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CMA Intermediate · Business Laws and Ethics · Indian Partnership Act, 1932

Ganga Traders, an unregistered firm, wants to sue a customer, Mr. Rao, for recovery of Rs. 5,00,000 due under a contract of sale. What is the legal position under the Indian Partnership Act, 1932?

The suit is barred. Under section 69(2), a firm cannot sue a third party to enforce a contractual right unless the firm is registered and the persons suing are shown in the Register of Firms as partners. Rs. 5,00,000 is far above the small-claim exception.

  1. AThe suit is barred unless the firm is registered and the suing partners are shown in the Register of Firms as partnersCorrect
  2. BThe suit is maintainable because Mr. Rao is a third party, not a partner
  3. CThe suit is maintainable if the firm registers within 30 days after the decree
  4. DThe suit is barred only if the amount exceeds Rs. 10,00,000

Explanation

Section 69(2) bars a suit by a firm against a third party to enforce a right arising from a contract unless the firm is registered and the persons suing are shown in the Register as partners. The suit does not qualify for the small-claim exception, which is limited to claims not exceeding one hundred rupees of a specified kind.

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