REGISTRATION OF PARTNERSHIP DEED
Section 69(2), does not require that the partnership deed must also be registered to enable the firm to file a suit against a third party.
69(3): The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a 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, or the Provincial Insolvency Act, 1920, to realise the property of an insolvent partner.
4. This section shall not apply—
to firms or to partners in firms which have no place of business in the territories to which this Act extends, or whose places or business in the said territories and situated in areas to which, by notification under Section 56, this Chapter does not apply, or
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 i9 of the Presidency Small Cause Courts Act, 1882, or, outside the Presidency towns, is not of a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887, or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim.
CLAIM OF SET-OFF OR OTHER PROCEEDINGS
According to sub-section (3), the disabilities mentioned above also apply to a claim of set-off or other proceedings to enforce a right arising from a contract.
For example, if a third party brings an action against the firm to recover some money, the firm cannot say that the third party also owes some money to the firm and, therefore, the claim of third party should be adjusted against the claim of the firm, which means the unregistered firm cannot claim a set-off.
DISABILITIES ALSO APPLY TO OTHER PROCEEDINGS
The disabilities mentioned in sub-sections (1) and (2) also apply to 'other proceedings' to enforce a right arising from a contract.
CLAIM UNDER SECTION 65, INDIAN CONTRACT ACT ALSO BARRED …
65. OBLIGATION OF PERSON WHO HAS RECEIVED ADVANTAGE UNDER VOID AGREEMENT, OR CONTRACT THAT BECOMES VOID.—
When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it.
ILLUSTRATIONS
A pays B 1,000 rupees, in consideration of B’s promising to marry C, A’s daughter, C is dead at the time of the promise. The agreement is void, but B must repay A the 1,000 rupees.
BIJENDRA PRASAD V. DULESHWARI DEVI
In above case Bijendra Prasad v. Duleshwari Devi, an unregistered firm consisted of the plaintiffs and three minors, now defendants whereby the 3 minor sons, were to be given a share of profits under the guardianship of their father.
The question arose whether an action could be brought against these minors for the return of the benefit received by them under section 65 of the Indian Contract Act.
It was held that the suit for the return of benefit under section 65 of the Contract Act was also barred under section 69 of the partnership firm, as it was an unregistered firm.
EXCEPTIONS
The disabilities discussed above are not applicable to the unregistered firm in the following exceptional cases:
1. Sec. 69(3)(a) permits a suit even by the partners of a unregistered firm to sue for the dissolution of a firm or for the accounts of a dissolved firm or to realize the property of dissolved firm .
2. According to Sec. 69(3b) an action would be permissible on behalf of an insolvent partner against an unregistered firm. It provides that an official assignee, receiver, of Court have a power to bring an action to realise the property of the insolvent partner.
3. Sec. 69(4)(a) exempts such firms from the operation of the provisions of this section whose place of business is not in India or whose-place of business is in such areas, where because of notification under Sec. 56, this Chapter does not apply.
4. According to section 69(4)(b), an unregistered firm or its partners can bring suit against third party if value of suit is less than 100 rupees.
