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farappanbb (partner)     21 October 2011

Unregistered partnership

I have entered into partnership with my friend. This was by way of an unregistered partnership deed. Both of us hold 50:50 profit:loss.  After 2 years, he was unwilling to pay income tax as a result of which the IT dept levied penalty. He was still unwilling to pay and mentioned that the IT dept could seize the company assets and auction it and recover the IT dues. I proposed a solution whereby I paid off the IT dues and pay him some amount of money to which he agreed. A deed of retirement was drawn up and this was unregistered. I paid the IT dues and he was due to relinquish 50% share of his in the assets. However he has gone back on his word. Now he claims that the deed of retirement is unregistered and does not have any value in court of law. Currently I am running the business as a proprietorship firm and is under  my control.

so my question is 

1) What legal power and validity does a unregistered deed of retirement  have given that the original partnership deed is unregistered as well?

2) Can i file a suit praying for court order to force him to honour the deed of retirement contract and relinquish his 50% share in immovable assets--- commercial complex.

3) What powers will he have to trouble me or disrupt my business.


 5 Replies

Nadeem Qureshi (Advocate/ nadeemqureshi1@gmail.com)     21 October 2011

Dear Farappa

Indian Paernership Act section 69 says:

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.
(2) 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.
(3) The provisions of sub- sections (1) and (2) shall apply also to claim of set- off or other proceeding to enforce a right arising from contract, but shall not affect-
(a) 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
(b) the powers of an official assignee, receiver or Court under the Presidency- towns Insolvency Act, 1909 , (2 of 1909 ). or the Provincial Insolvency Act, 1920 , (5 of 1920 ). to realise the property of an insolvent partner.
(4) This section shall not apply-
(a) to firms or to partners in firms which have no place of business in 1[ the territories to which this Act extends], or whose places of business in 2[ the said territories] are situated in areas to which, by notification under 3[ section 56], this Chapter does not apply, or
(b) 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 , (15 of 1882 ). or, outside the Presidency- towns, is not of a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887 , (9 of 1887 ). or to any pro- ceeding in execution or other proceeding incidental to or arising from any such suit or claim.
1 Like

Bharti Joshi (Advocate)     21 October 2011



1 Like

farappanbb (partner)     21 October 2011

Thanks for the input.

He has retired from the partnership via deed of retirement which is not registered. Can I register this deed of retirement.

Whilst I understand that the partner does not have any right to suit, What powers do I have to force him to relinquish his share of 50%, particularly the property which is registered in both of our names in 50:50 ratio.

Also if i continue this business as proprietership and sole ownership, what do I need to do in order to avoid legal problems.

What claims does the retired partner  have over the new proprietorship firm/business.

Nadeem Qureshi (Advocate/ nadeemqureshi1@gmail.com)     21 October 2011

you can file any criminal complaint against him if he is willing to harrass you

kumar t v s (advocate)     22 October 2011

If your business is so prosperous and generating huge profits and you are worried about your huge assets auctioned by IT dept, why do you not consult an advocate or a CA to overcome your problem.


It is difficult to give an opinion based on few facts mentioned and you may infact get more confused in the process.

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