partnership act 1932 shashank m hiremath

Indian Partnership Act, 1932 : 

Indian Partnership Act, 1932 Prof Shashank M Hiremath, KLS, IMER, Belgaum

Definition of Partnership : 

Definition of Partnership “relation between persons who have agreed to share the profits of a business carried on by all or by any of them acting for all”. - Persons who have entered in to 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’.

Characteristics : 

Characteristics Association of two or more persons Result of an agreement Carry on some business Sharing of profits Mutual agency - carried on by all or any of them acting for all.

Other Legal Characteristics of Partnership Form of Organisation : 

Other Legal Characteristics of Partnership Form of Organisation Unlimited liability No separate legal entity Utmost good faith Restriction on transfer of interest Unanimity of consent

Formation of Partnership : 

Formation of Partnership Based on agreement – oral/written/implied All essential elements of a valid contract must be present Free and genuine consent of parties competent to contract Object – lawful and all legal formalities to be complied with.

Two points to be noted : 

Two points to be noted Minor partner – minor may be admitted to the benefits of partnership with consent of all partners. Consideration – No consideration is required to create partnership which is an extension of the law of agency.

Partnership Deed : 

Partnership Deed Interest of parties: agreement be in writing and such document is called ‘partnership deed’ – must be duly stamped as required by the Indian Stamp Act, 1889. Contents: provisions relating to – nature, principal place of business, firm name, names and addresses of partners, duration of firm, profit-sharing ratio, interest on capital & drawings, valuation of goodwill, management, accounts, etc.

ILLEGAL PARTNERSHIP : 

ILLEGAL PARTNERSHIP A partnership may be illegal in either of two ways: By being formed to carry on an illegal business. e.g., to carry on a business of illicit liquor. 2. Where the number of partners exceeds the maximum limit (i.e. banking business: more than 10 and other businesses: more than 20) or comes down to one person.

Partnership for a fixed term : 

Partnership for a fixed term The partners may, at the time when they enter in to partnership agreement, fix the duration of the partnership. Partnership is entered into for a fixed period of time and when this period is over, it comes to an end.

Partnership at will : 

Partnership at will A Partnership is called a partnership-at-will, When the partnership is not for a fixed period of time and, When no provision is made as to when and how the partnership will come to an end. A partnership-at-will can be dissolved at any time by any of the partners notifying his willingness to do so.

Particular partnership : 

Particular partnership When a person becomes a partner another person or persons in a particular adventure or undertaking. It comes to an end as soon as that adventure is completed.

REGISTRATION OF THE FIRMS : 

REGISTRATION OF THE FIRMS Directly – not compulsory Indirectly – by certain disabilities suffered by unregistered firm. Does not create partnership: Only a reliable evidence of the existence of partnership.

Procedure for Registration (Section 58-59) : 

Procedure for Registration (Section 58-59) Section 58 - partnership firm may be registered at any time by sending by post, or delivering to the registrar of the firms of the area in which any place of business of the firm is situated or proposed to be situated, a statement in the prescribed form and accompanied by the prescribed fee stating:

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Name of the firm, The place or principal place of business of the firm, The names of any other places where the firm carries on business. The date when each partner joined the firm The names in full and addresses of the partners, and The duration of the firm - Signed by all the partners/agents and verified in prescribed manner.

EFFECT OF NON-REGISTRATION (Section 69) : 

EFFECT OF NON-REGISTRATION (Section 69) 1) A partner cannot file a suit against the firm or any partner, so as to enforce a right arising from contract, or conferred by the Partnership Act. Thus, if a partner of an unregistered firm is not paid his share of profits, he cannot claim it through a suit in the court of law. 2) An unregistered firm cannot sue a third party to enforce a right arising from a contract.

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3) An unregistered firm or any of its partners cannot Claim a set-off in a proceeding instituted against the firm. - Is not affected if the claim of set-off deos not exceed Rs. 100 in value.

MINOR AS A PARTNER (Sec. 30) : 

MINOR AS A PARTNER (Sec. 30) Agreement with or by a minor: Void ab-initio. Sec. 30: Rights and Liabilities of minor partners Right to share of the property as agreed Total access Minor’s share in property and profits of the firm is liable for acts of the firm, minor is not personally liable. Cannot file a suit against the other partners for accounts or for payment of his share. Can do so for severing his connection with the firm. Minor attaining majority.

RIGHTS OF A PARTNER : 

RIGHTS OF A PARTNER Right to take part in the conduct of business. Right to express his opinion on any matter. Right to have access to and inspect and copy any of the books of the firm. Right to share in the profits (equally in the absence of an agreement to the contrary) of the firm. Right to interest on capital.

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A partner is a joint owner of firm’s property. Right to interest on advances. 8. In an emergency, a partner has authority to do all such acts as are reasonably necessary to protect the firm from loss. 9. He has a right to be indemnified for liabilities incurred by him during the ordinary course of business. 10. Agent of the firm for the purposes of the businesses of the firm.

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11. No liability for any act of the firm done before one becomes a partner. 12. Not to be expelled. 13. Right to resist the introduction of a new partner. 14. Right to retire. 15. Right to carry on competing business after ceasing to be a partner. 16. Right of outgoing partner to share subsequent profits in certain cases.

DUTIES OF PARTNERS : 

DUTIES OF PARTNERS To carry on the business to the greatest common advantage. To be just and faithful to each other. To render true accounts and full information of all things affecting the firm. To indemnify for loss caused by his fraud. To attend diligently to firm’s business.

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6. Not to claim remuneration. 7. To share losses 8. To indemnify the firm for any loss caused by his willful neglect. 9. To hold and use property of the firm exclusively for the firm. 10. To account for personal profits.

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11. To account for profits in competing business. 12. To act within authority 13. To be liable jointly and severally 14. Not to assign his rights. 15. Unless otherwise agreed, to contribute equally to the losses of the firm.

LIABILITIES OF A PARTNER. : 

LIABILITIES OF A PARTNER. Acc. To Sec. 9, a partner shall be liable; For not carrying on the business of the firm to the greatest common advantage; For not being just and faithful to other partners and For failure to render true accounts and information of all things affecting the firm to any partner or his legal representative.

DISSOLUTION OF PARTNERSHIP (Sec. 39-44) : 

DISSOLUTION OF PARTNERSHIP (Sec. 39-44) Dissolution of partnership firm: The discontinuance of the judicial relation between all the partners of the firm. It amounts to the break-up of the relation of partnership between all the partners. Dissolution of firm: Complete breakdown of the relationship of partnership between all the partners of a firm. Dissolution of partnership: Involves only a change in the relation of the partners.

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Dissolution of the firm should, be distinguished from reconstitution of the firm.

Dissolution of firm : 

Dissolution of firm Voluntary/Without the order of the court By agreement Compulsory dissolution Happening of certain contingencies By notice II) By the order of the court

Dissolution by agreement : 

Dissolution by agreement With the consent of all the partners In accordance with a contract between them which may be either express or implied.

Compulsory Dissolution : 

Compulsory Dissolution By the adjudication of all partners or all the partners but one as insolvent. By the happening of any event which makes it unlawful for the business of the firm to be carried on, or for the partners to carry it on in partnership.

Dissolution on the happening of certain contingencies : 

Dissolution on the happening of certain contingencies The expiry of the term for which the firm was constituted. The completion of the particular adventure/s The death of a partner The adjudication of a partner as an insolvent

Dissolution by notice of partnership-at-will : 

Dissolution by notice of partnership-at-will The firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.

Dissolution by Court : 

Dissolution by Court Court may, at the suit of a partner, dissolve a firm on the following grounds: Insanity Permanent incapacity Misconduct Persistent breach of agreement

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5) Transfer of interest 6) Business working at a loss 7) Any other ground which renders it just and equitable that the firm should be dissolved.