Partnership

1. Section 4 of the Indian Partnership Act, 1932 defines ‘Partnership’ as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Section 2(b) defines ‘business’ as including every trade, occupation and profession.
    

2. Section 2(23) of the Income-tax Act, 1961 provides that ‘partnership’ has the same meaning as in the Indian Partnership Act, but the expression ‘partner’ shall also include any person, who being a minor, has been admitted to the benefit of partnership.
    

3. The three minimum requirements of a partnership are :

   1. agreement to form a partnership.

   2. agreement to share the profits of a business.

   3. The business must be carried on by all the partners or any of them acting for all.
       

4. The question whether or not a partnerships exists, is of importance. Once it is determined that persons are partners, whatever may be the arrangement or intention between themselves, each is liable for debts and liabilities of the firm upto the full extent of his or her assets.
    

5. Section 5 of the Partnership Act provides that the relation of partnership arises from contract and not from status. Section 6 provides that in determining whether a person is or is not a partner, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together and sharing of profits or of gross returns does not by itself constitute a partnership. An Agreement between the parties to the effect that a partnership does or does not exist is not by itself conclusive.
    

6. The following relationships or transactions will not by itself create a partnership

   1. Members of a Hindu Undivided Family carrying on a family business assuch, are not partners in such business (S.5).
       

   2. co-ownership of property, whether the co-owners do or do not share expenses or profits or gross returns made by the use of the property. However, if co-owners use their property for carrying on business, they may be partners as regards the business. In Champaran Cane Concern vs. State of Bihar A.I.R. 1963 Supreme Court 1737, the Supreme Court has held that the main differences between a partnership and co-ownership are :

      1. co-ownership is not necessarily the result of an agreement, whereas partnership is;

      2. co-ownership does not necessarily involve community of profit or loss, but partnership does;

      3. one co-owner can, without the consent of the other, transfer his interest to a stranger, a partner cannot do this; and lastly but prominently

      4. while in a partnership each partner acts as an agent of the other, in a co-ownership one co-owner is not as such the agent, implied or real, of the other.
         
         Two co-owners may appoint a common manger for facility of cultivation and management of their farms without entering into a partnership and the fact that the profits or even the losses are distributed in accordance with the shares of the two owners, does not necessarily establish a partnership within the meaning of the Partnership Act, 1932.
          

   3. a contract for the remuneration of an employee or agent of a person engaged in a business, by a share of profits or gross receipts of that business or by a payment contingent upon the earning of profits.
       

   4. a loan to a person engaged or about to engage in any business, on terms that the lender shall receive a rate of interest varying with the profits or shall receive a share of profits.
      
      However, receipt by a person of share of profits of the business will raise a presumption that he is a partner in the business, and if losses as well as profits are shared, the presumption will be stronger still, though not conclusive. If the agreement gives the supposed lender the rights and privileges of a partner, no device will enable him to escape the liabilities of a partner.
       

   5. the receipt of a debt out of profits or gross receipts of a business.
       

   6. Payment to a widow or child of a deceased partner in a business, of a portion of the profits as annuity .
       

   7. Payment of a share of profits of a business to a previous owner or part owner of the business, as consideration for the sale of goodwill or share thereof. (S. 6)
       

7.  

   1. A preliminary agreement to enter into partnership does not by itself create a partnership until the partnership commences business. It is the carrying on of a business, not an agreement to carry it on, which is the test of partnership.
       

   2. The relation between promoters associated only to form a company is not a partnership.
       

   3. The relation between executors carrying on under the powers of the will and in the same firm name, a business owned solely by the Testator, is not in itself a partnership.
       

   4. Voluntary associations for the purpose of carrying out temporary functions of a social character without any profit motive are not partnerships.
       

   5. If persons jointly export their individual goods as a joint venture, dividing the receipts of the transactions in specific shares, there is no partnership as regards the separate parcels of goods provided by each, unless they are brought into the common stock.
       

8. Section 2(42) of the General Clauses Act defines a ‘person’ to include a company or an association or body of individuals, whether incorporated or not. But the Supreme Court has held that this definition cannot be imported into the Partnership Act and that ‘person’ under the Partnership Act means either an individual or any other legal entity, such as a Limited Company or Corporation established under a Statute. An unincorporated club or a firm cannot as such become a partner.
    

9. The position as to who can and cannot enter into Partnership can be summarised as follows :

   1. Individuals who are majors and have capacity to contract can enter into partnership, subject to contractual and statutory restrictions referred to in paras 10 and 11 below. There must be at least two or more principals before there can be a partnership. A person cannot be a partner in his individual capacity with himself in his representative capacity. If several persons on behalf of a single person run a business, there can be no partnership.

   2. Minors cannot become partners, though all partners unanimously can admit minors (not necessarily children of partners) to the benefits of the partnership (Section 30).

   3. A firm as such cannot become a partner. A "firm" is not a person and cannot as such enter into partnership. Dulichand Laxmi-narayan vs. CIT AIR 1956 Supreme Court 354; Income Tax Comm. vs. Jadvaj AIR 1963 SC 1497; Kylasa Sarabhaiah vs. CIT AIR 1965 Supreme Court 1411. All the partners of one firm can become partners with all the partners of another firm, provided the total number of partners does not exceed 20 (or 10 in case of banking business). In such a case, the partnership is of individuals, and not of firms and though for sake of convenience of operation, the partners can be divided into groups, the unlimited liability is of the individual partners.

   4. HUF as such cannot enter into partnership. The Supreme Court has held that HUF as such cannot enter into a contract of partnership, because it is a fleeting body. CIT vs. Kalu Babu Lalchand A.I.R. 1959 Supreme Court 1289; Rashiklal & Co. vs. C.I.T. (1998) 2 Supreme Court Cases 49.

   5. The Karta or a member of HUF can become a partner, and the other members of the HUF do not become partners or liable as partners and cannot claim any rights against the firm or other partners as partners. Firm Bhagat Ram vs. C.E.P.T. AIR 1956 Supreme Court 374. In Kshetra Mohan vs. EPT Commissioner AIR 1953 SC 516, Supreme Court has held that when two Kartas constituted a partnership, the other members of the families do not become partners, though the Kartas are accountable to their respective families. The members of HUF who are not themselves partners, do not incur personal liability, though their share in HUF becomes liable for debts of the firm. In case of Karta who becomes a partner, both his share in HUF as also his personal property becomes liable for debts of the firm.
      
      A Karta of HUF can enter into partnership with an individual member of that very family provided the member has contributed his own self acquired capital or personal skill and labour to the firm. Lachman Das vs. CIT AIR 1948 P.C. 8 : Firm Bhagat Ram vs. CEPT ibid; Chandrakant Manilal Shah vs. CIT AIR 1992 Supreme Court 66.
      
      Within limits of his authority to carry on business, it is competent to the Karta to enter to a valid partnership with others, including Karta of another HUF or adult member of his own HUF.
      
      Though a Karta may extend a family business by entering into partnership for carrying on same or allied business, Karta cannot extend the business into a business which is more hazardous or speculative than the previously existing one and impose on members of HUF risk and liability of new business started by him, unless the new business is started or carried on with the consent, express or implied, of adult members of HUF. Benares Bank Ltd. vs. Hari Narain AIR 1932 Privy Council 182
       

   6. A limited company can become a partner, provided such partnership is not ultra vires its constitution. For this purpose, the object clause in the Memorandum of Association of the company should confer on the company power to enter into partnership and the business activities of the firm should be within the objects authorised by the Memorandum of Association of the company. An object clause about formation of partnership can be as follows :
      
      ‘To enter into partnership or into any consortium or arrangement for sharing of funding or profits, co-operation or joint venture with any person or company carrying on or engaged in or about to carry on or engage in any operation, business, trade, activity or transaction which the company is authorised to carry on or engage in or which can be carried on in conjunction therewith or which is capable of being conducted so as directly or indirectly to benefit the company.’
      
      The execution of the Deed of Partnership on behalf of the company should be authorised by a Resolution of the Board of Directors (and of shareholders if necessary) and should be under common seal of the company.
      
      The Department of Company Affairs has in its Circular No.1-81 (20-1-81-CL-V) dated 14.9.81 expressed the following view :
      
      "The view of the department is that prima facie a company entering into a partnership with some other person or some other company would be ultra vires and will be against the principle that a particular company or an incorporated body should lawfully employ funds for purposes authorised by its constitution which would normally be the memorandum and the articles of association. However, a company or an incorporated body, if so authorised by its constitution, can enter into partnership with an individual person or with another company irrespective of nationality and residence. This would, however, require the company to adopt very special articles since many of the provisions of the Partnership Act would be difficult to apply to such a partnership. In view of this, while considering applications for registration of firms with bodies corporate as partners under the Indian Partnership Act, 1932, the State Government should examine the applications before them and find out whether the memorandum and articles of association of the applicant incorporated companies contain any special articles which authorise incorporated companies to enter into partnerships and the articles also take care of the possible anomalies which have been pointed out in the Calcutta High Court’s ruling in the case of Ganga Metal Refining Co. (P) Ltd. vs. CIT West Bengal (1968) 38 Com. Cases 117 : AIR 1967 Cal. 429.
       

   7. Trustees of a private trust can become partners in a firm only if they are directed and empowered to enter into such partnership in clear terms under the Instrument of Trust, which is required to be construed strictly.
      
      Trustees of a Public Trust cannot invest trust moneys in partnership and cannot become partners in a firm.
       

   8. Association of persons, body of individuals, unincorporated club or Association cannot enter into partnership.
       

   9. Non-Resident Indian or a person of Indian origin resident outside India.
      Under Foreign Exchange Management (Investment in firm or proprietory concern in India) Regulations, 2000, a non-resident Indian or a person of Indian origin resident outside India, is permitted to invest by way of contribution to the capital of a firm (or a proprietory concern) in India, provided that :

      1. the amount invested is received either by inward remittance through normal banking channels or out of an account maintained with an authorised dealer/authorised bank by the non-resident Indian or the person of India origin in NRE/FCNR/NRO account in accordance with the relevant Regulations;

      2. the firm (or the proprietory concern) is not engaged in any agricultural/plantation activity or real estate business, i.e. dealing in land and immovable property with a view to earning profit or earning income therefrom;

      3. the amount invested shall not be eligible for repatriation outside India;

      4. where investment is made out of Non Resident Special Rupee account of the non-resident investor, the income earned on investment or proceeds of investment shall be credited only to the NRSR account of the investor.

      5. (w.e.f. 9.4.2002) the firm (or proprietory concern) is not engaged in print media.

      A firm (or a proprietory concern) in India is allowed to make payment to or for the credit of a non-resident Indian or a person of Indian origin, the sum invested by such person in that firm or the proprietory concern and the income accruing to such person by way of profit on such investment.

      NRI/PIO’s may invest in sole proprietorship concerns/partnership firms with repatriation benefits only with prior approval of Secretariat for Industrial Assistant Government of India / RBI.
       

   10. A person resident outside India (other than non-resident Indian or a person of Indian origin resident outside India), is not permitted to make any investment by way of contribution to the capital of a firm (or a proprietory concern or any association of persons in India) except with permission of the Reserve Bank and subject to such terms and conditions as may be considered necessary
        

10. Individuals and Companies, who seek to enter into a partnership, need to be free from contractual and statutory restrictions on their ability to enter into such partnership. Examples of contractual restrictions are :—

    1. terms of a partnership prohibiting its partners from assigning his share in the partnership or in the assets and properties of the firm or making any other person a partner with him therein or engaging directly indirectly in any business competing with that of the partnership;

    2. restrictions under Service Contract prohibiting an employee from engaging in any business activity or becoming interested as partner in any firm or business;

    3. provision under a Lease prohibiting the Lessee from parting with possession of premises leased.
       
       If a person enters into a partnership in breach of his obligations under other Contracts, the partnership may be valid, but the consequences of breaches of other contracts, including, termination of lease or injunction restraining the person from carrying on business of new partnership may follow.
        

11. Apart from contractual restrictions, there can be several statutory restrictions on the power of a person to engage in active business or enter into partnership e.g. under Rules and Regulations governing conduct of professionals like Advocates, Chartered Accountants, Architects, Medical Practitioners. Thus, an Advocate is not permitted to personally engage in any business, but he may be a sleeping partner in a firm doing business provided that in the opinion of the appropriate State Bar Council, the nature of business is not inconsistent with the dignity of the profession. Several activities e.g. manufacture and sale of alcohol, operation of public transport require valid licences, which cannot be dealt with without obtaining permission of the concerned authorities.

    1. In Biharilal Jaiswal vs. CIT (1996) 217 ITR 746, the Supreme Court has held that where liquor licence was in the name of an individual and the terms of licence expressly prohibited formation of partnership by Licensee, partnership formed in violation of such a condition, is an agreement prohibited by law and when the law prohibits entering into a particular partnership agreement, there can be in law no partnership agreement of that nature.
        

    2. In Additional CIT vs. Deagon Ganga Reddy (1995) - 214 ITR 650, a partnership was formed with 17 persons. This partnership was holding a liquor licence issued under Abkari Act which prohibited carrying on business in liquor without a licence granted for the purpose, G holding 10% share in this partnership, found it difficult to contribute the required capital towards his share and, therefore, formed what has been termed as a "sub-partnership" with 11 other persons, who agreed to provide the finance on being taken as partners in respect of the share of G in the main firm. The Supreme Court has held that partners of the "sub-partnership" did not become partners of the main firm and that since the terms of licence granted to the main firm did not prohibit formation of such "sub-partnership", the sub-partnership was not illegal.
        

    3. In CIT vs. Salkia Transport Associates (1994) - 207 ITR 274, Calcutta High Court has held that where buses and route permits issued under Motor Vehicles Act were held by one person and the Motor Vehicles Act prohibited transfer of route permits without permission of Transport Authority, formation of a firm with sole object of carrying on transport business by use of bus and route permits belonging to one of the partners without obtaining from the transport authority permission for transfer of bus or route permit, was void ab-initio.
        

    4. In Gobardhan Chakraborty vs. Abani Mohan AIR 1991 - Calcutta 195, it is held that where a cinema licence had been granted in the name of a proprietorship concern with express bar on transfer, partnership entered into by the Licensee is illegal and no suit can be brought for settlement of accounts on the basis of such illegal and forbidden partnership agreement.
       
       Under Section 23 of the Indian Contract Act, 1872, the consideration or object of an agreement is unlawful if it is forbidden by law or is of such a nature that if permitted, it would defeat the provisions of any law or is fraudulent or the Court regards it as opposed to public policy and agreement of which the object or consideration is unlawful, is void. It is well settled that no suit can be filed for recovery of capital invested in an illegal partnership and members of an illegal partnership have no remedy against each other for contribution or otherwise.
        

12. Under Section 11 of the Companies Act, the number of partners in a partnership is limited to 20 (10 in case of banking business).
    
    This section does not apply to a joint family as such carrying on business and provides that where a business is carried on by two or more joint families in computing the number of members, minors shall be excluded. There was a doubt on whether Kartas of two or more HUFs can enter into a partnership as such Kartas, where the total number of major members of such families (both male and female) exceed the minimum prescribed under Section 11 of the Companies Act. In Bisanchand Champalal Ginning Factory vs. Govinda Vishnusa 1934 4 Company Cases 214, Nagpur Judicial Commissioner’s Court held that only if individual members of one or more joint Hindu families enter into agreement of partnership amongst themselves, then each individual member must be reckoned a person for the purposes of Section 4 of the India Companies Act, 1913 (corresponding to section 11 of the Companies Act, 1956). The decision in Shyamlal vs. Madhusudan AIR 1959 Calcutta 380, where it is held that it is not correct to say that when two or more joint families represented by their Kartas enter into a partnership, the number of members would be the Kartas and not the other members of the joint families represented by their Kartas, is impliedly overruled by the Supreme Court in Agarwal & Co. vs. Commissioner of Income Tax, U.P. AIR 1970, S.C. 1343 where it is held that it is now well settled that a Hindu Undivided Family cannot as such enter into a contract of partnership with any person or persons and that the assumption in Section 4 of the Indian Companies Act, 1913 that a Hindu joint family can be a partner in a partnership appears to be based on an erroneous view of the law.
     

13. The principal distinctions between a limited company and a firm have been summarised New Horizons Ltd. vs. Union of India (1997) 89 Company Cases 785 at 803 (Delhi) as under :-

14. Advantages of a Partnership over a Limited Company are :

    1. Simplicity of Formation
       For formation of a partnership a written agreement is not necessary. The fact of conducting a business in common with a view to earn profits, will bring a partnership into existence, the terms of which may be oral or evidenced by course of dealings between the partners or by exchange of correspondence, and the remaining terms will be supplied by the Indian Partnership Act, 1932. However, for avoidance of doubts and disputes, it is necessary to record terms of partnership in writing. In Maharashtra, for registration of firm with the Registrar of Firms, a Deed of Partnership in writing is necessary. The terms of partnership can be varied by consent of all the partners, express or implied by a course of dealing (S.11).
        

    2. Simplicity of Management and Accounts
       Partners can conduct the affairs of the firm informally, without being required to comply with various regulations to which a company is subject. A firm is not required to maintain Minutes of meetings of partners or file Accounts.
        

    3. Flexibility
       A partnership is not constrained by the principle of ultra vires and a firm may undertake or discontinue any activity that its partners may agree to from time to time.
        

    4. Confidentiality of Accounts and Affairs
       Copies of Deed of Partnership and accounts of the firm are not publicly available for inspection (except in case of firms registered with Registrar of Firms in Maharashtra where a true copy of the Deed of Partnership along with a Marathi translation thereof is required to be filed along with the Application for registration of the Firm and is available for inspection in the office of Registrar of Firms on application). Internal affairs of a partnership can remain confidential to the partners
        

    5. Financial Flexibility in injection and withdrawal of capital / monies:
       There are no restraints on the ability of partners to bring in and withdraw capital, draw on account of their share of profits and borrow from the partnership.
        

15. Disadvantages of a partnership as compared to a Limited Company are :

    1. Joint and several liability of all partners
       for acts of the firm and of partners on behalf of the firm. Every partner is liable to third parties jointly with all the other partners and also severally for all acts of the firm and of partners on behalf of the firm done while he is a partner (Section 25). So far as third parties are concerned, this provision cannot be varied by contract between partners. The essence of a partnership is that each of the partners is the agent of all the other partners and the firm. In a Limited Company, once shares are fully paid up, a shareholder is under no liability in respect of debts owned by the Company.
        

    2. Lack of continuity
       A Company is a separate legal entry which can continue to exist regardless of death or insolvency of its shareholders, whereas a partnership has no legal existence apart from its partners and unless there is an agreement to the contrary, death or insolvency of any partner will dissolve the partnership. In case of partnership consisting of only two partners, death of one partner will result in dissolution of the firm (vide CIT vs. Seth Govindram Sugar Mills AIR 1966 S.C. 24) and invite consequences of such dissolution, including liability to tax on capital gains under Section 45(4) of the Income-tax Act.
        

    3. Lack of transferability
       Subject to contract between the partners, no person can be introduced as a partner into a firm without the consent of all the existing partners (Section 31). It has been held that a contract to form a partnership or to admit a person (even a nominee or legatee of a partner) as a partner cannot be specifically performed. A partner cannot retire from a firm and substitute another person as partner in his place without the consent of all other partners, whereas a shareholder in a Limited Company is free, subject to restrictions in the Company’s Articles of Association and lock-in period and other statutory restrictions and regulations, to transfer any part of his shares.
        

    4. Possibility of deadlock in Management
       Unless otherwise provided in the Partnership Agreement, each of the partners is as much entitled as any of the others to take part in the management of the business of the firm. In view of unlimited liability of partners, it becomes necessary for the partners to be active in the management of the firm. In a Limited Company, the roles of providers of capital and of management can be separated, whereas in a partnership, providers of capital run the risk of incurring liabilities and, therefore, need to be active in the day-to-day management of the affairs of the firm. In a partnership, any one partner even, with an insignificant share in the profits of the firm, can create obstacles in the operations of the firm and bank accounts of the firm by other partners without his consent, as the liability of every partner in the firm for all acts of the firm is unlimited.
        

    5. Constraints on borrowing capacity :
       As compared to a Limited Company, it is more difficult for a partnership to borrow, since a floating charge can be created on assets of a Limited Company, but not on assets of a firm and there are no provisions in case of partnership similar to the provisions for registration of charges in case of Limited Companies.
        

16. The articles of partnership are intended for the guidance of persons who are not necessarily lawyers and should be so drawn as to be a code of directions to which the partners may refer as a guide in all their transactions and upon which they may settle among themselves differences which may arise, without having recourse to Courts.
     

17. Subject to the provisions of the Indian Partnership Act,1932, the mutual rights and duties of the partners may be determined by contract between the partners and such contract may be express or may be implied by a course of dealing (Section 11). Such contract may be varied by consent of all the partners, express or implied by a course of dealing (Section 11).
     

18. Every partner is liable to third parties jointly with all the other partners and also severally for all acts of the firm done while he is a partner (Section 25). So far as third parties are concerned, this provision cannot be varied by contract between partners.
     

19. Partners are bound :

    1. to carry on the business of the firm to greatest common advantage.

    2. to be just and faithful to each other.

    3. to render true accounts and full information of all things affecting the firm to any partner, his heirs or legal representative (Section-9).

    4. to indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm (Section-10).

    These provisions cannot be varied by contract between partners.

20. A minor may be admitted to the benefits of the partnership with the consent of all the partners(Section 30).
     

21. Subject to contract between the partners, no person can be introduced as a partner into a firm without the consent of all the existing partners (Section 31).
     

22. A Court may dissolve a firm on any of the grounds provided in Section 44.
     

23. Subject to contract between partners :

    1. the partnership is at will (Section 7).

    2. a partner can carry on any business other than that of the firm while he is a partner (Section 11(2).

    3. every partner :

       1. has a right to take part in the conduct of the business;

       2. is bound to attend diligently to his duties in the conduct of the business;

       3. any difference arising as to ordinary matters connected with the business of the partnership may be decided by a majority of partners, and every partner shall have the right to express his opinion before the matter is decided;

       4. no change may be made in the nature of business without the consent of all the partners;

       5. has a right to have access to and to inspect and copy any of the books of the firm; and

       6. in the event of the death of a partner, his heirs or legal representatives or their duly authorised agent have similar right of access, inspection and copying (Section-12).
           

    4.  

       1. a partner is not entitled to receive remuneration for taking part in the conduct of the business;

       2. the partners are entitled to share equally in the profits earned and shall contribute equally to the losses sustained by the firm;

       3. where a partner is entitled to interest on the capital subscribed by him, such interest shall be payable only out of profits;

       4. a partner making, for the purposes of the business, any payment or advance beyond the amount of capital he has agreed to subscribe, is entitled to interest thereon at the rate of 6% p.a.;

       5. the firm shall indemnify a partner in respect of payments made and liabilities incurred by him in the ordinary and proper conduct of the business and for reasonably protecting the firm from loss;

       6. a partner shall indemnify the firm from any loss caused to it by his willful neglect in the conduct of the business of the firm (Section 13).
           

    5. The property of the firm includes all property and rights and interest in property originally brought into the stock of the firm or acquired by purchase or otherwise by or for the firm for the purpose and in the course of the business of the firm and goodwill of the business. Property and rights and interest in property acquired with money belonging to the firm are deemed to have been acquired for the firm (unless the contrary intention appears) (Section 14).
        

    6. The property of the firm shall be held and used by the partners exclusively for the purposes of the business (Section 15).
        

    7. If a partner derives any profits for himself from any transaction of the firm or from the use of the property or business connection of the firm or the firm name, by carrying on any business of the same nature as and competing with that of the firm, he shall account for that profit and pay it to the firm (Section 16).
        

    8. Where

       1. a change occurs in the constitution of a firm or;

       2. a firm constituted for a fixed term continues to carry on business after the expiry of that term or;

       3. a firm constituted to carry out one or more adventures or undertakings carries out other adventures or undertakings, the mutual rights and duties of the partners remain :

          1. the same as immediately before the change in case of (i);

          2. the same as before expiry of on term, so far as they may be consistent with the incidents of partnership at will in case of (ii); and

          3. same as those in respect of original adventures or undertakings in case of (iii) (Section 17);

    9. i) In the absence of any usage or custom of trade to the contrary, a partner does not have implied authority to :

       1. submit a dispute relating to the business of the firm to arbitration;

       2. open a banking account on behalf of the firm in his own name;

       3. compromise or relinquish any claim or portion of a claim by the firm;

       4. withdraw a suit or proceeding filed on behalf of the firm;

       5. admit any liability in suit or proceeding against the firm;

       6. enter into partnership on behalf of the firm (Section 19).
           

24. A partner may retire (inter alia) in accordance with an express agreement by the partners (Section 32).
     

25. A partner may be expelled from a firm by any majority of the partners in the exercise in good faith of powers conferred by contract between the parties (Section 33).
     

26. A retiring partner may carry on business competing with that of the firm and he may advertise such business, but subject to the contract to the contrary, he may not;

    1. use the firm name;

    2. represent himself as carrying on the business of the firm or;

    3. solicit the custom of persons who were dealing with the firm before he ceased to be a partner [Section 36(1)].
        

27. A partner may make an agreement with his partners that on his ceasing to be a partner he will not carry on any business similar to that of the firm within a specified period or within specified local limits, provided the restrictions imposed are reasonable [Section 36(2) and Section-54].
     

28. Subject to contract between the partners, a firm may be dissolved (inter alia) :

    1. In accordance with a contract between the partners (Section 40);

    2. If constituted for a fixed term by the expiry of that term;

    3. If constituted to carry out one or more adventures or undertakings by completion thereof;

    4. By death or insolvency of any partner (Section 42).
        

29. In settling the accounts of a firm after dissolution, subject to agreement by the partners, the rules provided in Sections 48 to 52 are to be followed.
     

30. After a firm is dissolved, every partner or his representative may in the absence of a contract between the partners to the contrary, restrain any other partner or his representative (except a partner who has bought the goodwill of the firm or his representative) from carrying on a similar business in the firm name or from using any of the property of the firm for his own benefit, until the affairs of the firm have been completely wound up (Section 53).
     

31. In settling the accounts of a firm after dissolution, the goodwill shall, subject to the contract between the partners, be included in the assets, and it may be sold either separately or along with other property of the firm (Section 55).
     

32. Usual provisions in a Deed of Partnership are :

    1. Date and parties.
        

    2. Recitals.
        

    3. Agreement to become partners and effective date of commencement of partnership and nature of business and power to make changes therein or particulars of adventure or undertaking for which the firm is formed.
        

    4. The name and style of the firm and of its business and power to make changes therein.
       
       The partners have freedom to choose their firm name subject to two qualifications, first that they may not use the name or style tending to mislead the public into confusing them with others already trading under the same or similar names and second they cannot use any name specified in the Schedule to the Emblems and Names (Prevention of Improper Use) Act, 1950 or any colourable imitation thereof, without the previous permission of the Central Government.
       
       Section 58(3) of the Indian Partnership Act, 1932, as amended in Maharashtra, provides that a firm shall not have any of the names or emblems specified in the Schedule to the Emblems and Names (Prevention of Improper Use) Act, 1950 or any colourable imitation thereof, unless permitted to do so under that Act, or any name which is likely to be associated by the public with the name of any other firm on account of similarity, or any name which, in the opinion of Registrar, for reasons to be recorded in writing, is undesirable.
       
       It has been held that an honest Defendant can be restrained from using his own name if such user leads to confusion and to the public buying the goods of the Defendant in the belief that they are those of the Plaintiff and that no special burden of proof is laid on the Plaintiff by the mere fact that the name which the Defendant is honestly using, in his own.
        

    5. The duration of the partnership whether (1) at will (b) for fixed term (c) till completion of a particular adventure or undertaking, (d) terminable by notice, or (e) terminable by any other mode.
        

    6. Whether death, retirement or insolvency of any partner shall result in dissolution of the firm.
        

    7. Principal (only and other) place/s of business and power to make changes therein.

       1. If the place of business (ownership, tenancy, right of occupation) is and is to remain the property of one or some of the partners, this should be stated with an agreement by other partners not to claim any interest therein and a provision made that on dissolution or retirement of the partner/s entitled to premises, such partners alone shall be entitled thereto. A genuine partnership in which a tenant of business premises becomes a partner and allows his partnership to carry on its business from such premises during the subsistence of the partnership, with tenancy rights reserved to the tenant, who should pay the rent and outgoings of the premises himself and with agreement by the other partners not to claim any interest in the premises or tenancy rights, does not amount to assignment or sub-letting of premises which can furnish a ground for eviction to the landlord under the Maharashtra Rent Control Act, 1999.
           

       2. Under Section 16(1)(e) of the Maharashtra Rent Control Act, 1999, a landlord is entitled to recover possession of any premises if the Court is satisfied that the tenant has unlawfully sub-let or given on licence the whole or part of the premises or assigned or transferred in any other manner his interest therein. This provision does not prevent a tenant who has taken business premises on rent from taking partners and carrying on business in partnership and does not restrict the tenant from allowing the use of his premises to his partners for carrying on business. (G. Rangamannar vs. Desu Rangiah – AIR 1954 - Madras -182).
           

       3. Where a tenant takes a partner in his business reserving the tenancy rights in himself, the transaction is not an assignment, transfer or sub-letting in favour of the partner or partnership. (Helper Girdharbhai vs. Saiyed M.M. Kadri – AIR 1987 – S.C. 1782 - Jaffar Hussain Ebrahim vs. Taiyabali - AIR 1997 S.C. 1757).
           

       4. The partners cannot be considered as sub-tenants or licensees of the premises, as no part of the premises is in their exclusive possession, but if after such partnership is entered into, the tenant by a subsequent agreement transfers all his interest in the tenanted premises, the transaction may amount to unlawful assignment, entitling the landlord to possession of the premises. It will have to be found in each case whether a plea of partnership is intended to be a mere cloak to cover up the use by the person other than the tenant or whether the tenant is himself carrying on the partnership business.
           

       5. The fact that the tenant is not related to the partners or that the tenant is not physically present at the place of business, do not by themselves prove the transfer of legal possession or interest in the premises (Manchharam Sobhraj vs. Jamnadas - AIR 1976 - Gujarat 47).
           

       6. In Gangaram vs. Ashok Kumar 1969 Maharashtra Law Journal (Notes) 43, it is held that the failure to produce the account books of the firm, the tenant not taking part in the business of the firm, the business carried in the name of the stranger and evidence of prior sub-letting indicated that the document of partnership was merely a cloak brought into being in order to defeat the claim for eviction on the ground of sub-letting. It has been held that the provisions in the Partnership Deed that the rent shall be paid by the firm and the firm shall be the tenant amounts to assignment.
           

       7. The firm not being a legal entity, in case of tenancies granted in the name of a firm, all the partners of that firm on the date of commencement of the tenancy in their individual capacity become tenants of the premises.
           

       8. Where the tenancy of premises is a partnership asset and on the dissolution of the partnership it goes to the share of one of the partners, such transaction does not amount to sub-letting or assignment.
           

       9. Where premises are let out to a firm, if in place of an outgoing partner, a new partner is taken, it does not amount to sub-letting or assignment.
           

       10. If premises let out to the firm on its dissolution are allotted to one of its partners, such partner alone becomes tenant and in case such partner reconstitutes the dissolved firm with two or more new partners, the reconstituted firm does not become the tenant.
            

       11. Where the tenant is a working partner in the firm and is precluded from doing any other business, the provision that the partnership should pay the rent may not lead to the conclusion that there was sub-letting or assignment of tenancy rights.
            

    8. The premium, if any, paid by any party for becoming a partner.
        

    9. The property of any partner allowed to be used by the partnership during its subsistence and position thereof on dissolution, particularly of premises, tenancies, goodwill and trade name, specifying what is not to be considered partnership property. Where one partner is or is to be solely entitled to the whole or some part of property to be used for common purposes, the partner’s rights concerning the same during the subsistence and on dissolution of the partnership should be specified. Goodwill of the business should be provided for.
        

    10. Provision relating to Capital of the partnership and the manner of contribution thereof and interest, if any, to be paid thereon. Amount in excess of fixed capital contributions can be brought in and withdrawn by partners as loans and advances, on which interest can be provided and provision for interest on capital at rates not exceeding 12% p.a. simple, as allowed under Section 40(b) (iv) of Income Tax Act, 1961 can be made. Under Section 40 (b) (iv) of the Income-tax Act, 1961, as substituted by Finance Act, 1992 with effect from 1-4-1993, payment of interest to a partner is not deductible in computing the taxable income of the firm, unless the following conditions are satisfied :

        1. payment of such interest is authorised by and is in accordance with the terms of Partnership Deed,

        2. such payment relates to a period falling after the date of the partnership Deed, and

        3. such payment of interest does not exceed the amount calculated @ 12% simple interest per annum
            

    11. Loans and advances by the partners to the firm and interest at rate not exceeding 12% p.a. simple as allowed under Section 40(b)(iv) of Income-tax Act thereon and period of notice for recovery thereof and similar provisions regarding moneys due from any partners to the firm.
         

    12. Division of profits and losses of the firm and minors, if any, admitted to the benefits of the partnership.
         

    13. Working partners of the firm and their duties and powers and remuneration, subject to maximum prescribed under Section 40(b) (v) of the Income-tax Act.
        
        Under Section 40 (b)(v) of the Income-tax Act, 1961, as substituted by Finance Act, 1992 with effect from 1-4-1993, payment of salary, bonus, commission or remuneration to a partner is not deductible in computing the taxable income of the firm, unless the following conditions are satisfied :

        1. the partner to whom the remuneration is paid is a working partner who is actively engaged in conducting the affairs of the business or profession of the firm of which he is a partner ,

        2. payment of such remuneration is authorised by and is in accordance with the terms of Partnership Deed and relates to the period falling after the date of such Partnership Deed and the Partnership Deed either specifies the amount of remuneration payable to each individual working partner or lays down the manner of quantifying such remuneration (1996) 218 I T R (St.) 131.

        3. the total amount of such remuneration to all the partners during the previous year does not exceed the aggregate mentioned below :

        In case of a firm carrying on a profession :

        (a) on the first 1 lakh of the book profit or in case of loss	50,000/- or @ 90% of book profit, whichever is more
        (b) on the next 1 lakh of the book profit	60%
        (c) on the balance of the book profit	40%

        In case of any other firm :

        (1) on the first 75,000/- of the book profit or in case of loss	50,000/- or  @ 90% of book profit, whichever is more
        (2) on the next 75,000/- of the book profit	60%
        (3) on the balance of the book profit	40%

        
        'Book profit’ means net profit as shown in the profit and loss account for the relevant previous year computed in the manner laid down in the Income Tax Act as increased by the aggregate amount of the remuneration paid or payable to all partners of the firm if such payment has been deducted while computing the net profit.
         

    14. Drawings of partners.
         

    15. Bank accounts of the partnership and mode of operation thereon.
         

    16. Maintenance of accounts and accounting period and place and custody of partnership books and access thereto.
         

    17. Making up and signing of periodical accounts and agreement that accounts when finalised shall not to be reopened by partners.
         

    18. Powers and duties of partners, amount of attention to be given to the affairs of the firm, employment, borrowing powers, carrying on any other business or competing business, decision making powers.
         

    19. Power and mode of nomination on death or retirement.
         

    20. Mode of retirement from the firm and of determining the amount of moneys and properties to be paid and allotted to the retiring partner.
         

    21. Grounds for and mode of expulsion of a partner and consequences of such expulsion.
         

    22. Ground for and mode of dissolution of the firm and Mode of settlement of accounts on dissolution.
         

    23. Arbitration Agreement.
         

    24. Execution Clause.
         

33. Usual provisions in a Deed of Retirement are :

    1. Date and parties

    2. Recital of Partnership and of Notice or Agreement for retirement.

    3. Declaration of retirement by Retiring Partner and the date of retirement.

    4. Acknowledgement by Retiring Partner of receipt of amount/property from firm and/or Continuing Partners in full satisfaction of all his claims.

    5. Release by Retiring Partner of all his share in the firm and its properties in favour of the Continuing Partners.

    6. Mutual Release of claims for accounts and demands between the Retiring Partner and the Continuing Partners, except as provided in the Deed of Retirement.

    7. Authority to Continuing Partners to collect assets of the Partnership.

    8. Appointment by the Retiring Partner of Continuing Partners as the Attorneys of the Retiring Partner for collection of debts and property of the firm.

    9. Covenant by the Continuing Partners to pay and discharge all debts and liabilities including tax liabilities of the firm and keep the Retiring Partner indemnified in respect thereof.

    10. Execution Clause
         

34. Sometimes the Deed of Retirement includes a declaration by the Retiring Partner to the effect that except as recorded in the Books of Accounts of the firm, the Retiring Partner has not incurred any debt or liability on behalf of the firm and that in case it is found that any liability had been incurred by the Retiring Partner on behalf of the firm, which is not recorded in the Books of Accounts of the firm, the Retiring Partner shall bear and pay the same and keep the firm and the Continuing Partner indemnified in respect thereof.
     

35. Usual provisions in a Deed of Dissolution are :

    1. Date and parties.

    2. Recital of Partnership and Notice/Agreement for Dissolution;

    3. Declaration by all the partners of dissolution of the firm and the date of such dissolution.

    4. Mode of settlement of accounts of the dissolved firm either by payment of a fixed amount by one partner to the other/s and take over of the assets and business and liabilities of the firm by the partner making such payment or by division of assets and liabilities of the firm between the partners or by providing for ascertainment and sale of assets and payment of the liabilities of the firm thereout and payments to the partners out of the surplus or any other manner.

    5. In case any of the assets of the firm are taken over by any partner, release and transfer of the share of the other partners therein in favour of the partner taking over such assets;

    6. Mutual release of partners of claims against one another except as provided under the Deed of Dissolution;

    7. In case any of the partners of the dissolved firm are to be authorised to collect the assets of the firm, grant of authority to such partner and appointment of such partner as the Attorney of the other partners of the dissolved firm;

    8. In case any of the liabilities of the dissolved firm are taken over by a partner, covenant by such partner to bear and pay the liabilities and keep the other partners indemnified in respect thereof;

    9. Agreement by the parties to sign and execute and do such further deeds and acts as may be required for winding up the affairs of the dissolved Partnership.

    10. In case all the affairs of the dissolved Partnership are not wound up on the date of execution of the Deed of Dissolution, Arbitration Agreement.

    11. Execution Clause
         

36. Under Article 47 of Schedule I to the Bombay Stamp Act, 1958, as amended by Maharashtra Act No.30 of 1997 (w.e.f. 15-5-97), the rates of stamp duty on Deeds of Partnership, Retirement and Dissolution are as follows :
    (i) Instrument of Partnership

    (a)	where there is no share of contribution in partnership, or where such share contribution brought in by way of cash does not exceed Rupees 50,000/- :	Five Hundred Rupees
    (b)	where such share contribution brought in by way of cash is in excess of Rupees 50,000, for every Rupees 50,000 or part thereof :	Five Hundred Rupees, subject to maximum duty of Rupees Five Thousand
    (c)	Where such share contribution is brought in by way of property,excluding cash :	The same duty as is leviable on conveyance under clauses (a), (b), (c) or (d) as the casemay be of Article 25 of the Bombay Stamp Act on the market value of such property
    -2	Dissolution of partnership or retirement of partner
    (i)	where on a dissolution of the partnership or on retirement of a partner any property is taken as his share by a partner other than a partner who brought in that property as his share of contribution in the partnership :	The same duty a sis leviable on a conveyance under clauses (a), (b), (c) or (d) as the case may be of under Article 25 of the Bombay Stamp Act, on the market value of such property, subject to a minimum of Rupees one
    		Hundred
    (ii)	in any one case :	Two Hundred Rupees

    Under Article 27 of Schedule I of the Bombay Stamp Act, 1958, stamp duty on a counterpart or duplicate of any instrument chargeable with duty and in respect of which the proper stamp duty has been paid is the same as is payable on the original, subject to a maximum of Rupee Twenty.
    
    Under section 52B introduced in the Bombay Stamp Act, 1958 w.e.f. 1-12-1989 a stamp paper is required to be used within six months of date of its purchase and under Section 34 introduced in the Bombay Stamp Act, 1968 w.e.f. 15th September, 1996 the stamp papers is required to be in the name of one of the executants of the document.
     

37. A Partnership Deed is not required to be registered even if immovable property belonging to one of the partners is brought in the firm. Similarly a deed of retirement or dissolution is not required to be registered as it does not amount to a transfer. In Narayanappa vs. Bhaskar AIR 1966 S.C. 1300 affirming AIR 1959 A.P. 380, the Supreme Court has taken the view that share of a partner in a partnership is movable property and therefore on retirement of any partner or on dissolution, the division of even immovable property among the partners does not amount to transfer and does not require registration. In N. Khadervali Saheb vs N. Gudu Saheb 2003 3 S.C.C. 229, Supreme Court has held that a partnership is not an independent legal entity and that firm name is only a compendious name given to the partnership and the partners are the real owners of its assets and that allotment of assets to individual partners on dissolution of the partnership does not constitute transfer of any assets of the firm and hence an Award recording or directing distribution of assets of the dissolved firm after settlement of accounts, does not require compulsory registration. With recent amendments to Bombay Stamp Act relating to stamp duty on Partnership, Retirement and Dissolution mentioned in para 36 above, it may be advisable to register Instruments of Retirement and Dissolution, when any immovable property is taken as his share by a partner other than a partner who brought in that property as his share of contribution in the partnership.
     

38. Provisions of Section 45 of Income-tax Act about conversion of a capital asset into stock-in-trade and transfer of capital asset by way of capital contribution or otherwise and distribution of capital assets on dissolution of a firm or otherwise are required to be considered.
     

39. Section 170 of the Income-tax Act about the liability on succession to business otherwise on death and Sections 187 to 189A of the Income-tax Act are relevant for consideration on Retirement or Dissolution.
     

40. Sections 18 and 19 of the Bombay Sales Tax Act, 1959 about sales tax liability of outgoing partners and of estate of a deceased partner are also relevant while considering Retirement and Dissolution.
     

41. REGISTRATION OF FIRMS

    1. Section 69 of the Indian Partnership Act, 1932 as amended in Maharashtra by Maharashtra Act No.29 of 1984 provides as follows :-
       
       "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 a 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 :
          
          Provided that the requirement of registration of firm under this sub-section shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of the firm or to realise the property of 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.
          
          (2A) No suit to enforce any right 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 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 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:
          
          Provided that the requirement of registration of firm under this sub-section shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of a dissolved firm or to realise the property of a dissolved firm.
           

       3. The provisions of sub-sections (1), (2) and (2A) shall apply also to a claim of set-off other proceedings to enforce a right arising from a contract but shall not affect

          1. the firms constituted for a duration upto six month or with a capital upto two thousand rupees; or;

          2. the powers of an official assigned, receiver or Court under the Presidency Towns Insolvency Act, 1909, or the Provincial Insolvency Act, 1920, to realise the property of an insolvent partner."
              

    2. In V. Subramaniyam vs. Rajesh Raghuvendra Rao 2001 (1) All Maharashtra Law Reporter 311, Division Bench of the Bombay High Court considered the question whether the Maharashtra Amendment No.29 of 1984 by which Section 69 of the Indian Partnership Act was amended to provide that a suit to enforce any right 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 by or on behalf of any person suing as a partner of a firm which is not registered is barred, is ultra vires the Constitution of India and upheld the constitutional validity of Maharashtra Amendment Act No.29 of 1984. In this case, the Maharashtra Amendment Act No.29 of 1984 was challenged on the following grounds:

       1. Amendment operates in Maharashtra alone and partners of unregistered firms in Maharashtra alone are subjected to the disability introduced by the amending act, while similarly situated partners of unregistered firms in other States are not subjected to such disability.
          
          This challenge was negatived by following decision of the Supreme Court in State of M.P. vs. G.C. Mandawar AIR 1954, S.C. 493, in which it is held that Article 14 of the Constitution does not authorise the striking down of a law of one State on the ground that in contrast with a law of another State on the same subject, the provisions are discriminatory.
           

       2. The discrimination made between the partners and heirs of deceased partners, in as much as partner of an unregistered firm cannot bring a suit even for accounts or for realisation of his share or property of the firm, but the heirs of such partner can.
          
          This ground has been negatived for the reason that heirs who are not responsible for non-registration of the firm cannot be visited with the same stringent consequences as the partner responsible for such non-registration.
           

       3. Bar of suit for accounts and realisation of assets of an unregistered firm is unreasonable, as the application for registration is required to be signed and accompanied by true copy of Deed of Partnership signed by all the partners, which may not be possible after disputes arise.
          
          This argument has been negatived on the ground that every partner must be deemed to have been aware of the disadvantages of non-registration, on the date on which he enters into partnership.
           

       4. The provision as to registration of firms is for protection of third parties and the bar on partners of unregistered firms suing for dissolution and accounts has no nexus to the object of registration.
          
          This argument has been negatived on the ground that the expansion of the disability to inter se disputes between the partners was for bringing in greater disincentive for non-registration and for encouraging registration for protection of members of the public and third parties.
           

       5. Maharashtra Amendment Act No.29 of 1984 places unreasonable restriction on the right to carry on business, which includes the right to close down business.
          
          It is held that the restriction under the Maharashtra Amendment Act No.29 of 1984 is in the interest of general public and therefore valid.
           

       6. There being no provision in the Act to the effect that the registration, when granted, would be deemed to be effective from the date of the application, if a dispute arises in the interregnum between the date of application and actual date of registration, even a vigilant partner would be rendered without a remedy specially considering the bureaucratic manner in which the Registrar acts.
          
          While negativing this ground of the Court has held that a suit filed by one partner against another to compel him to sign an application for registration under Section 58 is not hit by the bar under Section 69 and that an independent suit can be brought to compel a partner by a decree of Court to sign the application for registration. The Court has recommended that the Registrar of Firms should be given adjudicatory powers or at least the power to direct a recalcitrant partner to sign an application for registration.
           

    3. In CIT Andhra Pradesh vs. Jayalakshmi Rice & Oil Mills AIR 1971 SC 1015, the Supreme Court has held that the registration of the firm is effected only when the entry is recorded in the Registrar of Firms and the Statement is filed by the Registrar as provided in Section 69. In this case, it is also held that registration of a firm after institution of a suit will not cure the defect of non-registration at the time of institution of the suit.
        

    4. Application for registration of a firm is required to be submitted under the signature of all the partners whilst the firm is in existence and not after dissolution of the firm and the firm is required to be registered prior to the institution of the legal proceedings. Previously, the defect in suits instituted by unregistered firms could be cured by withdrawing the suit with liberty to file a fresh suit on the same cause of action and by getting the firm registered in the meantime and thereafter re-filing the suit in the name of the registered firm, but in M.L. Chaturvedy vs. Sanjay Finance Corporation (1998) 1, Bombay Cases Reporter 782, a Division Bench of the Bombay High Court has held that grant of liberty to file a fresh suit on the same cause of action to an unregistered firm is not legal.
        

    5. In Shah Velji Narsi vs. Vasantrai, 2003(4) All MR 1054, Bombay, it is held that if the name of the partner in whose favour the cause of action accrued was not shown in the Register of Firms, the suit was not maintainable in view of mandatory requirement under Section 69(2) of Partnership Act.
        

    6. In Sharad Vasant Kotak vs. Ramniklal (1998) 2 Supreme Court Cases 171, it is held that a suit for dissolution of a firm filed by a founder partner of the firm, whose name was included in the Register of Firms relating to the registration of the firm as originally constituted was maintainable, though subsequent changes in the constitution of the firm had not been recorded with the Registrar of Firms because induction of new partners amounts to reconstitution and not dissolution of the firm.
        

    7. In Firm Ashok Traders vs. Gurumukh Das Saluja, 2004 - 3 Supreme Court Cases 155, it is held prima facie that application to the Court under Section 9 of the Arbitration and Conciliation Act 1996 for interim reliefs relating to arbitral proceedings is neither a suit nor a proceeding in a suit nor a proceeding to enforce a right arising from a Contract and not affected by the bar under Section 69 of the Partnership Act. In this case, there are references to the decisions of the Supreme Curt in

       1. Delhi Development Authority vs. Kochar Construction Works (1998) 8 SCC 559 where the Supreme Court has held that Section 69 of the Partnership Act was applicable to an application under Section 20 of the Arbitration Act, 1940 (for filing arbitration agreement in Court and making an order of reference to arbitration), as such application was included within the meaning of ‘other proceedings’ in Section 69 (3) of the Partnership Act.

       2. Kamal Pushpa Enterprises vs. D.R. Construction Company - AIR 2000 S.C. 2676, in which the Supreme Court has held that the bar under Section 69 of the Partnership 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 enforced at the stage of passing decree in terms of the Award is not any right arising from the Contract.
           

    8. Under the Arbitration and Conciliation Act, 1996, which has replaced Indian Arbitration Act 1940, an award is enforceable as a decree and the step of obtaining decree in terms of award has been eliminated. It appears that an Award passed by an Arbitral Tribunal on contractual claims of an unregistered firm can be executed and cannot be objected to in execution proceedings, on the ground that the firm was not registered. Bar under Section 69 applies to suit and other proceedings. Whether arbitration proceedings are ‘other proceedings’ within the meaning of that term under Section 69 of the Partnership Act, whether claims arising out of a contract filed by an unregistered firm before an Arbitral Tribunal can be objected to by the opponent on the ground that the firm is not registered and whether Award granting claims of an unregistered firm arising out of contract is liable to be set aside, appear to be open for consideration. The Bombay High Court has held that a reference of disputes to arbitration by a partner of an unregistered firm is not maintainable. Narainji vs. Kiran Gajendra (1994) 3 Bombay Cases Reporter 286, Chandulal Hathibhai Shah vs. Champaklal (1994) 2 Bombay Cases Reporter 174 (Division Bench) = 193 Maharashtra Law Journal 1267.
        

42. Some recent decisions of the Supreme court and Bombay High Court dealing with the nature of partnerships and rights and obligations of partners are :-