Indian Partnership Act
Indian Partnership Act
Indian Partnership Act
A lender advanced money to a contractor to enable him to contract with the third party and he
was allowed to receive 10% profit – there was no intention of partnership.
On death of partner, if there is sharing of profits with the widow or child of the deceased –
doesn’t itself make them partners
Seller of goodwill receives profit doesn’t become partner by itself. [Goodwill is the
reputation attached to a business]
Duties of partners
Rights of Partners
1. Sec 25 – relation of Partner with three parties – partners are jointly and severally
liable
2. Partner can be jointly or individually sued by third parties
3. Act done after the person ceases to be partner, then – not liable for that act except in
holding out.
1. Share in profits and also in property, but being a minor s/he will not be liable
2. Minors can ask for the record and inspect it
3. The minor cannot sue the partner for the share, minor can only sue only when the
share of profit is severed.
4. Read language of the section
5. Minor is incompetent, cannot become partner but maybe admitted to the benefits of
the firm with consent of all other partners.
6. Minor has right to receive agreed share from the property or profit.
7. He has right to inspect the documents
8. He cannot sue the partners for the payment of his share until he severes his connection
with the firm
9. If the firm is dissolved, the court shall value his share according to sec. 48
10. Minor’s share in property and profit is liable for the act of firm, but he is not
personally liable
11. On being major, within 6 months from the date of his majority or from the date he
firsts come to know that he has been admitted into the firm. He has to decide whether
he wants to remain in the firm or leave. If he fails to do so, he automatically becomes
partner after expiry of months.
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V IMPORTANT
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V IMPORTANT!
Section 48
1. Firm will not operate – by consent of the parties, by agreement [in accordance with
the contract]
2. Partnership at will – if there is no fixed date till when the partnership firm will exist,
then it will be considered as partnership at will. Even one partner can give notice and
dissolve the firm. – sec 7 and 43.
3. Compulsory dissolution – Sec. 41 – insolvency, unlawful business or if partnership is
pursued, business will become unlawful.
a. Exception – firm involved in multiple ventures, if one becomes unlawful that
will be severed and the other ventures will continue.
4. Dissolution by Court – Sec. 444
1. Read section
1. Subject to the other provisions of the act, if the partner has done anything in usual
way of business, then the firm is bound by that act
2. E.g., firm engaged in buying and selling of goods – it is usual to take goods on credit/
3. Usual way depends on the nature of business
4. Restriction on scope of authority are of two types:
a. Statutory restrictions
b. By partnership deed/ by agreement
5. Statutory restrictions are binding on every person contracting with the firm.
Restrictions imposed by partnership deed is not effective against the person who has
no knowledge of the agreement.
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Important section.
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Important section – will come in exam.
Mode No. 2 – Compulsory dissolution
Mode No. 3
1. Contingent dissolution
1. Insanity
a. When one of the partners has become of unsound mind then any partner
including the one who is insane may apply in the court for dissolution. [legal
insanity].
2. Permanent Incapacity [Mental, Physical]
a. White Well v. Arthur
i. The partner of a firm got paralytic attack and was permanently
incapable to conduct a business. This was a valid ground for
dissolution.
3. Misconduct
a. Essel v. Hayward
i. Misconduct of breach of trust by a partner which was harming
reputation of a firm was sufficient ground for dissolution.
b. Snow v. Miford
i. Partner committed adultery with several women in the same city where
the business was conducted. His wife left him.
ii. The co-partners applied for dissolution of the firm. It was rejected by
the Court – Personal misconduct is generally not a ground for
dissolution of the firm.
4. Persistent breach of agreement
5. Transfer of interest to third party by a partner
6. Perpetual loss in the business
7. Or any other ground which the court thinks just and equitable that the firm should be
dissolved.
Section 58
1. Particulars to be included: -
a. Name of the firm
b. Principle place of business of the firm
c. Any other place where the business has been carried out
d. Date of joining of all partners
e. Name and permanent address of the partners
f. Duration of the firm
2. Partnership is not compulsorily registrable, no penalty for non-registration but Sec 69
limits the ability of the unregistered firm and its partners.
Section 69
1. A partner of an unregistered firm cannot sue a third party or his present or past
partners.
2. An unregistered firm cannot sue any third party for enforcement of any right arising
from the contract
3. If it is not registered then the partners or firm cannot claim for set off of other
proceeding arising from the contract.
4. Change is constitution of a partnership firm must also be registered.