• Unregistered Partnership Firm

My father is one of the partner in a partnership firm , there were 3 partners in the firm , Partner A and Partner B are working partner and has major share and my father is a sleeping partner ( Partner C ) . Partner B passed away and Partner A changed the partnership deed , but unknowingly Partner C has signed the deed ( Partner A told its for bank purpose to Partner C) and took the Partner B share, now partner A wants to remove Partner C as he is sleeping partner and Partner A is not allowing to with draw amount from capital account of Partner C . Partner A wants to remove Partner C from the firm . can Partner C fight legally as its a unregistered partnership firm ( for with drawing capital and good will ) .
Asked 3 years ago in Criminal Law
Religion: Hindu

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10 Answers

For any suit for rendition of accounts and claim of share in the profits registration if firm is not necessary. It is necessary only if the dispute is between the firm and a third party. Partner C can file a suit in civil Court against other partners under Section 44 of Partnership Act for rendition of accounts and recovery of profits accruing to his share including share in any immovable property, goodwill and other assets.

Ravi Shinde
Advocate, Hyderabad
5125 Answers
42 Consultations

Your father can issue notice for dissolution of firm 

 

2) 

Section 43 of Indian partnership act provides firm may be dissolved by any partner giving notice in writing to other partners of intention to dissolve the firm

 

 

3) firm would be dissolved from date mentioned in notice as date of dissolution

 

 

4) if no date mentioned in notice from date of receipt of notice

 

5) After the dissolution of the firm, every partner is entitled to equal rights or according to the contract. All the partners are entitled to the property of the firm applied in payment of the debts and liabilities of the firm and to have the surplus distributed among the partners or their representatives according to their rights.

Ajay Sethi
Advocate, Mumbai
99776 Answers
8145 Consultations

Your father is entitled to seek inspection of books of accounts 

 

2) 

goodwill is calculated by multiplying the average profits by a certain number of years of purchase. Simple average profit is calculated by adding the adjusted profits of certain number of years by dividing the total number of such years.

Goodwill = Average profit × Number of years of purchase

Average profit = Total profit / Number of years

Ajay Sethi
Advocate, Mumbai
99776 Answers
8145 Consultations

- According to Section 25 of the Indian Partnership Act, every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner; hence a sleeping partner is also liable jointly for the profit & loss of the firm

- Further, he can dissolve the firm after sending a notice in writing to other partners with the reason of the same.

- Hence, your father can send a notice to A for the sharing of the profits of the firm after dissolving the firm 

Mohammed Shahzad
Advocate, Delhi
15814 Answers
242 Consultations

File a criminal complaint in the court Magistrate for unlawful restrain if they are not allowing to enter in to premises. You have a right as a partner. Good will is calculated on the amount of turnover per year and age of business. Seek production of all record in Court immediately as they tamper of the records. You can also get the premises of business sealed.

Ravi Shinde
Advocate, Hyderabad
5125 Answers
42 Consultations

If the other partner is not willing to give your father's share in the profits in proportion to his capital investment, your father can issue a lgal notice notifying his decision to dissolve the partnership firm.

If partnership is at will then the partnership firm is dissolved if any partner giving notice in writing to all the other partners expressing his/her intention to dissolve the firm.

Dissolving a partnership firm means discontinuing the business under the name of the said partnership firm. In this case, all liabilities are finally settled by selling off assets or transferring them to a particular partner, settling all accounts that existed with the partnership firm.

Any profit/ loss is transferred to partners in their profit sharing ratio as agreed by them in the partnership deed.

If the firm is dissolving, all the assets and liabilities accounts are transferred to Realization Account. Amount received or paid against the assets and liabilities are debited/credited to the realization account.

Let the other partner deny the legal notice, your father can initiate legal process to dissolve the partnership firm even if it is an unregistered firm.

T Kalaiselvan
Advocate, Vellore
89978 Answers
2492 Consultations

  • Upon realization, all assets will be sold off in the market, and the cash realizing out of such a sale will be used for paying the liabilities. Assets or liabilities may also be taken over by the partner(s) for which the respective partner capital accounts will be adjusted by such amount.

Section 189 Dissolution of Partnership Firm

A partner may dissolve a partnership firm at any time. When any business or profession carried on by a firm has been discontinued, or where a firm is dissolved, an Assessing Officer would assess the total income of the partnership firm as if no such dissolution or discontinuance has taken place. The process of dissolving a partnership firm involves the sale or disposal of all the assets of the firm, a final settlement of all of its liabilities, and the settling of the accounts.

Goodwill is the assets of the company.

It is essential to note that for cases where the dissolution occurs through a court of law, it is only possible when the partnership deed is registered.

The primary reason for a dissolution of a partnership firm by a court of law is when the partnership firm or the partners involved participate in misconduct. Any partner or partners misbehaving with other members of the firm or not taking into consideration the signed agreement of that formed the partnership will find themselves ousted by their partners through a court case.

A partnership agreement that is registered is a document that legally binds all the partners after they have signed it. If a partner misses out on any particular clause, and even after being warned multiple times, are not heeding to it, can be dealt with at the court. The partnership firm may be dissolved through the court’s interference in such cases.

T Kalaiselvan
Advocate, Vellore
89978 Answers
2492 Consultations

Dear client I am sorry to hear that but in this case you can go ahead and file a case or complete against the other partner

Anik Miu
Advocate, Bangalore
11014 Answers
125 Consultations

In an unregistered partnership firm, a partner cannot take any legal action against a co-partner. Any breach of contract or conflicts of interest cannot be addressed by the law in the case of unregistered partnership firms. In an unregistered partnership firm, the partners cannot enforce their rights. 

 

Section 69 of the Partnership Act, lists out few disadvantages of not registering the firm.

 

Kindly check partnership agreement made by them and sort it out this issue among partners.

Ganesh Kadam
Advocate, Pune
13008 Answers
267 Consultations

Yes he has all the above rights being partner 

Prashant Nayak
Advocate, Mumbai
34514 Answers
249 Consultations

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