Partnership registration and Hindu joint families: adult members represented by kartas counted toward the statutory limit.

Section 4 of the Indian Companies Act, 1913 barred an unregistered partnership or association of more than twenty persons from carrying on business, while the statutory exception for joint families required exclusion of minor members only in specified circumstances. A karta could enter into partnership in a representative capacity, and the family members did not automatically become partners in law; however, where joint families were in substance associated through their kartas, the adult members of those families could be counted for the statutory limit. On the findings recorded, the partnership exceeded twenty persons, so registration was rightly refused.

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Issues: Whether registration of the firm was rightly refused on the ground that the partnership, though evidenced by a deed showing 18 named partners, was in substance a partnership of more than twenty persons because several partners acted as kartas representing their Hindu undivided families, attracting the prohibition in section 4 of the Indian Companies Act, 1913.

Analysis: The statutory scheme in section 4(2) of the Indian Companies Act, 1913 prohibits an unregistered company, association, or partnership consisting of more than twenty persons from carrying on gainful business, while section 4(3) excludes a joint family carrying on joint family trade or business and directs that, where two or more such joint families form a partnership, minor members are to be excluded in computing the number of persons. The Court held that a karta may enter a partnership in a representative capacity, but the family members do not automatically become partners in law; nevertheless, section 4(3) was intended to cover factual arrangements where joint families, through their kartas, are in substance associated in a partnership and to require counting the adult members of those families for the statutory limit. On the findings recorded, the number of persons constituting the partnership exceeded twenty.

Conclusion: Registration was rightly refused and the answer to the referred question was in the affirmative, against the assessee and in favour of the Revenue.

Ratio Decidendi: For the purposes of section 4(3) of the Indian Companies Act, 1913, a partnership formed through kartas representing Hindu undivided families may be treated as a partnership of the adult members of those families when computing the statutory limit of persons under section 4(2).

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