Partnership in India are governed by Partnership Act,1932. Partnership need not be compulsorily registered under this act or any other act. However it is always advised to register the partnership deed as it carries a lot of benefits.
Effect of non registration of partnership deed is given in section 69 of Partnership Act, 1932 as below
- Inability to sue firm or other co-partners – It is specifically mentioned that if a firm is not registered then any of its partner can’t sue firm or other co-partner. If firm is registered but a person is not shown as partner in register of firm, such partner can’t sue firm or other co-partner.
- Inability of firm to sue 3rd party – Partners of Unregistered firm can’t sue any third-party for enforcing a contract. However 3rd party can sue the firm for enforcement of right.
- Inability to claim set-off – If any 3rd party sue the unregistered firm then the unregistered firm can’t claim set-off of the amount which it owed by 3rd party to it.
But the unregistered firm and its partners can file a case for the dissolution of firm or getting accounts of a dissolved firm or for any right to realize the property of a dissolved firm.