Open Access Research Article
INDIAN PARTNERSHIP ACT-1932
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Article Details
INDIAN
PARTNERSHIP ACT-1932
AUTHORED BY - MR SUBODH KUMAR SARKAR
Class -LLM Ist YEAR
SEMESTER 2
ROLL NO. 57
Division -A
PROGRESSIVE EDUCATION SOCIETY’S
MODERN LAW COLLEGE, PUNE
SAVITRIBAI PHULE PUNE UNIVERSITY,
PUNE 411007
(2023-2024)
Chapter -I
Abstract
PARTNERSHIP Act 1932
Abstract
PARTNERSHIP Act 1932
Abstract: The Indian Partnership Act,1932is
playing a pivotal role in Indian society as because it is find that one person
is not able to perform all the functions all the job alone;he need partners to
execute the objected goal .This partner/ partners helps by sharing responsibility
by dint of all respect such as resources, labor, stillness, ideas , many more
to gain the profit from their agreement. We shall try to definition of partner. type of partner,
capacity to become a partner partnership deed, few sc
Introduction:
The Indian Partnership Act 1932
defines a partnership as a relation between two or more persons who agrees to
share the profits of a business run by them all or one or more persons acting
for all. Relation between partners means partnership. It arises by an
agreement. In this -Act, unless there is anything repugnant in the subject or
context -
An " act of a firm" means
any act or omission by all the partners, or by any partner or agent of the firm
which gives rise to a right enforceable by or against the firm":"
business includes every trade; occupation and profession. 'Prescribed"
means prescribed by rules made under this Act" "Thirdly party "
used in relation to a firm or to a partner therein means any person who is not
a partner in the firms" and expression used but not defined in this Act
and defined in the Indian[1]
Application of provisions of Act 9 of 1872 -
The unrepealed provisions of the Indian contract Act, 1872, save in so far as
they are inconsistent with the express provision of this act, shall continue to
apply to firm Agreement creates such relationship. Agreement may be written or
by understanding in them or by conduct of partners. Written agreement is called
Partnership Deed .Partners collectively called a firm .
Essential elements of Partnership:
1.Association of two more persons. Minimum number member is 2,maximum number 50.
2) Carrying on business: Partnership
can be formed only for the purpose of some business.
3) Agreement: Partnership originates
from an agreement/contract between person.
4)Sharing of profits : (a) Sharing
the profits of business is the essence of partnership but it cannot be the
conclusive evidence as to existence of partnership.
(b) Sharing of profits implies
sharing of loses as well , unless agreed otherwise.
© Ratio in which profits and losses
will be shared in the base of agreement amongst them. p
Mutual Agency :-
(a) A partner is both an agent
and principal.
(b) Partner can, by his acts,
bind other partners and is in turn bound by acts of other partners.
Chapter II
Definitions of terms and Explanation:
" Partnership",
"partner", firm" and "firm name"- "Partnership"
is the relation between persons who have agreed to share the profits of a
business carried on by all or any of them acting for all. Persons who have
entered into partnership with one another are called individually "
partners" and collectively " a firm" , and the name under which
their business is carried on is called the " firm name".
-Sec.4- Partnership is an association
of persons carrying business & in law the firm name is compendious method
of describing partners-Deoha F.Guzder
Bombay Vs C.I.T. Air, 1955 SC74.
Sec5- Partnership not created by
status- The relation of partnership arises from contract and not from status : and,
in particular, the members of a Hindu undivided family carrying on a family
business as such, or a Burmese Buddhist husband and wife carrying on business
as such, are not partners in such business.
6. Mode of determining extended of
partnership - In determining whether a
group of persons is or is not a firm, or whether a person is or is not partner
in a firm, regard shall be had to the real relation between the parties, as
shown by all relevant facts taken together
7. Partnership at will - Where no
provision is made by contract between the partners for the duration of their
partnership, or for the determination of their partnership, the partnership is
" Partnership at will"
8. Particular partnership - A person
may become a partner with another person in particular adventures or
undertaking[2]
RELATIONS OF PARTNERS TO ONE ANOTHER
9 General Duties of partners-
Partners are bound to carry on the business of the firm to the greatest common
advantage, to be just and faithful to each other, and to render true accounts
and full information of all things affecting the firm to any partner or his
legal representative.
-sec.9- Sleeping partner can file a
suit for rendition of account - SitaRam vs. Radha Rai, AIR 1968 SC 534[3].
Duty to indemnify for loss caused by
fraud- Every partner shall indemnify the firm for, any loss caused to it by his
fraud in the conduct of the business of the firm.
Determination of rights and duties of
partners by contract between the partners: (1) Subject to the provisions of
this Act, themutual rights and duties of the partners of a firm may be
determined by contract between the partners, and such contract may be expressed
or may be implied by a course of dealing. Such contract may be varied by
consent of all the partners, and such consent may be expressed or may be
implied by a course of dealing.
2) Agreements in restraints of trade-
Notwithstanding anything contained in Sec. 27 of the Indian Contract Act, 187, such
contracts may provide that a partner shall not carry on any business other than
that of the firm while he is a partner. The conduct of the business- Subject to
contract between the partners-Every partner has a right to take part in the
conduct of the business. Every partner is bound to attend diligently to his
duties in the conduct of the business. any difference arising as to ordinary
matters connected with the business may be decided by a majority of the partners,
and every partner shall have the right to express his opinion before the matter
is decided, but no change may be made in the nature of the business without any
consent of all the partners and every partner has a right to have access to and
to inspect and copy any of the books of the firm.
Chapter III
Mutual rights and liabilities -
Subject to contract between the
partners -
a) a partner is not entitled to
receive remuneration for taking part in the conduct of the business; The
partners are entitled to share equally in the profits earned, and shall
contribute equally to the losses sustained by the firm. Where a partner is
entitled to interest on the capital subscribed by him such interest shall be
payable only out of profits .a partner making, for the purposes of the
business, any payment or advance beyond the amount of capital he has agreed to
subscribe, is entitled to interest thereon at the rate of six per cent, per
annum The firm shall indemnify a partner in respect of payments
made and liabilities incurred by him.
i) In the ordinary and proper conduct
of the business, and
fi) In doing such act, in an
emergency, for the purpose of protecting the firm from loss as would
be done by a person of ordinary
prudence, in his own case, under similar circumstances and
a partner shall indemnify the firm
for any loss caused to it by his willful neglect in the conduct of the business
of the firm.
Sec 13- All the partners are entitled
& liable for equal share in loss &profit in absence of any agreement.
Chapter -IV
The Property of the Firm-
Subject to contract between the partners, the
property of the firm includes all property and rights and interests in property
originally brought into the stock of the firm, or acquired, by purchase or
otherwise, by or for the firm, or for the purposes and in the course of the
business of the firm; and includes also the goodwill of the business.
Unless the contrary intention
appears, property and rights and interests in property acquired with money belonging
to the firm are deemed to have been acquired for the firm Partner to decide: the
partners, by an ,by an agreement, are free to determine as to what shall be the
property of the firm and what shall be treated as separate property of one or
more of the partners[4].
Factors for consideration: when there is no such agreement, to ascertain
property belongs to the firm or not ,the following shall be considered:-
(a)source from which the property had
been acquired,
(b)Purpose for which the property was
acquired, and
© Manner in which such property has
been dealt with.
Sec 14 of Partnership Act1932: When
there is no contract to to the contrary, property of the firm include[5]s –
(a) All properties, rights and interests brought
into the stock of the firm,
(b) Property acquired by purchase or
otherwise by or for the firm,
(c) Property acquired for the purpose and
in the course of business of the firm,
(d) Property ,rights and interest in the
property with money belong to the firm,and
(e) Goodwill of the firm’s business.
Section-15 Partner’s Property-whether
Firm’s ?
When a partner’s property is used for
firm’s business, it does not automatically becomes the firm’s .In case where
the partner’s have an intention to make it as firm’s property, it can made so.
Application of the property of the
firm –
Subject to contract between the
partners, the property of the firm shall be held and usedby the partners
exclusively for the purposes of the business.
Firm’s liability for the acts of a
Partner :-
a) Implied authority -Sec-19;The act of
a partner which is done to carry in usual way that effect binds the firm.
b) Admission by a partner, Sec-21; In
the ordinary course of business ,where a partner makes admission into firm ,as
per terms and condition ,representation of firm ,the firms are liable.
c) Acting with intent to bind the firm, Sec-22;
Any act of a partner done in the firm’s name and intent to bind it, shall bind
the firm.
d) Wrongful act of partners,Sec-26; A
wrongful actor omission on the part of a partner which he has done it in the
ordinary course of the firm’s business with the authority of partners .The firm
is liable to extent of erring partner.
e) Misapplication by partners,Sec-27; A
partner ,acting within his apparent authority receives money or property ,he
cannot account for his personal name, Firm can make good that amount.
Chapter-V
“Notice to an acting Partner is the
notice to the Firm”[6].
Ø Notice to an acting Partner, Sec.21;Notice
to a partner, generally acts in the business of the, of any matter relating to
affairs of Firm operates as notice to as notice to the firm.
Ø Agency principle: A notice to an agent
to his principal ,notice to a partner is equivalent to notice rest of the
partners of the firm.
Ø Conditions: (a) This notice must be
actual and not constructive (b)It must be received by a Woking partner and not
by a Dormant or Sleeping partner (c) It must relate to the firm’s business.
Ø Notice to an agent of a firm :It
means that also constitute a notice to the firm.
Ø Exception,sec-24; In case of fraud on
the firm committed by or with consent of partner, a separate notice has to be
given to the firm.
Public Notice
Section 72 speak about the mode of giving
public notice and given following reasons when a notice is being served as :
(a) Retirement of partner, or
(b) Expulsion of partner or
(c) Dissolution of firm, or
(d) Minor’s exercise of option on
attainment of majority, to become a partner or cease relationship with the
firm.
Method adopted for
serving Public Notice:
A copy of the notice is sent to the
Registrar of the firm.
The notice is to be published in (I) the Official Gazette and
(II) in one vernacular circulating in the district where the firm’s principal
place of business situated newspaper.
Another situation sending Public Notice,
since the firm is not registered.; the notice to be published in (i)the
Official Gazette and (ii)in one vernacular newspaper circulating in the
district where the Firm’s principal place of business situated.
Copy of notice need not to be sent to
registrar since the firm is not registered
Chapter-VI
Minors admitted to the benefits of
partnership[7] –
(1) A person who is a minor according
to the law to which he is subject may not be a partner in a firm, but with the
consent of all the partners for the time being, he may be admitted to the
benefits of partnership .Such minor has a right to such share of the property
and of the profits of the firm as may be agreed upon, and he may have access to
and inspect and copy any of the accounts of the firm. Such minors share is
liable for the acts of the firm, but the minor is not personally liable for any
such act. Such minor may not sue the partners for an account or payment of his
share of the property or profits of the firm, -save when severing
his connection with the firm, and in
such case the amount of his share shall be determined by a valuation made as
far as possible in accordance with the rules contained in Sec. 48.
Provided that all the partners acting
together or any partner entitled to dissolve the firm upon notice to other
partners may elect in such suit to dissolve the firm , and thereupon the Court shall proceed with the
suit as one for dissolution and for settling accounts between the partners, and
the amount of the share of the minor shall be determined along with the shares
of the partners.
(5) At any time within six months of
his attaining majority, or of his obtaining knowledge that he had been admitted
to the benefits of partnership, whichever date is later, such person may give
public notice that he has elected to become or that he has elected not to become
a partner in the firm, and such notice shall determine his position as regards
the firm. Provided that - if he fails to give such notice, he shall become a partner
in the firm on the expiry of the said six months.
(6) Where any person has been
admitted as a minor to the benefits of partnership in a firm, the burden of
proving the fact that such person had no knowledge of such admission until a
particular date after the expiry of six months of his attaining majority shall
lie on the persons
asserting that fact.
7) Where such person becomes a
partner -his rights and liabilities as a minor continue up to the date on which
he becomes a partner, but he also becomes personally, liable to third parties
for all acts of the firm done since he was admitted to the benefits of
partnership and .his share in the property and profits of the firm shall be the
share to which he was entitled as a minor. Where such person elects not to
become a partner. his rights and liabilities shall continue to be those of a minor
under this section up to the date on which he gives public notice .his share
shall not be liable for any acts of the firm done after the date of the notice,
and he shall be entitled to sue the partners for his share of the property and
profits in accordance with sub section (4)
9) Nothing in sub sections (7) and
(8) shall effect then provisions of Sec. 28. In minors admitted to the benefits
of partnership - (1) A person who is a minor according to the law to which he
is subject may not be a partner in a firm, but with the consent of all the
partners for the time being, he may be admitted to the benefits of partnership.
Such minor has a right to such share of the property and of the profits of the
firm as may be agreed upon, an he may have access to and inspect and copy any
of the accounts of the firm .Such minors share is liable for the acts of the
firm, but the minor is not personally liable for any such act .Such minor may
not sue the partners for an account or payment of his share of the property or
profits of the firm, -save when severing his connection with the firm, and in
such case the amount of his share shall be determined by a valuation made as
far as possible in accordance with the rules contained in Sec. 48.
Chapter-VII
Reconstitution of Partnership Firm[8]:
Reconstitution of firm takes place in
following method as given here to: -
a) Admission, b) Retirement, c) Expulsion,
d)Insolvency e)Death and f) transfer of interest
A-Section 31 speak of Admission:
i)A person can be
admitted into already existing firm, only, with the consent of all existing
partners.
ii) Such new partner is
not liable for any act done by the firm before his admission ,where he specifically
agrees bear the past liabilities, he will be liable for that.
iii) Third party can not
hold him liable since there is no privity of contract between the new partner and
the creditors,
B_ Retirement, Sec-32: modes o
retirement: partner may retire-
i)
With
other partner’s consent
ii)
In
accordance with an express agreement
iii)
By given written notice of his intention to
retire in a partnership at will.
C -Expulsion, sec-33;A partner cannot
be expelled from a firm a firm by majority
of partners except in good faith of powers conferred by the contract between
the partner. When a partner is otherwise expelled than in good faith , it is
null and void .He continues to be a partner, and can (a) claim reinstatement (b) sue for the refund his share and of
capital and profits of the firm.
Chapter-VIII; Dissolution[9].
There are two modes of dissolutions those
are(a) without order of the Court [ Sec 40 -43] and (b)by order of the Court [
sec-44].
(a) Without order of the Court[ Sec 40
-43 ] is given below as:-
i)Mutual agreement between partners
ii)Compulsory dissolution and it has
two phenomenon one is insolvency of all or all but one partner second is
business of the firm becoming unlawful .
IV) on happening of certain contingency and
by notice.
and (b)by order of the Court [
sec-44]; those are
i)
Insanity:
If a partner has become unsound mind firm gets dissolved by Court order.
ii)
Permanent incapacity: a partner is incapable of
performing his duty as a partner.
iii)
Misconduct: If a partner is found guilty of
conduct which is likely to affect the carrying of business of the firm
prejudicially. Application to Court shall made by one who is not guilty of
misconduct that is other partners
iv)
Persistent
Breach of contract: The Court may dissolve the firm if-(a) partner willfully and
persistently commits breach of agreement as to management or (b) Partner conduct himself in a such a
way it is nit reasonable practice for other partners to carry the business.in
the partnership with him.
v)
Transfer
of interest: The court may order dissolution when a partner has in any way (a)Transferred the whole of his interest in a firm to a third
party , or (b) allowed his share to be charged on account of decree passed by a court towards payment of liabilities
of that partnership, or allowed to sold in the recovery of arrears of land
revenue.
vi)
Perpetual
loss: The firm has been continuously Suffering losses. Nochances of turn
around.
vii)
Any
other just equitable ground: If, on any other ground, it can be proved to the satisfaction
of court that it is just an equitable to dissolve the firm, the court may order
dissolution. Sufficient reasons include – (a) Deadlock in management, (b) Disappearance
of substratum(c) Partners not on speaking term.
Chapter-VIII
Case Law: Garner Vs Murray[10].
This above case law in the year of
1904, where Garner (G) ,Murray (M) and W
were partners of the firm . their profit sharing was equal but they contributed
capital in unequal shares. On dissolution of the firm the assets were
insufficient to pay the partners capital after paying the creditors and
advances of the partners W was insolvent and could not pay anything G
contributed more capital than M The question was how much each solvent partner G
and M should contribute and in what ratio to repay the capital of the firm.
Ø Decision: It was held that the solvent
partners should first contribute the deficiency of the capital in cash and
then, assets available to be applied in paying the partners rateable what is
due to them for their capital contribution.
Ø In other word, the deficiencies in
the capital of the insolvent partner are distributed among the solvent partners
in ratio of their capital
Goodwill of Partners:
Good will is not defined in the
Indian Partnership Act1932.It is a thing, which is very difficult to defined. It
may be said as advantage enjoyed any commercial under taking beyond its capital,
stock, fund or property employed in the firm.
Goodwill is the advantage enjoyed by
the firm for the reputation of the firm or partners built upby years of honest
work. As provided in section 14,it is the property of the firm unless contrary
is proved . It is an intangible asset in substantial form nebulas( without any
definite edges) in character and denotes benefits arising from connection and
reputation of the firm.It is that value of reputation of the firm which
contributes to the profitability of the firm.
Treatment[11]:
Though it is an intangible asset ,it has value ; unless otherwise agreed in the
partnership agreement, upon dissolution it must be sold and the proceed of sale
distributed as capital.
Right of Buyer and Seller on Sales of
Goodwill:
(a) Buyers Right: On the sale of goodwill
the buyer may, unless the term of contract of sale provide otherwise (i)
represents himself in continuing the business, (ii)maintain his exclusive rights
to use of the firm name.
Sellers Right: The vendors may enter
into a competition with purchaser unless he is prevented by a valid restraint
clause in the contract of sale.
Chapter-IX
Registration of Partnership Firm:
Registration of Partnership firm, it
is given in sec 56 to 59 of Indian Partnership Act1932 .
Section 57: is appointment of registrar,
the State government appoints the Registrar of Firms for the purpose of the Act,
it also defines the areas within which they shall exercise their power and
perform their duties.
Sec -56, firms get exempted from the registration
provision, and State government shall grant such exemption by way of
notification in Official Gazette.
Sec-58 to 59 is the procedure for Registration of
partnership firm, registration may be effected at any time during the continuance
of partnership. Generally where principal office of firm is located Registrar
of firms will do registration in that area.
Registration by Registrar If the
provisions of Sec-58 are duly complied with, the Registrar upon satisfaction of
the same shall record an entry of statement(application) in the Registrar of
the firms.
Cobnclusion:
Partnership is the backbone of Indian
economy, it has been generating employment in Indian society since ancient time.
It plays vital role to develop the country in all aspect. Although Indian partnership
Act denies HUF cannot form a partnership firm but the formation of partnership
has no limit and has many success are found in partnership firm. A partnership
is a sort of business origination in which owners are personally liable for the
company’s debt. A general partner manages the business on a daily basis in the organizations
that provides personal services such as legal firms , auditors and gardening
partnership, and Self Help group are popular organizational structure. To
revive partnership firm Government of India has brought Limited Liability Partnership
Act 2008 LLP Act-2008, which paved the way to bring betted scope and
opportunity for them. Itis pertinent to say government department’s official ,other
professional should come forward to educate them in technically, counselling in
different type of business.
Bibliography
Chapter-X
2)
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Article Information
INDIAN PARTNERSHIP ACT-1932
Authors: MR SUBODH KUMAR SARKAR
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/04/29
- Issue 7
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International Journal for Legal Research and Analysis
- Abbreviation IJLRA
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