- To enforce rights of partners against each in a firm registration of firm under Partnership Act is not required.
- Partners are bound to carry on the business of the firm to greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the firm to any partner. You can file a suit for rendition of true accounts under Section 9 of the Act against the You can also seek appointment of receiver by Court to keep accounts of the business of firm during the proceedings of Suit. As firm is earning, a is traying to usurp the business. Which he cannot do under the Act.
- File a suit under Section 48 of the Act for settlement of account. A is bound to share all the profits earned by him.
- Registration is required only if the suit is filed against third parties. It is not required for suit between partners.
Dispute between the partners
1. An unregistered partnership firm was started among 4 partners in the last year 2021. Among 4, one Mr. A taken a lead and was active in day to day activities of the firm but remaining 3 partners invested amount equally but not took any active role. 2. Subsequently borrowed loan for business purpose also and main business of firm are Ultra sound, Scan, CT, X - ray Lab etc. 3. In starting stage of business, in the ground floor all of them together only CT Scan and now when when business got improved Mr. A started to buy required machines and all and started individually X-Ray, Ultra sound, Lab in the 1st floor of the same building and not involved other remaining partners and also he himself invested for all in 1st floor. 4. Now Mr. A is claiming that 1st floor is completely mine and no share in that for any one but he uses power of ground floor and left of 1st floor but not ready to share 1st floor business with remaining 3 partners and also now started to restrict to enter even for ground floor. 5. Mr. A asking other partners to get back their investments and to leave the complete building for him along with leaving business. Questions. 1. Firm is not registered to go for court of law and as such, under which act we can claim our rights 2. 3 partners are not ready to leave business since they also rendered services but Mr. A is ready to give back their investment and restricting them for not to enter into premises. If that is the case under which way remaining 3 partners can protect themselves. 3. If they process for liquidation will any act protect them 4. What is the best remedy to overcome this problem for 3 partners.
Asked 2 years ago in Business Law
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7 Answers
Is there arbitration clause in partnership deed
2) if so invoke arbitration clause for resolution of disputes
3)The Supreme Court has quashed the law which debarred a partner of an unregistered firm in Maharashtra from filing a suit for dissolution of such a firm. The apex court also held as illegal the law prohibiting the partner to sue for accounts of the dissolved firm or realise properties of such dissolved firm, unless the duration of the firm was only six months or its capital was up to Rs 2,000.
Yes it can go to court in such circumstances to dissolve the same. You can also file appropriate applications before ROF in the said circumstances
The other partners who are restricted from entering into the premises or in the original business, may issue a legal notice to the partner A demanding his authority for such acts and can issue a notice to him to dissolve the firm and distribute the shares of each partner proportionately to their investment .
After that you can approach court of law seeking justice.
2. If the partnership firm cannot terminate the parteners then it ha to be dissolved.
The other partners have to initiate legal action by first issuing a legal notice.
3. The appropriate clause in the partnership deed will guide you on this.
4. Partnership disputes arise from various reasons and settings because contrary to the common belief, these disputes happen in the most successful business too.
As per Section 41 of the Indian Partnership Act, 1932, the partners are bound to compulsorily dissolve the firm. The necessity of compulsion may arise due to multiple reasons
As per Section 44 of the Indian Partnership Act, 1942, a partner can dissolve the involved firm by the method of suing the other partners.
- As per the Partnership Act, the registration of a partnership firm is not mandatory
- Since the four partners have entered into a contract /partnership agreement then all the partners are bound to comply the terms and conditions of the agreement legally , even it is not registered.
- Hence, you can approach the Court , if you have entered into an agreement at the time of forming the partnership Firm.
- If A is not complying the terms mentioned in the agreement , then you can issue a legal notice for the same
- Further, if he is trying to cheat other partners , then you can file a compliant against him as well.
- However , you can appoint an Arbitrator for the resolving the raised issues.
At the time of the Business initiated that time capital must be collected from each partners.
So if you have any evidence towards partners contribution towards business and any chat or email evidence that all partners are involved in it.
So you can file case against Mr. A and profit sharing accordingly. Plus you can force to register a Partnership Firm or LLP.
Dear Client,
Section 69 in The Indian Partnership Act, 1932- 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.
Thank You.
