e-StampNotary
The mistake this page exists to prevent
A partner leaves a firm. Somebody prepares an affidavit saying so, it is sworn before a notary, and everyone treats the matter as closed. Two years later a supplier sues on an old account, or a bank pursues an overdraft, and the retired partner discovers that as far as the outside world was concerned nothing ever changed. The affidavit was true, and it was useless, because it was never followed by the steps that make a retirement effective against people who dealt with the firm.
Retirement has an internal dimension - between the partners, governed by the deed and the settlement of accounts - and an external one, concerning people who dealt with the firm on the footing that you were a partner. The affidavit and the deed handle the first. Public notice and the correction of every public record are what address the second. Do not stop after the affidavit.
What has to happen, in order
- A retirement deed or a supplementary deed. This is the substantive document: the date of retirement, the settlement of the retiring partner's capital and share of profit, the treatment of goodwill, indemnities between the parties, and the reconstituted shares of the continuing partners.
- Public notice, in the manner ordinarily followed, so that persons dealing with the firm are put on notice of the change.
- The Registrar of Firms, Gujarat. Where the firm is registered, the change in constitution has to be intimated so that the register reflects the position.
- Banks. Operating mandates, signature authority, overdraft and guarantee arrangements. A retired partner who remains a guarantor on a facility is still a guarantor.
- Tax and other registrations. The constitution shown on the tax registration must be amended - see GST registration affidavit.
- Licences, tenders and empanelments held in the firm's name, and any premises or utility account standing in the retiring partner's name.
The affidavit accompanies these steps. It is what the bank, the registrar or the department reads when it wants the fact stated on oath by the person concerned.
The registration point behind all of this
Section 69 of the Indian Partnership Act, 1932 matters here. An unregistered firm cannot sue to enforce a contractual right against a third party, and a partner cannot sue the firm or the co-partners on the deed. Section 69(3) preserves suits for dissolution, for accounts of a dissolved firm and to realise the property of a dissolved firm. So a retiring partner from an unregistered firm who is owed his capital is in a materially weaker position than one leaving a registered firm - which is a reason to settle the accounts fully before signing anything, rather than accepting a promise.
Two affidavits, not one
It is often sensible to have the retiring partner and the continuing partners each depose. The retiring partner states the date of retirement, that the accounts have been settled, that no claim survives, and that he or she has no interest in the firm's assets, licences or bank accounts from that date. The continuing partners state that they have taken over the business, assumed the liabilities, and will indemnify the retiring partner against claims relating to the period after retirement. Each side then holds something.
What gets these rejected or disputed later
- Date of retirement in the affidavit not matching the date in the deed or in the accounts.
- Settlement described as complete when a sum remains outstanding.
- No mention of guarantees, securities or personal properties charged for the firm's borrowings.
- The firm's registered particulars never updated, so the register still shows the retired partner.
- Deceased partner's case treated as a retirement, when the position is one of succession - see legal heir affidavit.
The notarial act
Section 8(1)(e) of the Notaries Act, 1952 covers administering the oath and taking the affidavit, and section 8(2) requires the notary's signature and official seal. Rule 11(8) of the Notaries Rules, 1956 permits a notary to draw, attest and certify documents under the official seal. The seal proves the swearing, not the truth of the settlement recited in it.
Stamp duty on the affidavit as currently prescribed under the Gujarat Stamp Act, 1958 - confirmed at the counter. The deed itself is stamped separately according to its own character. The oath is capped at ₹35 under Rule 10(1) of the Notaries Rules, 1956.
What to bring
- The existing partnership deed and every supplementary deed
- Registration certificate of the firm and its Registrar of Firms particulars, if registered
- The retirement or supplementary deed, if already drafted
- Latest balance sheet or the settlement statement of the retiring partner's account
- Bank mandate, guarantee and security documents in the firm's name
- Tax and other registration certificates showing the current constitution
- Aadhaar and PAN of all partners, retiring and continuing