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

M/s Rao & Sons, an unregistered partnership firm carrying on business in Nashik, defaults on a debt. A creditor wants to know whether the Code's individual and firm insolvency provisions can apply to an unregistered firm. Under the Code's definition, what is the position?

An unregistered partnership firm is covered, because the Code defines a firm as a body of individuals carrying on business in partnership whether or not it is registered under the Indian Partnership Act, 1932. Registration is not a condition for the Code's provisions to apply.

  1. AThe firm definition covers only firms registered under the Indian Partnership Act, 1932
  2. BThe firm definition covers a body of individuals carrying on business in partnership whether or not registeredCorrect
  3. CThe Code applies only to limited liability partnerships and not to ordinary partnership firms
  4. DThe firm definition applies only if the firm has at least ten partners

Explanation

Section 79(16) defines 'firm' as a body of individuals carrying on business in partnership whether or not registered under section 59 of the Indian Partnership Act, 1932. Registration is therefore irrelevant. Option A adds a registration condition that the definition expressly rules out.

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