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Section 464: Prohibition of association or partnership of persons exceeding certain number

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Section 463 All 470 Sections of Companies Act Section 465
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Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 464

Section 464 prohibits the formation of any association or partnership consisting of more than the prescribed number of persons (presently 50, maximum limit 100) for commercial gain unless registered as a company under the Act or formed pursuant to another statute.

  • Numerical Cap on Unincorporated Associations: Strictly prohibits any unincorporated association or partnership exceeding 50 members (statutory ceiling up to 100) from carrying on business for the acquisition of gain.
  • Statutory Exceptions: Exempts Hindu undivided families (HUFs) carrying on business, and professional partnerships formed by chartered accountants, advocates, or company secretaries governed by special statutory enactments.
  • Strict Penal Sanctions and Personal Liability: Contravention renders the association an illegal entity, rendering every member personally liable for all contractual debts and punishable with a fine extending up to one lakh rupees.
Key Landmark Precedents:
  • Badri Prasad v. Nagarmal, AIR 1959 SC 559: The Supreme Court held that an unregistered association consisting of more than the statutory limit of persons is an illegal association; no suit can be maintained by or against such association to enforce its contracts or seek partnership dissolution.
  • Senaji Kapurchand v. Pannaji Devichand, AIR 1930 PC 300: Affirmed that contracts entered into by an illegal association exceeding the statutory membership ceiling are unenforceable in a court of law.
  • Greenberg v. Cooperstein, [1926] Ch 657: Held that while an illegal association cannot sue to enforce commercial contracts, members may maintain an action against fund administrators for an account of money subscribed and return of unapplied funds.
  • Kumaraswami Chettiar v. Chinna Gounder, AIR 1951 Mad 579: Held that members of an illegal partnership are personally liable to third-party creditors who were unaware of the illegal character of the association.
Courtroom Practice & Strategic Litigation Guidance:

When defending against commercial claims instituted by multi-member syndicates or unregistered chit groups exceeding 50 members, raise a preliminary plea under Section 464; the syndicate is an illegal association under Badri Prasad, and its suit is barred ab initio for lack of legal capacity.

Section 463 All 470 Sections of Companies Act Section 465