The Indian Partnership Act, 1932 governs the law of partnership in India. It provides a legal framework for individuals who wish to form a partnership and conduct business together. In this article, we will explore the scope and nature of the Partnership Act, as well as the various provisions related to admission, death, retirement, and dissolution of a partner. We will also discuss the rights and duties of partners, liabilities of partners, and the process of registration and non-registration of a partnership firm.
 

Introduction

Partnership is a business organization where two or more persons join together to carry out a business for the purpose of earning profits. It is an extension of a sole proprietorship, allowing individuals to pool their resources and expertise to create a larger, more successful enterprise. 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 one of them acting for all."

Nature of Business

A partnership is a contractual relationship between partners, governed by the Partnership Act, 1932. It is important to understand the essential requirements of a partnership, the number of members allowed, and the nature of the agreement.

Essential Requirements of a Partnership

To form a partnership, certain essential requirements must be met:

1. Association of two or more persons: A partnership must consist of at least two persons. There is no maximum limit on the number of partners, although the Companies Act, 2013 imposes a maximum limit of 100 partners for certain purposes.
2. Agreement: There must be a valid agreement between the partners, either in written or oral form. The partnership agreement, also known as the partnership deed, outlines the terms and conditions of the partnership, including the capital contributions, profit-sharing ratio, rights, and responsibilities of each partner.
3. Lawful business: The partnership must be formed for the purpose of carrying on a lawful business. Any business that is illegal or against public policy cannot be the subject of a partnership.
4. Mutual agency: Each partner must act as an agent of the firm and have the authority to bind the firm and other partners in the ordinary course of business. This means that one partner can enter into contracts on behalf of the firm, and the other partners will be bound by those contracts.
5. Sharing of profits: The partners must agree to share the profits and losses of the business. The sharing can be based on the capital contributions or on an equal basis, as specified in the partnership agreement.

Number of Members

A partnership may consist of any number of partners, provided there are at least two partners. There is no maximum limit imposed by the Partnership Act, 1932. However, the Companies Act, 2013 imposes a maximum limit of 100 partners for certain purposes, such as banking purposes or other purposes. If the number of partners exceeds the maximum limit, it will amount to an illegal association under Section 464 of the Companies Act, 2013.

Agreement

The partnership agreement is a crucial document that governs the rights and obligations of the partners. While the Partnership Act provides a framework for the partnership, the agreement allows partners to customize their relationship and address specific issues. The agreement can be in written or oral form, although it is advisable to have a written agreement, also known as a partnership deed, to avoid any disputes or misunderstandings in the future.

The partnership deed typically includes the following details:

1. Name and address of the firm and business: The partnership must have a unique name that distinguishes it from other partnerships and businesses.
2. Name and address of the partners: The partnership deed should list the names and addresses of all the partners involved in the partnership.
3. Capital contributed by each partner: The partnership deed should specify the capital contributions made by each partner. This helps determine the profit-sharing ratio and the extent of each partner's financial stake in the business.
4. Profit and loss sharing ratio: The partnership deed should outline the ratio in which the profits and losses of the business will be shared among the partners. This ratio can be based on the capital contributions or any other agreed-upon formula.
5. Rights, duties, and obligations of partners: The partnership deed should clearly define the rights, duties, and obligations of each partner. This includes the authority to make decisions, the responsibility for specific tasks, and the requirement to act in the best interests of the firm.
6. Settlement of accounts on the dissolution of the firm: The partnership deed should specify the procedure for settling the accounts and distributing the assets in the event of the dissolution of the partnership.
7. Rules for admission, retirement, and death of a partner: The partnership deed should outline the process for admitting new partners, retiring existing partners, and dealing with the death of a partner. This ensures a smooth transition and continuity of the business.
8. Dispute resolution mechanism: The partnership deed may include provisions for resolving disputes among the partners, such as through arbitration or mediation.
9. Any other provisions affecting the rights of the partners: The partnership deed can include any other provisions that the partners deem necessary or relevant to their specific business.

Business (Section 12)

To qualify as a partnership, the business must be carried out with the intention to earn profits. Co-ownership of property alone does not constitute a partnership. Section 2(b) of the Partnership Act defines business as "every trade, occupation, or profession." It encompasses any lawful activity conducted in a continuous manner, with the primary purpose of generating income or profits.

Mutual Agency (Section 13)

One of the key characteristics of a partnership is the principle of mutual agency. This means that each partner acts as both a principal and an agent for the firm and the other partners. Section 13 of the Partnership Act establishes the concept of mutual agency and its implications:

1. Each partner is entitled to carry out the business: Every partner has the authority to act on behalf of the firm and bind the firm with their actions. This means that each partner can enter into contracts, make decisions, and perform other acts necessary for the conduct of the business.
2. Mutual agency exists between the partners: The acts of one partner, within the scope of the partnership business, are binding on all the partners. This means that each partner is not only bound by their own acts but also by the acts of the other partners.
3. Sharing of profits: The sharing of profits is a significant factor in determining the existence of a partnership. However, it is not the sole criterion. Other factors, such as mutual agency and the intention to carry on a business together, also play a crucial role in determining the partnership.

Sharing of Profit

One of the fundamental aspects of a partnership is the sharing of profits among the partners. The Partnership Act, 1932 requires the partners to agree on a profit-sharing ratio, which determines how the profits will be distributed. The profit-sharing ratio can be based on the capital contributions of the partners or any other agreed-upon formula.

The sharing of profits serves multiple purposes in a partnership:

1. Incentive for partnership: The prospect of sharing in the profits provides partners with an incentive to work together and contribute their skills, resources, and efforts to the success of the business.
2. Equitable distribution of rewards: The profit-sharing ratio ensures that each partner receives a fair share of the profits, based on their contributions and the agreed-upon terms.
3. Risk-sharing mechanism: In the event of losses, the profit-sharing ratio also determines how the losses will be distributed among the partners. This helps to distribute the burden of losses and mitigate the financial impact on individual partners.

It is important to note that the profit-sharing ratio can be modified by the partners through mutual agreement. Partners may decide to change the ratio based on changing circumstances or the performance of individual partners.

Liability of Partnership

In a partnership, all the partners are jointly and severally liable for the debts and obligations of the firm. This means that each partner is personally responsible for the partnership's liabilities, and their personal assets can be used to satisfy the firm's debts. The liability of partners in a partnership is unlimited, which means that they can be held personally responsible for the firm's debts, even if their individual contributions to the capital are limited.

The Partnership Act, 1932 establishes the principle of joint and several liability among partners. This means that if the partnership is unable to pay its debts, the creditors can recover the amount from any or all of the partners, depending on their financial capacity. The liability of partners extends to both the debts and obligations incurred during the course of the partnership and those arising after the dissolution of the firm.

It is important for partners to understand the implications of joint and several liability and to take appropriate measures to protect their personal assets. One way to mitigate the risk is to maintain adequate insurance coverage, such as professional indemnity insurance, to protect against potential liabilities.

Test of Partnership Section 6

Section 6 of the Indian Partnership Act provides the test for determining the existence of a partnership. The section states that while determining whether an association of persons is a partnership or if a person is a partner in a firm, the real relationship between the parties should be examined based on the relevant facts. The section also provides certain instances where the sharing of profits does not automatically qualify an association as a partnership:

1. Servant or agent: A person who receives remuneration or commission for their services as a servant or agent is not considered a partner, even if they receive a share in the profits or a payment contingent on the profits.
2. Widow or child of a deceased partner: The widow or child of a deceased partner who receives an annuity or share in the profits as a result of the partnership is not considered a partner.
3. Moneylender to the partnership business: A person who lends money to the partnership on interest is not automatically considered a partner.
4. Previous owner or part-owner of the business: If a person sells the goodwill of a business or a share in it, they are not automatically considered a partner in the business conducted by the buyer.

The real criteria for determining the existence of a partnership is the mutual agency among the members of the association. While the sharing of profits is an important factor, it is not the sole determinant of a partnership. The intention of the parties and the overall relationship between them are crucial in establishing the existence of a partnership.

Kinds of Partnership

Partnerships can be classified based on the duration of the partnership and the extent of the business carried out by the partnership.

1. Partnership at Will: A partnership at will is formed when there is no fixed period prescribed for the expiration of the partnership. This means that the partnership continues until any of the partners give notice of their intention to dissolve the partnership. The partners have the freedom to dissolve the partnership at any time. The Partnership Act, 1932 provides two conditions for a partnership at will: (1) there is no agreement regarding the duration of the partnership, and (2) there is no clause for the determination of the partnership.
2. Partnership for a Fixed Period: In a partnership for a fixed period, the partners agree to carry on the business for a specific duration. The partnership comes to an end after the expiration of the fixed period, unless the partners decide to continue with the partnership. If the partners continue the partnership beyond the fixed period, it becomes a partnership at will.
3. Particular Partnership: A particular partnership is formed for completing a specific project or undertaking. Once the project or undertaking is completed, the partnership comes to an end. The partners have the option to continue with the firm or dissolve it.
4. General Partnership: A general partnership is formed for the purpose of carrying on a business. There is no particular task or project that needs to be completed. The business conducted by a general partnership is of a general nature.

Scope of Partnership Act (Section 5)

The Indian Partnership Act, 1932 provides a comprehensive legal framework for partnerships in India. It governs the formation, operation, and dissolution of partnerships. The Act clarifies that a partnership arises from a contract and not from the status of the partners. It also specifies that the partnership is subject to the provisions of the Partnership Act, unless those provisions are inconsistent with the Indian Contract Act, 1872.

Section 5 of the Partnership Act defines the scope of the Act. It states that the partnership arises from a contract and is subject to the provisions of the Act. The partners may exercise any of their powers at any time, but they must not exercise them in a manner that is illegal, fraudulent, or against public policy. Any contract made by a partner without the consent of all other partners is not binding on the firm, unless all the partners have accepted or ratified the contract.

The Partnership Act allows a partnership to become a member of another firm with the consent of all the partners. This provides flexibility for partnerships to enter into joint ventures or collaborations with other businesses.

Partners

Partners are the members of a partnership who agree to carry out the business jointly and share the profits and losses. The Partnership Act does not prescribe any specific qualifications for becoming a partner. However, the partners must have the legal capacity to enter into a contract, as determined by the Indian Contract Act, 1872.

The partners in a partnership can have different roles and responsibilities based on their skills, expertise, and contributions to the business. They can be classified into various types based on their involvement in the day-to-day operations, extent of liability, and other factors. Some common types of partners include:

1. Active/Managing Partner: An active or managing partner is actively involved in the day-to-day management and operations of the business. They take on leadership roles and make key decisions for the partnership.
2. Sleeping/Dormant Partner: A sleeping or dormant partner does not actively participate in the management of the business. They contribute capital to the partnership but do not have a significant role in the day-to-day operations.
3. Nominal Partner: A nominal partner is a partner in name only. They may not have a significant or real interest in the partnership. They may be included as partners for legal or administrative purposes.
4. Partner in Profit Only: A partner in profit only shares in the profits of the partnership but does not bear any losses. They are not liable for any obligations or liabilities of the partnership.
5. Minor Partner: A minor cannot be a full-fledged partner according to the Indian Contract Act, 1872. However, a minor can be admitted to the benefits of the partnership with the consent of all the partners. The minor shares in the profits and benefits of the partnership but is not personally liable for any obligations or losses.
6. Partner by Estoppel: A partner by estoppel is not a partner in reality but has represented themselves as a partner to third parties. They may be held liable as a partner based on their conduct or words, even though they are not legally a partner.

The rights and responsibilities of partners are determined by the partnership agreement. The Partnership Act provides a framework for the rights and duties of partners in the absence of a partnership agreement.

Relation of Partners with One Another

The partners in a partnership have a legal relationship with each other, governed by the partnership agreement and the provisions of the Partnership Act. The Act provides guidelines for the rights and obligations of partners in relation to each other.

Right to Determine the Relationship by Contract (Section 11)

The partnership agreement, also known as the partnership deed, sets out the general administration of the partnership. It determines the rights and duties of the partners and sets the framework for the partnership. The agreement can be made explicitly or by necessary implication. If the partnership agreement is silent on a particular matter, the Act provides default rules to govern the relationship between the partners.

Section 27 of the Indian Contract Act, 1872

An agreement in restraint of trade is void under Section 27 of the Indian Contract Act. However, Section 11 of the Partnership Act allows partners to restrict or expand the implied authority of a partner. The partners can agree to restrain each other from carrying on a business other than the partnership business. Such restrictions must be included in the partnership agreement.

Rights of the Partners

Partners have certain rights in relation to the partnership and other partners. These rights are derived from the partnership agreement and the provisions of the Partnership Act. Some of the key rights of partners include:

1. Right to Take Part in the Conduct of the Firm's Business: Every partner has the right to participate in the management and conduct of the firm's business. Each partner has the authority to make decisions, enter into contracts, and perform other acts necessary for the operation of the business.
2. Right to Express Opinion: Partners have the right to freely express their opinions on matters concerning the firm's business. However, the opinions of other partners must be taken into consideration before making any decisions.
3. Right to Have Access to Books of the Firm: Partners have the right to access and inspect the books of the firm. This includes both the accounts of the firm and any other books or records that pertain to the firm's business.
4. Right to Share in Profits: Partners are entitled to share in the profits of the partnership according to the profit-sharing ratio specified in the partnership agreement. The profit-sharing ratio determines the proportion of profits that each partner receives.
5. Right to Interest on Capital: Partners may be entitled to receive interest on the capital they have contributed to the partnership. The partnership agreement can specify the rate of interest on capital.
6. Right to Interest on Advances Made by Partner: Partners may make advances to the firm in addition to their capital contributions. In such cases, partners have the right to claim interest on these advances.
7. Right to Indemnity: A partner who incurs expenses or liabilities on behalf of the firm is entitled to be indemnified by the firm. The firm must reimburse the partner for any payments made or liabilities incurred in the ordinary course of business.
8. Right to Dissolve the Partnership: A partner has the right to file a suit for the dissolution of the partnership under certain circumstances. These circumstances include unsoundness of mind, permanent incapacity, misconduct of another partner, transfer of interest, and other grounds specified in the Partnership Act.
9. Right to Not Get Expelled: Partners have the right to not be expelled from the partnership, except on certain grounds specified in the Partnership Act. Any expulsion must be necessary for the interest of the partnership, and the expelled partner must be given reasonable warning and an opportunity to explain their position.
10. Right to Prevent Introduction of New Person: Every partner has the right to prevent the introduction of a new partner into the firm without their consent. This right can be restricted or waived by the partnership agreement.
11. Right to Retire: A partner has the right to retire from the partnership with the consent of the other partners or as specified in the partnership agreement. The retirement of a partner does not automatically dissolve the partnership.
12. Right to Share in Partnership Property: Partners have the right to share in the partnership property after the dissolution of the firm. The partnership property includes all assets and liabilities of the partnership.

Relations of Partners to Third Parties

Partners have a legal relationship with third parties who interact with the partnership. The Partnership Act establishes the rights and obligations of partners in relation to third parties.

1. Section 18 to 22 of the Act: These sections establish that partners are agents of the firm for the purpose of conducting the business. Each partner acts as both a principal and an agent for the other partners. This means that a partner can bind the firm and the other partners with their actions in the ordinary course of business.
2. Section 19: Any act done by a partner in the ordinary course of the firm's business binds the firm itself. This means that the firm is liable for the acts of its partners, provided those acts are within the scope of the partnership business.
3. Section 20: Partners can make agreements to restrict or expand the implied authority of a partner. This means that partners can define the limits of each partner's authority and determine which acts require the consent of all partners.
4. Section 21: If any act is done by a partner in an emergency that a prudent person would do, the act binds the firm. This means that partners can take necessary actions in emergency situations to protect the interests of the partnership.
5. Section 22: Any act done by a partner in the name of the firm, or in any other manner that binds the firm, is valid and binding on the firm. This means that partners can represent the firm and enter into contracts on its behalf.

Duties of Partners

Partners have certain duties and obligations towards each other and the partnership as a whole. These duties are essential for maintaining the trust, cooperation, and smooth functioning of the partnership. The Partnership Act and the partnership agreement outline the duties of partners. Some of the key duties of partners include:

1. Duty of Greatest Common Advantage: Partners must act in the best interests of the partnership and carry out the business for the greatest common advantage of all partners. This duty requires partners to put the interests of the partnership above their personal interests.
2. Duty of Good Faith: Partners must act with good faith and fairness towards each other. The relationship between partners is based on trust, and partners must not engage in any conduct that would undermine this trust.
3. Duty to Render True Accounts: Partners have a duty to maintain accurate and complete accounts of the partnership's business. They must keep and render true and complete accounts of the partnership's financial transactions, and make these accounts available to other partners when required.
4. Duty to Render Full Information: Partners must provide true and full information regarding the partnership's business. They must communicate all relevant information to other partners in a timely and accurate manner.
5. Duty to Not Carry Another Business: Partners must not carry on any business other than the partnership business, except with the consent of the other partners. This duty ensures that partners are fully committed to the success of the partnership and do not engage in activities that may conflict with the partnership's interests.
6. Duty to Act Diligently: Partners must act diligently in the conduct of the partnership's business. This duty requires partners to perform their responsibilities with care, skill, and attention to detail.
7. Duty to Perform Without Remuneration: Partners are not entitled to remuneration for their services in the partnership. The partnership is based on mutual cooperation, and partners are expected to contribute their time and efforts without expecting any additional compensation.
8. Duty to Share Losses: Partners are obligated to share losses in the partnership according to the profit-sharing ratio specified in the partnership agreement. This duty ensures that the burden of losses is distributed among all partners in a fair and equitable manner.
9. Duty to Indemnify for Wilful Neglect: If a partner incurs expenses or liabilities due to their wilful neglect, they have a duty to indemnify the partnership for such losses. This duty ensures that partners take their responsibilities seriously and do not engage in negligent or reckless behavior.
10. Duty to Not Assign Rights: Partners cannot assign their rights in the partnership to a third person without the consent of the other partners. This duty ensures that the partnership remains a close-knit association and that the rights and responsibilities of partners are not transferred without proper consideration.
11. Duty to Act Within Authority: Partners must act within the authority conferred upon them by the partnership agreement. They must not exceed their authority or engage in activities that are beyond the scope of their responsibilities.
12. Duty to Account Private Profits: Partners are prohibited from using the partnership's property or profits for their personal advantage. Any profits derived by a partner from the partnership's business must be accounted for and shared among all partners.

Partners must fulfill these duties and obligations to maintain the integrity and effectiveness of the partnership. Failure to adhere to these duties can lead to disputes, breaches of trust, and potential legal consequences.

When Do Rights and Duties Change?

The rights and duties of partners can change under certain circumstances, such as changes in the constitution of the partnership or the occurrence of specific events. The Partnership Act provides guidelines for the changes in the rights and duties of partners. Some of the situations that may lead to changes in rights and duties include:

1. Expiration of the term of the partnership: If the partnership has a fixed term, the rights and duties of the partners may change when the term expires. The partners may choose to renew the partnership or dissolve it.
2. Additional business beyond the agreed-upon scope: If the partners engage in additional business activities that were not included in the original agreement, the rights and duties of the partners may change. The partners must update their agreement to reflect the new business activities.
3. Changes in the composition of members: If there are changes in the membership of the partnership, such as the admission, retirement, or death of a partner, the rights and duties of the partners may change. The partnership agreement or the Partnership Act may provide guidelines for these changes.

Changes in the rights and duties of partners must be addressed through proper communication, agreement, and documentation. It is important for partners to understand their rights and duties and to ensure that any changes are made in accordance with the partnership agreement and the law.

Status of a Minor

The status of a minor in a partnership is governed by Section 30 of the Indian Partnership Act, 1932. According to Section 30, a minor cannot be a partner in a partnership firm. However, a minor can be admitted to the benefits of the partnership with the consent of all the partners. This means that a minor can share in the profits and benefits of the partnership, but they are not personally liable for any obligations or losses of the partnership.

The rights of a minor in a partnership include:

1. Right to Inspect the Books of Account: A minor partner has the right to inspect the books of account of the partnership. This allows them to understand the financial position of the partnership and ensure transparency.
2. Right to Share in the Profits: A minor partner is entitled to a share in the profits of the partnership, as specified in the partnership agreement. The share of profits is determined based on the profit-sharing ratio agreed upon by the partners.
3. Right to Sue for Share of Benefits or Profit: A minor partner has the right to sue the partnership or the other partners for their share of benefits or profits. This ensures that the minor partner can enforce their rights and claim what is due to them.

It is important to note that a minor's liability in a partnership is limited. If a minor partner is declared insolvent, their share in the partnership will be kept in the possession of the official liquidator. After attaining the age of majority, the minor partner has the option to become a full-fledged partner in the partnership by giving public notice within six months of attaining majority. Until the notice is given, the minor partner will not be liable for any acts of the partnership.

Liabilities of a Minor

The liability of a minor in a partnership is limited. A minor is not personally liable for the obligations or losses of the partnership. If a minor partner incurs debts or liabilities on behalf of the partnership, they are not personally responsible for these obligations. Instead, the liability rests with the other partners.

However, there are certain exceptions to this rule. If a minor partner becomes insolvent, their share in the partnership may be used to satisfy the debts of the partnership. The estate of the minor partner, in the possession of the official liquidator, ceases to be liable for any acts of the partnership, whether the partnership subsequently dissolves or continues.

When a minor partner attains the age of majority, they have the option to become a full-fledged partner in the partnership. If they choose to do so, they will be liable for the acts of the partnership to third parties. It is important for minor partners to understand their rights and liabilities and to seek proper legal advice to protect their interests.

Liabilities

The Indian Partnership Act, 1932 establishes the liabilities of partners in a partnership. Partners have joint and several liability for the acts of the firm and are personally responsible for the debts and obligations of the partnership.

Liability of Partners for the Acts of the Firm (Section 25)

All partners are jointly and severally liable for the acts of the firm. This means that each partner is individually responsible for the debts and obligations of the partnership. If the firm is unable to pay its debts, the creditors can recover the amount from any or all of the partners, depending on their financial capacity.

The liability of partners extends to the acts done during the course of the partnership. If a partner incurs a debt or obligation on behalf of the partnership, all partners are responsible for repaying the debt or fulfilling the obligation. Each partner's personal assets can be used to satisfy the firm's debts.

Liability of a Firm for the Wrongful Act of Partner (Section 26)

The firm is liable for any wrongful act or omission committed by a partner in the ordinary course of the firm's business or with the consent of the other partners. This means that if a partner commits a wrongful act or causes harm to a third party while conducting the firm's business, the firm is responsible for compensating the third party for any damages suffered.

Liability of a Firm for the Misapplications by Partner (Section 27)

If a partner, acting as an agent of the firm, receives money from a third party and misapplies it or if the firm receives money and it is misappropriated by a partner, the firm is liable to pay for the loss suffered by the third party. This means that if a partner misuses funds or misappropriates money that belongs to a third party, the firm is responsible for compensating the third party for any losses incurred.

It is important for partners to understand their liabilities and take appropriate measures to protect themselves and the firm. Maintaining accurate financial records, fulfilling obligations in a timely manner, and ensuring compliance with legal requirements can help mitigate the risk of liabilities.

How is Registration Done?

The registration of a partnership firm is not mandatory under the Partnership Act, 1932. However, registration offers several benefits and legal protections. To register a partnership firm, the partners must follow the procedure outlined in the Act.

1. Making an Application to the Registrar: Any partner can send an application to the registrar of the area in which the firm's principal place of business is located or proposed to be located. The application must be accompanied by the prescribed fee and a copy of the partnership deed. The partnership deed should contain the name and address of the firm, the names and addresses of the partners, the capital contributed by each partner, and other relevant details.
2. Verification: The application and the partnership deed must be verified by each partner who has signed the statement. This ensures the authenticity and accuracy of the information provided.
3. Registration by the Registrar: If the registrar is satisfied with the application and the partnership deed, they will record an entry in the Register of Firms and file the statement. The registration creates a public record of the partnership and establishes its legal existence.

While registration is not mandatory, it is recommended for partnerships to register their firm to enjoy the benefits and protections it offers. Registered firms have legal standing, can file suits in court, and enjoy certain tax benefits. Registration also provides clarity and transparency in the partnership's dealings with third parties.

Non-Registration of Partnership Firm

Although registration is not mandatory, non-registration of a partnership firm can lead to certain disabilities. Section 69 of the Partnership Act establishes the effects of non-registration:

1. No Suit by Firm or Partners Against Third Parties: A partnership firm or any of its partners cannot file a suit in a civil court against third parties to enforce any right arising from a contract or to claim any set-off.
2. No Suit by Third Parties Against Firm or Partners: In case of a breach of contract by the partnership firm or any of its partners, the suit cannot be filed in a civil court by any third party. The suit must be filed by a partner whose name is registered as a partner in the Register of Firms.
3. No Relief of Set-Off: Partners cannot claim a relief of set-off in any legal action brought against them by a third party if the value of the claim exceeds Rs. 100.
4. No Right to Sue Against Firm: An aggrieved person cannot file a suit against the partnership firm or any of its partners for any right arising from a contract.

It is important for partnerships to consider the benefits and drawbacks of registration and make an informed decision. While non-registration may save costs in the short term, it can limit the legal remedies available to the partnership and its partners in case of disputes or breaches of contract.