Drawbacks of Non-Registration of Partnership

Drawbacks of Non-Registration of Partnership

i. No right to file suit against others

An unregistered firm cannot file a suit to enforce its claims against third parties, if such rights arise out of a contract. For example, no court of action is possible to recover debts from third parties. It has no right even to demand a set-off in any suit filed by its creditors.

ii. Right to sue for right arising

However it can sue others for enforcing rights arising otherwise than out of a contract. For example, it can bring a suit for wrongful infringement of trade mark of patent.

iii. Right of third parties to sue the firm

The rights of third parties against the firm are not affected by non-registration. It means that they can sue the firm or any of its partners.

A partner of an unregistered firm  cannot sue the firm or other  partners for enforcing his rights under the partnership deed.

However, his right to sue for the dissolution of the firm or for the accounts of a dissolved firm or for his share in the assets of a dissolved firm is not affected by non-registration.

In short, non-registration does not affect the following rights:

·           Suit not exceeding Rs. 100

·           The rights of firm or partners of a firm having no place of business in India.

·           The power of an official assignee or receiver to realise the property of an insolvent partner.

·           Suit arising otherwise than out of contract as explained above.

·           The rights of third parties against the firms or any of its partners.

·           Suit by a partner for the dissolution of the firm or for accounts of a dissolved firm or for a share in the assets of a dissolved firm as stated above.

Registration can be effected at any time. All the disabilities automatically disappear as soon as the firm is duly registered.