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CS Professional · Insolvency and Bankruptcy - Law and Practice · Bankruptcy for Individuals and Partnership Firms

Meera Traders, an unregistered partnership firm, defaults on Rs 50,000. Assume the Central Government has not notified any higher minimum default amount. Is Part III applicable to this default?

Part III applies. It covers partnership firms where the default is not less than Rs 1,000 unless the Centre notifies a higher figure, and the definition of firm includes unregistered partnerships. A Rs 50,000 default clears the threshold, so registration is irrelevant.

  1. ANo, because only registered firms under the Indian Partnership Act, 1932 are covered
  2. BNo, because the minimum default for Part III is Rs 1 lakh
  3. CYes, because Part III covers partnership firms and the default is not less than Rs 1,000, whether or not the firm is registeredCorrect
  4. DYes, but only if each partner is individually in default

Explanation

Section 78 applies Part III to individuals and partnership firms where the default is not less than Rs 1,000, unless a higher amount (up to Rs 1 lakh) is notified. Section 79(16) defines a firm as carrying on business in partnership whether or not registered. Rs 50,000 exceeds Rs 1,000, so Part III applies.

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