contract shall
mean a right arising from a contract made in the course of business.
9

he had entered into as partner of an unregistered firm, whether existing or dissolved, is void 17.
In other words, a partner of an erstwhile unregistered partnership firm cannot bring a suit to
enforce a right arising out of a contract hit by the provision of section 69. However a suit by a
partner to recover money from a third person is not barred by section 69 of the Act, if the
transaction, involved in the suit, is in his own name only and the defendant had no notice of
the existence of the partnership. The conditions required by this section are mandatory, and
the bar of the section applies both to suits by the firm as well as on behalf of the firm.
In Jagdish Chandra Guptas case18 , the Constitution Bench approved of a liberal and full
meaning being assigned to the phrase other proceedings in Sub-section (3) of section 69 of
the Act untrammelled by the preceding words a claim of set-off. The Court refused to
countenance the plea for interpreting the words other proceedings ejusdem generis with the
preceding words a claim of set-off. In M/s. Shreeram Finance Corporation19 calls for the
effect of bar created by Section 69 being determined by reference to the date of institution of
the suit and not by reference to any subsequent event. In Delhi Development Authoritys case
20

, the Court held section 69 of the Act is applicable to an application under section 20 of the

Arbitration Act, 1940 as such an application (under the scheme of that Act) would be
included within the meaning of other proceedings in Section 69(3) of the Act. Section 8 of
the above English Act is relevant and it speaks of the rights of that defaulter under or arising
out of any contract made or entered into by or on behalf of such defaulter is in relation to the
business for which particulars were required to be furnished for carrying on that business.
The above provision clearly signifies that the right that is sought to be enforced by the
unregistered firm and which is barred must be a right arising out of a contract with a third
party-defendant in respect of the firms business transactions.
For the purpose of deciding the point about the words arising from a contract in section
69(2), it is necessary to go into the question as to what the legislature meant when it used it.
In this context it is important to refer to the Report of the Special Committee (1930-31) which
17 Pollack & Mulla on The Indian Partnership Act by R.K.Abhichandani, 5th edn.
N.M.Tripathi Private Ltd. Bombay ,1987
18 AIR 1964 SC 1882
19 (1989) 3 SCC 476
20 (1998) 8 SCC 559
10

examined the draft Bill and made recommendations to the legislature. Before going into the
above report of the special committee which preceded the Act, it will be necessary to refer to
the case in Commissioner of Income Tax, AP v Jayalakshmi Rice and Oil Mills Contractor
Co.21 where the Supreme Court refused to refer to this very report for construing section 59 of
the Act. But, that decision is no longer good law as it was clearly dissented on this aspect in
the judgment of the Constitution Bench in RS Nayak v AR Antulay22.
In number of later judgments, the court referred to the reports of committees or commissions.
The Constitution Bench of the Supreme Court for understanding the legislative intent relied
upon Hyderabad Industries Ltd v Union of India23 . The English Law has changed completely
after Pepper v Hart in favour of admissibility of such material. A restricted view was no
doubt expressed in PV Narasimharao v State24 that such reports can be looked into for the
purpose of knowing the historical basis or mischief sought to be remedied, but not for
construing the provision unless there is ambiguity. Even going by this restricted view, we find
that there is considerable ambiguity in section 69(2) (unlike the English Statutes of 1916 and
1985) as to what is meant by the words arising out of a contract in as much as the provision
does not say whether the contract in section 69(2) is one entered into by the firm with the
defendant or with somebody else who is not a defendant, nor to whether it is a contract
entered into with the defendant in business or unconnected with business. Hence, it should
thus be permissible to look into the report even for purpose of construing section 69(2). A
question has arisen whether the words enforce a right under a contract would include rights
arising out of contracts with third parties not in connection with the day-to-day business or
commercial transactions entered into by the unregistered firm. The view was expressed by the
Supreme Court in Raptakos Brett Co Ltd v Ganesh Property25 the Court held that the right to
evict a tenant was not a right arising from a contract but was a statutory right under the
Transfer of Property Act, 1882. The eviction proceeding was therefore not barred. The
Committee further suggested that Section 69 of the Act, as it stands presently, puts a partner
21 1971) 1 SCC 280
22 (1984) 2 SCC 183
23 (1995) 5 SCC 15 (Para 15)
24 (1998) 4 SCC 626
25 AIR 1998 SC 3085
11

in an unenviable situation of first suing for dissolution, before he could proceed to recover
monies under the contract.
The bar on suits should be restricted only to suits in respect of rights arising out of contracts
entered in the course of business. Accordingly, it is recommended that amendments in the
Act, on the lines suggested by the Law Commission of India, be initiated. The Supreme Court
following Raptakos Brett Co Ltd v Ganesh Property in Haldiram Bhujiwala v Anand Kumar
Deepak Kumar26 held that a suit to prevent infringement of trademark is not barred by the
section whether the firm is registered firm or not. The Court said that it is well settled that a
passing off action is a common law action based on tort. Therefore, a suit for perpetual
injunction to restrain the defendant from passing off the defendants goods as those of the
plaintiff by using the plaintiffs trademark and for damages is an action at common law and is
not barred by Section 69(2). But before the bar under Section 69 can be invoked by the
defendant the defendant needs to establish that the person suing is a partner of a partnership
firm within the meaning of Section 4 of the Act.

NON-REGISTRATION OF THE PARTNERSHIP FIRM HAS NO LEGAL

BEARING ON THE CRIMINAL CASE
The menace of bouncing cheques has been tackled by an amendment to the Negotiable
Instruments Act, 1881, providing for imprisonment of the offender and victims can approach
courts under Section 138 of the Negotiable Instruments Act, 1881. However, so far as a
partnership firm is concerned, its rights would depend upon its legal status. In a recent case,
the Karnataka High Court considered this issue in the case of a complaint filed by an
unregistered firm Beacon Industries v Anupam Ghosh27 . After receipt of the complaint filed
by Beacon (revision petitioner in the aforesaid case), the Trial Court at Bangalore dismissed
the complaint by holding that there was a bar under section 69 of the Act and that an
unregistered firm could not prosecute any person or a firm. The High Court observed that
even a plain reading of section 69(2) of the Act, left no scope for doubt that what was barred
by the said section was the institution of a suit. The court further observed that enforcing a
right arising from a contract or conferred by the Act and suing, as a partner in a firm against
the firm or any partner in the firm would not be possible unless the firm was registered firm.
The High Court remarked that a careful reading of section 69(2) of the Act clearly showed
26 AIR 2000 SC 1287
27 (2004) 52 SCL 345 (Kar)
12

that an unregistered partnership firm was barred from filing a civil suit, while there was no
such bar so far as filing of a private complaint was concerned. The Court noted that in the
case of a bounced cheque, there was purely criminal liability on the part of the person who
had issued the cheque. The Court held that even if the cheque had been issued by a partner of
an unregistered firm for a legally recoverable debt and if such a cheque was dishonoured, it
would amount to a criminal liability. Thus the contract by the unregistered firm referred to in
section 69(2) must not only be one entered into between the firm and the third partydefendant but must also be one entered into by the plaintiff firm in the course of the business
dealings of the plaintiffs firm with such third party-defendant28.

DISPUTE RESOLUTION AND NON REGISTRATION

Prior to the Arbitration and Conciliation Act, 1996, the law was settled. An application under
section 20 of the Arbitration Act, 1940 could not be filed to enforce a right arising from a
contract in respect of an unregistered firm; as it was barred by the provisions of section 69(2)
of the Act. By its decision in Jagdish Chandra Gupta v Kajaria Traders (India) Ltd

29

, the

Supreme Court had settled the law. A clause in a deed of partnership provided that in case of
dispute between the partners; the matter will be referred to arbitration. A dispute having
arisen, one partner appointed an arbitrator to which the other partner gave no response. An
action was then commenced to enforce the arbitration clause of the agreement. The other
partner contended that the firm was not registered and therefore the suit should be dismissed.
The Supreme Court held that the suit was not maintainable and the Court observed that It is
impossible to think that the right to proceed to arbitration is not one of the rights which are
founded on the agreement of parties. The word of section 69(3) or other proceedings to
enforce a right arising from a contract are sufficient to cover the present matter. If
arbitration proceedings were allowed, unregistered firm would, by providing for arbitration in
the partnership deed, to escape the disability contained in the section. But the Supreme Court
in Smt. Prem Lata and anothers v M/s Ishar Dass Chaman Lal and Others30 , opined that
proceedings under clause (a) and (b) of sub section (3) of section 69, could be referred to
arbitration and the bar of section 69 is not applicable then. In K.L. Verma and Anr .v Shri V.K.
Sharma and Anr , the appellant and the respondent were partners. There having arisen certain
28 Para 23 of the Report
29 AIR 1964 SC 1882
30 AIR 1995 SCW 505
13

disputes between the parties, appellant filed a suit for dissolution and rendition of accounts of
the partnership. On being served with summons in the suit, the respondent filed an
application under section 34 of the Arbitration Act stating inter alia that as the matter in
dispute between the parties was covered by an Arbitration Agreement, the suit cannot proceed
and was liable to be stayed. The Court allowed this application and stayed the proceedings in
the matter. After the proceedings were stayed, the appellant filed application under section 20
of the Arbitration Act for filing the Arbitration Agreement in Court and for reference of
disputes to the Arbitrator. In the written statement besides other objections one of the
objections taken by the respondent was that as the partnership was not registered under the
provisions of the Act, the suit was not maintainable and was barred under section 69 of the
said Act. The court observed that a bare reading of Clause 2(a) of section 69 (3) shows that a
suit to enforce a right to sue for dissolution and rendition of accounts is not barred by
provisions of section 69 of the Act and even if the firm is not registered and the person suing
has not been shown as a partner of the firm, the partner can still enforce his right to enforce
dissolution of firm and rendition of accounts irrespective of the bar under section 69 (1) of
the Act. In U.P. State Sugar Corporation Ltd. v Jain Construction Co. and Anr 31, an
agreement was entered into between parties for execution of certain civil works in a unit
belonging to appellant. On a dispute having arisen between parties, application was filed by
the respondent for appointment of an arbitrator, which was dismissed on ground that same
was not maintainable in view of section 69 of the Act, as respondent firm was not registered
partnership firm. Appeal was however allowed by High Court on ground that parties could
avail appropriate remedy to relegate as Arbitration & Conciliation Act, 1996 had come into
force. The Supreme Court opined that it is true that under section 69 arbitral proceedings
would not be maintainable at instance of an unregistered firm. Impugned judgment of High
Court held was unsustainable. The Court held that if the firm is not a registered one, the
application for appointment of an arbitrator both under the 1940 Act and the Arbitration and
Conciliation Act, 1996 was not maintainable. Reliance, in this connection, had been placed
on Firm Ashok Traders and Another v Gurumukh Das Saluja and Other

32

. The same has

bee6n held in Jagdish Chandra Gupta v Kajaria Traders (India) Ltd . In Firm Ashok Traders
and Anr. v Gurumukh Das Saluja and Ors, here the dispute was among 12 persons who were,
or are alleged to be, or claim to be partners in the firm M/s Ashok Traders. The registration of
31 (2004) 3 SCC 155
32
14

the partnership deed showed seven partners. The new partners were added and the same was
not registered. The dispute arose amongst partners. The civil suit was filed by one Group of
partners, which was held not be maintainable in view of section 69 (3) of the Act, as name of
partners were not been shown in Register of Firms as a partner of the firm. Further an
application was filed under section 9 of Arbitration and Conciliation Act, 1996 for
appointment of receiver, to take charge of business of firm, which being hit by section 69 (3)
was dismissed. The issue was whether enactment by section 69 of the Act, does or does not
affect maintainability of application under Section 9 of Arbitration and Conciliation Act,
1996? On the question of maintainability of application under section 9 of Arbitration and
Conciliation Act, 1996 as moved by a partner of an unregistered firm or by a person not
shown as a partner in the Register of Firms, the High Court, for upholding the
maintainability, relied on the decision of this Court in Kamal Pushpa Enterprises v.D.R.
Construction Company 33. The learned counsel for Group B argued that Sub-sections (1)
and (2) of section 69 of the Act strike at the very root of the jurisdiction of the Court to
entertain a suit to enforce a right arising from a contract, if the applicability of section 69 is
attracted. By virtue of Sub-section (3), the bar enacted by Sub-sections (1) and (2) applies
also to a claim of set-off or other proceedings to enforce a right arising from a contract
which, includes a proceeding commencing on an application under section 9 of the
Arbitration & Conciliation Act, 1996. The right arising from the partnership deed or
conferred by the Partnership Act is being enforced in the arbitral tribunal; the Court under
section 9 of the Arbitration & Conciliation Act, 1996 is only formulating interim measures so
as to protect the right under adjudication before the arbitral tribunal from being frustrated.
Section 69 of the Act has no bearing on the right of a party to an arbitration clause to file an
application under section 9 of the Arbitration & Conciliation Act, 1996. The provisions of
section 69(3) are not applicable to proceeding which arises from the filing of an award . Once
the matter is referred to an arbitrator without intervention of the Court, and so long as the
award is given, the Court never comes into picture. The involvement of the Court comes, for
the time, when the award is filed by the arbitrator. So long as the proceedings remain with the
arbitrator section 69 cannot be put forward.

33 AIR 2000 SC 2676

15

In Kamal Pushpa Enterprises v D.R. Construction Company 34 , the Supreme Court held that
the bar under section 69 of the Act is not applicable at the stage of enforcement of the award
by passing a decree in terms thereof because the award crystallises the rights of the parties
and what is being enforced at that stage is not any right arising from the objectionable
contract. So the law has taken a turn to which not all would approve of. The critics welcomed
the decision of Firm Ashok Traders as laying down further disability and thus making
registration even more urgent. But now though a suit is not maintainable in a Court of law but
arbitration proceeding is not hit by the bar. So a short cut has been given to the partnership
firms which is un- called for. The report of the Special Committee which though not made
registration mandatory but intended that any business not for very short duration and too
small; be registered has been not kept in mind while deciding Firm Ashok Traders.

REGISTRATION OF CHARGES
The Indian Partnership Act does not contain provisions for registration of charges, analogous
to those contained in Sections 124 to 145 of Indian Companies Act, 1956. In order to
facilitate financing and growth of small scale industries and businesses in India, it seems
necessary to put in place a mechanism for registration of charges in respect of even
partnership firms. The Indian Banks Association in their representation pointed out that this
omission is a handicap to partnership firms, which find it difficult to obtain finances on more
or less the same terms as applicable to corporates, since it is impossible for lenders to verify
the charges already created on the properties of the firm. Similarly, third parties proposing to
deal with the firm are not able to access relevant records for conducting due diligence. In
order to facilitate financing and growth of small scale industries and businesses in India, it
seems necessary to put in place a mechanism for registration of charges in respect of even
partnership firms. Being convinced of this, and being aware of the inadequate state of recordkeeping in the offices of the Registrar of Firms, it is recommended that: 1. The Partnership
Act should be appropriately amended to provide a legal framework for registration of
charges, on the lines of the provisions of the Companies Act, 1956 or the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. 2. Banks
and financial institutions also should be permitted to file the papers for registration of charge,
wherever they provide assistance against the security of asset/s. The firms can, of course,
themselves get the charge/s registered. In either case, the documents would have to be
34 AIR 2000 SC 2676
16

authenticated by both the secured creditor and the lender. Charges should be registered either
wit/h the Registrar of Companies (ROC), if the Department of Company Affairs (DCA) is
able to implement its comprehensive computerisation programme (DCA 21); alternatively,
they can be registered with the Central Registry envisaged in the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, if legally
permissible and if the Registry is set up in time and has adequate reach across the country.

CONCLUSION
Registration of a partnership firm has been given significant attention by the legislature by
incorporating it in a whole chapter in the Act. Though the Act never makes registration
compulsory but it would become too onerous for a firm to conduct its operations. Even
routine activities like suing a third party for monies due to the firm would be not allowed and
thus any partnership with relatively long period of operation would have to get themselves
registered. The registration of firm is condition precedent to its right to institute a suit and
thus a court of law cannot proceed with the trial of a suit when the condition precedent has
not been fulfilled. In order to institute a suit, a partnership firm must not only be a registered
firm but all the persons, who are partners in the firm at the time of institution of suit, must
also be shown as such in the register of firms. If one or more of the partners of the partnership
firm have not been shown in the register of firms when the suit is instituted by the firm, the
suit is not maintainable. The whole idea is that consumers and all others who are dealing with
the firm must be aware of the constitution of the company and thus the documents which are
available with the registrar of companies are public documents and people dealing with the
firm are said to have constructive notice of the details about the firm.

BIBLIOGRAPHY
WEBSITES:
http://taxguru.in/partnership-act/effect-of-non-registration-of-partnershipfirm.html
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http://www.legalserviceindia.com/articles/rn.htm
http://smallb.sidbi.in/%20/plan-new-entrepreneurship%20/forms-businessorganisations%20/partnership-firm%20/partnerships-legal

JOURNAL AND BOOKS:

SCC Online
Pollack & Mulla on The Indian Partnership Act by R.K.Abhichandani, 5th edn.
N.M.Tripathi Private Ltd. Bombay ,1987
Law of Partnership: C.L.Gupta, 3rd Edn., Modern Law Publications, Allahabad
2001
Law of Partnership: Avtar Singh, 3rd Edn, Eastern Book Company

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