In short. A partnership firm isn't a company. When it owes you money, its partners owe it too, personally, jointly and severally, under Section 25 of the Indian Partnership Act, 1932. So you sue the firm in its own name and, as a rule, every partner you can identify. The decree can then be executed against the firm's property and against the personal assets of partners named or served in the suit. This guide is for suppliers, lenders and service firms waiting on a firm's money. Your first job is simple. Find out who the partners were when the debt arose.
Is this your situation?
- The firm took your goods for two years without a hitch. Now the last four invoices are unpaid, and the partner who always picked up your calls has stopped.
- You've only ever dealt with one partner at the counter. You've no idea who else is on the deed.
- One brother tells you he left the business last year, so the dues are 'between you and the others'.
- The shutter's down at the old shop and the word in the market is that the partners fell out and split.
- A partner died a few months back. His sons say whatever the firm owed went with him.
- The GST invoice says 'Associates' and you honestly can't tell if that's a partnership, an LLP or one man's trade name.
- You won a decree against the firm. Its bank account turned out to be nearly empty.
Who exactly do you sue?
The firm, and its partners. Under the Indian Partnership Act, 1932, a firm isn't a legal person separate from the people in it, the way a company is. Section 4 defines it as the relationship between people who've agreed to share the profits of a business run by all of them, or by any of them acting for all. The firm name is just a collective label for those people. So if M/s Gupta Traders owes you Rs 18 lakh, the law reads that as the partners of Gupta Traders owing you Rs 18 lakh. It's that direct.
The Code of Civil Procedure, 1908 makes the suit easy to frame. Order XXX Rule 1 lets you sue partners in the firm's name, so your plaint can be titled 'M/s Gupta Traders, a partnership firm, through its partners', with each partner you know listed after it. You don't strictly have to name them to sue the firm. But naming them is what decides, later, whose house and bank account you can touch. We'll come back to that.
This is where a firm differs most from a private limited company. Directors usually aren't liable for a company's debts, and our guide on going after the directors of a private limited company explains the narrow exceptions. With a firm it's the other way round. Personal liability is the starting point. Your real work is finding the partners, serving them properly and keeping the decree alive against each one.
How much can you take from each partner?
All of it, from any one of them. Section 25 of the Partnership Act makes every partner liable, jointly with the others and also severally, for everything the firm does while he's a partner. In plain terms, you can recover the whole debt from all of them together or from whichever one has money. Section 43 of the Indian Contract Act, 1872 says the same about joint promises: a creditor can make any one joint promisor perform the whole promise. Whoever pays can then fight it out with his partners. That isn't your problem.
A firm only ever acts through its partners. Sections 18 and 19 treat each partner as the firm's agent, and anything a partner does in the usual course of the firm's business binds the firm. Section 22 adds a condition. The act has to be done in the firm's name, or in some way that shows he meant to bind the firm. So when one partner places an order on the firm's letterhead, for the kind of goods the firm always buys, every partner is bound. Even the one you've never met.
Clients are often surprised by the next part. A partner's exposure isn't capped at his profit share or the capital he put in. Hold 10 percent of the firm and you're still liable for 100 percent of its debt. The deed can split losses between the partners however they like, but that split only works among them. A creditor isn't bound by it.
Firm, LLP, company or proprietorship: whose assets can you actually reach?
| What the debtor is | Separate legal person? | Can you reach personal assets for its trade debts? | How the suit is framed |
|---|---|---|---|
| Partnership firm (Partnership Act, 1932) | No | Yes, every partner's, jointly and severally, as long as they're properly served and Order XXI Rule 50 is met | In the firm's name under Order XXX, with the partners named |
| Limited liability partnership (LLP Act, 2008) | Yes | Usually not. Only a partner who acted to defraud creditors faces unlimited liability | In the LLP's own name, the same way as a company |
| Private limited company (Companies Act, 2013) | Yes | Usually not, apart from guarantors and cases where the court lifts the veil | In the company's own name |
| Proprietorship firm | No. It's only a trade name for one person | Yes, everything the proprietor owns | Against the proprietor, or in the trade name under Order XXX Rule 10 |
| Hindu undivided family business | No | Joint family property and the karta's own property. Other members, generally only up to their share | In the business name under Order XXX Rule 10, or against the karta |
The sections that decide which partners are on the hook
Section 28, Partnership Act: holding out
Anyone who calls himself a partner, or knowingly lets others call him one, is liable as a partner to whoever gave the firm credit because of it. We see this with relatives all the time. If a cousin's name sits on the letterhead as 'Partner' and you relied on that, he can't turn round later and say he never was one.
Section 30, Partnership Act: minors
A minor can be admitted to the benefits of a partnership, but he isn't personally liable. You can only reach his share in the firm's property. Once he turns major he gets six months to give public notice that he's out. If he doesn't, he becomes a full partner, personal liability and all.
Sections 31(2) and 32(3), Partnership Act: incoming and retiring partners
A new partner isn't liable for what the firm did before he joined, unless he agrees to be. A retiring partner is another story. He stays liable to outsiders for the firm's acts after he leaves, until public notice of his retirement is given. The exception is a person who dealt with the firm without ever knowing he'd been a partner.
Sections 35 and 45, Partnership Act: death and dissolution
A dead partner's estate isn't liable for what the firm does after his death. After a dissolution, partners stay liable for anything that would have been an act of the firm until public notice of the dissolution is given. 'Public notice' has a fixed meaning under Section 72. It's notice in the Official Gazette and a local newspaper, and for a registered firm, to the Registrar of Firms as well.
Section 69, Partnership Act: registration
An unregistered firm can't sue an outsider to enforce a contract. The bar cuts one way only. It stops suits by the firm, not suits against it, so you can sue an unregistered firm and its partners like anyone else.
Retired, new, sleeping and minor partners: who's caught?
'I retired' is the line you'll hear most. The partner says he left in 2024, so a 2025 debt can't be his. Ask him for the public notice. If the firm never published notice of his retirement under Section 72, Section 32(3) keeps him liable to outsiders for what the firm did afterwards. His only way out is showing you dealt with the firm without knowing he'd ever been a partner. Across Delhi NCR, plenty of small firms change partners by signing a fresh deed and telling nobody except the bank. That leaves the old partner badly exposed. He rarely realises it until our notice reaches his house.
Debts from before he retired are his anyway. Notice or no notice. Section 25 fixes liability for acts done while he was a partner, and leaving later doesn't undo that. His retirement deed may say the continuing partners will indemnify him. Fine, but that's a private deal among them. It won't release him from you unless you agreed to let him go.
A partner who came in after your supplies began isn't liable for the earlier invoices. He's liable for the later ones. Sleeping partners get no special treatment. The man who put money in and never once sat at the shop is a partner like the rest and fully liable, whatever he calls himself. The real exception is a minor admitted to the benefits of the firm. You can reach his share in the firm's property, but not his own assets.
How do you find out who the partners are?
Start with your own files. Firms put partners' names on letterheads, visiting cards and quotations, and on the account-opening form you probably took when you first gave them credit. Every cheque the firm gave you was signed by a partner. Bank return memos sometimes name the signatory too. And if they ever handed over a copy of the partnership deed for credit approval, dig it out. Nothing beats it.
Then go to the public record. A registered firm's particulars, with the names and addresses of its partners and any changes reported later, sit with the state's Registrar of Firms. In Delhi that's the Registrar of Firms under the Delhi government. Uttar Pradesh has the Registrar of Firms, Societies and Chits, and Haryana the Registrar of Firms and Societies. You can apply to any of them for certified copies. The firm's GST registration shows its legal name, its constitution as a partnership and its principal place of business. That's handy for confirming what you're dealing with. It usually won't give you the partners, though.
Still missing someone? File anyway. The proviso to Order XXX Rule 1 lets you ask the court for a statement of the names and addresses of the persons who were partners when the cause of action arose. Order XXX Rule 6 also makes partners appear in their own names, which puts them on record. When Advocate B.K. Singh drafts a plaint against a firm, he names every partner the documents point to, including the ones who say they've retired, and asks that each be served individually as a partner. The reason is practical. A partner you leave out at the start is far harder to drag into execution later.
Recovering money from a partnership firm, one step at a time
These steps assume a commercial claim of Rs 3 lakh or more. Smaller claims go to the ordinary civil court instead. The logic about partners doesn't change.
Work out the amount and the dates
Draw up a statement of account listing each invoice or loan disbursement, when it fell due and what came in against it. Get the dates right. They decide limitation, and they decide which partners were in the firm when each debt arose.
Pin down the partners
Pull together the deed, letterheads, cheques and the Registrar of Firms record. Note anyone who claims he's retired, and check whether any public notice of retirement or dissolution actually went out.
Send a legal notice to the firm and every partner
Send it to the firm at its place of business and to each partner at home, and say plainly that they're jointly and severally liable. Our guide on drafting a legal notice for recovery of money covers the wording. If a partner writes back admitting the debt, keep that letter safe. It's a written acknowledgment under Section 18 of the Limitation Act.
Apply for Section 12A mediation
Unless you need urgent interim relief, you must try pre-institution mediation under Section 12A of the Commercial Courts Act, 2015 before filing. Make the firm and each partner parties. A settlement reached there has the status of an arbitral award.
File in the firm's name and list the partners
Sue the firm under Order XXX and add each partner as a defendant. Otherwise the plaint looks like any money recovery suit. If your claim rests on a written contract, invoices the firm acknowledged or a cheque, think about a summary suit under Order XXXVII. There the defendants need the court's leave before they can defend at all.
Serve every partner as a partner
Under Order XXX Rule 3, serving one partner, or whoever manages the principal place of business, is good service on the firm. Rule 5 says the person served must be told in writing whether he's served as a partner or as manager. Don't settle for the minimum. Ask the court to serve each partner individually, as a partner.
Get the decree and execute it
Once you have the decree, go after the firm's property. Under Order XXI Rule 50 you can also go after partners who appeared, admitted being partners, or were served as partners and stayed away. Anyone else needs the executing court's leave first.
Getting at the partners' own assets after the decree
Order XXI Rule 50 of the Code decides who can be made to pay a decree against a firm. Execution can go against any partnership property. It can also go against anyone who appeared in his own name under Order XXX Rule 6 or 7, anyone who admitted in his pleadings that he's a partner, anyone the court held to be a partner, and anyone individually served as a partner who didn't turn up. Against those people the decree reaches their houses, bank accounts, cars and other personal property, through the usual routes of execution of decree.
Partners outside those groups are harder. Say one's name only came out after the decree. Rule 50(2) makes you apply to the executing court for leave. If he accepts he was a partner, leave can be granted without much fuss. If he denies it, the court has to try his liability inside the execution, and that eats months. That's exactly why we fuss over naming and serving partners at the start.
Section 49 of the Partnership Act sets a pecking order between creditors. When a partner has personal creditors as well as the firm's creditors, the firm's property goes first towards the firm's debts. His separate property goes first towards his separate debts. Whatever's left is open to the other set. In most commercial recoveries this hardly comes up. It does when a partner is deep in personal debt and several creditors are chasing the same flat.
The firm's been dissolved, or a partner has died. What then?
Dissolution doesn't wipe out what the firm owes. Partners stay liable for debts from before the dissolution and, until public notice of it is given under Section 45, for anything that would have been an act of the firm. Section 47 keeps each partner's authority alive to wind up the firm's affairs, and paying its debts is part of that. Watch one procedural trap. If you knew the firm had dissolved before you filed, Order XXX Rule 3 needs summons served on every person in India you want to hold liable. Service at the old shop won't do.
Death works differently. A partner's estate isn't liable for what the firm does after he dies, but it stays liable for firm debts from his lifetime. Order XXX Rule 4 says you don't need to bring his legal representatives on record to carry on against the firm. You can still go after his estate in their hands. They're liable only up to what they inherited, though, not out of their own pockets. The surviving partners stay liable in full.
Sometimes the firm has just stopped trading and the partners have scattered. Our guide on recovering money from a debtor who has shut his business covers tracing assets and getting the timing right. The point specific to firms is short. Closing down doesn't reduce partner liability one bit. A shut firm with solvent partners is often a better bet than a running company with nothing in it.
How long it takes and what it costs
| Stage | Usual time | Costs other than lawyers' fees |
|---|---|---|
| Registrar of Firms record and other searches | 1 to 3 weeks, depending on the state office | A small fee for inspection and certified copies. Check what it is now |
| Legal notice to the firm and partners | 15 to 30 days for replies | Courier and postage for each addressee |
| Section 12A mediation | Up to 3 months, plus 2 more if both sides agree | A modest fee fixed by the legal services authority. Check the current figure |
| Filing, and serving each partner | 1 to 3 months, longer if partners dodge service | Ad valorem court fee on the claim under the state schedule (check the current one), plus process fee per defendant |
| Leave to defend (summary suit) or written statement (regular suit) | Leave: 10 days after summons for judgment. Written statement: 30 days, and never more than 120 days | No extra court fee |
| Trial and judgment if the suit is fought | Often 18 months to 3 years in Delhi NCR | Certified copies and witness expenses |
| Execution against partners | Ordinarily to be decided within six months under the Supreme Court's 2021 directions. Longer if a partner disputes liability under Rule 50(2) | Process fees, attachment and auction costs |
Which court will hear it?
The debtor being a firm changes nothing here. A supplier's claim for the price of goods or services is a commercial dispute under Section 2(1)(c) of the Commercial Courts Act, 2015. Once its specified value reaches Rs 3 lakh, it goes to a commercial court. Delhi splits these suits by value at Rs 2 crore (check the current limit). Below that line they're heard in the district courts, at Tis Hazari, Saket, Karkardooma, Rohini, Dwarka and the rest. Above it, the Delhi High Court. The NCR districts of Uttar Pradesh and Haryana send every such suit to the district's designated Commercial Court. Under Rs 3 lakh, it's an ordinary civil suit.
On place, Section 20 of the Code lets you file where the firm carries on business, or where the cause of action arose wholly or in part, say where the goods were delivered or payment was due. A partner living in Jaipur doesn't change that. The suit is against the firm. Our page on which commercial court will hear your case goes through the rules in more detail.
Papers to pull together before filing
- Invoices, delivery challans, e-way bills, and goods receipts signed by someone at the firm
- Purchase orders and any supply or dealership agreement. Note which partner signed
- Your ledger, any balance confirmations, and the record of part payments
- Cheques the firm gave you, and the bank return memo for any that bounced
- Anything that names the partners, whether it's a letterhead, a visiting card, a quotation or an email
- The partnership deed, if they ever gave you a copy
- A certified copy of the Registrar of Firms record, plus any notice of change or dissolution
- WhatsApp chats and emails where they admit the dues, with a Section 63 Bharatiya Sakshya Adhiniyam certificate
- Each partner's home address. You'll need it for summons now and execution later
A made-up example: the auto parts supplier and the 'retired' brother
This is an invented example, not a real client. A Faridabad maker of auto parts supplies brake components to a distribution firm in Kashmere Gate, Delhi. The firm is a partnership of three brothers. Supplies go out on 60-day credit, the account is never quite cleared, and by March 2026 the firm owes Rs 32 lakh. One brother says he retired in mid-2025. The second has moved to Jaipur. The third still runs the shop, says business is bad and offers Rs 2 lakh a month.
The supplier's books show Rs 14 lakh of the dues came from supplies before mid-2025 and Rs 18 lakh from supplies after. The Registrar of Firms record still shows all three brothers. Nobody can produce a Gazette or newspaper notice of the retirement. On those facts, all three are liable for the earlier Rs 14 lakh under Section 25. The 'retired' brother is arguably liable for the later Rs 18 lakh too, under Section 32(3), since no public notice went out and the supplier knew him as a partner.
The supplier sends a legal notice to the firm and to each brother at home, the Jaipur one included, and applies for mediation. At the mediation the 'retired' brother starts worrying about his own house in Faridabad. He leans on the other two to settle. They agree on Rs 27 lakh in six instalments, with a consent decree clause and all three brothers signing personally. If the supplier had sued only the firm name and served only the shop, nobody would have felt that pressure.
Where creditors go wrong with partnership firms
- Suing only the firm name. The suit is valid. But if no partner was named or served individually, reaching anyone's personal assets needs a separate leave application, and maybe a mini-trial inside execution.
- Believing the retirement story. Before you drop a partner from the claim, ask to see the public notice and check the Registrar's record yourself.
- Mixing up a partnership and an LLP. 'XYZ Associates LLP' is a limited liability partnership, and its partners usually aren't personally liable. Look up the LLPIN on the MCA portal before anything gets drafted.
- Letting small instalments drift in for months. A part payment restarts limitation under Section 19 of the Limitation Act only if it's acknowledged in the payer's handwriting or in a signed writing. Keep proof of every payment and whose account it came from.
- Letting one partner off in a side deal. Section 44 of the Contract Act says releasing one joint promisor doesn't discharge the others. A loosely worded settlement, though, can be read as a new arrangement that replaced the old debt. You don't want that argument.
Settling with one partner without letting the others go
Partners rarely agree on what to do about a creditor. One wants to settle. Another wants to fight. The third has switched off his phone. You can settle with the willing one and keep your claim against the rest, if the paper is drafted for it. It should say the money comes from that partner towards the joint debt, that the balance is still owed by the firm and the other partners, and that he alone is released, if at all, and only once he's paid every instalment.
Get security for the instalments. Post-dated cheques from the firm's account work, or a personal guarantee from whichever partner owns the most. If the deal is struck in mediation or in court, have it recorded as a settlement or a consent decree, so a default can go straight to execution. Our guide on a payment settlement agreement that's easy to enforce goes clause by clause. Advocate B.K. Singh insists that each partner sign the settlement in his own name as well as for the firm. A signature only 'for the firm' leaves room to argue later. Someone usually does.
If settlement falls through, you're back to the ordinary money recovery suit against the firm and partners, and then execution against their personal assets. It's a different case altogether if you were a partner yourself and you're owed your share. That's a claim for accounts, which our page on partnership disputes deals with.
Want your invoices, the firm's papers and any retirement or dissolution documents looked at before you decide whom to sue? Send them to Advocate B.K. Singh's team through the contact page.
Frequently asked questions
Can I recover the whole amount from just one partner?
Yes. Section 25 of the Partnership Act makes partners jointly and severally liable, so you can collect the entire decree from any one partner bound by it. He can claim contribution from the others under their deed. That's between them.
Does it matter if the firm isn't registered?
Not for suing it. Section 69 of the Partnership Act stops an unregistered firm from suing outsiders on its contracts. Nothing stops you suing an unregistered firm and its partners. Registration only makes the partners easier to find.
Can a partner's wife or family be made to pay the firm's debts?
No, unless they're partners themselves, let themselves be held out as partners, or are holding property that's really the partner's. If he moved property to relatives to defeat creditors, you can challenge it as a fraudulent transfer under Section 53 of the Transfer of Property Act, 1882.
Is an LLP partner personally liable the way a firm's partner is?
Usually not. An LLP is a separate legal entity under the LLP Act, 2008, and being a partner doesn't by itself make someone liable for its obligations. Liability turns unlimited only for a partner who acted to defraud creditors or for a fraudulent purpose.
What if one partner lives in another state?
You still sue the firm where it does business or where the cause of action arose, and name him as a defendant. The court can serve him at home, and in commercial suits that includes courier and email. Later the decree can be transferred to a court in his state for execution.
Can I file a cheque bounce case against all the partners?
A complaint under Section 138 of the NI Act goes against the firm and, under Section 141, against partners who were in charge of and responsible for its business when the cheque bounced. A partner who only invested and had no role may be dropped. The criminal case runs alongside your civil suit.
How long do I have to sue a partnership firm?
Usually three years from when payment fell due, under the Limitation Act, 1963, like any money claim. If a partner signs a written acknowledgment, or a part payment comes in, before the three years run out, you get a fresh three years.
Can the firm's bank account be frozen before the case is decided?
It can, but courts don't do it lightly. You have to satisfy the court that the firm or the partners are about to remove or dispose of property to defeat a decree. Attachment before judgment under Order XXXVIII Rule 5 needs specific evidence, like stock being sold off cheap or the shop being emptied.
Advocate B.K. Singh
Founder of B.K. Singh & Associates. MCA, LL.B., LL.M. More than twenty years in practice before the Supreme Court, the Delhi High Court, district and commercial courts in Delhi NCR, and tribunals.
This guide explains the law in general terms and is not legal advice. For advice on your own papers, contact the team.