Source: 3)a)7m,Sept20257 Marks
Back to Law List

Question Scenario

A,B,C are partners in an unregistered partnership firm M/s ABC & Associates. Is this suit maintainable in the following cases as per the provisions of the Indian Partnership Act, 1932? Give Justification also.\ni) A filed a suit against B who had stolen the goods of the firm.\nii) A filed a suit against M/s ABC & Associates for claiming shares of the assets on its dissolution.\niii) M filed a suit against the firm M/S ABC & Associates for the recovery of 10,000/- dues from the firm. M also owed 4,000/to the firm. The firm claimed a set off of 4,000/.

Estimated Writing Time: 12 mins Try in Practice Mode

Suggested Answer

(i) A filed a suit against B who had stolen the goods of the firm: \nThe said suit by A is Maintainable.\nJustification: According to Section 69(1) of the Indian Partnership Act, 1932, a partner of an unregistered firm cannot file a suit in any court against the firm or any partner to enforce a right arising from a contract, unless the firm is registered. Section 69 only bars civil suits to enforce contractual rights. It does not prevent criminal action. But, in this case, A had filed a suit against B for stealing the goods of the firm which is a criminal offense.\nHence, the suit filed against B for the theft of the goods of the firm is maintainable.\n(ii) A filed a suit against M/s. ABC & Associates for claiming share of the assets on its dissolution\nThe said suit by A is Maintainable.\nJustification: According to Section 69(3) of the Indian Partnership Act, 1932, a partner of an unregistered firm is precluded from bringing legal action against the firm. But such a person may sue for realization of his share in the firm's property where the firm is dissolved. Here, A's claim is valid as the shares are the assets of the dissolved firm and A can claim it even if the firm is unregistered.\n(iii) M filed a suit against the firm for recovery of ₹10,000/- dues. M also owed ₹4,000/-. The firm claimed a set-off.\nThe said suit by M is Maintainable\nJustification: According to Section 69(2) of the Indian Partnership Act, 1932, in case of an unregistered firm, an action can be brought against the firm by a third party. If an action is brought against the firm by a third party, then neither the firm nor the partner can claim any set-off, if the suit be valued for more than ₹ 100 or pursue other proceedings to enforce the rights arising from any contract.\nHere, M filed a suit against the firm for the recovery of ₹10,000 dues from the firm. M also owed ₹4,000/- to the firm.\nThe firm cannot set-off the claim of ₹4,000/- as it is more than ₹100/. – Nevertheless, M is entitled for recovery of ₹ 10,000 from firm.

Exam Strategy Tip

When answering law questions in the CA Foundation exam, follow the "Provision -> Facts -> Conclusion" structure for maximum marks. Ensure to state the relevant sections where applicable to earn bonus marks from the evaluator.

Ready to Practice More Law Cases?

Test your knowledge under timed conditions in our dedicated Writing Practice Mode. Get a feel for the real exam pressure.

Enter Writing Practice