The Indian Partnership (Punjab Amendment) Act, of
2021 is the most recent amendment to the Indian Partnership Act, of 1932. It
came into force on January 1, 2023. The amendment substitutes a new Schedule I
to the Central Act, which specifies the maximum fees that can be charged for
various services related to partnership registration.
The new Schedule I is as follows:
·
Maximum
Fees |
·
Statement
under Section 58 | ₹100
·
Statement
under Section 60 | ₹200
·
Intimation
under Section 61 | ₹100
·
Intimation
under Section 62 | ₹200
·
Notice
under Section 63 | ₹100
·
Application
under Section 64 | ₹200
·
Inspection
of the Register of Section 66 | ₹100
·
Inspection
of documents under Section 66 | ₹10 per page
·
Grant
of copies under Section 67 | ₹10 per page
The amendment also increases the penalty for
contravention of Sections 60, 61, 62, or 63 from ₹200 to ₹2,000.
In addition to the above, the Law Commission of
India has recommended several other amendments to the Indian Partnership Act,
1932, including:
Making registration of partnership firms
compulsory. Currently, registration of partnership firms is optional in India.
However, the Law Commission has recommended that registration be made
compulsory to protect the interests of partners and third parties.
Introducing electronic registration of
partnership firms. This would make it easier and faster for firms to register.
Simplifying the procedure for dissolution of
partnership firms. Currently, the dissolution process is complex and
time-consuming. The Law Commission has recommended that it be simplified to
make it easier for firms to dissolve.
Introducing provisions for mediation and
arbitration of partnership disputes. This would provide partners with a more
efficient and cost-effective way to resolve their disputes.
The government is currently considering the Law
Commission's recommendations. If implemented, these amendments would bring the
Indian Partnership Act, 1932 in line with international best practices and make
it more user-friendly for businesses.
The Supreme Court of India has held that the
words "arising out of a contract" in Section 69(2) of the Indian
Partnership Act, 1932 should be construed as referring to a contract made in
the course of business. This means that an unregistered partnership firm can
file a suit against a third party to enforce a right arising out of a contract
that is not related to its business.
The Law Commission of India has proposed to add
an Explanation to Section 69 to clarify this position. The Explanation would
state that the words "a right arising from a contract" mean a right
arising from a contract made in the course of business.
If this amendment is implemented, it would
provide greater certainty to unregistered partnership firms and their
third-party creditors. It would also make the Indian Partnership Act more
consistent with the English Business Names Act, 1985.
Here are some examples of contracts that would
be considered to be made in the course of business:
- A contract to sell or purchase goods or
services
- A contract to lease or rent property
- A contract to borrow or lend money
- A contract to hire or employ someone
- A contract to provide or receive a professional
service
Here are some examples of contracts that would
not be considered to be made in the course of business:
- A contract to sell or purchase personal
property, such as a car or a house
- A contract to lend money to a friend or family
member
- A contract to provide or receive a personal
service, such as a gift or a donation
If an unregistered partnership firm wants to
file a suit against a third party to enforce a right arising out of a contract,
it should first check to see whether the contract was made in the course of
business. If it was, then the firm will need to register before it can file the
suit.
One of the key amendments is the introduction
of the concept of Limited Liability Partnership (LLP). LLPs combine the
benefits of both partnerships and limited liability companies, offering
partners limited liability protection while retaining the flexibility of a
partnership. This amendment has been instrumental in encouraging professionals
such as lawyers, accountants, and consultants to form partnerships, as it
provides them with a legal structure that aligns with their specific needs.
Additionally, the amendments have introduced
provisions for the dissolution of partnerships. Earlier, the dissolution
process was often complex and time-consuming, leading to prolonged disputes.
The new amendments provide a clear framework for the dissolution of
partnerships, ensuring a smoother and more efficient process. This not only
protects the interests of partners but also facilitates the transition to new
business ventures.
Furthermore, the amendments have addressed the
issue of unlimited liability. Previously, partners were personally liable for
the debts and obligations of the partnership. The new amendments limit the
liability of partners, providing them with greater protection and reducing the
risk associated with partnerships. This change has been particularly beneficial
for small and medium-sized enterprises, as it encourages more entrepreneurs to
enter into partnerships without the fear of excessive personal liability.
In conclusion, the recent amendments in the
Indian Partnership Act have brought about significant positive changes in the
partnership landscape. The introduction of LLPs, mandatory registration,
streamlined dissolution process, and limited liability provisions have all
contributed to creating a more conducive environment for partnerships. These
amendments not only promote ease of doing business but also encourage
entrepreneurship and economic growth. It is expected that these changes will
attract more professionals and entrepreneurs to form partnerships, leading to
increased innovation and job creation in the country.
