Topic Law of partnership is an extension of law of agency

Submitted by

Bulti Bormon

BA, LLB

Second year year, first semester

Roll number 16

Faculty in charge

Ms. Daizy Changmai

Assistant Professor of Law

National Law University and Judicial Academy, Assam.

What is a Partnership?

Partnership means a partnership which have the relation between persons who agreed to share
the profits of a business carried on by all or any of them acting or all . In Indian it is governed by
the Indian partnership Act , 1932 which extends to the whole of India except the state of Jammu
and Kashmir .)

In such cases , the parties will be liable to the third party . This is referred to as the agency as an
extension . The provision for the extension of such a partnership is explained under section 6 of
the Indian partnership Act agency is considered as the tool for determining the existence of a
partnership .

One of the form in which business can be carried on is “ partnership “ , where two or more
persons join together to form the partnership and run the business . so as we know that the Indian
partnership act , 1932 is an act enacted by the parliament of India to regulate partnership firms
in India . Since public at large would be dealing with the partnership as customers , suppliers ,
creditors , lenders , employees or any other capacity , it is also very important for them to know
the legal consequences of their transactions and other actions in relation with the partnership .

A partnership is mean of bringing together the person who can contribute capital skill for
expansion of businesss .

The Indian Partnership Act , 1932

The Indian Partnership Act , 1932 received the assent of the Governor – General on 8 April ,
1932 and came into force on 1 October 1932 , except section 69 ( where the state or the central
government or any of its officers specially authorized by the central government or the state
government , as the case may be , in this behalf may, if satisfied that it is necessary or
expenditure to do in the interest of the sovereignty or integrity of India , Defence India ) which
came into force on the 1st Day of October , 1933 . Before the enactment of this act , partnership
were governed by provisions of the Indian Contract Act . It was derived from English
Partnership , since they are governed by the limited liability partnership Act , 2008 .
Features of the Act.

The Indian partnership Act is complimentary to contract Act . Basic requirements of contract
Act apply to contract of partnership also . Basic requirements of contract i.e legally enforceable
agreement , to partnership also .

Partnership contract is a ‘ concurrent subject ‘ : so we get that contract including partnership

contract is a concurrent subject covered in entry 7 of list 3 { seven schedule to constitution } .
Indian partnership act is a central act , but the state government can also pass legislation on this
issue . Though partnership act is a central act it is administered by state government , I .e work
of registration of firms and related matters are looked after by each state government . The Act is
not applicable to Jammu and Kashmir .

PARTNERSHIP FIRM IS NOT A LEGAL ENTITY : It may be susprising but there that a
partnership firm is not a legal entity .Under partnership law , a partnership firm is not a legal
entity , but only consists of individual partners for the time being . IT is not a distinct legal entity
apart from the partners constituting it ( Malabar fisheries co. v. cit )

FIRM LEGAL ENTITY FOR THE PURPOSE OF TAXATION : For tax law , income – tax as
well as sales tax , partnership firm is a legal entity – state of Punjab v . A . W. Figgies – cit V. G.
Parthasarathy Naidu . Though a partnership firm is not a juristic person , civil procedure code
enables the partners of a partnership fir m to be sued in the name of the firm – Ashok Transport
Agency v. Awadhesh Kumar .

An analysis of the sections in the Act with Landmark judgments if it is an extension of law pf
Agency.

Section 6 of the Partnership Act, specifies that in determining whether a group of persons is or is
not a firm, or whether a person, is or is not a partner in a firm, regard shall be had to the real
relation between the parties shown b all relevant facts taken together. The intention of the
partners will have to be decided with reference to the terms of the agreement and all the
surrounding circumstances.
The true test in determining the existence of partnership is ‘Agency and Authority’. In
determining the existence of partnership, it is essential to find out the real intention of the parties
to the agreement and circumstances of the case. The question to be asked is – Whether the
relation of principal and agent exists between the parties? Section 18 also provides that subject
to the provisions of Partnership Act a partner is the agent of the firm for the purposes of the
business of the firm.

In Cox Vs. Hickman it was held that the receipt by a person of a share in the profit is a prima-
facie evidence that he is a partner but this is not a conclusive test the question whether a person
is a partner or not therefore depends in all cases upon whether or not he has the authority to act
for other partners and whether or not the other partners have the authorities to act for him. Thus
a partners assumes a dual role; (a) he is an agent of the firm with regards to third parties and can
thus bind the firm by his acts. (b) he is principal in respect of the act of the other partners.